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The number of shares outstanding of each of the issuer's classes of common equity, as of November 5, 2003, was 2,357,401,286 shares of the issuer's common stock were outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X
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TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . 3
Item 1. Financial Statements. . . . . . . . . . . . . . . . . . . . . 3
Balance Sheet as of September 30, 2003 . . . . . . . . . . . . . . . 4
Statements of Operations as of September 30, 2003. . . . . . . . . . 6
Statements of Stockholders' Equity (Deficit) . . . . . . . . . . . . 7
Statement of Cash Flows as of September 30, 2003 . . . . . . . . . . 8
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . 10
Item 2. Management's Discussion and Analysis or Plan of Operation . . 15
Item 3. Controls and Procedures . . . . . . . . . . . . . . . . . . . 17
PART II - OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . 17
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 17
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . 18
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . 18
Item 4. Submission of Matters to a Vote of Security Holders . . . . . 18
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . 18
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . 18
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. 22
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. 23
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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 United States Securities and Exchange Commission (the "Commission"). Certain information and footnote disclosure normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America 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.
Set forth below are the balance sheets as of September 30, 2003 (unaudited) and December 31, 2002, and the results of operations for the three months and the nine months ended September 30, 2003 and 2002 (unaudited) and cash flows for the nine months ended September 30, 2003 and 2002. 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, 2003, and the results of its operations and changes in its financial position for the period then ended, 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.
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.
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AMERICAN FIRE RETARDANT CORPORATION
Balance Sheets
ASSETS
------
September 30, December 31,
2003 2002
--------------- --------------
(Unaudited)
CURRENT ASSETS
Cash $ 96,745 $ 2,938
Inventory 61,122 41,024
Accounts receivable, net 289,501 237,385
Loan receivable, related 21,337 -
--------------- --------------
Total Current Assets 468,705 281,347
--------------- --------------
PROPERTY AND EQUIPMENT, NET 34,082 67,639
--------------- --------------
OTHER ASSETS
Restricted cash 432,430 432,430
Intangible assets, net 3,000 7,500
Deposits 6,223 5,938
--------------- --------------
Total Other Assets 441,653 445,868
--------------- --------------
TOTAL ASSETS $ 944,440 $ 794,854
=============== ==============
The accompanying notes are an integral part of these financial statements.
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AMERICAN FIRE RETARDANT CORPORATION
Statements of Operations
(Unaudited)
September 30, December 31,
2003 2002
--------------- --------------
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 234,721 $ 367,243
Accrued expenses 1,761,346 1,840,510
Shareholder loans 310,994 224,038
Notes payable 856,252 580,139
Capital leases - 9,000
Line of credit 1,878,366 1,878,366
--------------- --------------
Total Current Liabilities 5,041,679 4,899,296
--------------- --------------
Total Liabilities 5,041,679 4,899,296
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COMMITMENTS AND CONTINGENCIES
SERIES A CONVERTIBLE PREFERRED STOCK
$0.001 par value; authorized 500,000,000,
42,000,000 and 2,500,000 issued and outstanding,
respectively 1,104,000 250,000
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STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $0.001 par value; 9,800,000,000 shares
authorized, 1,652,901,286 and 438,158 shares issued
and outstanding, respectively 1,652,902 438
Additional paid-in capital 15,524,204 8,254,437
Stock subscription receivable (15,912) -
Accumulated deficit (22,362,433) (12,609,317)
--------------- --------------
Total Stockholders' Equity (Deficit) (5,201,239) (4,354,442)
--------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 944,440 $ 794,854
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AMERICAN FIRE RETARDANT CORPORATION
Statements of Operations
(Unaudited)
For the For the
Nine Months Ended Three Months Ended
September 30, September 30,
------------- ------------ ------------- ------------
2003 2002 2003 2002
------------- ------------ ------------- ------------
NET SALES $ 919,168 $ 733,924 $ 232,340 $ 133,798
COST OF SALES 522,611 322,510 212,202 68,776
------------- ------------ ------------- ------------
GROSS MARGIN 396,557 411,414 20,138 65,022
------------- ------------ ------------- ------------
EXPENSES
Selling, general and administrative 9,338,250 3,407,715 4,941,254 1,648,740
Payroll expense 416,193 122,230 82,938 44,020
Travel and entertainment 95,994 55,428 54,248 4,125
Depreciation and amortization expense 40,858 49,324 12,227 16,690
Bad debt expense - 126,000 - 125,415
------------- ------------ ------------- ------------
Total Expenses 9,891,295 3,760,697 5,090,667 1,838,990
------------- ------------ ------------- ------------
LOSS FROM OPERATIONS (9,494,738) (3,349,283) (5,070,529 (1,773,968)
------------- ------------ ------------- ------------
OTHER INCOME (EXPENSES)
Loss on disposal of assets - (30,101) - -
Rental Income - 6,000 - -
Miscellaneous Income (Expense) 15,505 437 (620) 15
Interest expense (273,883) (201,661) (72,328) (67,770)
------------- ------------ ------------- ------------
Total Other Income (Expenses) (258,378) (225,325) (72,948) (67,755)
------------- ------------ ------------- ------------
LOSS BEFORE INCOME TAXES (9,753,116) (3,574,608) (5,143,477) (1,841,723)
PROVISION FOR INCOME TAXES - - - -
------------- ------------ ------------- ------------
NET LOSS $ (9,753,116) $(3,574,608) $ (5,143,477) $(1,841,723)
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BASIC LOSS PER SHARE $ (0.05) $ (116.03) $ (0.01) $ (36.47)
============= ============ ============= ============
BASIC WEIGHTED AVERAGE SHARES 188,246,817 30,808 557,929,583 50,506
============= ============ ============= ============
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AMERICAN FIRE RETARDANT CORPORATION
Statements of Stockholders' Equity (Deficit)
Common Stock Additional
-------------- ---------- Paid-in Accumulated
Shares Amount Capital (Deficit)
-------------- ---------- ------------ -------------
Balance, December 31, 2002 438,158 $ 438 $ 8,254,437 $(12,609,317)
Common stock issued for services
(unaudited) 1,196,713,133 1,196,714 6,408,950 -
Cancelled shares (unaudited) (5) - (5,000) -
Options exercised (unaudited) 455,750,000 455,750 865,817 -
Net loss for the nine months
ended September 30, 2003 (unaudited) - - - (9,753,116)
-------------- ---------- ------------ -------------
Balance, September 30, 2003 (unaudited) 1,652,901,286 $1,652,902 $15,524,204 $(22,362,433)
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AMERICAN FIRE RETARDANT CORPORATION
Statements of Cash Flows
(Unaudited)
For the Nine Months Ended
September 30,
--------------------------
2003 2002
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(9,753,116) $(3,574,608)
Adjustments to reconcile net loss to net cash
used by operating activities:
Common stock issued for services 7,450,859 1,111,960
Convertible preferred stock issued for services 200,000 -
Amortization of deferred compensation - 1,497,467
Depreciation and amortization 40,858 49,324
Loss on disposal of assets - 30,101
Change in Assets and Liabilities:
(Increase) decrease in accounts receivable (73,453) 289,584
(Increase) in deposits (285) -
(Increase) decrease in inventory (20,098) 52,173
(Increase) in restricted cash - (12,886)
Increase (decrease) in accounts payable (132,522) 31,662
Increase in accrued expenses 574,837 251,539
------------ ------------
Net Cash Used by Operating Activities (1,712,920) (273,684)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (2,801) -
------------ ------------
Net Cash Used by Investing Activities (2,801) -
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in cash overdraft - (20,826)
Proceeds from notes payable - related 86,955 -
Payments on notes payable - related - (10,053)
Cancellation of common stock (5,000) -
Proceeds from sale of common stock 138,893 226,500
Proceeds from common stock options 1,321,567 -
Proceeds from notes payable 352,780 36,832
Proceeds from lines of credit - 56,026
Payments on notes payable (76,667) (2,100)
Payments on capital lease (9,000) -
------------ ------------
Net Cash Provided by Financing Activities 1,809,528 286,379
------------ ------------
NET INCREASE IN CASH 93,807 12,695
CASH AT BEGINNING OF PERIOD 2,938 -
------------ ------------
CASH AT END OF PERIOD $ 96,745 $ 12,695
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