U.S. 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 May 31, 1996
[ ] 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 33-33819
Pyrocap International Corporation
(Exact name of small business issuer as specified in its charter)
Virginia 84-1124015
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
15010-B Farm Creek Drive, Woodbridge, Virginia 22191-3552
(Address of principal executive offices)
(703) 551-4452
(Issuer's telephone number)
(Former name, former address, and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
____ ____
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court. Yes No
____ ____
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
6,902,632 shares of Common Stock outstanding as of May 31, 1996.
Transitional Small Business Disclosure Format (check one): Yes No X
____ ____
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited financial statements of Pyrocap International Corporation
(the "Company") for the three months and nine months ended May 31, 1996, begin
on the following page.
2
<PAGE>
PYROCAP INTERNATIONAL CORPORATION
Balance Sheets
ASSETS: May 31, August 31,
1996 1995
(unaudited)
Current assets:
Cash $ 2,921 $ 7,281
Restricted cash 100,000 100,000
Accounts receivable, less allowance of $7,500 746,300 749,706
Due from affiliates 78,641 78,641
Inventories 72,960 103,518
Other current assets 112,544 111,442
---------- ----------
Total current assets 1,113,366 1,150,588
---------- ----------
Property and equipment:
Land 232,799 232,799
Building and improvements 782,132 782,132
Operating equipment 99,342 98,662
Vehicles 97,743 97,743
Furniture and office equipment 31,054 23,305
---------- ----------
1,243,070 1,234,641
Less accumulated depreciation and amortization 207,790 159,554
---------- ----------
1,035,280 1,075,087
---------- ----------
$2,148,646 $2,225,675
========== ==========
See accompanying notes.
3
<PAGE>
PYROCAP INTERNATIONAL CORPORATION
Balance Sheets
May 31, August 31,
1996 1995
(unaudited)
LIABILITIES & SHAREHOLDERS' EQUITY:
Current liabilities:
Current portion of long-term debt $ 54,891 $ 84,835
Current portion of capital lease obligations 6,481 12,868
Accounts payable 329,439 393,228
Accrued expenses 75,056 119,231
---------- ----------
Total current liabilities 465,867 610,162
---------- ----------
Long-term liabilities:
Long-term debt, net of current portion 573,974 607,312
Capital lease obligations, net of current portion 6,288 8,660
Notes payable, affiliate and shareholder 10,000 260,000
Due to affiliates 503 199,572
---------- ----------
590,765 1,075,544
---------- ----------
SHAREHOLDERS' EQUITY:
Common stock, par value $.001, 20,000,000 shares
authorized; 6,902,632 and 5,366,323 shares
issued and outstanding at May 31, 1996 and
August 31, 1995, respectively 6,903 5,366
Preferred stock, par value $.001, 10,000,000
shares authorized; 399,917 and 518,580 shares
issued and outstanding at May 31, 1996 and
August 31, 1995, respectively, liquidation
preference $1,555,740 400 518
Additional paid-in-capital 7,343,108 5,566,344
Other (972,965) (200,000)
Accumulated deficit (5,285,432) (4,832,259)
---------- ----------
1,084,711 539,969
---------- ----------
$2,148,646 $2,225,675
========== ==========
See accompanying notes
4
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PYROCAP INTERNATIONAL CORPORATION
Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
May 31, May 31, May 31, May 31,
1996 1995 1996 1995
<S> <C>
Net sales $ 105,243 $ 381,703 $ 132,532 $ 983,865
Cost of sales 44,202 162,482 116,236 614,759
---------- ---------- ---------- ----------
Gross profit 61,041 219,221 16,296 369,103
Operating expenses:
Selling, general and administrative 196,478 210,212 576,625 762,115
Research and development 9,149 33,596 49,352 106,704
Depreciation and amortization 13,276 39,662
---------- ---------- ---------- ----------
Loss from operations (157,862) (24,587) (649,343) (499,713)
Other income (expense):
Rental income 46,321 53,639 133,437 152,665
Interest income 1,281 30,093 4,332 38,711
Interest expense (10,777) (15,720) (26,330) (56,727)
---------- ---------- ---------- ----------
Net loss (121,037) 43,425 (537,904) (365,064)
---------- ---------- ---------- ----------
Cumulative dividends on preferred
stock (23,947) (32,765) (84,377) (105,534)
Net loss attributable to common
shares (144,984) 10,660 (622,281) (470,598)
Weighted average number of shares 6,407,781 5,306,689 6,279,626 5,218,791
---------- ---------- ---------- ----------
Net loss per common share ($.02) $.00 ($.10) ($.09)
========== ========== ========== ==========
</TABLE>
See accompanying notes.
5
<PAGE>
PYROCAP INTERNATIONAL CORPORATION
Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
May 31, May 31,
1996 1995
<S> <C>
Cash flows from operating activities: (598,135) (365,064)
Reconciliation of net loss to net cash used in
operating activities:
Net loss
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 48,236 96,856
Provision for bad debt expense 4,500
Changes in assets and liabilities:
(Increase) decrease in:
Restricted cash 3,290
Accounts receivable, trade 3,406 (797,060)
Due from affiliates 70,000
Inventories 30,558 179,599
Other current assets
Increase (decrease) in:
Accounts payable and accrued expenses (107,964) 99,205
Due to affiliates 199,069 106,614
-------- --------
Net cash used in operating activities (424,830) (637,927)
-------- --------
Cash flows from investing activities:
Acqusition of property and equipment (48,236) (95,107)
-------- --------
Net cash used in investing activities (48,236) (95,107)
-------- --------
Cash flows from financing activities:
Net proceeds from common stock issuance 744,416
Proceeds from borrowings from shareholder and
affiliate 10,000 266,000
Principal payments on capital lease obligations (2,372) (6,279)
Principal payments on notes payable (250,000) (264,079)
Principal payments on mortgage payable (33,338) (22,023)
-------- --------
Net cash provided by (used in) financing activities 468,706 (26.381)
-------- --------
Net increase (decrease) in cash (4,360) (759,415)
Cash at beginning of period 7,281 762,645
-------- --------
Cash at end of period 2,921 3,230
======== ========
</TABLE>
See accompanying notes.
6
<PAGE>
Pyrocap International Corporation
Notes to Financial Statements
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three months and nine months ended May 31, 1996 are
not necessarily indicative of the results that may be expected for the year
ended August 31, 1996. For further information, refer to the financial
statements and footnotes thereto included in the Company's annual report on Form
10-KSB for the year ended August 31, 1995.
2. Inventories
The following is a summary of inventories as of May 31, 1996 and August 31,
1995:
May 31, August 31,
1996 1995
----------------------------
Raw Materials $ 59,756 $ 41,220
Finished Goods 13,204 62,298
----------------------------
Total Inventories $ 72,960 $ 103,518
============================
3. Significant Customer
Sales to the Company's Middle East distributor, who is also a stockholder, of
$86,045 accounted for 82 percent of the Company's net sales during the three
months ended May 31, 1996.
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<PAGE>
4. Related Party Transactions
Unified Industries Incorporated (Unified), an affiliate that shares common
ownership, provides funding to the Company in the form of cash advances and
administrative and management services. Expenses related to such services were
$53,726 and $12,117 for the three months ended May 31, 1996 and May 31, 1995,
respectively.
At May 31, 1996 and August 31, 1995, the Company had notes payable to Unified of
$10,000 and $170,000, respectively. The Company also had notes payable to an
officer/shareholder for $10,000, bearing interest at 10% and due at various
dates from February 1996 through June 1996. In May 1996, these notes were
converted to common stock (see Note 5).
In July 1994, the Company loaned Mr. Ali Kolaghassi (Kolaghassi), its Middle
East distributor and a shareholder (see Note 2), $75,000, which was outstanding
at May 31, 1996 and August 31, 1995. Kolaghassi also owed $721,265 as of May 31,
1996 and August 31, 1995, pursuant to product purchases, and $3,641 related to
expenses paid on his behalf. Kolaghassi has pledged as security for these
amounts $486,663 due from a foreign customer under a completed sale and $376,780
expected to become due under certain pending sales.
5. Equity Transactions
Effective May 31, 1996, the Company's board of directors authorized the issuance
of additional shares of common stock as discussed below which transaction was
effected in May 1996. Fifty five thousand, eight hundred sixty five (55,865)
shares were authorized for issuance to Unified in exchange for the cancellation
of notes payable and services aggregating $136,312.96 as of May 31, 1996. The
notes provided for conversion based on the market price as of the date of each
note. By agreement with Unified, the actual conversion price was based on the
higher of the market value per share as of the date of each note on May 31,
1996. The average conversion price was $2.44.
In March 1996 the Company issued 250,000 shares to W. A. Moumina Trading
Establishment ("Moumina") for financial consulting services regarding Moumina's
supervision of Pyrocap's investor relations program to be implemented by
Continental Capital & Equity Corporation.
In March 1996 the Company issued 143,443 shares to Moumina for professional
consulting services regarding the use of the Company's fire suppressant and odor
mitigation products by Skab, a company in Saudi Arabia. The Company is still in
the initial stages of its business arrangement with Skab.
8
<PAGE>
6. Income Taxes
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109") requires an asset and liability approach for financial
accounting and reporting for income taxes. Deferred income taxes reflect the net
tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax assets as of May
31, 1996 are as follows:
Deferred tax liabilities: None
Deferred tax assets:
Net operating loss carryforwards $ 4,796,306
Valuation allowance for deferred
tax assets $ 4,796,306
-----------
Net deferred tax assets $ 4,796,306
===========
At May 31, 1996, the Company has net operating loss carryforwards of
approximately $4,796,306 for financial reporting and income tax purposes which
expire, if unused, between 2003 and 2010. For financial reporting purposes a
valuation allowance of $4,796,306 has been recognized to offset the tax effect
of the deferred tax assets related to those carryforwards.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
General
The Company's principal product is a fire suppressant, PYROCAP B-
136,(trade mark symbol) the primary market for which is municipal governments
(both domestically and internationally) and the federal government. The Company
has also introduced a series of odor suppression agents for environmental and
agricultural use under the trade name ODOR-GO(trade mark symbol).
On April 9, 1996, the Company announced it had entered into an agreement
with The Colbra Corporation of Jackson, Mississippi, to package and distribute
Pyrocap's environmentally friendly fire suppressant formula for retail consumer
use. Colbra Corporation will purchase concentrated PYROCAP B-136(trade mark
symbol) formula from the company and package it in 13 and 16 ounce, light-weight
aluminum canisters designed for personal use in the home and workplace. Colbra
Corporation will market the product under the trademark "Fire Cap(trade mark
symbol)".
Under the agreement, Colbra has the exclusive right to market the Fire
Cap(trade mark symbol) canisters in certain parts of the world, including the
U.S. In addition to purchasing concentrate from Pyrocap, Colbra will pay a
licensing royalty to Pyrocap for unit sales. Also under the agreement, Pyrocap
has the exclusive right to market the Fire Cap(trade mark symbol) canisters in
the Middle East, Africa and the Caribbean, and as such will pay a per unit
royalty to Colbra for sales in these territories. Pyrocap has already initiated
test marketing in all three regions. There can be no assurances with regard to
the level of sales the Company might achieve through this arrangement.
The Company has focused much of its marketing resources to the ODOR-
GO(trade mark symbol) product line. An immediate target for ODOR-GO(trade mark
symbol) sales is the Lower Potomac Pollution Control Plant in Fairfax, Virginia,
where the Company has found initial success in using its product to reduce
odors emanating from the facility. Like the community in Fairfax, Virginia,
the Company is working with community action groups, municipal governments, and
universities to develop methods to utilize its odor neutralization products to
eliminate odors from waste treatment facilities. The Company has already made
sales of ODOR-GO 300(trade mark symbol) to other waste treatment facilities and
industrial facilities in the state of Maryland.
The Company has also initiated sales programs for the ODOR-GO(trade mark
symbol) which target the Food-Farm Animal Waste Odor Remediation and Swine Farm
Clean-up efforts in North Carolina. The Company is currently working with
researchers at North Carolina State
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<PAGE>
University and an independent farming operation to quantify the effects of its
ODOR-GO 300(trade mark symbol) chemical additive in not only remediation of
odors in hog waste, but the hog farm cleanup market as well.
Results of Operations
Quarters ended May 31, 1996 and 1995
From its inception in 1988 through August, 1995, the Company's primary
efforts were focused on the development, testing and marketing of its fire
suppressant product, PYROCAP B-136(trade mark symbol). During the fiscal year
ending August 31, 1995, the Company increased efforts to commercialize the
product and began to market its odor suppression products, recording total net
sales of $1,314,702. Net sales for the three months ended May 31, 1996 were
$105,243, a decrease of 72 percent as compared to $381,703 in sales for the
quarter ended May 31, 1995. The Company's sales efforts continue to be
characterized by intermittent, large orders and, as a result, the Company's
quarter-to-quarter sales continue to fluctuate widely. Total backlog for all
products as of May 31, 1996 was $2,381,400.
Net operating results for the third quarter of fiscal 1996 were
($157,862), or ($.02) per share, an 542% decrease from a net loss of ($24,587) ,
or ($.00) per share for the quarter ended May 31, 1995. Management attributes
this to decreased sales. Sales for the nine months ended May 31, 1996, were
$132,532, a decrease of 87 percent as compared to sales of $983,865 for the same
period of fiscal 1995. The Company continued to focus much of its sales effort
on securing large annual sales contracts with large private and municipal
institutions and civil defense agencies of foreign governments.
The Company's gross profit margin increased from 57 percent in the third
quarter of 1995 to 58 percent in the third quarter of 1996. Management
attributes this increase to lower raw material and production cost related to
ODOR-GO 300(trade mark symbol) in the quarter while direct labor costs remained
relatively stable.
Total operating expenses for the nine months ended May 31, 1996 were
$665,639 as compared to $868,819 for the same period of fiscal 1995. This
represents a 23 percent decrease. If the Company is able to convert existing
purchase orders to booked sales this fiscal year, management anticipates that
such increased sales would absorb a greater percentage of fixed manufacturing
costs and with the resulting production efficiencies generated by the
11
<PAGE>
manufacturing standardization associated with increased production volume, that
gross margin would improve in the remaining quarters of fiscal 1996.
Selling, general and administrative expenses decreased from $210,212
during the third quarter of fiscal 1995 to $196,478 during the third quarter of
fiscal 1996 due to a decrease in personnel costs associated with the marketing
and sales effort and to a temporary reduction of three members of its permanent
workforce implemented in January 1996.
For the quarter ended May 31, 1996, interest expense decreased to
$10,777 from $15,720 for the quarter ended May 31, 1995, due in large part to a
substantial reduction in principal due under a loan with a bank. Research and
development expenses decreased to $9,149 from $33,596 due to a reduction in
major external testing projects and a temporary reduction of two members of its
research and development staff.
At May 31, 1996, the Company had net operating loss carry-forwards of
approximately $4,796,306 for tax purposes which expire, if unused, between the
years 2003 and 2010. As a result of the ownership changes during 1993, the net
operating loss carry-forwards will be limited in their use in accordance with
Section 382 of the Internal Revenue Code.
Balance Sheets
Current assets at May 31, 1996, were $1,113,366, a decrease of $37,222
from current assets of $1,150,588 at August 31, 1995. The decrease was
principally due to the decrease in inventory due to sales. Total assets at May
31, 1996 were $2,148,646 as compared to $2,225,675 at August 31, 1995. Total
current liabilities at May 31, 1996 were $465,867, a decrease of $144,295 from
$610,162 at August 31, 1995 due to conversions of notes payable into equity.
Total shareholders' equity at May 31, 1996 was $1,084,711, an increase of
$544,742 from $539,969 at August 31, 1995 as a result of a sale of equity of
$250,000 and other sales of equity and debt conversions which was offset in part
by the Company's increased accumulated deficit.
At May 31, 1996, the Company was owed approximately $75,000 by its
Middle East Distributor for advances made against future commissions to the
distributor in order to provide it with short-term working capital. At May 31,
1996, the distributor also owed the Company $721,265 for product purchased,
representing 95 percent of the outstanding trade accounts receivable as of that
date, and $3,640 for expenses paid on its behalf. The distributor has pledged as
security for these amounts $486,663 due from a foreign customer under a
contemplated sale and $376,780 expected to become due under certain pending
sales.
12
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Liquidity and Capital Resources
The Company's working capital is severely limited. If it is to survive,
the Company will need to raise additional capital in the near future or increase
sales and quickly convert orders and sales to cash. A portion of the Company's
working capital needs during fiscal 1995 and fiscal 1996 were met by loans from
the Company's chief executive officer and from Unified Industries Incorporated,
a major shareholder. Effective May 31, 1996, the Company's board of directors
authorized the issuance of additional shares of common stock as discussed below
which transaction was effected in May 1996. Fifty five thousand, eight hundred
sixty five (55,865) shares were authorized for issuance to Unified in exchange
for the cancellation of notes payable aggregating $136,312.96 as of May 31,
1996. The notes provided for conversion based on the market price as of the date
of each note. By agreement with Unified, the actual conversion price was based
on the higher of the market value per share as of the date of each note on May
31, 1996. The average conversion price was $2.44.
The Company is hopeful it will receive payments or letters of credit in
the near future for certain product orders received in July through December,
1995, which would provide additional working capital to finance operations. If
the Company does not consummate such sales and receive the related payments,
however, the Company cannot be assured of having enough capital to operate, if
it has not then consummated an additional sale of equity or the proposed sale of
certain Mideast distribution rights or the proposed sale of certain European
distribution rights for the Company's odor-remediation product.
As of May 31, 1996, the Company's capital resources consisted primarily
of cash amounting to $2,921. The Company's total current liabilities at that
date were approximately $465,867. The Company is currently negotiating with
sources of capital for additional equity investment in the Company. There is no
assurance that the Company will be able to raise additional capital or will
consummate the distribution agreements, however, and if it fails to do so, it
may be forced into bankruptcy or reorganization. In that regard, the audit
report issued in connection with the Company's financial statements for the year
ended August 31, 1995, states that there can be no assurance that the Company
will be able to increase sales or obtain additional funding, and that,
accordingly, "substantial doubt exists regarding its ability to continue as a
going concern."
To assist in financing its receivables, the Company has also initiated
a program with its major suppliers whereby it may assign proceeds from letters
of credit for shipments overseas. The Company has also submitted a letter to the
Export-Import Bank for an insurance guarantee for exports to Saudi Arabia.
Management believes that such guarantee, if obtained, would
13
<PAGE>
enable it to fulfill product orders already received if and when such orders
become supported by letters of credit or other irrevocable method of payment.
There is no assurance, however, that the application will be approved and that
funds will be received.
14
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities.
The Class B Warrants expired on April 30, 1996, and the Class C Warrants
expired on March 31, 1996.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5. Other Information.
As previously reported, the American Stock Exchange ("AMEX") has
conditioned the resumption of trading on a future review of the
Company's financial status and stockholder's equity, which review is
expected to be conducted at the end of August, 1996. There can be no
assurance that the Company's stock will remain trading on the AMEX.
On June 27, 1996, Brian Argrett resigned as a member of the Company's
Board of Directors.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits Required by Item 601 of Regulation S-B:
Product Promotion Agreement between Pyrocap International
Corporation and W. A. Moumina Trading Est.
Financial Consulting Services Agreement between Pyrocap
International Corporation and W. A. Moumina Trading Est.
15
<PAGE>
EXHIBITS INDEX
Page 18 Product Promotion Agreement between Pyrocap International
Corporation and W. A. Moumina Trading Est.
Page 21 Financial Consulting Services Agreement between Pyrocap
International Corporation and W. A. Moumina Trading Est.
16
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PYROCAP INTERNATIONAL CORPORATION
(Registrant)
Date: July 15, 1996 __________________________________
Theodore A. Adams, III
President, Chief Financial Officer
17
<PAGE>
MODIFICATION
OF
PRODUCT PROMOTION CONSULTING AGREEMENT
WHEREAS, on September 12, 1995 Pyrocap International Corporation (the
"Company") entered into a Product Promotion Consulting Agreement (the
"Agreement") with W. A. Moumina Trading Establishment (the "Consultant"); and
WHEREAS, the Company and the Consultant have determined that it is in
their mutual interest to modify the Agreement regarding the duties of the
Consultant and compensation.
NOW THEREFORE, in accordance with section 11.0 of the Agreement, and
intending to be legally bound, the parties hereby agree as follows:
PREAMBLE
The Preamble of the Agreement is hereby modified and amended to read as
follows:
WHEREAS, the Company requires professional consulting services regarding
the use of its fire suppressant and odor mitigation products by Skab, a company
in Saudi Arabia;
WHEREAS, the Consultant has represented that it has sufficient expertise
to provide such services in a manner and to an extent required by the Company;
and
WHEREAS, it is in the mutual interest of the parties to this AGREEMENT
for the Company to obtain and for the Consultant to provide such services
pursuant to the terms and conditions specified herein."
2.0 DUTIES OF CONSULTANT
Section 3.0 of the Agreement is hereby modified and amended by adding at
the end thereof the the following new paragraphs:
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<PAGE>
"3.1(f) the use of the Company's fire suppressant and odor mitigation
products by Skab. Such products are to be used for purposes of fire protection
and industrial odor control in a factory owned and operated by Skab; and
(g) a potential purchase of the rights to certain products
of the Company by Skab."
3.0 COMPENSATION
Section 7.0 of the Agreement is hereby modified and amended by adding at
the end thereof the following new paragraph:
"7.3 The Consultant shall be paid 143,443 free trading shares of
Pyrocap International Corporation common stock for providing professional
consulting services regarding the use of the Company's fire suppressant and odor
mitigation products by Skab."
4.0 TECHNICAL AMENDMENTS
(a) The second paragraph of the Preamble of the AGREEMENT is hereby
modified and amended by striking out "and" where it appears at the end of the
paragraph.
(b) Paragraph 3.1(d) of the Agreement is hereby modified and amended
by striking out "and" where it appears therein.
5.0 EFFECTIVE DATE
This modification shall be deemed effective as of the later date of the
two signatures appearing below.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have executed this Modification of Product Promotion Consulting Agreement.
PYROCAP INTERNATIONAL CORPORATION
--------------------------------------------
By: Theodore A. Adams, III
President
Date: _______________________________________
19
<PAGE>
W. A. MOUMINA TRADING ESTABLISHMENT
---------------------------------------------
By: Ayman Moumina
Date: _______________________________________
20
<PAGE>
CONTRACT AGREEMENT
FOR
FINANCIAL CONSULTING SERVICES
This AGREEMENT is effective as of March 12, 1996 and is entered into by
and between PYROCAP INTERNATIONAL CORPORATION, a corporation validly existing
under the laws of the Commonwealth of Virginia, having offices at 15010-B Farm
Creek Drive, Woodbridge, Virginia 22191 (hereinafter referred to as the
"Company"), and W. A. MOUMINA TRADING ESTABLISHMENT, a corporation validly
existing under the laws of the Kingdom of Saudi Arabia, having an address at P.
O. Box 8597, Jeddah, Saudi Arabia 21492 (hereinafter referred to as the
"Consultant").
PREMISES
WHEREAS, the Company requires supervision of its investor relations
program to be implemented by Continental Capital & Equity Corporation ("CCEC");
WHEREAS, the Company requires professional consulting services regarding
the establishment of a core broker program with Cactus Corp.;
WHEREAS, the Consultant has represented that it has sufficient expertise
to provide such services in a manner and to an extent required by the Company;
and
WHEREAS, it is in the mutual interest of the parties to this AGREEMENT
for the Company to obtain and for the Consultant to provide such services
pursuant to the terms and conditions specified herein.
21
<PAGE>
NOW THEREFORE, in consideration of the premises, covenants, and
conditions contained in this AGREEMENT, the parties mutually agree as follows:
COVENANTS
1.0 RELATIONSHIP OF PARTIES
At all times under this AGREEMENT the Consultant shall be considered an
independent contractor. Nothing contained herein, nor any course of action or
failure to act, shall be construed to create an employer-employee or agent-
servant relationship, or a partnership, or any other affiliation between the
parties.
2.0 FINANCIAL CONSULTING SERVICES
During the term of performance of this AGREEMENT, the Consultant shall
provide to the Company, as ordered, the following financial consulting services:
(a) participation and assistance in the supervision of the Company's
investor relations program to be implemented by CCEC;
(b) a liaison with Cactus Corp., which will produce a core of 8-10
retail brokers, market makers and or money managers who will take positions in
the stock of Pyrocap. Pyrocap will have the right to exclude from the group any
broker who fails to meet Pyrocap's standards. This process will begin
immediately upon Cactus Corp. receiving the payment of contract. Upon
completion, selection and approval of the Core Broker Group, Cactus Corp. will
arrange and provide a Core Broker meeting. This will last for two days, which
will include; a show and tell from the top management of Pyrocap in intense
training of these core brokers.
3.0 TERM OF PERFORMANCE
22
<PAGE>
Except as otherwise indicated in Section 9.0, the term of this AGREEMENT
shall begin on the effective date and shall terminate two years thereafter on
the anniversary of such date.
4.0 PAYMENTS
4.1 The Consultant shall be paid 250,000 free trading shares of Pyrocap
International Corporation common stock, of which a minimum of 175,000 free
trading shares shall be paid to CCEC by the Consultant.
4.2 The Consultant shall pay Cactus Corp. a minimum of 50,000 free trading
shares of Pyrocap International Corporation common stock.
5.0 CONFIDENTIALITY OF INTELLECTUAL PROPERTY
5.1 All intellectual property of the Company that the Consultant may know as
of the effective date herein, or may learn or become aware of during the term of
performance rendered hereunder, shall for all time and for all purposes be
regarded by the Consultant as strictly confidential and held by the Consultant
in trust and solely for the Company's benefit and use, and shall not be directly
or indirectly disclosed by the Consultant to any person whomsoever, except to
the Company, or with the Company's written permission, to a third party.
5.2 The Consultant shall surrender to the Company such of the Company's
intellectual property, as may be in the Consultant's possession or under its
control, either on request or upon expiration of the term specified in Section
3.0, whichever is earlier, and shall not retain copies, notes, or memoranda of
such data either in hard text, code, electronic format, or in any other medium
for the storage of data.
6.0 CONFLICT OF INTEREST; REPRESENTATION
23
<PAGE>
6.1 The Consultant agrees that it will avoid any actual or apparent conflict
of interest relative to the financial consulting services being supplied by it
under this AGREEMENT and that it will promptly submit to the Company, for its
determination of applicability under this paragraph, the facts of any situation
that may reasonably give rise to such a conflict or apparent conflict.
6.2 Nothing contained in paragraph 6.1 shall be deemed as a prohibition of
the Consultant's rights, as an independent contractor, to market or provide its
services to others in a manner, and to an extent, that does not violate such
paragraph.
6.3 The Consultant hereby warrants and represents that it has not paid or agreed
to pay, or caused anyone else to pay or agree to pay, anything of value to a
person employed by the Company, or to any other individual or legal entity
designated by such person, in return for influencing any action hereunder,
including the execution of this AGREEMENT by the Company. For the purposes of
this paragraph, the term "employee" includes members of the Board of Directors
of the company.
7.0 WAIVERS
Any waiver by a party to any term or condition of this AGREEMENT by the
other party shall not affect or impair the waiving party's right with respect to
any subsequent act or omission of the same type, nor shall it be deemed to waive
any other right under this AGREEMENT; nor shall any delay or omission of a party
to exercise any right arising under this AGREEMENT affect or impair such party's
rights as to the same or any future delay or omission; nor shall the failure of
a party to this AGREEMENT to require or exact full and complete compliance with
any one or more of the provisions of this AGREEMENT be construed as in any
manner changing such provision or provisions.
8.0 AUTHORITY TO ACT
The parties hereto warrant and represent that they have the power and
authority to enter into this AGREEMENT and to consummate the transactions
contemplated hereby and have been duly authorized to execute this AGREEMENT.
24
<PAGE>
9.0 TERMINATION
9.1 Subject to the provisions of paragraph 9.2, this AGREEMENT shall be
deemed terminated, prior to the term specified in Section 3.0, upon the
occurrence of any one or more of the following events:
(a) at the expiration of the two year term specified in Section 3.0;
(b) a material breach of a term or condition of this AGREEMENT, if
the non-breaching party so elects;
(c) a party becomes insolvent or subject to a petition in bankruptcy
or is placed under the control of a receiver, liquidator or
committee of creditors;
(d) if the Consultant does not perform the substantive work ordered
hereunder, or becomes incapacitated to the extent that it cannot
render satisfactory performance pursuant to section 2.0; or
(e) upon mutual consent of the parties.
9.2 The provisions contained in section 5.0 (dealing with Proprietary
Information and Confidentiality) shall survive the termination of this
AGREEMENT. If there is a termination prior to the completion of a particular
month, payments under section 4.0 shall be prorated to compensate the Consultant
for that portion of the month this AGREEMENT was in effect.
10.0 NOTICES
Except as specifically provided for in Section 2.0, all notices,
designations and other communications contemplated under this AGREEMENT shall be
in writing and shall be either personally delivered, or transmitted by certified
mail, facsimile transmission, wire, or other device reasonably calculated to
effect delivery of documents within four (4) calendar days.
25
<PAGE>
Unless otherwise agreed to in writing by the parties, such notices,
designations, and communications shall be sent to the parties at the addresses
noted below:
If to the Company:
Pyrocap International Corporation
15010-B Farm Creek Drive
Woodbridge, VA 22191
26
<PAGE>
If to the Consultant:
W. A. Moumina Trading Establishment
P. O. Box 8597
Jeddah
Saudi Arabia 21492
11.0 MODIFICATIONS: ENTIRE AGREEMENT
This writing contains the entire AGREEMENT of the parties. No
representations were made or relied upon by any party other than those expressly
set forth herein. No agent, employee, or representative of a party is empowered
to alter or modify any of the terms in this AGREEMENT unless such modification
is done, in writing, and signed by the signatories below or other authorized
representatives of the respective parties who are so designated, in writing, by
such signatories.
12.0 SEVERABILITY
Any provision of this AGREEMENT that is invalid, illegal or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity, illegality or unenforceability, without
affecting in any way the remaining provisions hereof in such jurisdiction or
rendering that or any other provision of this AGREEMENT invalid, illegal or
unenforceable in any other jurisdiction.
13.0 CONTROLLING LAW AND DISPUTE RESOLUTION
This AGREEMENT shall be interpreted, controlled, and enforced in
accordance with the substantive laws of the Commonwealth of Virginia, without
reference to the Conflict of Laws Rule.
13.1 All disputes under this AGREEMENT (including a dispute as to whether a
particular issue falls within the scope of this AGREEMENT) shall be settled by
binding arbitration between the parties hereto in accordance with the commercial
arbitration rules of the American Arbitration Association. Such arbitration
shall take place in Springfield, Virginia and shall be
27
<PAGE>
conducted by one neutral arbitrator who shall be selected by the American
Arbitration Association.
13.2 Each party shall bear its own expenses in any arbitration conducted
under this section regardless of the outcome of the arbitration. The costs of
retaining the services of a neutral arbitrator, pursuant to paragraph 13.1,
shall be shared equally by the parties.
13.3 Judgment upon any arbitral award issued hereunder may be entered in
accordance with the applicable law in any court in the Commonwealth of Virginia
having jurisdiction thereof. The parties to this AGREEMENT hereby submit to
personal jurisdiction in Virginia for such purposes and for the purposes of
enforcing arbitration hereunder. In the event such litigation is commenced, each
party agrees that service of process may be made, and personal jurisdiction over
each obtained, by service of a copy of the summons, complaint, and other
pleadings (or motions) required by applicable law to commence such litigation
upon the party's appointed agent for service of process in Virginia. In the
event a party fails to appoint such agent pursuant to the laws of the
Commonwealth, or if such appointment should lapse for any reason, each party
hereby alternatively designates its signatory to this AGREEMENT as its appointed
agent for the service of process in Virginia regardless of the place of
residence of such signatory.
28
<PAGE>
14.0 HEADINGS
The headings to the sections herein are for convenience only and shall
not be used as an aid in the interpretation of this AGREEMENT.
IN WITNESS WHEREFORE, the parties hereto have duly executed this
CONTRACT AGREEMENT FOR FINANCIAL CONSULTING SERVICES.
PYROCAP INTERNATIONAL CORPORATION
BY:________________________________ DATE:_____________________
W. A. MOUMINA TRADING ESTABLISHMENT
BY:________________________________ DATE:_____________________
29
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<INTEREST-EXPENSE> (81,171) (13,328) (2,227) (10,777)
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