UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A-1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended: December 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period From ____ to ____
Commission File Number: 0-26261
AMERICAN FIRE RETARDANT CORP.
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(Exact name of Registrant as specified in its charter)
NEVADA 88-038624
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(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
9337 Bond Avenue, El Cajon, California, 92021
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(Address of principal executive offices) (Zip Code)
(619) 390-6888
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(Registrant's telephone number, including area code)
Securities Registrant pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 Par Value
------------------------------
(Title of Class)
Check whether the issuer: (1) filed all reports required to be filed by
Section 12 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [ ] No [X]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is contained in this form, and no disclosure will be
contained to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
The issuer's revenues for the year ended December 31, 1999 were $2,452,906.
As of December 31, 1999, there were 2,349,647 shares of the Registrant's
Common Stock outstanding and the aggregate market value of such shares held by
non-affiliates of the Registrant on December 31, 1999 was $0.
Documents Incorporated by Reference: None
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
<PAGE>
AMERICAN FIRE RETARDANT CORP.
FORM 10-KSB
For The Fiscal Year Ended December 31, 1999
INDEX
Page
PART I
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Item 1. Description of Business ..................................... 3
Item 2. Description of Properties ................................... 16
Item 3. Legal Proceedings ........................................... 17
Item 4. Submission of Matters to a Vote of Security Holders ......... 18
PART II
-------
Item 5. Market for Common Equity and Related Stockholder Matters ... 18
Item 6. Management Discussion and Analysis or Plan of Operation ..... 19
Item 7. Financial Statements ........................................ 25
Item 8. Changes in and Disagreements With Accountants on Accounting
And Financial Disclosures ................................... 45
PART III
--------
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act .. 45
Item 10. Executive Compensation ....................................... 47
Item 11. Security Ownership of Certain Beneficial Owners
and Management ............................................... 48
Item 12. Certain Relationships and Related Transactions ............... 49
Item 13. Exhibits and Reports on Form 8-K ............................. 51
Signatures............................................................... 55
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This Annual Report on Form 10-KB and the documents incorporated herein by
reference contain forward-looking statements that have been made pursuant to the
provisions of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are based on current expectations, estimates and
projections about American Fire Retardant Corp., and its management's beliefs,
and assumptions made by management. Words such as "anticipates," "expects,"
"intends," "plans," "believes," "seeks," "estimates," variations of such words
and similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and are
subject to certain risks, uncertainties and assumptions that are difficult to
predict; therefore, actual results and outcomes may differ materially from what
is expressed or forecasted in any such forward-looking statements. Such risks
and uncertainties include those set forth herein under "Risk Factors" on pages
13 through 16 as well as those noted in the documents incorporated herein by
reference. Unless required by law, American Fire Retardant Corp., undertakes no
obligation to update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.
PART I
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ITEM 1. DESCRIPTION OF BUSINESS
--------------------------------
American Fire Retardant Corporation is a Nevada Corporation, (hereinafter,
referred to as the "Company") American Fire Retardant Corporation originally
commenced operations as, a corporation organized under the laws of the State of
Florida ("AFRC Florida") on November 20, 1992. In 1993 AFRC Florida incorporated
in the State of Louisiana, as a separate and distinct entity having the same
shareholders as AFRC Florida. On March 4, 1994, AFRC Florida qualified to do
business in the State of California under the name American Fire Retardant
Corporation. AFRC Florida closed the facility operated in Florida in August
1994, but continued to maintain its good standing status within the State of
Florida. On July 24, 1995, AFRC, a Wyoming corporation ("AFRC Wyoming"), was
incorporated. Upon the formation of AFRC Wyoming, AFRC Wyoming acquired all the
issued and outstanding shares from the shareholders of AFRC Florida and AFRC
Louisiana, in exchange for newly issued shares of AFRC Wyoming, whereby AFRC
Florida and AFRC Louisiana became wholly owned subsidiaries of AFRC Wyoming. In
January 1998, as part of the plan restructuring and change of the domicile of
the Company, AFRC Wyoming formed American Fire Retardant Corp., a Nevada
corporation, the present Company.
The Company is a fire protection company that specializes in fire
prevention and fire containment. The Company is in the business of developing,
manufacturing and marketing a line of interior and exterior fire retardant
chemicals and provides fire resistive finishing services through the Company's
"Textile Processing Center" for commercial users. The Company also designs new
technology for future fire resistive applications that are being mandated by
local, state and governmental agencies and is active in the construction
industry as sub-contractors for fire stop and fire film installations.
Recent Developments
-------------------
During 1999 the Company began to implement a restructuring plan that was
developed by Company in 1998. On March 17, 1999, at a special meeting of the
shareholders of the Company, the shareholders authorized the restructuring of
the Company to simplify its corporate structure by:
(1) Merging its wholly owned subsidiary, AFRC Louisiana into AFRC
Wyoming, whereupon the separate corporate existence of AFRC
Louisiana would cease; and
(2) Merging its wholly owned subsidiary, AFRC Florida into AFRC
Wyoming, whereupon the separate corporate existence of AFRC
Florida would cease.
The shareholders further authorized the Company to change its domicile to
the state of Nevada through the merger of AFRC Wyoming with and into AFRC
Nevada, with no change in the nature of the business or management of the
Company and no dilution to the shareholders or change in the shareholdings of
the Company. The Merger of AFRC Louisiana, with and into its parent AFRC Wyoming
was completed on March 25, 1999. A copy of the Articles of Merger and Plan of
Reorganization are attached hereto and incorporated herein by reference. See
Exhibit Index, Part III. The Merger of AFRC Florida, with and into its parent
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AFRC Wyoming was completed on March 25, 1999. On March 31, 1999, as the final
step of the restructuring of the Company, the merger of AFRC Wyoming, the parent
with and into AFRC Nevada, for the sole purpose of changing the domicile of the
Company from that of Wyoming to Nevada was completed. A copy of the Articles of
Merger and Plan of Reorganization are attached hereto and incorporated herein by
reference. See Exhibit Index, Part III.
The Company has qualified as a foreign corporation in the following states;
the State of Mississippi, the State of Florida, the State of Louisiana, the
State of California, and the State of Colorado.
Key Products And Services
-------------------------
The Company offers a wide range of products and services. The Company is
actively engaged in the following operations, which are divided into three areas
of sales income:
(1) Manufacturer of Fire Retardant Chemicals and Coatings. The Company has
several proprietary formulations. Raw materials are ordered from several supply
sources such as B. F. Goodrich, Van Waters & Rogers, and Albright & Wilson. With
precise mixing instructions these formulations are made into fire retardant
chemicals for resale and in-house use for fire retarding fabrics and other
products.
(2) Textile Processing Center for Fire Resistive Fabrics. The Company
applies fire retardant chemicals to fabrics for commercial customers. The
company's main clients are purchasing agents who are hired by major hotel chains
to assist the hotels as "buyers" during new construction or refurbishing.
Because of the fire standards & codes that are enforced through city ordinances,
it is mandatory for fabrics such as upholstery and drapes to meet the
flammability requirements when installed in publicly used buildings. The clients
fabrics are shipped to the Company's business location where the fabrics are
processed to meet the necessary flammability standards and shipped to the
clients desired location.
(3) Firestop and Firefilm Installation. The Company is recognized by the
State Contractors Board of California as a subcontractor in the field of
Fireproofing - California License #729794. Firestop and Fire Film is a service
the company offers in the new and retrofit construction industry.
Manufacturer of Fire Retardant Chemicals and Coatings
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The Company's chemical sales have not proceeded as fast as they could
because the Company's attention has been directed to handling the rapid increase
in fire stop and fire film sales. The central core of the Company has always
been the chemical area of operations with the focus on the manufacturing,
marketing and distribution of the Company's current product lines. Chemicals
consists of two different classes:
(i) Company owned where the Company is the owner of several formulations
(both proprietary and patented) that the company manufactures and markets; and
(ii) Non-exclusive marketed products where the Company has agreements to
market several fire retardant products that are owned by other entities, on a
non-exclusive basis.
Proprietary Products
--------------------
Fyberix(TM)2000V is a non-durable fire retardant compound designed for use
on textiles used in hospitals, nursing homes, hospices and other health care
facilities as well as in the transportation and tourist industries. (i.e. cruise
ships, aircraft, hotels, motels, restaurants, etc.). It enables fabric to be
fire resistive while maintaining a clean appearance with its anti-soiling agent
and at the same time resists the growth of bacteria, fungus, mites, etc. U.S.
Patent #5.631.047
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Firextra(TM)1000 sold in either concentrate or ready-to-use form is a
proprietary product which is an primary all-purpose, non-durable aqueous saline
based fire retardant compound. It is used on almost every type of textile fabric
-- natural, synthetic, or blended. It may be used on unfinished wood and wood
products as well as hay and paper. It is effective in treating leather and is
used by the major leather tanners in the United States.
Fyberix(TM)2000 is a proprietary formulation, which is an all-purpose,
non-durable aqueous saline-based fire retardant and anti-soiling compound. It is
designed for fabrics used as upholstery, drapery and curtain.
Firextra(TM)NS200 is a proprietary formulation, which is an all-purpose
non-durable, and non-saline aqueous based fire retardant compound. It is used on
almost every type of textile fabric natural, synthetic, or blended. It is
especially useful for treating fabrics where chemical salt content could present
problems.
Firextra(TM)4000 is a proprietary formulation which is an aqueous saline
based fire retardant compound. It is designed to treat unfinished wood and wood
products, thatch and bamboo. Wood products treated with this product should be
kept indoors or away from weathering unless the surface has been sealed with a
paint or sealant after application.
Firextra(TM)4135 is a proprietary formulation which is a non-durable
aqueous saline based fire retardant compound. It is designed to treat spun woven
polyester fabrics.
Firextra(TM)5000 is a proprietary formulation which is a non-durable
aqueous saline based fire retardant compound. It is designed specifically for
nylon fabrics.
Firextra(TM)UV-11 is a proprietary and highly complex formulation which is
a concentrate that can be diluted with plain water or added to other fire
retardant or soil protection compounds to afford an effective block against
Ultra Violet "B" waves that cause color fading, fabric thread weakening and
fabric aging.
Firextra(TM)FBC is a proprietary formulation, which is latex in an aqueous
base. It is manufactured for the Company by a major chemical manufacturing
company and can only be obtained from them by a coded number. The product is
used on the backside of hard-to-treat textile products. In addition to providing
fire resistance the product adds fabric strength and integrity to the fabric.
B.F. Goodrich, is the major chemical supplier of Firextra FBC. The formula is
the proprietary formulation of the B. F. Goodrich Company, which was created for
the use of the Company. There is no contract with regard to the development by
B.F. Goodrich of this formulation for the Company and the product can only be
ordered by a confidential code number, which was assigned to the Company by the
B.F. Goodrich Company.
Firextra(TM)238 is a proprietary formulation that is an acrylic base clear
coating fire retardant compound. It is used on thatch, bamboo and other wood
products that must be used outdoors and/or be exposed to the elements of
weather. It must be re-applied every three years to maintain its integrity.
Overall, the Company's existing chemical product line is broad for today's
marketplace that consists mainly of water based fire retardant chemicals. The
Company's products are able to treat a wide variety of manufactured goods and
with the addition of intumescent paints and other fire retardant coatings; we
are now able to provide additional services to the customer.
Research and development is continuously needed for the expansion of the
Company's lines. Development of the next generation of fire retardant
formulations is limited only by the need for a research staff at this time.
Product development is necessary in order to progress and further develop
products for the future. The Company's products either meet or exceed the
various protocols as required by local, state and federal regulation. All
products are thoroughly tested and certified by the State of California Fire
Marshall's Office. In order to sell or market a fire retardant chemical in the
State of California, each chemical must be tested by an outside laboratory for
the chemicals use. All other states have the choice to utilize their own state's
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regulations or to adopt the standards mandated by the State of California, which
are the most restrictive. Therefore, because the Company follows California
mandated rules, which are the most restricted, the Company believes it to be in
compliance. A copy of the test for flammability is sent to the State Fire
Marshall's Office, along with a sample of the chemical, the fabric or item that
the chemical is specifically designed to treat. Once the State Fire Marshall's
Office has performed their own flammability test, they issue a certification
number on the product.
Textile Processing Center for Fire Resistive Fabrics
----------------------------------------------------
Since 1993, the Company has been successfully treating a wide variety of
fabrics, and has become technical consultants in the field of topically treated
yard goods and piece goods in the commercial industry. Due to the limited number
of fire retardant consultants in the United States market place, commercial
customers who are forced to comply with their local fire ordinances are told by
their local inspectors what ordinances that they must comply with, but are not
told how to comply with such ordinances. For the past four years, the Company
has been committed to assisting clients in solving their fire ordinance
problems. The Company's ability to successfully treat a wide variety of fabrics
has been due to the ability to create and manufacture fire retardants to meet
the hundreds of different fabric blends that are in the market place. Because of
this success, most of the Company's fabric business is through referrals from
current customers. As more emphasis and manpower is placed on enforcing the
stringent flammability codes for the use of textiles, the growth of the fabric
processing division is expected to increase.
For four years the Company has used and is currently using a process called
"topical coatings" to meet all current flammability standards. The Company
believes that this process will become second to a new durable textile process
that will be in demand within the next two years and will affect the fire
retardant industry as a whole. The differences between these two processes are
as follows:
(a) Topical coatings - chemicals are applied to the surface of the fabrics
and air dried. If the fabric is laundered, the treatment will wash out and
re-treatment is necessary;
(b) Durable processing - chemicals are applied to fabrics that are absorbed
into the fibers of the fabric and a controlled heat cure is used for drying.
This locks the fire retardants into the fiber, which can withstand multiple
washings.
Currently, the only areas within the United States that require residential
as well as commercial upholstered furniture to be fire treated to meet fire
testing is the State of California, the City of Boston and the City of New York.
Outside of the United States, the United Kingdom has been the only producer of
fire resistant upholstery for the last 10 years. The testimony from the advisors
of the United Kingdom was the Consumer Product Safety Commission's ("CPSC's")
strongest source of information. The CPSC staff concluded that a national
upholstered furniture flammability standard is feasible, cost effective and that
there is no evidence of any possible hazards to humans from fire retardant
chemicals that would be used to meet the standard.
The Company has the durable technology and is planning to enter the durable
fire resistive fabric marketplace within the next two years. Due to the cost of
the durable processing equipment, the company is currently unable to enter the
marketplace today. Currently, in the United States there are only a few small
fire retardant firms using topical coatings. The number of fire retardant firms
can be obtained from The State of California Fire Marshall's Office. The Company
knows of no major operations at this time that would be able to handle the
potential volume when the CPSC legislation is in force.
Current applications of the Company's various fire retardant compounds are
accomplished through the following procedures.
(a) Textile processing for fire resistive fabric treatments are in bulk
rolled goods (by the yard). Applications are designed for interior designers,
hotels and purchasing agents, restaurants, hospitals, schools, business, etc.
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(b) Piece or finished goods, such as wood, mini-blinds, hay, costumes,
thatch roofing, tents, artificial foliage, props, etc. applications cater to the
theme park industry, theater sets, construction, exterior decorative materials
for restaurants and bars, hotel interior scene designers, etc.
(c) On site applications are required when customers have failed fire
inspections and are forced to comply with the fire codes. When it is impossible
for the customer to transport materials for treatment, the company's crew are
sent on site to perform the application.
Firestop and Firefilm Installation
----------------------------------
Firestop
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Since the middle of the 1980's fire stopping of through wall penetrations
of plumbing, electrical and other mechanical devices through fire rated walls
and floor assemblies has become a major focus of fire safety and building
officials. In the fall of 1995 the Company was asked to provide the services and
materials to fire stop several large hotels on the Mississippi Gulf Coast. With
each project satisfactorily completed came additional requests for bids on more
construction projects. The growth rate is such that the Company had to devote
extra time and effort to maintaining stability. The Company works on fire
stopping projects in the states of Alabama, Mississippi, Louisiana, California,
Colorado, Florida, and Nevada. The building codes require that all buildings,
with the exception of one and two family dwellings, must have firewalls and fire
rated walls in certain areas to allow the occupants of those buildings to escape
in the event of fire.
A "fire wall" is a fireproof wall used in buildings and machinery to
prevent the spread of fire. For example, two - 1/2" gypsum wallboards in an
assembly will achieve approximately a 1-hour fire rating. This means there is 1
hour before the structure fails in a fire.
A "fire rated wall" is a fireproof wall that has additional fire rated
materials added to the face of the wall to increase the fire rating or time
allowed before the structure fails in a fire. These assemblies can achieve a 3
to 4 hour fire rating.
No matter how the buildings are constructed, plumbing, electrical and
mechanical devices routinely penetrate and are routed through these firewalls
and fire rated walls as part of the construction. When this penetration occurs,
the wall looses its integrity and materials must be used to reinstate the fire
resistance integrity. These materials include fire rated silicone caulks,
sealants, mineral wool, intumescent putty and putty pads, intumescent wraps,
collars, alumna-silica blanket wraps, etc. "Intumescent" is the property of
swelling, enlarging or expanding, or bubbling up as with heat. Accordingly, in a
fire the product softens and then expands to form a white, meringue-like layer,
up to 100 mm (4 in.) thick, which insulates the structure and protects the steel
from fire.
The Company specializes in the installation of fire stopping materials. The
Company's fire stop crews work directly under the general, electrical,
mechanical or plumbing contractors. To relieve our customer's liability and
reduce the possibility of delays due to failed inspections, the Company uses
only those products which have been tested and listed by approved testing
laboratories for the through wall penetration or construction gap to be fire
stopped. Project submittal packages are provided by the Company showing the
proper engineering diagram and the testing laboratory number for each type of
through wall penetration, construction gap or special installation involved in
the project. The project submittal packages are presented to the local building
and fire inspectors, as well as the general and subcontractors involved for
review and approval before work is begun. Once the project submittal package has
been approved and the contract signed, our trained and certified fire stop
installation crews begin their work coordinating with the other contractors
involved to complete the project in the most efficient and timely manner
possible.
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The Company has received their Nevada State Contractor's License #0046990,
in order to take advantage of the fire stop projects that the Company has future
work for. In addition, the Company markets A/D Fire Barrier Products, which are
thoroughly tested to ASTM E-814 "Through Penetration Fire Stop Systems" and are
listed by Underwriters Laboratories, Inc. ("UL"), Underwriter Laboratories of
Canada ("ULC"), Factory Mutual ("FM"), and Warnock Hersey Testing Laboratories.
Firefilm
--------
The Company has trained and certified crews in the application of A/D
Firefilm. A/D Firefilm is a decorative, thin-film, intumescent fire protection
for structural steel. It allows the designer to express the structure as an art
form for interior locations in buildings where fire resistance ratings are
required. In the past, steel beams and structural members could only be
protected by boxing them in with gypsum board or by applying an unattractive
cement fiber coating to them. Beneath the colorful surface, A/D Firefilm is a
thin film coating that is an intumescent.
Intumescent is the property of swelling, enlarging or expanding, or
bubbling up when heated. Accordingly, in a fire the product softens and then
expands to form a white meringue-like layer, up to 100 mm (4 in.) thick, which
insulates the structure and protects the steel from fire
The second component of the system is the decorative topcoat, which acts as
a protective layer and serves as the attractive finish. A/D Firefilm has been
tested and is certified by ULC and Warnock Hersey. Flammability ratings up to
two hours were attained in accordance with CAN/ULC-S101 and ASTM-E119.
CAN/ULC-S101 and ASTM-E119 are two different fire test protocols or standards
used to measure the strength and time the product must meet before it is
approved for use in a commercial building. The product must hold back combustion
(fire) or the bi-products of combustion, such as carbon monoxide and carbon
dioxide for a definitive time period. The product could withstand 1, 2 or 3
hours of exposure to fire. To receive a two-hour rating means that if an
approved product is applied to the structure that meets the ASTM-E119 Standard,
the structure will withstand two hours of direct heat before the integrity of
the structure will begin to fail.
The Market
----------
According to the National Fire Protection Agency (NFPA) a fire occurs
somewhere in the United States every 18 seconds, resulting in an injury every 23
minutes and a death every 130 minutes. The statistical data obtained through the
United States Fire Administration (USFA) and the Consumer Product Safety
Commission (CPSC), reflects that in 1998 alone, there were over 381,500
residential fires, 3,250 deaths and 17,175 injuries, which caused in excess of
$4.4 billion dollars in damages. The residential fire problem represents
approximately 80 percent of all fire deaths and 74 percent of the injuries to
civilians. Fire is the third leading cause of accidental death in the home. The
true cost of fire in the United States is much greater than just the value of
property destroyed by fire, perhaps as high as billions per year. Analysis of
the growing costs of the major components of the total cost of fire is being
given more consideration in setting new priorities by our government. See the
Article "1998 Fire Loss in the United States" from the NFPA Journal,
September/October 1999 is attached hereto and incorporated herein by reference.
See Exhibit Index, Part III.
The market is rapidly undergoing changes through federal and state
regulations and codes that are continuously being enforced in the United States.
The direction and emphasis is on the removal of potential fire loads and flame
spreads in structures. The market has incurred various problems, which include a
lack of public awareness for the need of fire resistant materials and a lack of
formal education for the enforcement personnel. The United States Fire
Administration's National Fire Data Center ("NFDC") states that mayors, city
managers, school officials, the media, and the general public, are still largely
unaware of the magnitude of the losses incurred by fire. Their lack of awareness
and failure to realize the seriousness of fire to communities and the country
are factors in keeping the U.S. fire problem one of the worst in the world per
capita. See NFDC Statistics attached hereto and incorporated herein by
reference, as posted on the NFDC website at:
www.usfa.fema.goc/nfdc/statistics.hrm. See Exhibit Index, Part III.
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The Company believes it has gained recognition in the field of fire
retardant and fire stop technology. Because of the Company's involvement in
assisting to educate the fire law enforcement, the Company has received many
referrals for its fire stop services. In the past, the Company has conducted
various seminars for building officials, architects, and Fire Marshall's at
their request.
The Company believes that with an increase in its marketing ability, the
products and technology can reach the world market. With the acquisition of two
chemical companies, the market size is large and diverse. The markets include
retailers, paint and coating suppliers, industrial manufacturers, distributors,
field users such as contractors, contractor suppliers, thatch and bamboo
wholesalers, silk foliage wholesalers, any many others.
Currently, in the United Kingdom, there are six firms that provide fire
resistant coatings for the upholstery market. It is estimated that the finishers
treat 25,590,500 linear yards per year at approximately $2.00 per yard. The fire
resistive fabric industry is estimated at approximately $51.0 million annually.
The United Kingdom has a population base of approximately 70 million people. In
comparison to the United States population of approximately 260 million people,
the ratio is 3.7 to 1. Therefore the estimates for the United States fire
resistive fabrics for the upholstery industry alone could exceed $190.0 million
annually. The company currently has two methods of distribution for this new
market. (1) To treat the client's textiles at the Company's textile processing
facility; and (2) To offer chemicals and technology to established clients, such
as mills, tanneries, etc., so they may implement this process prior to or along
with the production of their goods.
Distribution Methods Of Products Or Services
--------------------------------------------
Distribution of the company's products or services is relatively simple, as
most new business comes by referrals and reputation. Orders or service needs are
requested by phone, and distribution is through one of the company's two
locations. Promotional costs and effective sales programs have to date limited
the company's ability to expand this area. The company offers its products and
services to a multiple cross section of industries, such as Institutional,
Commercial, Industrial, Government, Manufacturers, Consumers, Independent
Retailers and Certified Applicators. The majority of the company's clients are
identified as end users of the products or services. In certain industries,
companies that are considered end users have also been able to distribute the
products for resale. The company established their web site in 1998, which can
be found at "www.americanfireretardant.com", which the Company uses only for
marketing and for providing a summary of information pertaining to fire
retardant processes, rules and regulations. The information contained on the
Company's website is a summary only and is not to be construed as a complete
statement of all fire stopping and retardant procedures, and rules and
regulations. This registration statements contains and sets forth in further
detail the information summarized on the Company's website.
Status Of Any Publicly Announced New Product Or Service
-------------------------------------------------------
The Company has not made any public announcements of new products or
services offered by the Company.
Competitive Business Conditions And The Small Business Issuer's
Competitive Position In The Industry And Methods Of Competition
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There are several fire retardant companies in the United States offering
the same types of products and are engaged in an ongoing fight for the market
share.
Among these are California Flame Proofing, Flamort and Flame Control. The
Company's products are different in composition due to different proprietary
ingredients, such as smoke inhibitors, rust inhibitors and anti-fungal
properties (the Company's patented formulation).
The Company's largest competitors in the fabric finishing market are
Kiesling and Hess, Texas Flameproofing and Schneider Banks. The Company has not
promoted any marketing in this area due to the time that management has devoted
to its other divisions. The majority of the work performed by finishers comes
from the hotel industry for new and refurbishing installation projects. All of
the Company's current customers were past customers of one of the above
competitors. The advantage the Company has over all three of these competitors
is the ability to treat diverse fabrics with little or no change in the fabric's
dyes or feel to the touch of the hand, as a result of processing.
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The in-house tracking service offered by the Company is considered one of
great importance to the customers. There are hundreds of rolls of fabrics that
are sent to the Company for the fire retardant process on a weekly basis. In
some cases, one customer or purchasing agent may be responsible for 4 different
hotel projects. The agent has the fabric mill send all fabrics directly to the
Company, which are side marked with what hotel and customer the fabric is for.
The Company's computerized tracking of each client's fabrics allows the Company
to print a report on the date received by job name. It also indicates when the
fabric was treated, shipped out and to whom.
There are several competitors in the Company's fire stop division, but most
are through other market segments. Currently, electrical, plumbing and
mechanical contractors perform most fire stop installations. The advantages are
that the Company specializes in fire stop systems, fire codes and statutes and
is continuously aware of the constant changes being made in building codes,
whereas, this is not a main focus for subcontractors. The Company saves the
contractor time and money loss from failed inspections, deals directly with the
building inspectors and provides approved submittals directly to the general
contractor. The reputation the Company has in this market is its strongest asset
today.
Sources And Availability Of Raw Materials
And The Names Of Principal Suppliers
---------------------------------------------------------------------------
The company does not utilize any specialized raw materials and as such any
and all materials and raw materials are readily available. The company is not
aware of any problem that exist at present time or that is projected to occur
with the near future that will materially affect the source and availability of
raw materials, which would be required by the company. The company currently
purchases raw materials from Van Waters and Rogers, Morre-tech, Albright and
Wilson, B.F.Goodrich and Great Lakes Chemical.
Dependence On One Or A Few Major Customers
------------------------------------------
The Company feels that the because of the diversity of the applications and
uses of the various products and services provided by the Company and the wide
base of customers for such products and services, that this alleviates the
dependence on one or more major customers. With the introduction of new fire
laws, codes and regulations and the continuing growth in the new construction,
retrofitting and refurbishing industry, the company will develop a wider base of
customers.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty
Agreements Or Labor Contracts, Including Duration
---------------------------------------------------------------------------
The Company believes its chemical products and technology to be unique. The
company is also dedicated to the protection of its trade secrets through tight
security, the advancement of the technology, and the establishment of strong
patent protection. Therefore, the Company has retained legal counsel to develop
and submit patent applications for its chemical products and technologies that
the Company views as patented. To date one patent has been granted in the United
States and one other patent application has been filed and is pending in the
United States.
A very brief summary of the categories covered by the patent which has been
issued which relates to the application of the Company's compounds and products.
Subject Matter of Issued Patent
-------------------------------
(1) Relates to compounds applied to porous materials, such as fabrics,
wood, cardboard, and fiberboard, to protect the materials from various
destructive and undesirable processes;
(2) Relates to compounds applied to porous materials, especially fabrics of
natural and synthetic materials used to make rugs, carpets, furniture coverings,
and wall hangings, to protect against fire, soil and water damage, and virus and
fungus growth;
10
<PAGE>
(3) Protects not only the materials to which it is applied but also
protects persons in contact with the materials, by stopping fire and germ
growth.
United States Patents
---------------------
The Company has had one U.S. patent granted on its chemical products and
has one additional patent application pending:
Fyberix (TM)2000V U.S. Patent #5.631.047
Fyberix (TM)2000 Patent Pending #08.089793
Copyrights / Trademarks
-----------------------
The Company has a copyright on "Fire Retardant Applicator's Manual"
certificate of registration number TX 3-878-798 and two trademarks,
"Firextra(TM)" registration number 1,812,119 and "Fyberix(TM)" registration
number 1,815,602.
License And Royalty Agreements
------------------------------
On June 24, 1997, American Fire Retardant Corporation, entered into a
royalty agreement with Norman O. Houser, wherein American Fire will utilize Mr.
Houser's vermicide compound for the companies patented 2000V formulation. The
agreement grants Mr. Houser the sum of $0.75 per gallon on the sale of the
companies Fyberix 2000V. Said royalties are to begin at the time of agreement.
Cancellation of this royalty agreement would occur if the company no longer used
Mr. Houser's compound in the formulation. A copy of the Agreement with Mr.
Houser is attached hereto and incorporated herein by reference. See Exhibit
Index, Part III.
Research, Development An Intellectual Property
----------------------------------------------
The Company's water-based chemical development stage has been completed.
The fire retardant product line is constantly being evaluated and upgraded to
keep up with the market demands, customer problems and new discoveries in field
applications. In textile finishing, not all fabrics can be made fire resistive
due to several different specialty blends. As in the United Kingdom, there will
be problems with this and U.S. mills will began to discontinue those fabrics
targeted for the upholstery industry and work closely with the fire resistive
finishers in order to produce those fabrics that can easily be treated. This is
where research and development into new chemical formulations and technology
will come into its heaviest stage.
Testing
-------
All of the Company's products have undergone vigorous testing to insure
that they meet the flame resistance protocols for their applicable use. Properly
treated materials have successfully passed the burn requirements of the
following test protocols and more:
(a) retardancy
(b) toxicity
(c) corrosiveness
(d) resistance to staining
(e) static electricity reduction
(f) tensile strength
The fire stop and fire film materials have been tested by various
independent testing laboratories and pass the protocols that must be met for the
various types of through wall/floor/ceiling assemblies.
11
<PAGE>
Over the past five years the Company has tested the chemical uses on many
various materials through outside laboratories. The Company has over 100
different flammability test reports of various fabric blends performed by
independent testing laboratories, such as United States Testing Laboratories,
Textest, Better Fabrics Testing Bureau and many others. The Company is an active
member of several fire protection-related organizations, including the National
Fire Protection Association, International Fire Service Training Association,
Associated General Contractors, The American Society for Testing and Materials,
and The Industrial Fabric Association International.
Need For Any Government Approval Of Principal Products Or Services
------------------------------------------------------------------
If government approval is necessary and the small business issuer has not
yet received that approval, discuss the status of the approval within the
government approval process. All of the products the company currently
manufactures do not contain any constituents that require government regulation.
The state does require that all-fire retardant chemicals must be certified and
registered with the State of California Fire Marshall's Office. The company is
in compliance with this.
Effect Of Existing Or Probable Governmental Regulations On The Business
-----------------------------------------------------------------------
The Company is governed by the California Health and Safety Code of
regulations under which the State of California established flammability
standards that must be met by any and all companies providing flameproofing
services to the public in the State of California. In order to comply with
California's law for the application of flame-retardants, each applicator must
be certified by the state. The Company is mandated by the State of California to
meet the following flammability standards upon the completion of treating
drapes, hangings, curtains, drops, tents, upholstery furniture fabrics or it's
components and other decorative material for use in the State of California. All
materials treated by the Company require a "Certificate of Flamepoofing" to be
issued to the customer.
Cal Title 19 - which dictates the vertical flame test for drapes, hangings,
curtains, drops, all other decorative material, Christmas trees, tents, awnings,
and fabric enclosures.
Cal. TB-116- which is the standard of fire test for cigarette ignition
resistance of components of furniture.
Cal. TB-117- which is the standard of fire test for cigarette ignition
resistance of upholstered furniture assemblies.
Cal. TB-133- which is the standard of fire test for seating furniture in
public buildings.
While management is unaware of any new regulations being contemplated by
the subject agencies, it remains possible that these agencies could institute
new guidelines, which could affect all companies in this field.
The Company is not aware of any other governmental regulations now in
existence or that may arise in the future that would have an effect on the
present business of the Company.
Estimate Of The Amount Spent During Each Of The Last Two Fiscal
Years On Research And Development Activities
---------------------------------------------------------------------------
During the last two fiscal years the Company has not incurred any cost on
research and development and no expenses have been born by customers of the
Company relating to research and development activities.
Costs And Effects Of Compliance With Environmental Laws (Federal,
State And Local)
---------------------------------------------------------------------------
As the present time, the Company does not manufacture any chemicals that
are subject to federal, state or local environmental compliance laws and
regulations.
12
<PAGE>
Number Of Total Employees And Number Of Full Time Employees
-----------------------------------------------------------
The Company employs nineteen full time employees as of December 31, 1999.
Two of the Company's employees are employed in administrative positions as
President and Executive Vice President. One employee is Sales and Technical
Manager for the firestop division of the Company. One employee is an accountant
in charge of accounts receivable and accounts payable. One employee is the
shipping and receiving manager. Another employee is in charge of construction
contracts and general secretarial duties, and one is clerical only. Three of the
other twelve employees are warehouse and field supervisors. The other nine
employees are laborers. The company performs all activities at the Company's
business location, with the exception of construction, which is performed at the
clients' location. The activities include, but are not limited to, sales,
marketing, accounting, shipping, manufacturing (blending chemicals), and
treating of fabrics and other goods with fire retardant chemicals, architect
blue print reading and construction. Outside services are legal and certified
accounting. The company also uses job finders for part time work in the
construction area. None of these employees are covered by collective bargaining
agreements.
IMPACT OF YEAR 2000
-------------------
During 1999 we completed our remediation and testing of our platform
systems, management support, systems, and our internal information technology
and non-information technology systems. Because of those planning and
implementation efforts, we experienced no disruptions in our information
technology and non-information technology systems and those systems have
successfully responded to the Year 2000 date change. We did not incur any
significant expenses during 1999 in conjunction with remediating our systems. We
are not aware of any material problems resulting from Year 2000 issues, either
with our products, internal systems, or the products and services of third
parties. We will continue to monitor our mission critical computer applications
and those of our suppliers and vendors throughout the Year 2000 to ensure any
latent Year 2000 matters arising are addressed promptly.
RISK FACTORS
------------
Several of the matters discussed in this document contain forward-looking
statements that involve risks and uncertainties. Factors associated with the
forward-looking statements that could cause actual results to differ materially
from those projected or forecast appear in the statements below. In addition to
other information contained in this document, readers should carefully consider
the following cautionary statements and risk factors:
FUTURE CAPITAL REQUIREMENTS; UNCERTAININTY OF FUTURE FUNDING. The Company's
plan of operation calls for additional capital to facilitate growth and support
its long-term development and marketing programs. It is likely that the Company
would need to seek additional financing through subsequent future public or
private sales of its securities, including equity securities. The Company may
also seek funding for the development and marketing of its products through
strategic partnerships and other arrangements with investment partners. There
can be no assurance, however, that such collaborative arrangements or additional
funds will be available when needed, or on terms acceptable to the Company, if
at all. Any such additional financing may result in significant dilution to
existing stockholders. If adequate funds are not available, the Company may be
required to curtail one or more of its future programs.
SUBSTANTIAL DOUBT THAT THE COMPANY CAN CONTINUE AS A GOING CONCERN. The
Company expects to continue to incur significant capital expenses in pursuing
its plans to increase sales volume, the expansion of its product line and to
obtain additional financing through stock offerings or other feasible financing
alternatives. In order for the Company to continue its operations at its
existing levels, the Company will require $700,000 of additional funds over the
next twelve months. While the Company can generate funds necessary to maintain
its operations, without additional funds there will be a reduction in the number
of new projects that the Company could take on which may have an effect on the
Company's ability to maintain its operations. Therefore, the Company is
dependent on funds raised through equity or debt offerings. Additional financing
may not be available on terms favorable to the Company, or at all. If adequate
funds are not available or are not available on acceptable terms, the Company
may not be able to execute its business plan or take advantage of business
opportunities. The ability of the Company to obtain such additional financing
and to achieve its operating goals is uncertain. In the event that the Company
13
<PAGE>
does not obtain additional capital or is not able to increase cash flow through
the increase of sales, there is a substantial doubt of its being able to
continue as a going concern.
Additionally, it should be noted that the Company's independent auditors
have included a going concern opinion in the note to financial statements. The
auditor's have included this provision because the Company has an accumulated
deficit which the auditor believes raises substantial doubt about its ability to
continue as a going concern. Until such time as the Company does receive
additional debt or equity financing, there is a risk that the Company's auditors
will continue to include a going concern provision in the notes to financial
statements.
PATENTS AND PROPRIETARY RIGHTS. The Company relies on patents,
contractual rights, trade secrets, trademarks, and copyrights to establish and
protect its proprietary rights in its products and its components. The Company
has patented the technology that is incorporated into its products and believes
that, since it is a technology patent, competitors will have a more difficult
time developing products functionally similar to the Company's. To further
protect its products, the Company will apply for additional patents for its
inventions and for non-commercial available components designed and developed by
the Company that are integral to product performance.
PROSECUTING ANY INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS COULD BE
EXPENSIVE AND, IF THE COMPANY IS NOT SUCCESSFUL, COULD DISRUPT ITS BUSINESS. The
Company intends to closely monitor competing product introductions for any
infringement of the Company's proprietary rights. The Company believes that, as
the demand for products such as those developed by the Company increases,
infringement of intellectual property rights may also increase. If infringement
of the Company's proprietary rights is by industry competitors, they have
substantially greater financial, technical, and legal resources than the Company
which could adversely affect the Company's ability to defend its rights. In
addition, the Company could incur substantial costs in defending its rights.
Further, the Company's patents are U.S. patents, and the Company does not
have patent protection outside the United States. The Company will be unable to
obtain patent protection in most non-U.S. jurisdictions, including Europe and
Japan. Some competitors may have non-U.S. operations where U.S. Patent rights
are not effective which could permit competitors to infringe on the Company's
proprietary rights without violating U.S. law.
The Company anticipates, based on the size and sophistication of its
competitors and the history of rapid technological advances in its industry,
that several competitors may be working to develop the Company's patented
technology. The Company intends to closely monitor any infringement of the
Company's proprietary rights. Competitors may have patent applications in
progress in the United States that, if issued, could relate to the Company's
products. If such patents were to issue, there can be no assurance that the
patent holders or licensees will not assert infringement claims against the
Company or that such claims will not be successful. The Company could incur
substantial costs in defending itself and its customers against any such claims,
regardless of the merits of such claims. Parties making such claims may be able
to obtain injunctive or other equitable relief which could effectively block the
Company's ability to sell its products, and each claim could result in an award
of substantial damages. In the event of a successful claim of infringement, the
Company and its customers may be required to obtain one or more licenses from
third parties. There can be no assurance that the Company or its customers could
obtain necessary licenses from third parties at a reasonable or acceptable cost
or at all. Patent litigation could be very expensive, and there is no assurance
that it would not have an adverse effect on the Company's business, financial
condition and results of operations.
DEPENDENCE ON KEY EMPLOYEES. Historically, the Company has been heavily
dependent on the ability of Bruce E. Raidl, to contribute essential technical
and management experience. In the event of future growth in administration,
marketing, manufacturing and customer support functions, the Company may have to
increase the depth and experience of its management team by adding new members.
The Company's success will depend to a large degree upon the active
participation of its key officers and employees. Loss of services of any of the
current officers and directors could have a significant adverse effect on the
operations and prospects of the Company. There can be no assurance that it will
be able to employ qualified persons on acceptable terms to replace officers that
become unavailable.
14
<PAGE>
NEED FOR ADDITIONAL SPECIALIZED PERSONNEL. Although the management of the
Company is committed to the business and continued development and growth of the
business, the additional of specialized key personnel and sales persons to
assist the Company in its expansion of its national operations will be
necessary. There can be no assurance that the Company will be able to locate and
hire such specialized personnel on acceptable terms.
COMPETITION. There are numerous corporations, firms and individuals which
are engaged in the type of business activities in which the Company is presently
engaged. Many of those entities are more experienced and possess substantially
greater financial, technical and personnel resources than the Company. While the
Company hopes to be competitive with other similar companies, there can be no
assurance that such will be the case.
VOTING CONTROL. Due to the joint ownership of a majority of the shares of
the Company's outstanding common stock by Angela M. Raidl and her brother Bruce
Raidl, collectively, these individuals have the ability to elect all of the
Company's directors, who in turn elect all executive officers, without regard to
the votes of other stockholders.
ABILITY TO MAINTAIN ADEQUATE INVENTORY LEVELS. The size of the fire
retardant and fire protection markets and need to maintain adequate inventories
with regard to such products could force the Company into implementing
additional manufacturing and warehousing programs. There can be no assurance
that the Company will have the necessary capital resource or man power to
implement such manufacturing and warehousing programs.
DEPENDENCE ON ABILITY TO MARKET PRODUCTS AND SERVICES. Due to the Company's
limited resources, the sales and marketing of the Company's products has been
limited to date. The success of the Company is dependent upon its ability to
market and sell the products and services of the Company with such limited
resources.
RISKS OF "PENNY STOCKS." The Company's common stock may be deemed to be
"penny stock" as that term is defined in Reg. Section 240.3a51-1 of the
Securities and Exchange Commission. Penny stocks are stocks (i) with a price of
less than five dollars per share; (ii) that are not traded on a "recognized"
national exchange; (iii) whose prices are not quoted on the NASDAQ automated
quotation system (NASDAQ-listed stocks must still meet requirement (i) above);
or (iv) of an issuer with net tangible assets less than US$2,000,000 (if the
issuer has been in continuous operation for at least three years) or
US$5,000,000 (if in continuous operation for less than three years), or with
average annual revenues of less than US$6,000,000 for the last three years.
Section 15(g) of the 1934 Act and Reg. Section 240.15g-2 of the Commission
require broker-dealers dealing in penny stocks to provide potential investors
with a document disclosing the risks of penny stocks and to obtain a manually
signed and dated written receipt of the document before effecting any
transaction in a penny stock for the investor's account. Potential investors in
the Company's common stock are urged to obtain and read such disclosure
carefully before purchasing any shares that are deemed to be "penny stock."
Moreover, Reg. Section 240.15g-9 of the Commission requires broker-dealers
in penny stocks to approve the account of any investor for transactions in such
stocks before selling any penny stock to that investor. This procedure requires
the broker-dealer to (i) obtain from the investor information concerning his or
her financial situation, investment experience and investment objectives; (ii)
reasonably determine, based on that information, that transactions in penny
stocks are suitable for the investor and that the investor has sufficient
knowledge and experience as to be reasonably capable of evaluating the risks of
penny stock transactions; (iii) provide the investor with a written statement
setting forth the basis on which the broker-dealer made the determination in
(ii) above; and (iv) receive a signed and dated copy of such statement from the
investor, confirming that it accurately reflects the investor's financial
situation, investment experience and investment objectives. Compliance with
these requirements may make it more difficult for investors in the Company's
common stock to resell their shares to third parties or to otherwise dispose of
them.
15
<PAGE>
NO MARKET FOR COMMON STOCK. Although the Company intends to submit for
quotation of its common stock on the OTC Bulletin Board of the NASD following
the effectiveness of this registration statement, and to seek a broker-dealer to
act as market maker for its securities (without the use of any consultant),
there is currently no market for such shares, there have been no discussions
with any broker-dealer or any other person in this regard, and no market maker
has been identified; there can be no assurance that such a market will ever
develop or be maintained. Any market price for shares of common stock of the
Company is likely to be very volatile, and numerous factors beyond the control
of the Company may have a significant effect. In addition, the stock markets
generally have experienced, and continue to experience, extreme price and volume
fluctuations which have affected the market price of many small capital
companies and which have often been unrelated to the operating performance of
these companies. These broad market fluctuations, as well as general economic
and political conditions, may adversely affect the market price of the Company's
common stock in any market that may develop.
ITEM 2. DESCRIPTION OF PROPERTY
-----------------------
California Office
-----------------
The Company's main office facility is located at 9337 Bond Avenue, El
Cajon, California 92021, which serves as its corporate headquarters and is
situated in a leased 7,800 square feet office/warehouse building, which contains
1,500 square feet of office space and 6,300 square feet of warehouse. The
Company leases this space from Darwin E. Zavadil, who is not affiliated in any
way with the Company and the terms of the lease were negotiated at arms-length.
This office space is leased through May 31, 2002.
Louisiana Office
----------------
The Company owns the Broussard Property which is located at 110 Brush Road,
Broussard, Louisiana, 70518 ("Broussard Property") and is situated in a
Company-owned 4,000 square feet metal building of which 1,200 square feet is
office space and 2,800 square feet is warehouse.
Louisiana Corporate Apartment
-----------------------------
The Company leases an apartment in Lafayette, Louisiana which is located at
211 Liberty Avenue, Lafayette, Louisiana 70508. This apartment is utilized by
the Company's principals or employees when visiting the Louisiana facility. The
apartment is approximately 900 square feet. The Company leases this space from
The Plantations at Lafayette, who is not affiliated in any way with the Company
and the terms of the lease were negotiated at arms-length. This Corporate
Apartment is leased through April 30, 1999.
ITEM 3. LEGAL PROCEEDINGS
-----------------
Friloux v. AFRC
---------------
The Company is a party defendant in the matter Friloux v. American Fire
Retardant Corporation 15th Judicial District Court, Parish of Lafayette,
Louisiana, Docket No. 99-5744 "D". In this matter Mr. Friloux filed a Petition
seeking a pre-trial judgment alleging (1) that the Company is indebted to Mr.
Friloux under the terms of a promissory note dated March 7, 1994, in the
principal sum of $100,000 with interest there on at the rate of 5.0% per annum
and that the Company is in breach of said promissory note; (2) that the Company
is in breach of employment contract with Mr. Friloux an is obligated to pay Mr.
Friloux back wages; (3) that the Company is indebted to Mr. Friloux for past due
health and hospitalization costs due under the alleged employment agreement; and
(4) that the Company is indebted to Mr. Friloux as a result of the sale by Mr.
Friloux of shares of common stock owned by Mr. Friloux back to the Company. The
Company filed exceptions to the petition and counsel for Mr. Friloux and the
Company have agreed that any and all claims shall be disposed of at trial rather
that through Mr. Friloux's pre-trial petition. The Company denies the
allegations and intends to vigorously defend the complaint of Mr. Friloux. At
present Mr. Friloux and the Company are attempting to resolve this matter
amicably in order to avoid further costs to either party.
16
<PAGE>
Alman v. AFRC Florida
---------------------
The Company was involved in litigation in the calendar year 1997. The
Company's former subsidiary, AFRC Florida was a party defendant in the matter
Allen E. Alman and Phyllis S. Alman v. American Fire Retardant Corporation of
Florida and Stephen F. Owens, Dade County Florida, Case No. 97-7203 CA 09. The
matter was a dispute over the terms of a Stock Purchase Agreement entered into
in September 1993, with regard to the purchase by AFRC Florida of all the stock
and assets of Apco Equipment Sale Corporation dba Thoro-Sheen Company. This
matter was resolved in July 1997. wherein AFRC Florida and Mr. Owens agreed to
pay to Mr. And Mrs. Almans the total sum of $51,550, payable $5,775.00, on or
before July 15, 1997; $5,775.00, on or before August 30, 1997; and the balance
of $40,000 in installments of $1,800.00 per month for 24 months commencing on
September 30, 1997, until paid in full.
All payments were made in a timely manner pursuant to the terms of the
Joint Stipulation and the final payment was made on September 15, 1999.
Halvelin v. AFRC
----------------
The Company is a party defendant in the matter of Havelin v. American Fire
Retardant Corporation, United States District Court, Southern District of
Mississippi, Case No. 1-99CV156GR. The Plaintiff, Jennifer L. Havelin was suing
the Company alleging that the Company discriminated against the Plaintiff
because of Plaintiff's sex, a female. The Plaintiff originally filed a claim
with Equal Employment Opportunity Commission ("EEOC") in May 15, 1998, alleging
discrimination and that Plaintiff had been laid off because she was a female. On
January 29, 1999, the EEOC dismissed Plaintiffs claim as being without merit.
This action arose from the same facts set forth by Plaintiff in her claim with
the EEOC. Further, pursuant to Title VII the Plaintiff had 90 days (i.e. until
May 1, 1999) to file a lawsuit in Federal Court with regard to this matter. The
Plaintiff filed her action beyond the prescribed time period.
On August 25, 1999, the Company settled this matter for a total sum of
$5,000 paid by the Company to Ms. Havelin.
As a result of the resolution of the above matters, the costs of litigation
associated with those matters have ceased and, therefore, there is no further
effect on the results of operations and liquidity.
Delinquent Payroll Taxes
------------------------
The Company owes the Internal Revenue Service $359,300 including interest
for prior delinquent payroll taxes by the Company's former subsidiaries, AFRC
Florida and AFRC Louisiana. These payroll taxes became delinquent starting in
the 3rd quarter of 1997 through the 4th quarter of 1998. The total delinquent
payroll tax liabilities are $166,472 attributed to AFRC Florida and $192,828
attributed to AFRC Louisiana. The Company has retained the tax counsel of
Royston & Hebert in Lafayette, Louisiana to represent the Company before the
Internal Revenue Service and the Company has submitted an Offer and Compromise
work-out agreement to obtain a substantial reduction of the outstanding payroll
tax balance due. The Company has since kept current with all present payroll and
other tax obligations.
With the exception of the legal proceedings and tax matter set forth above,
the Company is not presently a party to any litigation, claim, or assessment.
Further, the Company is unaware of any unasserted claim or assessment, which
will have a material effect on the financial position or future operations of
the Company.
17
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
No matter was submitted during the Company's fourth quarter of the fiscal
year covered by this report to a vote of the security holders, through the
solicitation of proxies, or otherwise.
PART II.
-------
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
-----------------------------------------------------------------
Market Information
------------------
There has never been any established "public market" for shares of common
stock of the Company. The Company has submitted an application for listing and
quotation on the OTC Bulletin Board of the National Association of Securities
Dealers, Inc. (the "NASD"). If approved for quotation, there can be no assurance
that any market for the Company's common stock will develop or be maintained. If
a public market develops in the future, the sale of "unregistered" and
"restricted" shares of common stock pursuant to Rule 144 of the Securities and
Exchange Commission by members of management may have a substantial adverse
impact on any such public market.
Holders
-------
The number of record holders of the Company's common stock as of the date
of this Registration Statement is approximately 184.
Dividends
---------
The Company has not declared any cash dividends with respect to its common
stock, and does not intend to declare dividends in the foreseeable future. The
future dividend policy of the Company cannot be ascertained with any certainty.
There are no material restrictions limiting, or that are likely to limit, the
Company's ability to pay dividends on its common stock.
18
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATION RESULTS
----------------------------------------------------------
The following discussion and analysis should be read together with the
Consolidated Financial Statements of the Company and the notes to the
Consolidated Financial Statements included elsewhere in this Registration
Statement.
Trends and Uncertainties
------------------------
Demand for the Company's products is constantly increasing. The United
States Fire Administration (USFA), The Consumer Product Safety Commission
(CPSC), and the National Fire Protection Association (NFPA) all agree that the
United States has the worst per capita record of fire related accidents and
deaths in the world. As a result, the federal and state regulatory agencies are
continually adding new and stricter fire codes and are becoming more and more
vigilant in the enforcement of these codes. In addition, non-governmental bodies
such as Insurance Companies are constantly instituting regulations and standards
that are, in some instances, even stricter than those imposed through federal
and state agencies. The Company, of course, benefits from increased governmental
and non-governmental fire regulations.
However, due to the Company's limited resources, the sales and marketing of
the Company's products has been limited to date. The success of the Company is
dependent upon its ability to market and sell the products and services of the
Company with such limited resources. Although the management of the Company is
committed to the business and continued development and growth of the business,
the addition of specialized key personnel and sales persons to assist the
Company in its expansion will be necessary. There can be no assurance that the
Company will be able to locate and hire such specialized personnel on acceptable
terms.
The industry in which the Company operates is highly competitive, rapidly
growing and the Company will have to compete with a multitude of similar
companies, possessing substantially greater financial, personnel, technological
and marketing resources. As discussed below, there is no assurance that the
Company will be able to compete in such an environment without additional
financing.
Capital and Sources of Liquidity.
--------------------------------
The Company expects to continue to incur significant capital expenses in
pursuing its plans to increase sales volume and to expand its product line. In
order for the Company to continue its operations at its existing levels, the
Company will require $675,000 of additional funds over the next twelve months.
Only through the factoring of its receivables can the Company generate funds to
maintain its daily operations. The construction industry in general does not use
factors. Funding for construction projects are generally done through lines of
credit with banks that advance moneys against contract at reasonable rates and
are equipped to deal with progress billing and percentage of completion
contracts. The Company has not been able to establish such a relationship with a
bank, and the penalties imposed by the factors for timing differences have
eroded the Company's profit on construction projects. This erosion can be seen
in the substantial increase in interest expense over the past two years. See
analysis of fiscal 1999 vs. fiscal 1998 for details.
Also, if additional capital is not obtained, there may be a reduction in
the Company's ability to accept new projects which may, in turn, have an effect
on the Company's ability to maintain its operations. Therefore the Company is
dependent on funds raised through equity or debt offerings, and through
receivable factoring. Additional financing may not be available on terms
favorable to the Company, or at all. If adequate funds are not available or are
not available on acceptable terms, the Company may not be able to execute its
business plan or take advantage of business opportunities. The ability of the
Company to obtain such additional financing and to achieve its operating goals
is uncertain. In the event that the Company does not obtain additional capital
or is not able to increase cash flow through the increase of sales, there is a
substantial doubt of its being able to continue as a going concern.
19
<PAGE>
YEAR ENDED DECEMBER 31, 1999 COMPARED WITH YEAR ENDED DECEMBER 31, 1998
-----------------------------------------------------------------------
The Company sustained net losses of $708,204 and $547,695 for the fiscal
years ending December 31, 1999 and December 31, 1998 respectively, for an
increase of $160,509 or 29%. As discussed in detail below, this loss was
attributable mainly to (1) increased legal and accounting fees incurred in
connection with the Company's Public Filing, (2) increased interest expense
incurred because progress billings on construction projects did not meet
factoring payment schedules and thus the Company was liable for large penalties
from the factor, and (3) increased travel expenses incurred in connection with
both the on-site running of construction jobs and the need of the Company's
principals to raise outside capital for continued operations of the business.
Selling, general and administrative expenses, and bad debt expense has
increased in line with the increased sales for fiscal 1999; however, included in
SG&A for 1999 are legal and accounting fees specifically attributable to the
preparation of the Company's Form 10-SB. These fees amounted to $215,685 in
1999. Throughout 1999 management has made a concerted effort to reduce SG&A. The
decreases in SG&A accounts that are directly related to the everyday running of
the business have been offset by the legal and accounting fees attributable to
the public offering. Management does not feel that these large costs will
continue in 2000. Depreciation and amortization expense has risen due to the
purchase of equipment needed for increased construction work. There are no
significant fluctuations in the depreciation and amortization accounts that
warrant any further discussion here. Changes in Payroll expense, Outside
services, Travel and Entertainment, and Interest expense will be discussed
below.
20
<PAGE>
OPERATIONAL RESULTS
-------------------
The following schedule compares the changes in major components of sales,
costs of sales, gross margin and expenses between 1999 and 1998.
RESULTS OF OPERATIONS RESTATED TO PROPERLY CLASSIFY EXPENSES AS COST OF GOODS
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percentage
Increase
1999 1998 (Decrease)
------------ ----------- -----------
<S> <C> <C> <C>
Net Sales
Chemicals $ 458,201 $ 363,376 26.00%
Textiles 343,813 301,088 14.20%
FireStop/FireFilm 1,650,892 1,395,432 18.30%
------------ ----------- -----------
2,452,906 2,059,896 19.00%
Cost of Goods
Chemicals 100,457 85,881 17.00%
Textiles 176,432 119,927 47.00%
FireStop/FireFilm 1,056,938 1,057,327 (3.00%)
------------ ----------- -----------
1,333,827 1,263,135 5.60%
Gross Margin
Chemicals 357,744 277,495 28.90%
Textiles 167,381 181,161 7.60%
FireStop/FireFilm 593,954 338,105 75.60%
------------ ----------- -----------
1,119,079 796,761 40.50%
SG&A 690,898 625,586 10.00%
Payroll 380,383 328,204 16.00%
Travel & Entertainment 189,038 78,537 140.00%
Depreciation & AmortiZation 68,592 39,286 74.60%
Bad Debt Expense 22,042 17,370 26.90%
------------ ----------- -----------
1,350,953 1,088,983 24.00%
Net Loss from Operations (231,874) (292,222) (21.00%)
Interest Expense 476,330 255,473 86.50%
------------ ----------- -----------
Net Loss $(708,204) $(547,695) 29.00%
Gross Profit
Chemicals 78% 85%
Textiles 49% 60%
FireStop/FireFilm 36% 24%
Combined 46% 39%
Percentage of Total Sales
Chemicals 19% 18%
Textiles 14% 14%
FireStop/FireFilm 67% 68%
Percentage of Gross Profit
Chemicals 33% 35%
Textiles 14% 23%
FireStop/FireFilm 53% 42%
</TABLE>
In 1998 the Company issued 5,859 shares to a consultant. The shares were
valued at $0.70 per share which is the price at which the Company issued other
shares in 1998. The consultant performed legal and investment banking services
for the Company.
The Company's sales of chemicals, textiles and firestop / fire film
products increased in 1999 over 1998. The sales increased because of the
Company's increased market and name recognition by potential customers. Sales
also increased due to the Company's expanded marketing efforts which includes
sales through representatives and the recommendation of the Company by
contractors familiar with the Company.
21
<PAGE>
ANALYSIS
--------
The Company's net sales derive from three divisions: (1)Chemical Sales, (2)
Textile Processing, and (3)Fire Stop/Fire Film construction projects. During
fiscal 1999, Chemical sales increased by 26%, Fire Stop/Fire Film increased by
18.3%, and Textile increased by 14.2% as a percentage of net sales 1999 vs.
1998. For 1999, the Chemical sales, Textile sales, and Fire Stop/Fire Film sales
have a gross profit of 78%, 49% and 36% respectively, and the Company has a
combined gross profit of 46%. Increased growth in gross profit beyond that
applicable to the percentage increase in net sales demonstrates the fact that
the Company is relying on increased volume in both Chemical and
FireStop/FireFilm as the chief product mix to create this higher combined gross
profit. Textile processing produced only 14% of 1999's gross profit, yet this
division does not consume a great deal of management's time. The Company intends
to concentrate on its Chemical division which has a much higher gross profit,
and the FireStop/FireFilm division which although it has a lower gross profit,
it is easy to contract and represents a small number of large dollar jobs.
However, the FireStop/FireFilm division does produce excessive cash needs early
in the fulfillment of the contract which forces the Company to rely heavily on
the Factors for financing the start up. Hence, if outside capital is not
obtained in order to eliminate the need for factoring, this division cannot
operate effectively without drastically increasing interest expense.
For 1999 Chemical process, Textile processing, and FireStop/Fire Film
contributed $357,744, $167,381, and $593,954 respectively to the companies total
gross profit of $1,119,079. The Company expects the sales of Chemicals and Fire
Stop/Fire Film to continue to increase and the Textile processing should remain
consistent by the end of the year 2000.
The Company's increase in gross profit has also been brought about by the
fact that the Company is becoming more experienced in the FireStop/Fire Film
construction business and is able to more effectively manage these large jobs.
As a result, the gross profit for FireStop/FireFilm increased from 24% in 1998
to 36% in 1999. The Company is also more effectively managing its purchase of
raw material for all divisions of the business which is also evident in the
decreased raw goods inventory.
As noted above, certain of the Company's Operating Expenses increased
substantially during 1999. Of the $111,000 increase in travel expenses,
approximately $58,000 is attributable to management's need to visit prospective
Fire Stop/Fire Film sites in order to compile proper bids, approximately $37,000
is attributable to management's constant involvement in attempts to raise
outside capital for the Company, and the balance is due to travel expenses
incurred in the normal course of business, especially for the marketing of the
Company's patented product, Fiberix 2000V. This product is packaged as an
aerosol application to the consumer. Management feels that the prospects for
this product are great; however, the Company cannot fund the necessary expenses
to bring this product to the market place. Hence, if outside capital is not
found, this product will have to remain dormant.
The single most significant cause of the net loss for 1999 is the increase
in interest expense of $220,857 or 86.5%. As noted earlier, the Company is now
engaging in the construction business which requires enormous outlays of capital
at the beginning of the project which is then reimbursed through standard
percentage of completion billing as the work is done. The Company has been
forced to work with Factors who are not really part of the construction
industry, and hence the factoring agreement contains harsh penalties should the
factored receivables age beyond a certain date. Because the Company is new to
this construction industry, certain dates were not met throughout the fiscal
year and penalties have been incurred by the Company. Interest including these
penalties for 1999 is $476,330 on a loan/line of credit base of approximately
$1,388,000. This creates an effective interest rate for 1999 of 34.31%. Had the
company been able to avoid these penalties, interest expense for 1999 would have
been $262,139, or 18.8%.
22
<PAGE>
The Company believes that the expenses for filing the Form 10-sb and travel
will not be the substantial burden in the year 2000 that they were in the year
1999. However, the Company will incur the same substantial interest rates in
2000 because the Company is still factoring its receivables. The Company
currently estimates that it would need a capital infusion of $675,000 over the
next twelve months in order to be able to avoid the excessive interest rates
discussed above. At this time, although the Company is exploring several avenues
of financing, no one answer to this problem has been found.
CAUTIONARY FORWARD - LOOKING STATEMENT
--------------------------------------
Statements included in this Management's Discussion and Analysis of
Financial Condition and Results of Operations, and in future filings by the
Company with the Securities and Exchange Commission, in the Company's press
releases and in oral statements made with the approval of an authorized
executive officer which are not historical or current facts are "forward-looking
statements" made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 and are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. The Company
wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. The following
important factors, among others, in some cases have affected and in the future
could affect the Company's actual results and could cause the Company's actual
financial performance to differ materially from that expressed in any
forward-looking statement: (i) the extremely competitive conditions that
currently exist in the three dimensional software development marketplace are
expected to continue, placing further pressure on pricing which could adversely
impact sales and erode profit margins; (ii) many of the Company's major
competitors in its channels of distribution have significantly greater financial
resources than the Company; and (iii) the inability to carry out marketing and
sales plans would have a materially adverse impact on the Company's projections.
The foregoing list should not be construed as exhaustive and the Company
disclaims any obligation subsequently to revise any forward-looking statements
to reflect events or circumstances after the date of such statements or to
reflect the occurrence of anticipated or unanticipated events.
23
<PAGE>
EXISTING FINANCING ARRANGEMENTS
-------------------------------
St. Martin Bank - Accounts Receivable Financing
-----------------------------------------------
In March 1997, the Company entered into a Merchant Services Agreement with
St. Martin Bank and Trust of St. Martinville, Louisiana. The note had a maturity
date of November 16, 1998. The maturity date of this note was extended and on
February 4, 1999, with a balance of $154,059.29, the loan was converted to a
7-year term loan under which the Company is to make monthly installment payments
of $2,600.57 per month for 84 months.
On April 17, 1999 the Company entered into a Purchase and Security
Agreement with Private Capital, Inc., located in Lafayette, Louisiana. Under the
terms of this agreement, the Company would sell certain qualified account
receivables to Private Capital, Inc., at a price equal to the net amount of the
acceptable account receivable, less a discount equal to 8.0% of the net amount
of the acceptable account receivable. At the time of purchase of such account
receivables by Private Capital, Private Capital shall pay to the Company the net
amount of the account receivable less the discount. Private Capital agrees to
rebate to the Company a sum equal to 2.0% on each account receivable that is
paid within 30 days. Any account that pays after 30 days will be charged the
full discount, plus any account purchased by Private Capital from the Company
unpaid for a period in excess of ninety (90) days from the date of said purchase
by Private Capital, the Company agrees to pay to Private Capital additional sums
equal to and calculated based on 2.0% for any part of a 30 day increment,
exceeding 60 days that Private Capital purchases said account receivable.
To secure the payment by the Company to Private Capital for any
indebtedness which may result from a charge back as a result of a delinquent or
non-paying account, the Company has granted to Private Capital a security
interest in all of the Company's inventory now or hereafter acquired by the
Company located at the Company's offices in Broussard, Louisiana, and all
accounts receivable, deposit accounts with Private Capital, equipment and
general intangibles and chattel papers of the Company and all proceeds thereof.
As additional security for the payment by the Company to Private Capital
for any indebtedness which may result from a charge back as a result of a
delinquent or non-paying account, the then acting officers of the Company,
Stephen F. Owens, Angela M. Raidl and Edward Friloux all executed guarantees.
24
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
--------------------
AMERICAN FIRE RETARDANT CORPORATION
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
C O N T E N T S
---------------
Page
----
Independent Auditors' Report ........................................... 26
Consolidated Balance Sheet ............................................. 27
Consolidated Statements of Operations .................................. 29
Consolidated Statements of Stockholders' Equity (Deficit) .............. 30
Consolidated Statements of Cash Flows .................................. 31
Notes to the Consolidated Financial Statements ......................... 34
25
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
American Fire Retardant Corporation and Subsidiary
San Diego, California
We have audited the accompanying consolidated balance sheet of American Fire
Retardant Corporation and Subsidiary as of December 31, 1999 and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for the years ended December 31, 1999 and 1998. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
American Fire Retardant Corporation and Subsidiary as of December 31, 1999 and
the consolidated results of their operations and their cash flows for the years
ended December 31, 1999 and 1998, in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company is a development stage company with no
significant operating results to date, which raises substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 2. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
Jones, Jensen & Company
Salt Lake City, Utah
April 5, 2000
26
<PAGE>
AMERICAN FIRE RETARDANT CORPORATION
AND SUBSIDIARY
Consolidated Balance Sheet
ASSETS
------
<TABLE>
<CAPTION>
December 31,
1999
-----------
<S> <C>
CURRENT ASSETS
Cash $ 3,408
Undeposited funds 9,821
Inventory (Note 1) 174,978
Accounts receivable, net (Notes 1 and 4) 539,197
-----------
Total Current Assets 727,404
-----------
PROPERTY AND EQUIPMENT (Notes 1 and 3) 240,180
-----------
OTHER ASSETS
Restricted cash (Note 4) 173,981
Intangible assets, net 42,500
Deposits and other assets 15,115
-----------
Total Other Assets 231,596
-----------
TOTAL ASSETS $ 1,199,180
===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
27
<PAGE>
AMERICAN FIRE RETARDANT CORPORATION
AND SUBSIDIARY
Consolidated Balance Sheet (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
December 31,
1999
-----------
<S> <C>
CURRENT LIABILITIES
Accounts payable $ 238,238
Accrued expenses (Note 10) 422,148
Unearned revenue 96,986
Shareholder loans (Note 6) 209,739
Notes payable, current portion (Note 5) 223,372
Capital leases, current portion (Note 7) 7,969
Line of credit (Note 4) 755,064
-----------
Total Current Liabilities 1,953,516
-----------
LONG-TERM LIABILITIES
Notes payable (Note 5) 199,825
Capital leases, long-term portion (Note 7) 36,855
-----------
Total Long-Term Liabilities 236,680
-----------
Total Liabilities 2,190,196
-----------
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $0.001 par value; 25,000,000
shares authorized, 2,349,647 shares issued and
outstanding 2,351
Additional paid-in capital 960,899
Accumulated deficit (1,954,266)
-----------
Total Stockholders' Equity (Deficit) (991,016)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 1,199,180
===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
28
<PAGE>
AMERICAN FIRE RETARDANT CORPORATION
AND SUBSIDIARY
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------
1999 1998
------------ ------------
<S> <C> <C>
NET SALES $ 2,452,906 $ 2,059,896
COST OF SALES 1,333,827 1,263,135
------------ ------------
GROSS MARGIN 1,119,079 796,761
------------ ------------
OPERATING EXPENSES
Selling, general and administrative 690,898 625,586
Payroll expense 380,383 328,204
Travel and entertainment 189,038 78,537
Depreciation and amortization expense 68,592 39,286
Bad debt expense 22,042 17,370
------------ ------------
Total Operating Expenses 1,350,953 1,088,983
------------ ------------
LOSS FROM OPERATIONS (231,874) (292,222)
------------ ------------
OTHER EXPENSES
Interest expense (476,330) (255,473)
------------ ------------
Total Other Expenses (476,330) (255,473)
------------ ------------
LOSS BEFORE INCOME TAXES (708,204) (547,695)
PROVISION FOR INCOME TAXES (Note 1) - -
------------ ------------
NET LOSS $ (708,204) $ (547,695)
============ ============
BASIC LOSS PER SHARE $ (0.30) $ (0.27)
============ ============
BASIC WEIGHTED AVERAGE SHARES 2,327,193 2,059,754
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
29
<PAGE>
AMERICAN FIRE RETARDANT CORPORATION
AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Common Stock Additional Stock
--------------------------- Paid-in Subscription Accumulated
Shares Amount Capital Receivable Deficit
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 2,018,333 $ 2,019 $ 732,966 $ (30,000) $ (698,367)
January 10, 1998: common
stock issued for cash at $4.20
per share 833 1 3,498 - -
March 2, 1998: common stock
issued for cash at $4.20 per
share 1,905 2 7,999 - -
May 14, 1998: common stock
issued for cash at $4.20 per
share 1,667 2 6,999 - -
Receipt of stock subscription - - - 30,000 -
December 20, 1998: common
stock issued for consulting
services valued at $0.35
per share 209,090 209 72,972 - -
December 20, 1998: common
stock issued for interest
expense valued at $0.35 per
share 46,833 47 16,345 - -
Contribution of capital by
shareholder for services
rendered - - 70,500 - -
Net loss for the year ended
December 31, 1998 - - - - (547,695)
------------ ------------ ----------- ------------
Balance, December 31, 1998 2,278,661 $ 2,280 $ 911,279 $ - $(1,246,062)
------------ ------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
30
<PAGE>
AMERICAN FIRE RETARDANT CORPORATION
AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
<TABLE>
<CAPTION>
Common Stock Additional Stock
--------------------------- Paid-in Subscription Accumulated
Shares Amount Capital Receivable Deficit
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1998 2,278,661 $ 2,280 $ 911,279 $ - $(1,246,062)
March 31, 1999: common stock
issued for reduction of related
party note payable and interest
valued at $0.70 per share 65,127 65 45,525 - -
September 22, 1999: common
stock issued for consulting
services valued at $0.70 per
share 5,859 6 4,095 - -
Net loss for the year ended
December 31, 1999 - - - - (708,204)
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1999 2,349,647 $ 2,351 $ 960,899 $ - $(1,954,266)
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
31
<PAGE>
AMERICAN FIRE RETARDANT CORPORATION
AND SUBSIDIARY
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (708,204) $ (547,695)
Adjustments to reconcile net loss to net cash
(used) by operating activities:
Common stock issued for services and interest 4,101 89,573
Depreciation and amortization 68,593 67,018
Bad debt expense 22,042 17,370
Capital contributed for services rendered - 70,500
Change in Assets and Liabilities:
(Increase) decrease in restricted cash (111,924) (62,117)
(Increase) decrease in accounts receivable (88,937) (56,192)
(Increase) decrease in deferred charges - (44,486)
(Increase) decrease in deposits 1,257 (6,683)
(Increase) decrease in inventory (34,483) (77,128)
Increase (decrease) in accounts payable 172,352 (21,308)
Increase (decrease) in accrued expenses 192,827 155,720
(Increase) decrease in undeposited funds (9,821) -
Increase (decrease) in unearned revenue 54,296 -
------------ ------------
Net Cash (Used) by Operating Activities (437,901) (415,428)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (82,170) (15,866)
------------ ------------
Net Cash (Used) by Investing Activities (82,170) (15,866)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock - 48,501
Proceeds from notes payable - related 115,726 129,000
Payments on notes payable - related (87,983) (85,300)
Proceeds from notes payable 292,643 382,590
Proceeds from lines of credit 336,195 -
Payment on lines of credit (9,367) (79,517)
Payment on notes payable (123,735) (47,891)
------------ ------------
Net Cash Provided by Financing Activities $ 523,479 $ 347,383
------------ ------------
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
32
<PAGE>
AMERICAN FIRE RETARDANT CORPORATION
AND SUBSIDIARY
Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------
1999 1998
------------ ------------
<S> <C> <C>
NET INCREASE (DECREASE) IN CASH $ 3,408 $ (83,911)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR - 83,911
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 3,408 $ -
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID FOR
Interest $ 334,745 $ 208,490
Income taxes $ - $ -
NON-CASH FINANCING ACTIVITIES
Stock issued for interest and conversion of note payable $ 45,590 $ -
Note payable issued for purchase of Formulation 238 $ - $ 45,000
Common stock issued for services and interest $ 4,101 $ 89,573
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
33
<PAGE>
AMERICAN FIRE RETARDANT CORPORATION
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
American Fire Retardant Corporation, a Nevada corporation,
("American Fire" or the "Company") is a fire protection company
that specializes in fire prevention and fire containment. The
Company is in the business of developing, manufacturing and
marketing a unique line of interior and exterior fire retardant
chemicals and provides fire resistive finishing services through
the Company's "Textile Processing Center" for commercial users.
The Company also specializes in designing new technology for
future fire resistive applications that are being mandated by
local, state and governmental agencies. As specialists in fire
safe systems, the Company is active in the construction industry
as sub-contractors for fire stop and fire film installations.
The Company originally commenced operations as American Fire
Retardant Corporation, a corporation organized under the laws of
the State of Florida ("AFRC Florida") on November 20, 1992.
On June 1, 1993, the Board of Directors of AFRC Florida
unanimously agreed to incorporate in the State of Louisiana, as a
separate and distinct entity having the same shareholders of AFRC
Florida.
On June 29, 1993, American Fire Retardant Corporation, a Louisiana
Corporation ("AFRC Louisiana") was formed. AFRC Louisiana was
initially authorized to issue a total of 1,000 shares of common
stock, without par value.
On March 4, 1994, AFRC Florida qualified to do business in the
State of California under the name American Fire Retardant
Corporation.
On June 15, 1995, by unanimous consent of the shareholders of both
AFRC Florida an AFRC Louisiana, it was adopted that a new
corporation be formed in the State of Wyoming under the name
American Fire Retardant Corporation ("AFRC Wyoming"). The new
Wyoming corporation, AFRC Wyoming would acquire all the issued and
outstanding shares from the shareholders of AFRC Florida and AFRC
Louisiana, in exchange for newly issued shares of AFRC Wyoming,
whereby AFRC Florida and AFRC Louisiana would be wholly-owned
subsidiaries of AFRC Wyoming.
On July 24, 1995, AFRC Wyoming applied for and received approval
from the State of Wyoming to be domesticated in Wyoming without
any break in the corporate existence.
The Board of Directors of AFRC Wyoming unanimously resolved on
December 30, 1996 pursuant to Section 17-6-1002 of the Wyoming
Business Corporation Act, to amend the Articles of Incorporation
to increase its authorized capital from 1,000 shares of common
stock to an unlimited number of shares of common stock, without
par value.
Accordingly, in January 1998, AFRC Wyoming formed AFRC Nevada
(i.e. the present Company). AFRC Nevada is authorized to issue a
total of 25,000,000 shares of common stock, $0.001 par value.
34
<PAGE>
AMERICAN FIRE RETARDANT CORPORATION
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
December 31, 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
a. Organization (Continued)
The Board of Directors of AFRC Wyoming unanimously resolved on
September 3, 1998 to effect a one-for-twelve (1-for-12) reverse
stock split of all issued and outstanding shares of the common
stock of the Company as of September 1, 1998. At a special meeting
of the shareholders of the Company held on September 29, 1998, the
shareholders approved the reverse stock split.
On March 17, 1999, at a special meeting of the shareholders of the
Company, the shareholders authorized the restructuring of the
Company to simplify its corporate structure by:
1) Merging its wholly-owned subsidiary, AFRC Louisiana into AFRC
Wyoming, whereupon the separate corporate existence of AFRC
Louisiana would cease;
2) Merging its wholly-owned subsidiary, AFRC Florida into AFRC
Wyoming, whereupon the separate corporate existence of AFRC
Florida would cease;
The shareholders further authorized the Company to change its
domicile to the State of Nevada through the merger of the Company
(i.e., AFRC Wyoming) with and into AFRC Nevada, with no change in
the nature of the business or management of the Company and no
dilution to the shareholders or change in the shareholdings of the
Company.
The Merger of AFRC Louisiana, with and into its parent AFRC
Wyoming was completed on March 25, 1999.
The Merger of AFRC Florida, with and into its parent AFRC Wyoming
was completed on March 25, 1999.
On March 31, 1999, as the final step of the restructuring of the
Company, the merger of AFRC Wyoming, the parent with and into AFRC
Nevada, for the sole purpose of changing the domicile of the
Company from that of Wyoming to that of Nevada was completed.
b. Accounting Method
The Company's consolidated financial statements are prepared using
the accrual method of accounting. The Company has elected a
December 31 year end.
c. Cash and Cash Equivalents
Cash equivalents include short-term, highly liquid investments
with maturities of three months or less at the time of
acquisition.
35
<PAGE>
AMERICAN FIRE RETARDANT CORPORATION
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
December 31, 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
d. Accounts Receivable
Accounts receivable are shown net of an allowance for doubtful
accounts of $16,461 at December 31, 1999.
e. Basic Loss Per Share
The computations of basic loss per share of common stock are based
on the weighted average number of shares outstanding during each
period presented.
For the Year Ended
December 31, 1999
------------------------------------
Loss Shares Per Share
(Numerator) (Denominator) Amount
------------- -------------- ------------
Net loss $ (708,204) 2,327,193 $ (0.30)
============= ============== ============
For the Year Ended
December 31, 1998
------------------------------------
Loss Shares Per Share
(Numerator) (Denominator) Amount
------------- -------------- ------------
Net loss $ (547,695) 2,059,754 $ (0.27)
============= ============== ============
f. Principles of Consolidation
The consolidated financial statements include those of American
Fire Retardant Corporation and its wholly-owned subsidiary,
American Fire Retardant Corporation (California) for 1998. In
1999, all of the companies were merged into a Nevada corporation.
All significant intercompany transactions and accounts have been
eliminated in the consolidation. Accordingly, the 1998 financial
statements are consolidated, and the 1999 financial statements are
not.
36
<PAGE>
AMERICAN FIRE RETARDANT CORPORATION
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
December 31, 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
g. Property and Equipment
Property and equipment are stated at cost. Expenditures for small
tools, ordinary maintenance and repairs are charged to operations
as incurred. Major additions and improvements are capitalized.
Leasehold improvements are being amortized over their estimated
useful lives. Depreciation is computed using the straight-line and
accelerated methods as follows:
Machinery and equipment 4-5 years
Vehicles 5 years
Building 39.5 years
Furniture and fixtures 5 years
Leasehold improvements 7 years
Depreciation expense for the years ended December 31, 1999 and
1998 was $38,593 and $33,433, respectively.
h. Revenue Recognition
Revenue is recognized using the percentage of completion method
for fire retardant and prevention projects. The amount of revenue
recognized at year-end is the portion of the total contract price
that the cost expended to date bears to the anticipated final
total cost, based on current estimates of costs to complete. It is
not related to the progress billings to the customers. At the time
a loss on a contract becomes know, the entire amount of the
estimated loss is recognized in the financial statements.
Additionally, the Company recognizes revenue upon delivery of fire
prevention materials.
i. Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
j. Concentrations of Risk
Cash
----
At times, the Company has demand deposits in excess of amounts
protected by FDIC insurance.
37
<PAGE>
AMERICAN FIRE RETARDANT CORPORATION
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
December 31, 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
j. Concentrations of Risk (Continued)
Accounts Receivable
-------------------
Credit losses, if any, have been provided for in the financial
statements and are based on management's expectations. The
Company's accounts receivable are subject to potential
concentrations of credit risk. The Company does not believe that
it is subject to any unusual, or significant risk in the normal
course of its business.
Sales
-----
The Company had one customer in 1999 which accounted for 10% of
the net sales.
k. Provision for Income Taxes
No provision for income taxes has been accrued because the Company
has net operating loss carryovers. The net operating loss
carryforwards of approximately $1,800,000 at December 31, 1999,
expire in 2019. No tax benefit has been reported in the
consolidated financial statements because the Company is uncertain
if the carryforwards will expire unused. Accordingly, the
potential tax benefits are offset by a valuation account of the
same amount.
l. Inventory
Inventories are stated at the lower of cost or market value using
the first-in, first-out method of valuation. Inventories consisted
of $158,414 of finished goods and $16,564 of raw materials.
m. Advertising
The Company expenses advertising costs as they are incurred.
n. Deferred Charges
Formulation 238
---------------
In November 1998, the Company acquired Formulation 238 for
$45,000. The cost of $45,000 is being amortized over a five year
life and is shown in the deferred charges net of accumulated
amortization of $10,500 at December 31, 1999.
38
<PAGE>
AMERICAN FIRE RETARDANT CORPORATION
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
n. Deferred Charges (Continued)
Fabric Protection
-----------------
In 1995, the Company purchased various pieces of equipment and
customer lists for $40,000. The amount is being amortized over a 5
year period and is shown net of $32,000 of accumulated
amortization at December 31, 1999 as part of the deferred charges.
Thorosheen
----------
In July 1997, the Company purchased various customer lists and
technologies for $40,000. The amount was amortized over a 2 year
period and is shown net of $40,000 of accumulated amortization.
Amortization expense for the three deferred charges for the years
ended December 31, 1999 and 1998 was $30,000 and $33,585,
respectively.
o. Change in Accounting Principle
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" which requires
companies to record derivatives as assets or liabilities, measured
at fair market value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending
on the use of the derivative and whether it qualifies for hedge
accounting. The key criterion for hedge accounting is that the
hedging relationship must be highly effective in achieving
offsetting changes in fair value or cash flows. SFAS No. 133 is
effective for all fiscal quarters of fiscal years beginning after
June 15, 1999. The adoption of this statement had no material
impact on the Company's financial statements. The Company adopted
SFAS No. 133 prior to the issuance of SFAS No. 137 which pushes
the effective date back to fiscal years beginning after June 15,
2000.
p. Reverse Stock Split
In September 1998, the Board of Directors authorized a 1-for-12
reverse stock split. All references to common stock have been
retroactively restated to reflect the reverse stock split.
39
<PAGE>
AMERICAN FIRE RETARDANT CORPORATION
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 2 - GOING CONCERN
These consolidated financial statements are presented on the basis
that the Company is a going concern. Going concern contemplates
the realization of assets and the satisfaction of liabilities in
the normal course of business over a reasonable length of time.
The Company has an accumulated deficit which raises substantial
doubt about its ability to continue as a going concern.
Management is presently pursuing plans to increase sales volume,
reduce administrative costs, and improve cash flows as well as
obtain additional financing through stock offerings. The ability
of the Company to achieve its operating goals and to obtain such
additional finances, however, is uncertain.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31,
1999:
December 31,
1999
-----------
Machinery and equipment $ 184,302
Vehicles 93,605
Building 90,733
Land 10,000
Furniture and fixtures 21,652
Leasehold improvements 5,324
-----------
405,616
Less accumulated depreciation (165,436)
-----------
$ 240,180
===========
The Company signed an oil, gas and mineral lease on October 31,
1997 with a Texas corporation on the land in Broussard, Louisiana.
The lease is for the initial term of 3 years with minimum annual
rents of $200 per year. The Company has not received any royalty
revenue in the years ended December 31, 1999 or 1998.
NOTE 4 - LINE OF CREDIT
The Company has entered into a purchase and security agreement
with Private Capital, Inc. (Private Capital) wherein the Company
may take advances against its accounts receivables. The Company is
accounting for the factoring agreement as financing because it
does not meet the requirements of SFAS No. 125. The balance due
Private Capital at December 31, 1999 was $755,064. The Company is
required to maintain a reserve account balance of 22% of the total
advances. The reserve account balance at December 31, 1999 was
$173,981. Private Capital charges the Company an 8% discount on
all receivables purchased.
40
<PAGE>
AMERICAN FIRE RETARDANT CORPORATION
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 5 - NOTES PAYABLE
Notes payable at December 31, 1999 consisted of the following:
<TABLE>
<CAPTION>
December 31,
1999
------------
<S> <C>
Note payable to a bank secured by property and equipment, interest
at 8.5% on the outstanding balance, principal and interest
payments of $925, due monthly, maturing December
2006. $ 58,557
Note payable to a bank, secured by property accruing
interest at 7.75%, principal and interest payments of
$867 due monthly, maturing September 2001. 16,768
Note payable to a bank, secured by equipment accruing interest at
12.5%, principal and interest payments of $503,
due April 15, 2001. 7,796
Notes payable to a bank, secured by vehicles, accruing interest at
8.9%, principal and interest payments of $866,
maturing October 2001. 16,838
Note payable to St. Martin Bank bearing interest at 9.75%,
secured by building and due on April 20, 2006. 146,238
Note payable to an individual, unsecured, interest rate of
72% if the Company defaults. Principal and interest payments
of $12,500 due monthly, maturing August 2000. 100,000
Note payable to suppliers, secured by equipment,
interest at 10%, due on demand. 77,000
------------
Total notes payable 423,197
Less: current portion (223,372)
------------
Long-term notes payable $ 199,825
============
</TABLE>
41
<PAGE>
AMERICAN FIRE RETARDANT CORPORATION
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
December 31, 1999
<TABLE>
<CAPTION>
NOTE 5 - NOTES PAYABLE (Continued)
Maturities of long-term debt are as follows:
Year ending December 31:
<S> <C>
2000 $ 223,372
2001 43,418
2002 29,292
2003 32,427
2004 34,947
Thereafter 59,741
------------
Total $ 423,197
============
NOTE 6- SHAREHOLDER LOANS
December 31,
1999
------------
Note payable to shareholder dated November 3, 1996 and February 3,
1997, interest imputed at 10%, unsecured,
due on demand. $ 38,000
Note payable to shareholder dated October 28, 1998, bearing
interest at 6.00%, guaranteed by the president of the Company,
due on demand. 75,870
Note payable to shareholder dated October 3, 1997, bearing
interest at 10.50%, secured by Company stock and due
August 1999. 95,869
------------
$ 209,739
============
</TABLE>
All amounts are due on demand and are classified as current liabilities.
42
<PAGE>
AMERICAN FIRE RETARDANT CORPORATION
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
December 31, 1999
<TABLE>
<CAPTION>
NOTE 7 - CAPITAL LEASES
Equipment payments under capital leases as of December 31, 1999 is
summarized as follows:
Year Ended
December 31,
<S> <C>
2000 $ 19,997
2001 19,997
2002 19,997
2003 11,665
------------
Total minimum lease payments 71,656
Less interest and taxes (26,832)
------------
Present value of net minimum lease payments 44,824
Less current portion (7,969)
------------
Long-term portion of capital lease obligations $ 36,855
============
</TABLE>
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Leases
------
The Company leases office space under a non-cancelable operating
lease. The lease calls for monthly payments of $4,155 and expires
May 31, 2002. The Company has leased an apartment in Louisiana
which calls for monthly payments of $925 per month and expires on
April 30, 1999. Future minimum lease payments are as follows:
Amount
------------
2000 $ 49,860
2001 49,860
2002 24,930
------------
Total $ 124,650
============
Rent expense for the years ended December 31, 1999 and 1998 was
$63,020 and $63,244, respectively.
43
<PAGE>
AMERICAN FIRE RETARDANT CORPORATION
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 8 - COMMITMENTS AND CONTINGENCIES (Continued)
Employment Contract
-------------------
The Company has an employment contract with a key employee. Under
the terms of this contract, the Company is committed to paying
this individual $3,500 in salary per month through November 1,
2003. Salary expense under this contract for the years ended
December 31, 1999 and 1998 was $38,500 and $38,500, respectively.
This contract is currently in dispute.
Vehicle and Equipment Operating Leases
--------------------------------------
The Company has leased two vehicles under operating leases which
call for combined monthly payments of $1,050 per month. The
operating leases expire in 2000.
Royalty Agreement
-----------------
The Company has committed to paying an individual $0.75 per
gallon in royalties on the sale of Fyberix 2000V. The royalties
are payable monthly. Royalty expense for the years ended December
31, 1998 and 1997 was $-0- and $-0-, respectively, as there have
been no sales of Fyberix 2000V.
NOTE 9 - STOCK ISSUANCES
In January, March and May 1998, the Company issued 4,405 shares
of common stock at $4.20 per share for cash.
On December 20, 1998, the Company issued 209,090 shares of common
stock valued at $0.35 per share for consulting services.
On December 20, 1998, the Company issued 46,833 shares of common
stock valued at $0.35 per share for interest expense.
On March 31, 1999, the Company issued 65,127 shares of common
stock valued at $0.70 per share for reduction in a related party
note payable and interest.
On September 22, 1999, the Company issued 5,859 shares of common
stock valued at $0.70 per share for consulting services.
Currently, the Company has no established market for its common
stock. Accordingly, the stock issuances are valued at the fair
market value of the goods or services received.
44
<PAGE>
AMERICAN FIRE RETARDANT CORPORATION
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 10 - ACCRUED EXPENSES
Accrued expenses consisted of the following at December 31, 1999:
Contract liability $ 30,000
Payroll taxes - federal and state 359,300
Accrued interest 12,791
Sales tax payable 20,057
------------
$ 422,148
============
The Company is delinquent in paying payroll taxes. Interest and
penalties have been accrued on the payroll taxes and are included
in the $359,300 liability. The Company has been current in their
payments from June 1998 to date and, as they are able to, are
making additional monthly payments on the delinquent taxes.
45
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
------------------------------------------------------------------------
There has been no change of the independent auditors of the Company and
there are no disagreements with such independent auditors.
PART III.
---------
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16 (a) OF THE EXCHANGE ACT
------------------------------------------------------------------------
See Item 11 for information on the beneficial ownership of the Company's
securities.
The directors and executive officers of the Company are as follows:
(a) Identity of Directors and Executive Officers.
Name and Address Age Position Term Served Since
Stephen F. Owens 40 President, CEO, 1 Year 1992
1951 Tavern Road and Director
Alpine, California 91901
Angela M. Raidl 39 Vice President, 1 Year 1992
1951 Tavern Road Treasurer,
Alpine, California 91901 Secretary and Director
Each of the persons listed in the above table possesses sole investment
power and sole voting power over the shares set forth in the above table.
There are no arrangements or understandings between any of the directors or
executive officers, or any other person or persons pursuant to which they were
selected as directors and/or officers.
Stephen F. Owens - Chairman of the Board of Directors, Chief Executive
Officer and President. Mr. Owens, a native of New York and a resident of
California, has served as Chief Executive Officer and President since the
company's inception. Mr. Owens has 13 years experience in the fire retardant
industry, specializing in product evaluations, sales and marketing. Mr. Owens is
able to quickly recognize future market requirements and develop effective short
range action and long term plans to capitalize on new opportunities. Mr. Owens
was Vice President of Sales for International Research Center from 1987 to 1989
prior to founding American Fire Retardant Corporation. He is a member of the
National Fire Protection Association. Mr. Owens co-authored along with Mr.
Edward E. Friloux the Fire Retardant Applicator's Manual, which has been under
copyright protection with the Library of Congress Number TX 3-878-798 since 11
August 1994. Prior to his entry into the fire retardant industry, Mr. Owens
served in the United States Army.
Angela M. Raidl - Vice President, Treasurer, Secretary and a Director. Ms.
Raidl, a native of Louisiana and a resident of California, has served as officer
and director since the company's inception. Ms. Raidl has 11 years experience in
the fire retardant industry, specializing in the management and administration
of the day to day responsibilities of the company, including training all
clerical staff, cash flow management, receivables, payables, payroll, purchasing
and personnel. Ms. Raidl also heads the operations division of American Fire's
Fabric Treatment Division, monitoring quality control, researching new ways of
increasing production, in addition to soliciting new accounts for this division.
Ms. Raidl has held administrative positions for 19 years. She attended Nicholls
State University and the University of Southwestern Louisiana, studying Business
Administration at both. Ms. Raidl is a Licensed Certified Applicator by the
State of California and is a member of the National Fire Protection Association.
46
<PAGE>
Other Key Advisors and Consultants
----------------------------------
(1) Directorships
No Director of the Company or person nominated or chosen to become a
director holds any other directorship in any company with a class of securities
registered pursuant to section 12 of the Exchange Act or subject to the
requirements of section 15(d) of such Act or any other company registered as an
investment company under the Investment Company Act of 1940.
(a) Identity of Significant Employees.
The Company has one employee, Mr. Bruce Raidl, who is not an executive
officer, but is expected to make a significant contribution to the Company's
business. It is expected that current members of management and the Board of
Directors will be the only persons whose activities will be material to the
Company's operations. Members of management are the only persons who may be
deemed to be promoters of the Company
(b) Family Relationships.
Stephen F. Owens, the President and Chairman of the Board is the husband of
Angela M. Raidl, the Vice President, Treasurer, Secretary and a director.
Additionally, Bruce Raidl, an employee of the Company is the brother of Angela
Raidl. Other than the husband-wife relationship of Mr. Owens and Mrs. Raidl, and
the brother-sister relationship of Ms. Raidl and Mr. Raidl, there is no family
relationship between any director or executive officer of the Company.
(c) Involvement in Certain Legal Proceedings
During the past five years, no present or former director, executive
officer or person nominated to become a director or an executive officer of the
Company:
(1) was a general partner or executive officer of any business against
which any bankruptcy petition was filed, either at the time of the bankruptcy or
two years prior to that time;
(2) was convicted in a criminal proceeding or named subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses);
(3) was subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking activities; or,
(4) was found by a court of competent jurisdiction (in a civil action), the
Securities and Exchange Commission or the Commodity Futures Trading Commission
to have violated a federal or state securities or commodities law, and the
judgment has not been reversed, suspended or vacated.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
--------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"),requires the Company's directors and executive officers, and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file with the SEC initial reports of ownership and reports
of changes in ownership of Common Stock and other equity securities of the
Company. Officers, directors and greater than ten percent beneficial owners are
required by SEC regulation to furnish the Company with copies of all reports
they file under Section 16(a).
47
<PAGE>
To the Company's knowledge, based solely on its review of the copies of
such reports furnished to the Company and written representation that no other
reports were required, with respect to the year ended December 31,1999, all
Section 16(a) filing requirements applicable to each person who, at any time
during the fiscal year ended December 31,1999, was an officer, director and
greater than ten percent beneficial owner, were complied with.
ITEM 10. EXECUTIVE COMPENSATION
----------------------
The following table sets forth the aggregate compensation paid by the
Company for services rendered during the periods indicated:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
---------------------------
Long Term Compensation
--------------------------------------------------
Annual Compensation Awards Payouts
-----------------------------------------------------------------------------------------------
Securities All
Other Underlying Other
Annual Restricted Options/ LTIP Compen-
Name and Year or Compen- Stock SAR's Payouts sation
Principal Period Salary Bonus sation) Awards (#) ($) ($)
Position Ended ($) ($) ($)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Angela M. Raidl 1999 $72,000.00 0 0 0 0 0 0
Vice President 1998 $41,346.00 0 0 0 0 0 0
CFO and Secretary
Stephen F. Owens 1999 $25,500.00 0 0 0 0 0 0
President and 1998 $ 1,500.00 0 0 0 0 0 0
CEO
Bruce Raidl 1999 $60,000.00 0 0 0 0 0 0
Employee 1998 $50,000.00 0 0 0 0 0 0
Edward Friloux 1999 $11,200.00 0 0 0 0 0 0
Employee 1998 $32,200.00 0 0 0 0 0 0
</TABLE>
EMPLOYMENT CONTRACTS/STOCK INCENTIVE PLANS
------------------------------------------
Management Employment Agreements and Compensation
No employee agreements were entered into in 1999. The Company previously
entered into written employment agreements effective October 7, 1997 with
several key members of the management team, which included Stephen F. Owens,
Angela M. Raidl, Bruce E. Raidl and Edward E. Friloux, Sr. Each of these
employment agreements established a base monthly salary for the Company's
officers, which base salary was to commence as of February 1, 1998. Prior to
these employment agreements becoming effective, all of the above individuals
mutually agreed that the agreements were null and void and of no force or
effect. All of the above individuals have executed written agreements canceling
such employment agreement with the exception of Mr. Edward Friloux who has since
refused to cancel his employment agreement. On April 28, 1999 the Company
terminated Mr. Friloux for failure to report to work and failure of performance
of his duties.
48
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners
The following table sets forth security ownership information (on a
Post-reverse split adjusted basis) as of the close of business on December 31,
1999, for any person or group, known by the Company to own more than five
percent (5%) of the Company's voting securities.
The following table sets forth security ownership information as of the
close of business on December 31, 1999, for any person or group, known by the
Company to own more than five percent (5%) of the Company's voting securities.
Title of Name of Amount of Percent
Class Beneficial Owner Ownership of Class
------------ ---------------- --------- --------
Common Stock Angela M. Raidl 1,016,291 43.36%
1951 Tavern Road
Alpine, CA 91901
Common Stock Edward E. Friloux 175,257 7.47%
117 Red Barn Drive
Carenco, LA 70520
Common Stock Bruce E. Raidl 166,667 7.11%
12139 Valhalla Drive
Lakeside, CA 92040
Common Stock David Ian Foster 157,000 6.69%
PO Drawer 5127
Lake Charles, LA 70606
Common Stock Richard Rosenberg 130,211 5.55%
901 Foxpointe Circle
Delray Beach, FL 33445
Angela M. Raidl has sole investment power and sole voting power over the
shares set forth in the above table.
(b) Security Ownership of Management
The following table sets forth security ownership information (on a
Post-reverse split adjusted basis, as of the close of business on April 19,
1999, for any director, executive officer or group of the Company's voting
securities:
Title of Name of Amount of Percent
Class Beneficial Owner Ownership of Class
------------ ---------------- --------- --------
Common Stock Angela M. Raidl 1,016,291 43.36%
1951 Tavern Road
Alpine, CA 91901
Common Stock Stephen F. Owens 0 0.0%
1951 Tavern Road
Alpine, California 91901
Common Stock All Directors & Officers
as a Group (2 Persons) 1,016,291 43.36%
49
<PAGE>
(c) Change in Control.
There are no present arrangements or pledges of the Company's securities
which may result in a change in control of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
Transactions With Management And Others
---------------------------------------
There have been several significant transactions entered into between the
Company and its management during the course of its development. Each of the
officers and directors of the Company may engage in other businesses, either
individually or through partnerships or corporations in which they have an
interest, hold an office or serve on boards of directors. Certain conflicts of
interest may arise between the Company and its officers and directors. All of
the officers and directors may have other business interests to which they
devote their time.
The Company attempts to resolve any such conflicts of interest in favor of
the Company. The officers and directors of the Company are accountable to it and
its shareholders as fiduciaries, which requires that such officers and directors
exercise good faith and integrity in handling the Company's affairs. A
shareholder may be able to institute legal action on behalf of the Company or on
behalf of itself and all other similarly situated shareholders to recover
damages or for other relief in cases of the resolution of conflicts in any
manner prejudicial to the Company.
During the course of the previous three years, several officers and
directors of the Company, as set forth below have received shares of the
Company's Common Stock in exchange for their services to the Company and in lieu
of cash compensation to which they would have been entitled.
On April 1, 1997 the Company issued 3,333 post-reverse split adjusted
shares of restricted Common Stock to John E. Domingue, a former director and
officer of the Company exchange for his services with organization the business
and the development of the business plan. These shares were issued at $0.84 per
share on a post-reverse split adjusted basis. The securities were issued
pursuant to an exemption from registration provided under Section 4(2) of the
Securities Act of 1933. Mr. Domingue was, at the time of the issuance of said
shares, an officer and director of the Company and possessed all information
about the Company to make an informed investment decision.
The Company has borrowed cash for working capital from certain officers and
directors as well as other shareholders of the Company. Each loan has been
documented by the Company's promissory notes, which are generally described
below, and all loans are current. The Company believes that the terms of all of
the loan transactions described herein are based upon terms which are no more or
less favorable than terms which would have been agreed to by persons
unaffiliated with the Company and that all of the transactions set forth below
are otherwise fair to the Company and its shareholders:
Richard Rosenberg Note Consolidation and Conversion. On March 31, 1999, the
Company entered into an agreement with Richard Rosenberg, a shareholder and
former director of the Company, which agreement was amended on April 12, 1999,
under which Mr. Rosenberg agreed to the convert $34,411.45 of the $77,545.79
debt owing to him by the Company, into 49,159 post-split shares of restricted
Common Stock at the rate of $0.70 per share. The price per shares was determined
through the negotiations between the Company and Mr. Rosenberg as part of the
negotiations in resolving the consolidation of and conversion of the notes owing
to Mr. Rosenberg as set forth below.
50
<PAGE>
Mr. Rosenberg further agreed to consolidate all notes and loans made by him
to the Company into one note with a principal balance of $43,134.34, with
interest thereon at the rate of 6.0% interest. The Company will make month
payments of $2,500 per month for 18 months commencing on May 1, 1999.
In consideration for Mr. Rosenberg's agreement to convert a portion of his
debt to common stock and consolidate the note and loans made by him to the
Company into one note with a reduced interest rate of 6.0%, the Company agreed
to issue Mr. Rosenberg 15,968 shares of restricted common stock.
There have been no preliminary contact or discussion by any of the
Company's officers, directors, promoters, their affiliates or associates with
any representatives of the owners of any business or company regarding the
possibility of any acquisitions or mergers transactions, and there are no
present plans, proposals, arrangements or understandings with any person or
company regarding the possibility of any acquisitions or merger transaction.
Transactions With Promoters
---------------------------
There have been no material transactions, series of similar transactions,
currently proposed transactions, or series of similar transactions, to which the
Company or any of its subsidiaries was or is to be a party, in which the amount
involved exceeded $60,000 and in which any promoter or founder, or any member of
the immediate family of any of the foregoing persons, had a material interest.
51
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ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) List of Exhibits attached or incorporated by referenced pursuant to
Item 601 of Regulation S-B.
Exhibit
Number Description*
------- -----------
2.1(a)(+) Certificate of Merger from the State of Wyoming regarding Merger
of AFRC Louisiana with and into AFRC Wyoming. (Incorporated by from
the Registrant's Registration Statement on Form 10-SB filed June 4,
1999, Commission File No. 000-26261)
2.1(b)(+) Certificate of Merger from the State of Louisiana regarding
Merger of AFRC Louisiana with and into AFRC Wyoming. (Incorporated by
from the Registrant's Registration Statement on Form 10-SB filed June
4, 1999, Commission File No. 000-26261)
2.1(c)(+) Articles of Merger regarding Merger of AFRC Louisiana with and
into AFRC Wyoming. (Incorporated by from the Registrant's Registration
Statement on Form 10-SB filed June 4, 1999, Commission File No.
000-26261)
2.1(d)(+) Acquisition Agreement and Plan of Merger regarding Merger of AFRC
Louisiana with and into AFRC Wyoming. (Incorporated by from the
Registrant's Registration Statement on Form 10-SB filed June 4, 1999,
Commission File No. 000-26261)
2.2(a)(+) Certificate of Merger from the State of Florida regarding Merger
of AFRC Florida with and into AFRC Wyoming. (Incorporated by from the
Registrant's Registration Statement on Form 10-SB filed June 4, 1999,
Commission File No. 000-26261)
2.2(b)(+) Certificate of Merger from the State of Wyoming regarding Merger
of AFRC Louisiana with and into AFRC Wyoming. (Incorporated by from
the Registrant's Registration Statement on Form 10-SB filed June 4,
1999, Commission File No. 000-26261)
2.2(c)(+) Florida Articles of Merger regarding Merger of AFRC Louisiana
with and into AFRC Wyoming. (Incorporated by from the Registrant's
Registration Statement on Form 10-SB filed June 4, 1999, Commission
File No. 000-26261)
2.2(d)(+) Wyoming Articles of Merger regarding Merger of AFRC Louisiana
with and into AFRC Wyoming. (Incorporated by from the Registrant's
Registration Statement on Form 10-SB filed June 4, 1999, Commission
File No. 000-26261)
2.2(e)(+) Acquisition Agreement and Plan of Merger regarding Merger of AFRC
Florida with and into AFRC Wyoming. (Incorporated by from the
Registrant's Registration Statement on Form 10-SB filed June 4, 1999,
Commission File No. 000-26261)
2.3(a)(+) Articles of Merger regarding Merger regarding Merger of AFRC
Wyoming with and into AFRC Nevada (the "Company") to change the
Domicile of the Company. (Incorporated by from the Registrant's
Registration Statement on Form 10-SB filed June 4, 1999, Commission
File No. 000-26261)
2.3(b)(+) Acquisition Agreement and Plan of Merger regarding Merger of AFRC
Wyoming with and into AFRC Nevada (the "Company") to change the
Domicile of the Company. (Incorporated by from the Registrant's
Registration Statement on Form 10-SB filed June 4, 1999, Commission
File No. 000-26261)
52
<PAGE>
3.1(+) Articles of Incorporation of American Fire Retardant Corp. filed on
January 20, 1998. (Incorporated by from the Registrant's Registration
Statement on Form 10-SB filed June 4, 1999, Commission File No.
000-26261)
3.2(+) Restated By-laws of American Fire Retardant Corp. (Incorporated by
from the Registrant's Registration Statement on Form 10-SB filed June
4, 1999, Commission File No. 000-26261)
3.3(+) Qualification of American Fire Retardant Corp., as a Foreign
Corporation in the State of Florida. (Incorporated by from the
Registrant's Registration Statement on Form 10-SB filed June 4, 1999,
Commission File No. 000-26261)
3.4(+) Qualification of American Fire Retardant Corp., as a Foreign
Corporation in the State of Louisiana. (Incorporated by from the
Registrant's Registration Statement on Form 10-SB filed June 4, 1999,
Commission File No. 000-26261)
3.5(+) Statement and Designation of American Fire Retardant Corp., as a
Foreign Corporation in California. (Incorporated by from the
Registrant's Registration Statement on Form 10-SB filed June 4, 1999,
Commission File No. 000-26261)
3.6(+) Qualification of American Fire Retardant Corp., as a Foreign
Corporation in the State of Colorado. (Incorporated by from the
Registrant's Registration Statement on Form 10-SB filed June 4, 1999,
Commission File No. 000-26261)
3.7(+) Qualification of American Fire Retardant Corp., as a Foreign
Corporation in the State of Mississippi. (Incorporated by from the
Registrant's Registration Statement on Form 10-SB filed June 4, 1999,
Commission File No. 000-26261)
10.1(a)(+) Letter of Intent Between American Fire Retardant Corp., and
Fabritek Industries, LLC. (Incorporated by from the Registrant's
Registration Statement on Form 10-SB filed June 4, 1999, Commission
File No. 000-26261)
10.1(b)(+) Amendment to Letter of Intent Between American Fire Retardant
Corp., and Fabritek Industries, LLC. (Incorporated by from the
Registrant's Registration Statement on Form 10-SB filed June 4, 1999,
Commission File No. 000-26261)
10.2(+) Royalty Agreement between American Fire Retardant Corp., and Norman
O. Houser. (Incorporated by from the Registrant's Registration
Statement on Form 10-SB filed June 4, 1999, Commission File No.
000-26261)
10.3(+) Sale, Assignment and Assumption Agreement between American Fire
Retardant Corp. and Patrick L. Brinkman with regard to the purchase of
manufacturing rights to De-Fyre X-238. (Incorporated by from the
Registrant's Registration Statement on Form 10-SB filed June 4, 1999,
Commission File No. 000-26261)
10.4(a)(+) Merchant Service Agreement between American Fire Retardant
Corp., and St. Martin Bank. (Incorporated by from the Registrant's
Registration Statement on Form 10-SB filed June 4, 1999, Commission
File No. 000-26261)
10.4(b)(+) St. Martin Bank $100,090 Promissory Note Dated March 11, 1997.
(Incorporated by from the Registrant's Registration Statement on Form
10-SB filed June 4, 1999, Commission File No. 000-26261)
10.4(c)(+) Edward E. Friloux Commercial Guaranty to St. Martin Bank re:
$100,090 Promissory Note. (Incorporated by from the Registrant's
Registration Statement on Form 10-SB filed June 4, 1999, Commission
File No. 000-26261)
10.4(d)(+) Stephen F. Owens Commercial Guaranty to St. Martin Bank re:
$100,090 Promissory Note. (Incorporated by from the Registrant's
Registration Statement on Form 10-SB filed June 4, 1999, Commission
File No. 000-26261)
53
<PAGE>
10.4(e)(+) Angela M. Raidl Commercial Guaranty to St. Martin Bank re:
$100,090 Promissory Note. (Incorporated by from the Registrant's
Registration Statement on Form 10-SB filed June 4, 1999, Commission
File No. 000-26261)
10.4(f)(+) St. Martin Bank $250,000 Promissory Note Dated May 21, 1998.
(Incorporated by from the Registrant's Registration Statement on Form
10-SB filed June 4, 1999, Commission File No. 000-26261)
10.4(g)(+) St. Martin Bank Business Loan Agreement Dated August 18, 1998.
(Incorporated by from the Registrant's Registration Statement on Form
10-SB filed June 4, 1999, Commission File No. 000-26261)
10.4(h)(+) St. Martin Bank $172,725.73 Promissory Note Dated August 18,
1998. (Incorporated by from the Registrant's Registration Statement on
Form 10-SB filed June 4, 1999, Commission File No. 000-26261)
10.4(i)(+) Edward E. Friloux Commercial Guaranty to St. Martin Bank re:
$172,725.73 Promissory Note. (Incorporated by from the Registrant's
Registration Statement on Form 10-SB filed June 4, 1999, Commission
File No. 000-26261)
10.4(j)(+) Stephen F. Owens Commercial Guaranty to St. Martin Bank re:
$172,725.73 Promissory Note. (Incorporated by from the Registrant's
Registration Statement on Form 10-SB filed June 4, 1999, Commission
File No. 000-26261)
10.4(k)(+) Angela M. Raidl Commercial Guaranty to St. Martin Bank re:
$172,725.73 Promissory Note. (Incorporated by from the Registrant's
Registration Statement on Form 10-SB filed June 4, 1999, Commission
File No. 000-26261)
10.4(l)(+) St. Martin Bank Commercial Pledge Agreement re: $172,725.72
Promissory Note. (Incorporated by from the Registrant's Registration
Statement on Form 10-SB filed June 4, 1999, Commission File No.
000-26261)
10.4(m)(+) St. Martin Bank Pledge of Collateral Mortgage Note re:
$172,725.72 Promissory Note. (Incorporated by from the Registrant's
Registration Statement on Form 10-SB filed June 4, 1999, Commission
File No. 000-26261)
10.4(n)(+) St. Martin Bank Agreement to Provide Insurance re: $172,725.72
Promissory Note. (Incorporated by from the Registrant's Registration
Statement on Form 10-SB filed June 4, 1999, Commission File No.
000-26261)
10.4(o)(+) St. Martin Bank - Collateral Mortgage re: $172,725.72 Promissory
Note. (Incorporated by from the Registrant's Registration Statement on
Form 10-SB filed June 4, 1999, Commission File No. 000-26261)
10.4(p)(+) St. Martin Bank - $54,059.29 Promissory Note Dated February 4,
1999. (Incorporated by from the Registrant's Registration Statement on
Form 10-SB filed June 4, 1999, Commission File No. 000-26261)
10.5(a)(+) Private Capital, Inc. - Purchase and Security Agreement Dated
April 17, 1997. (Incorporated by from the Registrant's Registration
Statement on Form 10-SB filed June 4, 1999, Commission File No.
000-26261)
10.5(b)(+) Private Capital, Inc. - Angela M. Raidl Continuing Guaranty &
Waiver. (Incorporated by from the Registrant's Registration Statement
on Form 10-SB filed June 4, 1999, Commission File No. 000-26261)
10.5(c)(+) Private Capital, Inc. - Stephen F. Owens and Edward E. Friloux
Continuing Guaranty & Waiver. (Incorporated by from the Registrant's
Registration Statement on Form 10-SB filed June 4, 1999, Commission
File No. 000-26261)
10.6(a)(+) Bank of Erath $15,030 Promissory Note Dated June 16, 1997.
(Incorporated by from the Registrant's Registration Statement on Form
10-SB filed June 4, 1999, Commission File No. 000-26261)
54
<PAGE>
10.6(b)(+) Bank of Erath Loan Extension Agreement Dated October 20, 1998.
(Incorporated by from the Registrant's Registration Statement on Form
10-SB filed June 4, 1999, Commission File No. 000-26261)
10.7(+) American Fire Retardant Corp. - El Cajon, California Industrial
Lease (Incorporated by from the Registrant's Registration Statement on
Form 10-SB filed June 4, 1999, Commission File No. 000-26261)
10.8(a)(+) Whitney Bank - $74,400 Secured Promissory Note Dated
(Incorporated by from the Registrant's Registration Statement on Form
10-SB filed June 4, 1999, Commission File No. 000-26261)
10.8(b)(+) Whitney Bank - Collateral Mortgage, Security Agreement and
Assignment of Leases and Rents (Incorporated by from the Registrant's
Registration Statement on Form 10-SB filed June 4, 1999, Commission
File No. 000-26261)
10.9(+) American Fire Retardant Corp. - Standard Lease for Louisiana
Corporate Apartment (Incorporated by from the Registrant's
Registration Statement on Form 10-SB filed June 4, 1999, Commission
File No. 000-26261)
10.10(+) Oil, Gas & Mineral Lease with Penwell Energy Inc. (Incorporated by
from the Registrant's Registration Statement on Form 10-SB filed June
4, 1999, Commission File No. 000-26261)
10.11(a)(+) Whitney National Bank - $42,888.46 Promissory Note
(Incorporated by from the Registrant's Registration Statement on Form
10-SB filed June 4, 1999, Commission File No. 000-26261)
10.11(b)(+) Whitney National Bank - Security Agreement (Incorporated by
from the Registrant's Registration Statement on Form 10-SB filed June
4, 1999, Commission File No. 000-26261)
10.12(+) Presidio Capital Consulting Agreement (Incorporated by from the
Registrant's Registration Statement on Form 10-SB filed June 4, 1999,
Commission File No. 000-26261)
10.13(+) Warren Guidry Letter Promissory Note (Incorporated by from the
Registrant's Registration Statement on Form 10-SB filed June 4, 1999,
Commission File No. 000-26261)
10.14(a)(+) Agreement with Richard Rosenberg (Incorporated by from the
Registrant's Registration Statement on Form 10-SB filed June 4, 1999,
Commission File No. 000-26261)
10.14(b)(+) Amendment to Agreement with Richard Rosenberg (Incorporated by
from the Registrant's Registration Statement on Form 10-SB filed June
4, 1999, Commission File No. 000-26261)
10.14(c)(+) Richard Rosenberg - $43,134.39 Promissory Note (Incorporated by
from the Registrant's Registration Statement on Form 10-SB filed June
4, 1999, Commission File No. 000-26261)
10.15(++) Investment Banking and Consulting Agreement with Capstone
Partners LLC.
10.16(++) March 7, 1999 $100,000 Promissory Note.
10.17(+) August 25, 1999 Equipment Lease with Preferred Capital Corporation
10.18(+) December 7, 1999 $100,000 Promissory Note with Private Capital,
Inc.
99.1(+) Consumer Product Safety Commission's Notice of Public Hearing and
Request for Comments with regard to the proposed rule pertaining to
Flame Retardant Chemicals that may be suitable for use in upholstered
furniture.
99.2(+) A copy of the Article "1998 Fire Loss in the United States" from
the NFPA Journal, September/October 1999.
99.3(+) See National Fire Data Center Statistics as posted on the NFDC
website at "www.usfa.fema.goc/nfdc/statistics.htm"
(+) Previously filed.
(++) Attached hereto.
55
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the Undersigned, thereunto duly authorized.
AMERICAN FIRE RETARDANT CORP.
A Nevada Corporation
Date: October 25, 2000 /S/ Stephen F. Owens
------------------------------------
By: Stephen F. Owens
Its: President and Director
Date: October 25, 2000 /S/ Angela M. Raidl
------------------------------------
By: Angela M. Raidl
Its: Vice President, Chief Financial
Officer, Secretary and Director
55
