SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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: 33-15097-D
AFFILIATED RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)
Colorado 84-1045715
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3050 Post Oak Boulevard
Suite 1080, Houston, Texas 77056
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (713) 355-8940
Check whether the issuer (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 the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
stock as of the latest practicable date.
Common Stock, $.003 Par Value 16,597,743
(Shares outstanding as of
September 30, 1999)
Transitional Small Business Disclosure Format (Check One) Yes No X
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AFFILIATED RESOURCES CORPORATION
QUARTERLY REPORT ON FORM 10-QSB FOR THE INTERIM
PERIOD ENDED September 30, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Number
Part I. Financial Information
Item I. Financial Statements
<S> <C>
Balance Sheets at September 30, 1999 and December 31, 1998........................................ 1
Statements of Operations for the Three Months and Nine Months Ended
September 30, 1999 and 1998........................................................................3
Statements of Cash Flows for the Three Months and Nine Months Ended
September 30, 1999 and 1998........................................................................4
Notes to Financial Statements.....................................................................5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................................................5
Part II. Other Information
Item 1. Legal Proceedings.......................................................................................9
Item 7. Reports on Form 8-K....................................................................................10
Signatures........................................................................................10
</TABLE>
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AFFILIATED RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
-------------------- ---------------------
(Unaudited)
ASSETS
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 3,665 $ 144,123
Accounts receivable - trade 18,026
Inventory 713,288 966,584
Prepaid expenses 1,947 18,699
-------------------- ---------------------
Total Current Assets 736,926 1,129,406
-------------------- ---------------------
Property and Equipment
Land 41,000 41,000
Buildings 1,068,200 1,064,000
Warehouse equipment 2,432,407 2,450,000
Office equipment and furniture 76,195 76,552
Vehicles 39,784 39,784
Leasehold improvements 9,925 7,277
-------------------- ---------------------
3,667,511 3,678,613
Less: Accumulated depreciation 183,572 5,300
-------------------- ---------------------
3,483,939 3,673,313
Goodwill, net of accumulated amortization of $171,095 and $-0- at
September 30, 1999 and December 31, 1998, respectively
3,250,828 3,421,923
Deposits 3,201 3,201
-------------------- ---------------------
$ 7,474,894 $ 8,227,843
==================== =====================
</TABLE>
See Accompanying Notes to the Financial Statements
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<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
-------------------- ---------------------
(Unaudited)
LIABILITIES
Current Liabilities
<S> <C> <C>
Current maturities of long-term debt $ 611,718 $ 236,624
Accounts payable 1,340,014 1,430,057
Accrued expenses 407,778 352,330
Advances payable 0 23,000
-------------------- ---------------------
Total Current Liabilities 2,359,510 2,042,011
Long-Term Debt 140,000 141,846
-------------------- ---------------------
2,499,510 2,183,857
-------------------- ---------------------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock, $1 par value, 10,000,000 shares
authorized, no shares outstanding
Common Stock, $.003 par value, 25,000,000 shares
authorized, 16,597,743 and 16,451,743 shares
issued and outstanding at September 30, 1999 and December
31, 1998, respectively
49,793 49,355
Additional Paid-In Capital 15,553,042 15,320,480
Accumulated Deficit (9,217,017) (7,630,070)
Unamortized Stock Compensation (1,410,434) (1,695,779)
-------------------- ---------------------
4,975,384 6,043,986
-------------------- ---------------------
$ 7,474,894 $ 8,227,843
==================== =====================
</TABLE>
See accompanying notes to consolidated financial statements.
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AFFILIATED RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
------------------ ------------------ ----------------- -----------------
<S> <C> <C> <C>
Revenues $ 80,495 $ $ 485,885 $
Cost of Revenues 51,367 497,907
------------------ ------------------ ----------------- -----------------
Gross Margin 29,128 (12,022)
Selling, general and administrative
expenses 37,301 184,865 733,061 1,444,408
Depreciation and amortization
expenses 112,569 1,179 350,568 7,253
Operating expenses 223,348 462,785
------------------ ------------------ ----------------- -----------------
373,218 186,044 1,546,414 1,451,661
------------------ ------------------ ----------------- -----------------
Loss from Operations (344,090) (186,044) (1,558,436) (1,451,661)
Other Income (Expenses)
Interest expenses (10,161) (28,511)
Settlement of litigation (86,000)
Debt forgiveness 234,507
Loss on disposal of property
and equipment (64,593)
------------------ ------------------ ----------------- -----------------
(10,161) (28,511) 83,914
------------------ ------------------ ----------------- -----------------
Net Loss $ (354,251) $ (186,044) $ (1,586,947) $ (1,367,747)
================== ================== ================= =================
Net Loss Per Share $ (.02) $ (.01) $ (.10) $ (.10)
================== ================== ================= =================
Weighted Average Shares
Outstanding 16,597,743 14,236,509 16,526,854 14,236,509
================== ================== ================= =================
</TABLE>
See accompanying notes to consolidated financial statements.
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AFFILIATED RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
------------------ ------------------ ----------------- -----------------
Cash Flows From Operating Activities:
<S> <C> <C> <C> <C>
Net Loss $ (354,251) $ (186,044) $ (1,586,947) $ (1,367,747)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization
expense 112,568 1,179 350,567 7,253
Loss on disposal of assets 64,593
Stock issued for services 313,187
Non-cash compensation
expense 95,115 95,113 285,345 1,027,433
Debt forgiveness (234,507)
Changes in assets and
liabilities:
Account receivables 33,959 (21,330) (18,026) (21,330)
Inventory 69,748 253,296
Prepaid expenses 7,571 16,752 11,045
Accounts payable and
accrued liabilities (184,204) (9,036) (57,595) 72,062
------------------ ------------------ ----------------- -----------------
Net Cash Used in
Operating Activities (219,494) (120,118) (756,608) (128,011)
Cash Flows From Investing Activities:
Purchase of equipment (11,795) (20,302) (11,795)
Proceeds from sale of equipment 5,735 30,204 23
------------------ ------------------ ----------------- -----------------
Net Cash Provided (Required)
by Investing Activities 5,735 (11,795) 9,902 (11,772)
Cash Flows From Financing Activities:
Proceeds from debt 190,000 86,000 400,000 91,742
Payment of debt (11,079) (63,000) (26,752) (63,000)
Sale of common stock 25,000 110,000 233,000 110,000
------------------ ------------------ ----------------- -----------------
Net Cash Provided by
Financing Activities 203,921 133,000 606,248 138,742
------------------ ------------------ ----------------- -----------------
Net Increase (Decrease) in
Cash Equivalents (9,838) 1,087 (140,458) (1,041)
Cash and Cash Equivalents at
Beginning of Period 13,503 455 144,123 2,583
------------------ ------------------ ----------------- -----------------
Cash and Cash Equivalents at
End of Period $ 3,665 $ 1,542 $ 3,665 $ 1,542
================== ================== ================= =================
</TABLE>
During the quarter ended September 30, 1998, the Company issued 641,026 shares
of its restricted common stock to acquire Cobol Texas, Inc. as a wholly-owned
subsidiary.
See accompanying notes to consolidated financial statements.
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AFFILIATED RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
Note 1 - Basis of Presentation
The consolidated financial statements of Affiliated Resources Corporation
(formerly Synaptix Systems Corporation) (the "Company") included herein are
unaudited for all periods ended September 30, 1999 and 1998. They reflect all
adjustments (consisting of normal recurring adjustments) which are, in the
opinion of management, necessary to fairly depict the results for the periods
presented. Certain information and note disclosures, normally included in
financial statements prepared in accordance with generally accepted accounting
principles, have been condensed or omitted pursuant to rules and regulations of
the Securities and Exchange Commission. It is suggested that these financial
statements be read in conjunction with the audited financial statements for the
year ended June 30, 1998 and the six months ended December 31, 1998, which are
included in the Company's annual report. The Company believes that the
disclosures made herein are adequate to make the information presented not
misleading.
Note 2 - Earnings Per Common and Common Equivalent Share
Earnings per common and common equivalent share are based on the average number
of common shares and dilutive common share equivalents outstanding.
Note 3 - Acquisitions
Effective December 29, 1998, the Company acquired from Evans Systems, Inc., all
of the outstanding stock of ChemWay Systems, Inc., which is engaged in the
business of producing, packaging and marketing automotive aftermarket chemical
products. The purchase price of $6,000,000 consisted of 1,500,000 shares of
common stock valued at $4 per share. The acquisition has been accounted for as a
purchase, and the operations are included in the accompanying consolidated
financial statements from the date of acquisition.
The Purchase Agreement requires the Company to fulfill certain obligations,
including funding of $1,500,000 to satisfy creditors of ChemWay and providing
working capital for current operations and repayment of a $232,500 note payable
to Chase Bank. The Company has pledged all of the assets of ChemWay Systems,
Inc. to secure the obligations.
Effective July 8, 1998, the Company acquired all of the outstanding stock of
CobolTexas, Inc. in exchange for 641,026 shares of common stock, which is
contractually restricted. The acquisition is accounted for as a pooling of
interests and recorded at the net book value of CobolTexas, Inc. There were no
operations of CobolTexas, Inc. prior to the acquisition. CobolTexas, Inc. is
engaged in the remediation of computer systems involving the year 2000 problems.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The following discussion contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and
Section 27A of the Securities Act of 1933, as amended, and is subject to the
safe harbors created by those sections. These forward-looking statements are
subject to significant risks and uncertainties, including those identified in
the section of this Form 10-QSB and in the Company's Annual Report
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on Form 10-KSB, filed with the SEC on August 9, 1999, which may cause actual
results to differ materially from those discussed in such forward-looking
statement. The forward-looking statements within this Form 10-QSB are identified
by words such as "believes," "anticipates," "expects," "intends," "may" and
other similar expressions. However, these words are not the exclusive means of
identifying such statements. In addition, any statements which refer to
expectations, projections or other characterizations of future events or
circumstances are forward looking statements. The Company undertakes no
obligation to publicly release the results of any revisions, to these forward-
looking statements which may be made to reflect events or circumstances
occurring subsequent to the filing of this Form 10-QSB with the Securities and
Exchange Commission. Readers are urged to carefully review and consider the
various disclosures made by the Company in this report and in the Company's
other reports filed with the Securities and Exchange Commission, including its
Form 10-KSB, that attempt to advise interested parties of the risks and factors
that may affect the Company's business.
Introduction
During the six months ended December 31, 1998, the Company acquired
CobolTexas Inc., in exchange solely for shares of the Company's voting stock,
all of the stock of CobolTexas Inc. CobolTexas owns a software product that uses
on-line technology to solve the Year 2000 technology (Y2K) problems for COBOL
and PL1 software users. CobolTexas is primarily exploring business as a
subcontractor or licensor to software remediation companies. The focus has been
on those companies who are currently negotiating with domestic and international
organizations and governments to enter into contracts for services to be
rendered in connection with solutions to year 2000 problems. Under this
scenario, the CobolTexas email response systems which uses on-line technology to
identify and create year 2000 solutions over the Internet for both Cobol and PL1
software becomes an analysis tool of the remediation company. Although to date
no sales have materialized, management feels that this approach provides the
best alternative for use of the product, while at the same time reducing
potential liability.
On December 30, 1998 the Company acquired all the outstanding stock of
ChemWay Systems, Inc., a corporation that blends and packages chemicals for the
automotive aftermarket. The Company commenced operations of ChemWay on January
7, 1999, and during the first quarter of 1999, ChemWay's facilities became fully
operational with respect to providing customers with a full line of its
products. In August 1999, the Company entered into a Distribution Agreement with
RTB Ventures, Inc., a Portland, Oregon based marketing and distribution company
for the distribution of aftermarket automotive products that are produced by
ChemWay. A copy of the Distribution Agreement and Press Release announcing this
Agreement is being filed as an Exhibit hereto. Additionally, ChemWay is
aggressively pursuing new product lines and marketing alliances to expand to a
national market. Additionally, ChemWay is aggressively pursuing new product
lines and marketing alliances to expand to a national market. While this process
has been severely hampered by a lack of adequate working capital, ChemWay has
begun to generate sales and is shipping product. The Company raised
approximately $1,005,000 in private placement during the fiscal year ended
December 31, 1998, $754,385 of which was used to pay ChemWay debt and other
costs assumed pursuant to the Purchase Agreement. The Purchase Agreement for the
acquisition, as amended through the date of this filing, requires the Company to
fulfill certain covenants including, but not limited to, (i) receiving at least
$1,500,000 in additional proceeds from the sale of Common Stock in a private
placement, and (ii) paying the mortgage indebtedness on the ChemWay's commercial
industrial facility described below (which amounted to $232,500 plus principal
and interest at December 31,1998). As of September 30, 1999, the Company had not
fulfilled the obligations but believes that it will be able to fulfill its
obligations on a timely basis. Various of the Company's obligations under the
Purchase Agreement are secured by a pledge of substantially all of the assets of
ChemWay.
6
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Management is continuing in its endeavor to identify acquisition
candidates that it believes will be suited to management's business plan to
generate sufficient revenues and provide an asset base for continued growth.
When evaluating acquisitions, the ability to use leverage in order to reduce the
issuance of stock, will be a significant factor, especially in the near term.
Management's business strategy is to focus on the acquisition of those companies
whose product or service is technically innovative or market proven, whose
market penetration can be significantly expanded through enhanced marketing or
additional capitalization, and believes that these acquisitions will generate
sufficient revenues and provide an asset base for continued growth.
Based on management's evaluation of business opportunities and
discussions with investors, it has been decided to focus the Company's expansion
activities on those companies, products or services which are related to or can
make use of ChemWay products or services. This endeavor may involve expanded
retail and promotional opportunities. Management is confident that, based on
current discussions with investors, the new focus of the Company will provide
the basis for sufficient capital for operations and planned acquisitions.
Results of Operations
Analysis of Three Months ended September 30, 1999 Compared to Three
Months ended September 30, 1998
The following discussion is included to describe the Company's
financial position and results of operations for the three months ended
September 30, 1999 and 1998, respectively. The financial statements and notes
thereto contain detailed information that should be referred to in conjunction
with this discussion.
Revenues
The Company recorded revenues of $80,495 for the three months ended
September 30, 1999, compared with $0 for 1998.
Gross Profit
The gross profit for the three months ended September 30, 1999 was
$29,128 compared with $0 for the same period in 1998.
General and Administrative Expenses
General and administrative expenses were $37,301 and $186,044 for the
three months ended September 30, 1999 and 1998, respectively. Depreciation and
amortization was $112,569 and Operating expenses were $223,348 compared to
$1,179 and $0 for the same period in 1998. These increases were mainly
attributable to salaries, compensation paid by stock, professional fees, and
depreciation and amortization of goodwill related primarily to the acquisition
of ChemWay and the start up of its operations.
Loss from Operations
The Company had an operating loss of $354,251 for the three months
ended September 30, 1999 and $186,044 for the same period in 1998. The loss for
the period ended September 30, 1999 was the result of general and administrative
costs as described above.
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Net Loss
The Company had a net loss of $354,251 ($.02 per share) for the three
months ended September 30, 1999, compared with a net loss of $186,044 ($.01 per
share) for the same period in 1998. The net loss for the three months ended
September 30, 1999 was attributable to an increase in administrative and
operating expenses.
Analysis of Nine Months ended September 30, 1999 Compared to Nine
Months ended September 30, 1998
The following discussion is included to describe the Company's
financial position and results of operations for the nine months ended September
30, 1999 and 1998, respectively. The financial statements and notes thereto
contain detailed information that should be referred to in conjunction with this
discussion.
Revenues
The Company recorded revenues of $485,885 for the nine months ended
September 30, 1999, compared with $0 for 1998.
Gross Loss
The gross profit for the nine months ended September 30, 1999 was
($12,022) compared with $0 for the same period in 1998.
General and Administrative Expenses
General and administrative expenses were $733,061 and $1,444,408 for
the nine months ended September 30, 1999 and 1998, respectively. The 1998 figure
contains audit adjustments of $821,768 to record options and stock compensation
to former employees during the period July 1, 1997 to December 31, 1997. When
this adjustment is taken into consideration, the September 30, 1999 expense
represents an increase of $110,421 over the same period in 1998. Depreciation
and amortization was $350,568 and Operating expenses were $462,785 compared to
$7,253 and $0 for the same period in 1998. These increases were mainly
attributable to salaries, compensation paid by stock, professional fees, and
depreciation and amortization of goodwill related primarily to the acquisition
of ChemWay and the start up of its operations.
Loss from Operations
The Company had an operating loss of $1,558,436 for the nine months
ended September 30, 1999 and $1,451,661 for the same period in 1998. The loss
for the period ended September 30, 1999 was the result of general and
administrative costs as described above and a significantly higher cost of
revenues component due to manufacturing inefficiencies during the start up of
operations and the inability to take advantage of volume discounts on the
purchase of raw materials.
Income Taxes
The Company had no income tax expense. As of September 30, 1999, the
Company had net operating loss carryfowards of approximately $7,500,000. The
utilization of net operating carryforwards will be severely limited as
determined pursuant to applicable provisions of the Internal Revenue Code and U.
S. Treasury regulations thereunder.
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Net Loss
The Company had a net loss of $1,586,947 ($.10 per share) for the nine
months ended September 30, 1999, compared with a net loss of $1,367,747 ($.10
per share) for the same period in 1998. The net loss for the nine months ended
September 30, 1999 was attributable to an increase in administrative and
operating expenses. This increase in expenditures was planned under the
Company's operating plan following the acquisition of the ChemWay subsidiary in
1998. The plan anticipated that ChemWay would require a start up period leading
to full operational capability before revenues would be realized.
Liquidity and Capital Resources
At September 30, 1999, the Company maintained a negative liquidity
position which is evidenced by a current ratio of .31 to 1. Management will
continue to restructure the Company and seek to increase the Company's current
ratio and liquidity, and generate capital which would provide cash flow for
future operations and expansion.
At September 30, 1999, the Company had a working capital deficiency of
$1,622,584, compared to a working capital deficiency of $509,769 at September
30, 1998. The cash balance at September 30, 1999 was approximately $3,665 and at
September 30, 1998 was $1,542.
Cash used by operations totaled $756,608 (largely attributable to
operating losses at the start up of ChemWay operations) for the nine months
ended September 30, 1999, compared to $128,011 for the same period in 1998. Cash
provided by investing activities for the nine months ended September 30, 1999
was approximately $9,092. Cash provided by financing activities during the nine
months ended September 30, 1999 totaled $606,248, which included the proceeds
from the sale of stock.
Based on management's evaluation of business opportunities and
discussions with investors, it has been decided to focus the Company's expansion
activities on those companies, products or services which are related to or can
make use of ChemWay products or services. This endeavor may involve expanded
retail and promotional opportunities. Management is confident that, based on
current discussions with investors and lenders, the new focus of the Company
will provide the basis for sufficient capital for operations and planned
acquisitions. There can be no assurance that the Company will be able to raise
sufficient additional capital to achieve these objectives or meet its working
capital needs. PART II OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, the Company is involved in various legal proceedings
arising in the ordinary course of business. To management's knowledge, the
Company is not currently involved in any legal proceedings and is not aware of
any legal proceeding threatened against it, except for a claim that was made by
an individual that was formerly employed by an unrelated company. The Company
does not believe that this claim has merit.
At the time of the acquisition of ChemWay, a number of vendor claims
had been incurred in the normal course of business. Since the acquisition of
ChemWay, several of the items have been paid and the Company believes that the
final disposition of the items will not have a materially adverse effect upon
the financial statements of the Company.
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Item 7. Exhibits and Reports on Form 8-K
A. Exhibits
10.12 Distribution and Compensation Agreement by
and between RTB Ventures, Inc. and
Affiliated Resources Corporation, dated
August 31, 1999.
99 Press Release announcing National Marketing
Agreement with RTB Ventures, Inc., dated
October 4, 1999.
27 Financial Data Schedule
B. Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
AFFILIATED RESOURCES CORPORATION
Dated: November 18, 1999 By: /s/ Peter C. Vanucci
----------------------------------------
Peter C. Vanucci, Chairman and CEO
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Exhibit 10.12
DISTRIBUTION AND COMPENSATION AGREEMENT
THIS AGREEMENT made and entered into this 31st day of August , 1999, by and
between RTB Ventures, Inc., a corporation organized and existing under the laws
of the State of Oregon, hereinafter referred to as "RTB," and Affiliated
Resources Corporation, a corporation organized and existing under the laws of
State of Colorado, and hereinafter referred to as "Affiliated."
RECITALS
WHEREAS Affiliated manufactures certain products as set forth on Exhibit A,
attached hereto and by this reference made a part hereof, and
WHEREAS RTB is a marketing and distribution company that will become the
exclusive retail distributor, except as set forth on Exhibit C attached hereto
and by this reference made a part hereof, of Affiliated's products for North
America and will have the first right of refusal for all other countries in the
world, and
WHEREAS it is the desire of the parties hereto to enter into an exclusive
distribution agreement for Affiliated's products.
WITNESSETH:
NOW, THEREFORE IT IS HEREBY AGREED as follows:
1. RTB shall be the exclusive retail distributor of Affiliated's products. RTB
shall use its reasonable best efforts to sell Affiliated products and shall not,
without Affiliated's prior written consent, sell competing products. This
agreement shall be exclusive for North America and shall grant to RTB a first
right of refusal for exclusive distribution rights in each and every country of
the world as determined by RTB. This right of distribution includes all channels
of retail distribution and is all inclusive of each and every means of retail
distribution of Affiliated's products as may be determined by RTB. The only
exceptions hereto are as set forth on Exhibit C.
2. Affiliated shall be responsible for the development and manufacture of the
products operations that are the subject of this agreement. Patents, if any, for
Affiliated's products shall remain the exclusive property of Affiliated.
3. This is a continuing agreement in that as Affiliated develops new products in
its ChemWay operations, at the discretion of RTB, RTB may become the exclusive
retail distributor of said products under the same terms and conditions of this
agreement.
4. This agreement is exclusive, and any and all inquiries Affiliated receives,
either directly or indirectly, about their products shall be immediately turned
over to RTB for handling and execution. Affiliated shall not be allowed to sell,
distribute, consign, lease or in any way transfer any products in the retail
market, except as set forth on Exhibit C, without first obtaining the written
permission of RTB.
5. Cost of products per unit from date of agreement shall be as agreed between
the parties hereto and as set forth on Exhibit B, attached hereto and by this
reference made a part hereof. From time to time it may be necessary to adjust
the pricing of any and all products, and at such time the same shall be done on
a mutually agreed basis. All pricing includes packaging, warranty and any and
all items required to market the product.
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6. All sales and marketing material required to introduce, sell and advertise
Affiliated's products including sales literature, pricing materials, point of
sales purchase and display materials, trade show exhibiting, travel expenses and
advertising shall be the sole responsibility and expense of Affiliated but shall
be at the sole direction and control of RTB. It is understood that said expenses
shall be deducted from gross revenue created from retail sales, and that it may
be necessary for RTB to advance said expenses from time to time. An agreed
expense policy is set forth on Exhibit D, attached hereto and by this reference
made a part hereof.
7. Affiliated agrees to warrant the product free from defects in workmanship.
All defective units will result in a credit being issued RTB. RTB has the right
to elect if this refund is to be received via cash or product replacement.
Affiliated will not be responsible for any incidental or consequential damages.
8. Affiliated hereby indemnifies RTB, its assigns and/or officers and employees
from any and all claims that may arise as a result of the production or
operation of the products that are the subject of this agreement.
9. Affiliated agrees to maintain a comprehensive liability insurance policy in
an amount of not less that One Million Dollars ($1,000,000.00) and naming RTB as
an additional insured.
10 A. As compensation for this agreement, Affiliated agrees, upon the execution
hereof, to immediately transfer, or cause one or more of its stockholders to
transfer, to RTB Five Hundred Thousand (500,000) shares of common stock of the
corporation. In addition, RTB shall have the irrevocable right to an additional
Two Million (2,000,000) shares of Affiliated on the following terms and
conditions: For each Two Million Dollars ($2,000,000.00) of sales of Affiliated
products as a result of RTB's efforts, Affiliated shall immediately transfer to
RTB Two Hundred Thousand (200,000) shares of stock. Any costs associated with
the registration and/or transfer of any of the shares referred to in this
paragraph shall be the responsibility of RTB.
10 B. Until such time as RTB has been issued Two Million (2,000.000) shares,
exclusive of the Five Hundred Thousand (500,000) shares originally issued
hereunder, a majority of said shares are restricted 144 legend stock. It is
understood between the parties hereto said shares are being obtained for
investment, however, a percentage of shares will be distributed to a small
number of employees or affiliates of RTB. To the extent permitted by law, if
this agreement is terminated as set forth herein, the restrictions on said stock
shall be immediately removed. In addition, upon termination, if sales exceed the
Two Million Dollar ($2,000,000.00) increments, the proportionate percentage of
stock owed will be issued, i.e., if sales are Five Million dollars
($5,000,000.00) and Four Hundred Thousand (400,00) shares have been issued, an
additional One Hundred Thousand (100,000) shares would be issued on termination.
11. This Agreement may be terminated on September 5, 2000, if annual sales of
Affiliated products by RTB for the first twelve months of 2000 are not be at
least Two Million dollars ($2,000,000.00). Thereafter, annual sales by RTB shall
be Ten Million dollars ($10,000,000.00) or this agreement may be terminated by
Affiliated. This agreement shall automatically terminate in the event of the
bankruptcy or insolvency of RTB.
12. This agreement shall be interpreted under the laws of the state of Oregon.
13. RTB may not assign this agreement without the prior written consent of
Affiliated which shall not be unreasonably withheld.
14. If suit is brought to enforce any of the terms of this agreement, the
prevailing party is entitled to its reasonable attorney's fees at the trial
level, together with those incurred in any appeal thereof, as well as any costs
incurred in said suit. In addition, if any other party not a part of this
agreement brings any suit or action to determine the validity
12
<PAGE>
of this agreement, then said party shall be responsible for attorney fees and
costs incurred by the parties hereto regardless of the outcome of said suit.
Dated the date and year first above written.
RTB VENTURES, Inc.
By:
Its: Secretary/Treasurer
AFFILIATED RESOURCES CORPORATION
By: Peter C. Vanucci
Its: Chairman/CEO
13
<PAGE>
EXHIBIT A / EXHIBIT B
<TABLE>
<CAPTION>
ChemWay Systems, Inc. G.M. $ / G.M. %
Area 01 10/12/99 250 Case / 500 Case
500 Gross Gross
Stock Number Case Margin Margin
Product Description Net Fill Hard Cost Price $ %
<S> <C> <C> <C> <C> <C> <C>
101106 R-22 #30 Cylinder 30# 42.00 56.76 14.76 26.0
101112 R-12 Refrigerant Oil 32 oz. 6.94 12.12 5.18 42.7
101120 134A 30# Cylinder 30# 64.89 102.50 37.61 36.7
101121 134A 12 oz. 12 oz. 22.90 41.50 18.60 44.8
101122 134A Oil Charge 4 oz. 9.30 21.96 12.66 57.7
101123 134A Ester Oil 8.5 oz. 13.97 29.44 15.47 52.5
101124 134A Pag Oil LV 8.5 oz. 15.01 37.52 22.51 60.0
101125 134A Pag Oil HV 8.5 oz. 15.58 29.44 13.86 47.1
101126 134A Flush Gal 33.85 162.48 128.63 79.2
102200 Brake Parts Cleaner 20 oz. 9.49 11.76 2.27 19.3
102201 BPC Non-Chlor 13 oz. 7.88 9.72 1.84 18.9
102202 Carb/Choke 13 oz. 6.40 10.32 3.92 38.0
102204 Engine Degreaser 15 oz. 7.20 13.32 6.12 45.9
102210 Penetrating Oil 13 oz. 5.70 10.32 4.62 44.8
102214 De-Icer 13 oz. 5.38 8.28 2.90 35.0
102216 Starting Fluid 25% 11 oz. 7.11 7.92 0.81 10.2
102218 Starting Fluid 50% 11 oz. 7.44 8.16 0.72 8.8
102220 Tire Inflator W/Hose 12 oz. 9.03 11.64 2.61 22.4
102222 Tire Inflator W/Cone 12 oz. 6.67 9.36 2.69 28.7
103304 Carb/Injector Cleaner 12 oz. 3.76 6.24 2.48 39.7
103305 Super Carb/Injector Cleaner 12 oz. 4.05 6.48 2.43 37.5
103306 Octane Boost 12 oz. 3.55 5.88 2.33 39.6
103308 5 Min Engine Flush 32 oz. 7.34 10.80 3.46 32.0
103310 Anti Freeze Gallon Gal 19.80 27.36 7.56 27.6
103314 Gas Treatment 12 oz. 3.69 6.24 2.55 40.9
103316 Diesel Treatment 8 oz. 4.34 7.44 3.10 41.7
103320 Windshield Wash Conc. 12 oz. 2.40 4.56 2.16 47.4
103326 Gas line Anti-Freeze 12 oz. 3.57 5.04 1.47 29.2
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
500 Gross Gross
<S> <C> <C> <C> <C> <C> <C>
103330 Petroleum Solvent Gal 8.66 13.32 4.66 35.0
103334 F.S. Water Remover 12 oz. 5.64 6.72 1.08 16.1
103336 Gas Tank Treatment/Iso 12 oz. 5.64 6.72 1.08 16.1
104400 Brake Fluid Dot 3 12 oz. 4.68 6.96 2.28 32.8
104401 Brake Fluid Dot 4 12 oz. 6.83 10.56 3.73 35.3
104402 Brake Fluid Dot 3 32 oz. 10.65 16.2 5.55 34.3
104404 Brake Fluid Dot 3 Gal 20.34 31.56 11.22 35.6
104405 Brake Fluid Dot 4 Gal 31.14 47.34 16.20 34.2
104406 Brake Fluid Dot 3 5 Gal 15.63 26.55 10.92 41.1
104500 Power Steering Fluid 12 oz. 2.88 5.04 2.16 42.9
104502 Power Steering Fluid 32 oz. 6.45 11.40 4.95 43.4
104514 PSF Stop Leak 12 oz. 4.00 6.96 2.96 42.5
104516 Honda Power Steering Fluid 12 oz. 4.45 9.36 4.91 52.5
104518 Manual Clutch 12 oz. 4.98 10.32 5.34 41.7
104606 2-Cycle Oil 8 oz. 3.84 4.68 0.84 17.9
104618 Engine Oil Treatment 12 oz. 3.98 9.46 5.50 58.0
104620 Engine Oil No Smoke 12 oz. 3.98 10.68 6.70 62.7
104622 Engine Oil Stop Leak 12 oz. 4.04 9.36 5.32 56.8
104634 Mercon/Dexson III 32 oz. 8.25 10.56 2.31 21.9
104640 Auto Transmission Stop Leak 12 oz. 4.09 6.60 2.51 38.0
104800 Radiator Stop Leak 12 oz. 2.25 6.12 3.87 63.2
104802 Radiator Flush 22 oz. 2.11 5.88 3.77 64.1
104804 Radiator Anti-Rust 12 oz. 2.98 6.00 3.02 50.3
105100 Vinyl Cleaner Pump 16 oz. 13.21 16.68 3.47 20.8
105102 Rain Guard 8 oz. 8.24 9.60 1.36 14.2
105104 Fog Guard 8 oz. 5.97 8.04 2.07 25.7
</TABLE>
15
<PAGE>
EXHIBIT C
ChemWay, Inc.
An Affiliated Resources Corporation Company
1605 Cottonwood Phone: 409-245-8811
Bay City, Texas 77414 Fax: 409-244-2546
REPRESENTATIVE AGREEMENT
We at ChemWay Inc. are pleased to appoint
Quest, Crelia & Co.
1860 Crown Dr. #1400
Dallas, Texas 75234
As our representative in the territory outlined below-
AL, AR, LA, MO, OK, TN, TX, NM, MS, KS
The representative agrees to promote the sale of ChemWay Inc. products
in a manner consistent with company policies and procedures. The representative
is an independent contractor and will be paid on a commission basis at the rate
of (see page 2), the gross amount of each order. Commissions will be paid when
ChemWay Inc. receives payment from the customer.
Either party to this agreement shall have the right to terminate,
effective 60 days after written one or the other of the parties gives notice.
Effective Date: January 05, 1999
Accepted by: Accepted by:
ChemWay, Inc.
- -------------------------- -------------------------------------
(Signature) (Signature)
President President
Date: 1-5-99 Date: 1-5-99
16
<PAGE>
Exhibit 99
PRESS RELEASE
Affiliated Resources Corporation
3050 Post Oak Boulevard, Suite 1080
Houston, TX 77056
For more information contact:
Peter C. Vanucci
Chairman and Chief Executive Officer
Telephone: 713-355-8940
FOR IMMEDIATE RELEASE
Affiliated Resources Corporation Announces National Marketing
Agreement with RTB Ventures, Inc.
HOUSTON, TX - October 4, 1999 - Affiliated Resources Corporation (ARCX:
OTC Electronic Bulletin Board) is pleased to announce that the Company has
entered into a Distribution Agreement with RTB Ventures, Inc. ("RTB"), a
Portland, Oregon, based marketing and distribution company, for the distribution
of aftermarket automotive products that are produced by ChemWay, Inc., a wholly
owned subsidiary of Affiliated Resources Corporation.
According to the agreement, RTB will have exclusive retail distribution
rights in selected markets in connection with the retail distribution of
ChemWay's aftermarket automotive product line. The Agreement is exclusive in
North America and shall grant to RTB a first right of refusal for exclusive
distribution rights in each and every country of the world, as determined by
RTB. The agreement is designed to provide compensation to RTB in the form of
common stock and commissions in achieving the goal of increasing sales of
ChemWay's products by $20 million during the next 24- month period.
"We're very excited to be named as an exclusive distributor by
Affiliated Resources Corporation on behalf of its ChemWay operations" stated
Randy Wright, President and Chief Executive Officer of RTB. "ChemWay's newly
installed high speed production line is so powerful that we believe it should
provide a major advantage in producing the capacity of products required to meet
our goals. It's a real time saver when it comes to producing the quantity of
products we intend to distribute. This association should certainly have a
positive impact on Affiliated Resources Corporation and RTB Ventures, Inc.,
growth."
Peter C. Vanucci, Chairman and Chief Executive Officer of Affiliated
Resources Corporation adds, "We are very pleased to add a marketing partner like
RTB Ventures to enhance our distribution network. One of our major strategic
marketing goals is to expand our distribution channels so that we can reach new
customers on a national basis. The agreement with RTB is a major step forward in
achieving that goal. As a full service marketing firm, RTB also provides such
services as an in-house graphics department, which will be of great assistance
in our advertising and new product development."
ChemWay, Inc., a subsidiary of Affiliated Resources Corporation,
produces and packages a full line of automotive aftermarket fluids, such as
refrigerants, lubricants and penetrants, fuel treatments and additives, cooling
system, brake system and power steering products, cleaners and solvents, as well
as appearance and emergency products.
RTB is a marketing an distribution company based in Portland, Oregon,
with distribution to major retailers in North America in the grocery, drug and
general merchandise industries.
17
<PAGE>
Statements included in this press release which are not historical in
nature, are intended to be, and are hereby identified as "forward-looking
statements" for purposes of the safe harbor provided by Section 21E of the
Securities Exchange Act of 1934, as amended by Public Law 104-67 and provisions
of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements may be identified by words including "anticipate," "believe,"
"intends," "estimates," "expects," and similar expressions. Affiliated Resources
Corporation cannot guarantee that agreements or contracts will be fulfilled by
its customers or distributors. The Company cautions readers that forward-looking
statements, including, without limitation, those relating to the Company's
future business prospects are subject to certain risks and uncertainties that
could cause actual results to differ materially from those indicated in the
forward-looking statements.
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Affiliated Resources Corporation September 30, 1999 financial
statements and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000817125
<NAME> Affiliated Resources Corporation
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1.00
<CASH> 3,665
<SECURITIES> 0
<RECEIVABLES> 18,026
<ALLOWANCES> 0
<INVENTORY> 713,288
<CURRENT-ASSETS> 736,926
<PP&E> 3,667,511
<DEPRECIATION> (183,572)
<TOTAL-ASSETS> 7,474,894
<CURRENT-LIABILITIES> 2,359,510
<BONDS> 0
0
0
<COMMON> 49,793
<OTHER-SE> 4,925,591
<TOTAL-LIABILITY-AND-EQUITY> 7,474,894
<SALES> 485,885
<TOTAL-REVENUES> 485,885
<CGS> 497,907
<TOTAL-COSTS> 497,907
<OTHER-EXPENSES> 1,546,414
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,511
<INCOME-PRETAX> (1,586,947)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,586,947)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,586,947)
<EPS-BASIC> (.10)
<EPS-DILUTED> (.10)
</TABLE>
