SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A-1
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended: September 30, 1999; or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period _________ to __________
Commission File Number: 000-26261
AMERICAN FIRE RETARDANT CORP.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
NEVADA 88-03826245
------------------------------ -----------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9337 Bond Avenue, El Cajon, California 92021
---------------------------------------------------- ------------------------
(Address of principal executive offices) Zip Code)
(619) 390-6888
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that a
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
On September 30, 1999 there were 2,343,788 shares of the registrant's
Common Stock, $0.01 par value, issued and outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
This Form 10-QSB has 28 pages, the Exhibit Index is located at page 23.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The financial statements included herein have been prepared by the Company,
without audit pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosure normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading.
In the opinion of the Company, all adjustments, consisting of only normal
recurring adjustments, necessary to present fairly the financial position of the
Company as of September 30, 1999 and the results of its operations and changes
in its financial position from inception through September 30, 1999 have been
made. The results of operations for such interim period is not necessarily
indicative of the results to be expected for the entire year.
Index to Financial Statements
-----------------------------
Page
----
Balance Sheets........................................................... 3
Statements of Operations................................................. 5
Statements of Stockholders' Equity (deficit)............................. 6
Statements of Cash Flows................................................. 7
Notes to Financial Statements for Period................................. 9
All other schedules are not submitted because they are not applicable or
not required or because the information is included in the financial statements
or notes thereto.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
2
<PAGE>
AMERICAN FIRE RETARDANT CORPORATION
AND SUBSIDIARY
Consolidated Balance Sheets
ASSETS
------
September 30, December 31,
1999 1998
------------ ------------
(Unaudited)
CURRENT ASSETS
Cash $ - $ -
Inventory 211,371 140,495
Accounts receivable, net 840,056 472,302
Prepaid expenses 10,000 -
------------ ------------
Total Current Assets 1,061,427 612,797
------------ ------------
PROPERTY AND EQUIPMENT 247,166 196,603
------------ ------------
OTHER ASSETS
Restricted cash 138,649 71,519
Intangible assets, net 46,750 72,500
Deposits and other assets 28,194 16,372
------------ ------------
Total Other Assets 213,593 160,391
------------ ------------
TOTAL ASSETS $ 1,522,186 $ 969,791
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
AMERICAN FIRE RETARDANT CORPORATION
AND SUBSIDIARY
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
September 30, December 31,
1999 1998
------------ ------------
(Unaudited)
CURRENT LIABILITIES
Cash overdraft $ 43,716 $ 9,462
Accounts payable 336,748 65,887
Accrued expenses 327,041 229,321
Unearned revenue 87,690 42,690
Shareholder loans 203,714 215,700
Notes payable, current portion 291,696 225,697
Line of credit 646,460 418,869
------------ ------------
Total Current Liabilities 1,937,065 1,207,626
------------ ------------
LONG-TERM LIABILITIES
Notes payable 100,000 94,668
------------ ------------
Total Liabilities 2,037,065 1,302,294
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, 0.001 par value; 25,000,000
shares authorized, 2,343,788 and 2,278,661
shares issued and outstanding, respectively 2,344 2,279
Additional paid-in capital 917,614 872,090
Accumulated deficit (1,434,837) (1,206,872)
------------ ------------
Total Stockholders' Equity (Deficit) (514,879) (332,503)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 1,522,186 $ 969,791
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
AMERICAN FIRE RETARDANT CORPORATION
AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the For the
Nine Months Ended Three Months Ended
September 30, September 30,
---------------------------- ---------------------------
1999 1998 1999 1998
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 1,914,924 $ 1,301,496 $ 893,380 $ 451,982
COST OF SALES 648,375 470,608 309,291 194,004
------------ ------------- ------------ ------------
GROSS MARGIN 1,266,549 830,888 584,089 257,978
------------ ------------- ------------ ------------
EXPENSES
Selling, general and administrative 1,205,586 1,055,420 479,650 231,229
Depreciation and amortization expense 27,300 14,769 8,554 9,908
Bad debt expense 7,711 20,995 (3,148) 8,537
------------ ------------- ------------ ------------
Total Expenses 1,240,597 1,091,184 485,056 249,674
------------ ------------- ------------ ------------
INCOME (LOSS) FROM OPERATIONS 25,952 (260,296) 99,033 8,304
------------ ------------- ------------ ------------
OTHER EXPENSES
Interest expense (258,018) (113,029) (113,567) (30,923)
------------ ------------- ------------ ------------
Total Other Expenses (258,018) (113,029) (113,567) (30,923)
------------ ------------- ------------ ------------
LOSS BEFORE INCOME TAXES (232,066) (373,325) (14,534) (22,619)
PROVISION FOR INCOME TAXES - - - -
------------ ------------- ------------ ------------
NET LOSS $ (232,066) $ (373,325) $ (14,534) $ (22,619)
============ ============= ============ ============
BASIC LOSS PER SHARE $ (0.10) $ (0.18) $ (0.00) $ (0.01)
============ ============= ============ ============
BASIC WEIGHTED AVERAGE SHARES 2,322,556 2,021,010 2,343,788 2,022,738
============ ============= ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<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 2,017,953 $ 2,018 $ 730,369 $ (30,000) $ (695,768)
Common stock issued for cash 4,785 5 18,495 - -
Receipt of stock subscription - - - 30,000 -
Common stock issued for
services and interest 255,543 256 52,726 - -
Contributed capital for
services rendered - - 70,500 - -
Net loss for the year ended
December 31, 1998 - - - - (511,104)
------------ ------------ ------------- ------------ ------------
Balance, December 31, 1998 2,278,661 2,279 872,090 - (1,206,872)
Common stock issued for
debt conversion (unaudited) 49,159 49 34,362 - -
Common stock issued for
interest (unaudited) 15,968 16 11,162 - -
Common stock issued for
consulting services
(unaudited) 5,859 6 4,095 - -
Net loss for the nine months
ended September 30, 1999
(unaudited) - - - - (227,965)
------------ ------------ ------------- ------------ ------------
Balance, September 30, 1999
(unaudited) 2,343,788 $ 2,344 $ 917,614 $ - $(1,434,837)
============ ============ ============= ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
AMERICAN FIRE RETARDANT CORPORATION
AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the For the
Nine Months Ended Three Months Ended
September 30, September 30,
---------------------------- ---------------------------
1999 1998 1999 1998
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net (loss) $ (232,066) $ (373,325) $ (14,534) $ (22,619)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Common stock issued for services and
interest expense 15,279 48,586 4,101 17,625
Depreciation and amortization 54,600 25,408 18,584 18,912
Bad debt expenses 7,711 20,995 (3,148) 8,537
Change in Assets and Liabilities:
(Increase) decrease in accounts receivable (375,465) (32,947) (435,647) (35,407)
(Increase) decrease in deposits - (6,683) - -
(Increase) decrease in inventory (70,876) (45,814) (88,120) (31,314)
(Increase) decrease in prepaid expenses
and intangibles (10,000) (8,281) (10,000) (13,506)
(Increase) decrease in notes receivable (11,822) - (11,822) -
(Increase) decrease in restricted cash (67,130) - (96,290) (9,002)
Increase (decrease) in cash overdraft 34,254 (588) 20,606 -
Increase (decrease) in accounts payable 270,861 (14,904) 247,979 (15,207)
Increase (decrease) in accrued expenses 97,720 114,456 68,717 38,366
Increase (decrease) in unearned revenue 45,000 3,170 45,000 3,170
------------ ------------- ------------ ------------
Net Cash Provided (Used) by
Operating Activities (241,934) (269,927) (254,574) (9,002)
------------ ------------- ------------ ------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of fixed assets (79,413) (12,290) (69,994) -
------------ ------------- ------------ ------------
Net Cash (Used) by Investing Activities (79,413) (12,290) (69,994) -
------------ ------------- ------------ ------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from notes payable - related 48,000 90,500 10,000 45,000
Payments on notes payable - related (25,575) (56,150) (7,949) (23,150)
Proceeds from sale of common stock - 48,500 - -
Proceeds from notes payable 157,500 160,500 85,000 85,000
Payment on notes payable (86,169) (108,468) (30,306) (11,591)
Proceeds from lines of credit 227,591 233,592 267,823 -
Paydown on line of credit - (86,257) - (86,257)
------------ ------------- ------------ ------------
Net Cash Provided (Used) by
Financing Activities $ 321,347 $ 282,217 $ 324,568 $ 9,002
------------ ------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
AMERICAN FIRE RETARDANT CORPORATION
AND SUBSIDIARY
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
<TABLE>
<CAPTION>
For the For the
Nine Months Ended Three Months Ended
September 30, September 30,
---------------------------- ---------------------------
1999 1998 1999 1998
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
NET INCREASE (DECREASE) IN CASH $ - $ - $ - $ -
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD - - - -
------------ ------------- ------------ ------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ - $ - $ - $ -
============ ============= ============ ============
SUPPLEMENTAL CASH FLOW
INFORMATION
CASH PAID FOR
Interest $ 174,038 $ 103,665 $ 58,345 $ 52,520
Income taxes $ - $ - $ - $ -
NON-CASH FINANCING ACTIVITIES
Common stock issued for debt $ 34,411 $ - $ - $ -
Common stock issued for interest and
services $ 15,279 $ 48,586 $ - $ 17,625
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
8
<PAGE>
AMERICAN FIRE RETARDANT CORPORATION
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
September 30, 1999 and December 31, 1998
NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared
by the Company without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of
operations and cash flows at September 30, 1999 and 1998 and for all
periods presented have been made.
Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. It is suggested that these condensed consolidated financial
statements be read in conjunction with the financial statements and
notes thereto included in the Company's December 31, 1998 audited
consolidated financial statements. The results of operations for the
periods ended September 30, 1999 and 1998 are not necessarily
indicative of the operating results for the full years.
NOTE 2 - 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. Future minimum lease payments are as follows:
Amount
------------
1999 $ 42,460
2000 49,860
2001 49,860
2002 24,930
------------
Total $ 178,210
============
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.
9
<PAGE>
AMERICAN FIRE RETARDANT CORPORATION
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
September 30, 1999 and December 31, 1998
NOTE 2 - COMMITMENTS AND CONTINGENCIES (Continued)
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 periods ended September 30, 1999 and
1998 was $-0-, as there have been no sales of Fyberix 2000V.
NOTE 3 - FINANCING AGREEMENT
Private Capital - Accounts Receivable Financing
-----------------------------------------------
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 accounts receivable 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 receivable 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 chargeback as a
result of a delinquent or non- paying account, the then acting
officers of the Company all executed guarantees.
10
<PAGE>
AMERICAN FIRE RETARDANT CORPORATION
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
September 30, 1999 and December 31, 1998
NOTE 4 - LEGAL PROCEEDINGS
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 ws 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 on or before July
15, 1997, $5,775 on or before August 30, 1997 and the balance of
$40,000 in installments of $1,800 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- 99CV159GR. 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.
NOTE 5 - STOCK ISSUANCE
On March 31, 1999, the Company issued 65,127 shares of common stock
for the conversion of $34,411 of debt and 15,968 shares of common
stock for interest expense of $11,178 to a related party.
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto appearing elsewhere herein.
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 have 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.
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.
The Company sustained net losses of $232,066 and $373,325 for the
nine-month periods ending September 30, 1999 and September 30, 1998 respectively
for a total loss decrease of $141,259 or 38%. 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
12
<PAGE>
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.
These excessive costs were somewhat offset by a general decrease in other SG&A
accounts and an improvement in the companies overall gross margin.
Selling, general and administrative expenses, and bad debt expense has
increased in line with the increased sales for the period ending September 30,
1999; however, included in SG&A for this period are legal and accounting fees
specifically attributable to the preparation of the Company's Form 10-sb. These
fees amounted to $85,980 during this period. Thus far during 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 beyond fiscal 1999. Depreciation
and amortization expense has risen due to the purchase and/or leasing of
equipment needed for increased construction work. There are no significant
fluctuations in the depreciation and amortization accounts that warrant any
further discussion here
OPERATIONAL RESULTS
-------------------
During the first nine months of 1999, the Company has greatly increased
sales in the area of FireStop/FireFilm. Management feels that certain expenses
should be included in cost of goods sold rather than certain expense accounts
because they relate directly to the construction process and should be
categorized as such per basic cost accounting principals. The financial
statements for 1999 and 1998 do not reclassify these expenses into cost of goods
sold. Management believes that an analysis of the Company's operation should be
done with these expenses properly classified, hence the financial information
presented below has been restated to effect this re-classification. First, the
re-classified operational results are presented, followed by a listing of
certain percentages based on these results. After this section, a complete
reconciliation between the analysis here and the amounts shown in the financial
statements is performed.
13
<PAGE>
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1999 WITH
NINE MONTHS ENDED SEPTEMBER 30, 1998
--------------------------------------------------------------------------------
RESULTS OF OPERATIONS RESTATED TO PROPERLY CLASSIFY EXPENSES AS COST OF GOODS
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percentage
September 30 September 30 Increase
1999 1998 (Decrease)
--------------------------------------------------
<S> <C> <C> <C>
Net Sales
Chemicals $ 385,722 $ 209,319 84%
Textiles 256,829 222,914 15%
FireStop/FireFilm 1,272,373 869,263 46%
--------------------------------------------------
1,914,924 1,301,496 47%
Cost of Goods
Chemicals 106,210 67,282 58%
Textiles 132,020 110,810 19%
FireStop/FireFilm 757,595 570,233 32%
--------------------------------------------------
995,825 748,325 33%
Gross Profit
Chemicals 279,562 142,037 97%
Textiles 124,809 112,104 11%
FireStop/FireFilm 514,728 299,030 72%
--------------------------------------------------
919,099 553,171 66%
SG&A 858,136 777,703 10%
Depreciation & Amortization 27,300 14,769 84%
Bad Debt Expense 7,711 20,995 (63%)
--------------------------------------------------
893,147 813,467 10%
Net Income (Loss) from
Operations 25,952 (260,296)
Interest Expense 258,018 113,029 128%
--------------------------------------------------
Net Loss $ (232,066) $ (373,325) (38%)
Gross Profit
Chemicals 72% 68%
Textiles 48% 50%
FireStop/FireFilm 40% 34%
Combined 48% 43%
Percentage of Total Sales
Chemicals 20% 16%
Textiles 13% 18%
FireStop/FireFilm 67% 66%
Percentage of Gross Profit
Chemicals 30% 25%
Textiles 14% 20%
FireStop/FireFilm 56% 55%
</TABLE>
14
<PAGE>
RECONCILIATION OF FINANCIAL STATEMENTS
--------------------------------------
<TABLE>
<CAPTION>
September 30 September 30
1999 1998
-----------------------------
<S> <C> <C>
Cost of Goods Per Analysis $ 995,825 $ 748,325
Less: Outside Services 220,838(1) 96,361(1)
Construction Payroll 73,546(2) 143,379(2)
Construction Travel 36,981(3) 5,552(3)
Construction Lodging 16,085(4) 32,425(4)
-----------------------------
Cost of Goods per Financials $ 648,375 $ 470,608
SG&A per Analysis $ 858,136 $ 777,703
Add: Outside Services 220,838(1) 96,361(1)
Construction Payroll 73,546(2) 143,379(2)
Construction Travel 36,981(3) 5,552(3)
Construction Lodging 16,085(4) 32,425(4)
-----------------------------
SG&A per Financials $1,205,586 $1,055,420
</TABLE>
(1) Outside Services represents workers hired specifically for performing
one particular construction job.
(2) Construction Payroll represents those people who are employed by the
Company full time, but who work only on detailed construction projects at the
job-site.
(3) Construction Travel represents the cost of getting a crew of workers to
the job-site.
(4) Construction Lodging represents the cost of housing a crew of workers
while they are at the job-site.
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
the first nine months of 1999, Chemical sales increased by 84%, Fire Stop/Fire
Film increased by 46%, and Textile processing increased by 15% as a percentage
of net sales September 30, 1999 vs. September 30, 1998. The Chemical sales,
Textile sales, and Fire Stop/Fire Film sales have a gross profit of 72%, 48% and
40% respectively, and the Company has a combined gross profit of 48%. 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. 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 the 9 months ended September 30, 1999 Chemical processing, Textile
processing, and FireStop/Fire Film contributed $279,562, $124,809, and 514,728
respectively to the companies total gross profit of $919,099. The Company
expects the sales of Chemicals and Fire Stop/Fire Film to continue to increase
in the almost geometric proportions it has demonstrated thus far this year.
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 34% at
September 30, 1998 to 40% at September 30, 1999. The Company is also more
effectively managing its purchase of raw material for all divisions of the
business.
15
<PAGE>
The single most significant cause of the net loss for the period ended
September 30, 1999 is the increase in interest expense of $144,989 or 128% 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 thus far in 1999 is $258,018. Had the company
been able to avoid these penalties, interest expense for this period would have
been $139,329.
The Company believes that the expenses for filing the Form 10-sb and travel
will not be the substantial burden in future years that they were in the year
1999, and the Company is now properly allocating its resources so that the Gross
Profit mix in 2000 will be maximized. However, the Company will incur the same
substantial interest rates in the future, because the Company is still having to
factor 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.
16
<PAGE>
CAUTIONARY FORWARD - LOOKING STATEMENT
-------------------------------------
Statements included in the 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" 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 fire retardant and fireproofing industry
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.
RISKS FACTORS
-------------
The Company's present and proposed business operations will be highly
speculative and subject to the same types of risks inherent in any new or
unproven venture, as well as risk factors particular to the industries in which
it will operate, and will include, among other things, those types of risk
factors outlined below.
YEAR 2000 PROBLEMS MAY DISRUPT THE COMPANY'S OPERATIONS AND HARM ITS BUSINESS
RISK ASSOCIATED WITH YEAR 2000 ISSUES - THE COMPANY IS UNCERTAIN OF THE EFFECTS
OF THE YEAR 200O ON ITS COMPUTER PROGRAMS AND SYSTEMS.
Many currently installed computer systems and software programs were
designed to use only a two digit date field. These date code fields will need to
accept four digit entries to distinguish 21st century dates from 20th century
dates. Until the date fields are updated, the systems and programs could fail or
give erroneous results when referencing dates following December 31, 1999. Given
that the Company's products operate on certain hardware platforms and within
certain software operating systems and environments, the Company must rely upon
the efforts of the hardware and software vendors and manufacturers to be in the
vanguard with respect to operating systems and platform issues relating to the
Year 2000 compliance.
PRESENT YEAR 2000 STATUS
The Company has assessed the impact of the year 2000 issue on the Company's
products, services, platforms systems and internal information technology
systems (IT systems) and non-information technology systems (non-IT systems), in
use, and has found them to be Year 2000 compliant. The Company has also
contacted its major vendors and suppliers and has received confirmation and
verification that their respective computer systems are also Year 2000
compliant. The Company does not expect the Company's financial results to be
materially affected by the need to continue to monitor and address year 2000
issues, but if the costs associated with addressing these issues are greater
than planned, the Company's earnings and results of operations could be
affected. Due to the Company's dependence on computer technology to conduct the
Company's business, the nature and impact of year 2000 processing failures on
the Company's business, financial condition and operating results could be
material.
17
<PAGE>
BUSINESS CONTINUITY AND CONTINGENCY PLANNING
The Company continues the process of identifying the reasonably likely year
2000 problem failures that the Company could experience with the goal of
revising, to the extent practical, the Company's existing business continuity
and contingency plans to address the internal and external issues specific to
those problems. Thus far, the Company has focused as planned on reviewing the
Company's critical business processes and although the Company conducted tests
on the various and Platform systems in use, and has found them to be Year 2000
compliant, the Company's expect to continuously review, test and revise the
Company's existing business continuity and contingency plans to ensure that all
systems are and maintain year 2000 compliant. This will include as required
repairing or obtaining replacement systems; changing suppliers; and reducing or
suspending certain non-critical aspects of our operations.
POSSIBLE CONSEQUENCES OF YEAR 2000 PROBLEMS
The Company believes that the Company has put in place the processes and
are devoting the resources necessary to achieve a level of readiness to meet the
Company's year 2000 challenges in a timely and appropriate manner. However,
there can be no assurance that the Company's internal systems or the systems of
others on which we rely will be year 2000 ready in a timely and appropriate
manner or that the Company's contingency plans or the contingency plans of
others on which the Company relies will mitigate the effects of year 2000
problem failures. Currently, the Company believes the most reasonably likely
worst case scenario would be a sustained, concurrent failure of multiple
critical systems (internal and external) that support the Company's operations
(i.e. vendors and suppliers of the Company). While the Company does not expect
that scenario to occur, that scenario if it occurs could, even despite the
successful execution of the Company's business continuity and contingency plans,
result in the reduction or suspension of a material portion of our operations
and accordingly have a material adverse effect on the Company's business and
financial condition.
The "Year 2000 Information" discussion contains various forward-looking
statements that represent the Company's beliefs or expectations regarding future
events. When used in the "Year 2000 Information" discussion, the words
"believes," "expects," "estimates," "plans," "goals," and similar expressions
are intended to identify forward-looking statements. Forward-looking statements
include, without limitation, the Company's expectations as to when the Company
will complete the identification and assessment, remediation planning,
remediation, and testing activities of the Company's year 2000 program as well
as the Company's year 2000 contingency planning; the Company's estimated cost of
achieving year 2000 readiness; and the Company's belief that the Company's
internal systems and equipment will be year 2000 ready in a timely and
appropriate manner. All forward-looking statements involve a number of risks and
uncertainties that could cause the actual results to differ materially from the
projected results. Factors that may cause those differences include availability
of information technology resources; customer demand for the Company's products
and services; continued availability of materials, services, and data from the
Company's suppliers; the ability to identify and remediate all date sensitive
lines of computer code and to replace embedded computer chips in affected
systems and equipment; the failure of others to timely achieve appropriate year
2000 readiness; and the actions or inaction of governmental agencies and others
with respect to year 2000 problems.
RISK THAT THE COMPANY'S COMMON STOCK MAY BE DEEMED A "PENNY STOCK."
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."
18
<PAGE>
PATENTS AND PROPRIETARY RIGHTS - THE UNAUTHORIZED USE OF INTELLECTUAL PROPERTY
BY THIRD PARTIES MAY HARM THE COMPANY'S BUSINESS.
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.
19
<PAGE>
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.
THE COMPANY IS DEPENDANT ON CERTAIN 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.
IF THE COMPANY IS UNABLE TOO HIRE AND RETAIN NECESSARY SPECIALIZED KEY PERSONNEL
THE COMPANY'S BUSINESS AND GROWTH WILL SUFFER.
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 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.
IF THE COMPANY IS UNABLE TO MAINTAIN ADEQUATE LEVELS OF INVENTORY THE COMPANY'S
BUSINESS MAY BE DISRUPTED.
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.
IF THE COMPANY IS UNABLE TO MARKET ITS PRODUCTS AND SERVICES ITS BUSINESS WILL
SUFFER.
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.
IF THE GOVERNMENT IMPLEMENTS NEW OR ADDITIONAL REGULATIONS IN THE INDUSTRY IN
WHICH THE COMPANY OPERATES, THESE REGULATIONS MAY BE COSTLY OR DIFFICULT FOR THE
COMPANY TO COMPLY WITH AND COULD RESULT IN LOSS OF SALE.
While the Company 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 similar companies in this field. The
implementation of new regulatory compliance factors could restrict sales of
certain products. Additional testing could be required and such additional
testing could cause delays in the introduction of products into certain market
sectors, which delays could adversely affect the Company's revenues.
20
<PAGE>
IF THE COMPANY DOES NOT OBTAIN ADDITIONAL FINANCING IT MAY NOT BE ABLE TO
IMPLEMENT ALL OF ITS BUSINESS PLAN.
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.
COMPETITION AND RAPID TECHNOLOGICAL CHANGE COULD HARM THE COMPANY'S BUSINESS.
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. It is particularly difficult for small independent
companies to compete with such major companies in the automobile industries,
fabric manufacturers, mills, etc. There is no assurance that the Company will be
able to compete in such an environment.
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. 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.
21
<PAGE>
PART II - OTHER INFORMATION.
Item 1. Legal Proceedings.
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 $219,582 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 $101,403 attributed to AFRC Florida and $118,178 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 is currently submitting 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.
Item 2. Changes in Securities.
Not required.
Item 3. Defaults Upon Senior Securities.
Not required.
22
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
Engagement of Capstone Partners.
-------------------------------
On September 27, 1999, the Company entered into an Investment Banking and
Consulting Agreement with Capstone Partners. A copy of the Agreement between the
Company and Capstone Partners is attached hereto and incorporated herein by
reference. See Exhibit List Index.
Recent Issuance of Securities
-----------------------------
On September 27, 1999, pursuant to the terms of the Investment Banking and
Consulting Agreement with Capstone Partners the company issued 5,859 restricted
shares to Capstone Partners.
Item 6. Exhibits and Reports on Form 8-K.
(a) List of Exhibits attached or incorporated by referenced pursuant to
Item 601 of Regulation S-B.
(2) 2.1(a) Certificate of Merger from the State of Wyoming
regarding Merger AFRC Louisiana with and into AFRC Wyoming
(Incorporated by reference from the Company'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 reference from the Company'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 reference from
the Company'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 reference from the Company'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 reference from the Company'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 reference from the Company'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
reference from the Company'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
reference from the Company's Registration Statement on Form
10-SB filed June 4, 1999; Commission File No. 000-26261).
23
<PAGE>
2.2(e) Acquisition Agreement and Plan of Merger regarding
Merger of AFRC Florida with and into AFRC Wyoming.
(Incorporated by reference from the Company'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
reference from the Company'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 reference from the Company's Registration
Statement on Form 10-SB filed June 4, 1999; Commission File
No. 000-26261).
(3) 3.1 Articles of Incorporation of American Fire Retardant
Corp. filed on January 20, 1998. (Incorporated by reference
from the Company'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 reference from the Company'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 reference from the Company'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 reference from the Company'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 reference from the Company'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 reference from the Company'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 reference from the Company's Registration
Statement on Form 10-SB filed June 4, 1999; Commission File
No. 000-26261).
(10) 10.1(a) Letter of Intent Between American Fire Retardant
Corp., and Fabritek Industries, LLC. (Incorporated by
reference from the Company'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 reference from the Company's Registration Statement on
Form 10-SB filed June 4, 1999; Commission File No.
000-26261).
24
<PAGE>
10.2 Royalty Agreement between American Fire Retardant
Corp., and Norman O. Houser. (Incorporated by reference from
the Company'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 reference from the Company'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
reference from the Company'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 reference from the Company'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 reference
from the Company'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 reference
from the Company's Registration Statement on Form 10-SB
filed June 4, 1999; Commission File No. 000-26261).
10.4(e) Angela M. Raidl Commercial Guaranty to St. Martin
Bank re:$100,090 Promissory Note. (Incorporated by reference
from the Company'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 reference from the Company'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 reference from the Company'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 reference from the
Company'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
reference from the Company'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
reference from the Company'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
reference from the Company'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 reference from
the Company's Registration Statement on Form 10-SB filed
June 4, 1999; Commission File No. 000-26261).
25
<PAGE>
10.4(m) St. Martin Bank Pledge of Collateral Mortgage Note
re: $172,725.72 Promissory Note. (Incorporated by reference
from the Company'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 reference from
the Company'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 reference from
the Company'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 reference from the
Company'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 reference
from the Company'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 reference from the
Company'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
reference from the Company'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 reference from the Company's
Registration Statement on Form 10-SB filed June 4, 1999;
Commission File No. 000-26261).
10.6(b) Bank of Erath of Loan Extension Agreement Dated
October 20, 1998.(Incorporated by reference from the
Company'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 reference from the
Company'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.
(Incorporated by reference from the Company'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 reference from the Company'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 reference
from the Company'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 reference from the Company'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 reference from the Company's Registration
Statement on Form 10-SB filed June 4, 1999; Commission File
No. 000-26261).
26
<PAGE>
10.11(b) Whitney National Bank - Security Agreement.
(Incorporated by reference from the Company's Registration
Statement on Form 10-SB filed June 4, 1999; Commission File
No. 000-26261).
10.12 Presidio Capital Consulting Agreement. (Incorporated
by reference from the Company'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
reference from the Company'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
reference from the Company'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 reference from the Company'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 reference from the Company's Registration
Statement on Form 10-SB filed June 4, 1999; Commission File
No. 000-26261).
10.15 Capstone Partners Investment Banking and Consulting
Agreement dated September 27, 1999. (Incorporated by
reference from the Form 10-QSB filed November 15, 1999.
(27) Financial Data Schedule
27.1. Financial Data Schedule (submitted electronically for
SEC information only).
(b) There were no other reports on Form 8-K filed during the quarter of the
period covered.
The following Exhibit Index sets forth the Exhibits attached hereto.
EXHIBIT INDEX
Exhibit Description
------- -----------
None
27
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amended report on Form
10-QSB to be signed on its behalf by the Undersigned, thereunto duly authorized.
AMERICAN FIRE RETARDANT CORP.
A Nevada Corporation
Date: June 27, 2000 /S/ Stephen F. Owens
---------------------------------------
By: Stephen F. Owens
Its: President
Date: June 27, 2000 /S/ Angela M. Raidl
---------------------------------------
By: Angela M. Raidl
Its: Vice President, Chief Financial
Officer, Secretary
28
