UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
   
                                    FORM 10-K/A
                               AMENDMENT NO. 1 TO
    
              [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
               THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
                  For the Fiscal Year Ended December 31, 1996

                                       OR

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
            OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]

                        Commission file number 000-21133

                            SPURLOCK INDUSTRIES, INC.
             (Exact Name of Registrant as Specified in its Charter)
                Virginia                                    84-1018956
       (State or other jurisdiction                       (I.R.S. Employer
    of incorporation or organization)                    Identification No.)

           209 West Main Street                                23890
            Waverly, Virginia                                (Zip Code)
  (Address of Principal Executive Offices)

                                 (804) 834-8980
              (Registrant's telephone number, including area code)

        Securities registered pursuant to Section 12(b) of the Act: None.

           Securities registered pursuant to Section 12(g) of the Act:

                           Common Stock, no par value

         Indicate  by check  mark  whether  the  registrant:  (1) has  filed all
reports  required to be filed by Section 13 or 15(d) of the 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 past 90 days.
                                                             Yes  _X_    No ___

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item  405 of  Regulation  S-K is not  contained  in this  form,  and will not be
contained,  to the  best of  registrant's  knowledge,  in  definitive  

<PAGE>


proxy or information  statements  incorporated  by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.                               _X_

         The aggregate  market value of the voting stock of the registrant  held
by  non-affiliates  computed by reference to the average bid and asked prices of
such stock, as of March 12, 1997, was $1,564,462.13.

         The number of shares  outstanding of Common Stock as of March 31, 1997,
was 6,572,066.

Documents Incorporated by Reference:

         The Company's definitive Proxy Statement for its 1997 Annual Meeting of
Shareholders  (to be filed) is  incorporated  by reference into Part III of this
Form 10-K.


                                      -2-
<PAGE>
                                   AMENDMENT

         The Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 is hereby amended as follows:

<PAGE>

Item 8.           Financial Statements and Supplementary Data


REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders
Spurlock Industries, Inc.

We have  audited  the  accompanying  consolidated  balance  sheets  of  Spurlock
Industries,  Inc. (formerly Air Resources  Corporation) as of December 31, 1996,
and 1995, and the related consolidated  statements of operations,  stockholders'
equity,  and cash flows for each of the three years in the period ended December
31, 1996.  These financial  statements are the  responsibility  of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audit.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing  the  accounting   principles  used  and   significant   estimates  by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the  financial  position of Spurlock  Industries,  Inc.
(formerly Air Resources  Corporation) as of December 31, 1996, and 1995, and the
results of its operations, and its cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles.



                                            Winter, Scheifley & Associates, P.C.
                                              Certified Public Accountants

Englewood, Colorado
January 17, 1997

<PAGE>

                            Spurlock Industries, Inc.
                      (Formerly Air Resources Corporation)
                           Consolidated Balance Sheets
                        As of December 31, 1996 and 1995
   
<TABLE>
<CAPTION>

Assets
                                                              1996                               1995
<S>                                                          <C>                                 <C>     
Current Assets:
Cash and cash equivalents                                    $106,072                            $250,751
Trading securities                                              -                                 200,000
Accounts receivable - trade                                 1,446,930                           1,813,775
Other accounts receivable                                       8,718                              62,179
Accounts and notes receivable
         -   officers current portion                          38,595                              40,520
Inventories                                                   541,632                             595,765
Prepaid income taxes                                           72,477                               -
Deferred tax asset                                              -                                  98,300
Prepaid expenses                                               74,490                              38,124
                                                          -----------                          ----------
Total current assets                                        2,288,914                           3,099,414

Property, plant and equipment, net of
accumulated depreciation of $4,313,075 and
$3,559,436                                                  9,444,057                           5,712,885

Other Assets:
Accounts and notes receivable
         -  officers                                          101,044                             118,119
Investments                                                   150,000                             150,000
Other                                                         259,736                             262,550
                                                          -----------                          ----------
                                                              510,780                             530,669
                                                          -----------                          ----------
Total assets                                              $12,243,751                          $9,342,968
                                                          ===========                          ==========
</TABLE>
    
    The accompanying notes are an integral part of the financial statements.

<PAGE>



                           Spurlock Industries, Inc.
                      (Formerly Air Resources Corporation)
                           Consolidated Balance Sheets
                        As of December 31, 1996 and 1995
                                   (Continued)
<TABLE>
<CAPTION>

Liabilities and Stockholders' Equity
                                                            1996                       1995
<S>                                                         <C>                        <C>        
Current Liabilities:
Notes payable - line of credit                              $ 1,420,801                $ 1,329,096
Notes payable - other                                                 -                     82,447
Current portion of long-term debt                             1,029,090                    993,590
Accounts payable - trade                                      1,678,442                  2,069,561
Accrued expenses                                                260,527                    249,922
Amounts due stockholders and
 and related parties                                                  -                     95,622
Deferred rent                                                         -                    510,070
                                                            -----------                -----------
Total current liabilities                                     4,388,860                  5,330,308

Long-term debt                                                3,402,621                    983,652
Deferred tax liability                                          143,476                    109,900
Post retirement benefit liability                                42,667                          -

Commitments and contingencies

Stockholders' Equity:
Preferred stock, convertible,
  $2 par value, 5,000,000 shares
  authorized, 1,200,000 shares
  issued and outstanding                                              -                  2,400,000
Common stock, no par value
  500,000,000 shares authorized
  6,572,066, and 4,325,066
  shares issued and outstanding                               4,808,814                  2,528,814
Accumulated deficit                                           (542,687)                (2,009,706)
                                                            -----------                -----------
                                                              4,266,127                  2,919,108
                                                            -----------                -----------
Total liabilities and
  stockholders' equity                                      $12,243,751                $ 9,342,968
                                                            ===========                ===========
</TABLE>
<PAGE>



                            Spurlock Industries, Inc.
                      (Formerly Air Resources Corporation)
                      Consolidated Statements of Operations
              For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>

                                                           1996                  1995                   1994
<S>                                                      <C>                  <C>                    <C>        
Revenues:
Net sales                                                $28,643,415          $33,243,677            $30,512,704
Cost of sales                                             21,129,265           26,092,053             26,269,016
                                                         -----------          -----------            ------------
                                                           7,514,150            7,151,624              4,243,688
Selling, general and
  administrative expenses                                  4,429,906            3,903,371              3,456,356
                                                         -----------          -----------            -----------
                                                           3,084,244            3,248,253                787,332
Other income and (expense):
Other income                                                  72,204               12,007                  2,513
Interest expense                                            (667,942)            (663,662)              (828,261)
                                                         -----------          -----------            -----------
                                                            (595,738)            (651,655)              (825,748)

Net income before income taxes                             2,488,506            2,596,598                (38,416)
Provision for income taxes                                 1,021,487              115,600                 -
                                                         -----------          -----------            -----------
Net income (loss)                                        $ 1,467,019          $ 2,480,998            $   (38,416)
                                                         ===========          ===========            ============

Earnings per share                                           $0.22                 $0.37                  $(0.01)
                                                             =====                 =====                  =======

Weighted average shares outstanding                        6,678,983            6,717,666              4,226,066
                                                           =========            =========              =========
</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>


                            Spurlock Industries, Inc.
                      (Formerly Air Resources Corporation)
                      Consolidated Statements of Cash Flows
              For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>

                                                                         1996               1995               1994
<S>                                                                      <C>                <C>               <C>         
Operating activities:
Net income (loss)                                                        $ 1,467,019        $ 2,480,998       $   (38,416)
Adjustments to reconcile net income
  (loss) to net cash:
Depreciation and amortization                                                758,365            700,240            560,599
Issuance of common stock for services                                              -              5,000                  -
Write off of intangible assets                                                     -                  -             23,372
Abandonment of fixed assets                                                        -                  -              9,958
(Increase) decrease in receivables                                           420,306            546,277          (371,281)
(Increase) decrease in trading securities                                    200,000          (200,000)                  -
(Increase) decrease in inventory                                              54,133            566,152          (320,578)
(Increase) decrease in prepaid expenses                                    (108,843)              6,001              1,695
(Increase) in other assets                                                     2,814           (79,381)           (15,181)
Increase in deferred taxes                                                   131,946             11,600                  -
Increase (decrease) in accounts payable
  and accrued expenses                                                     (380,584)        (2,188,581)            775,959
Increase in post retirement benefit liability                                 42,667

                                                                           ---------          ---------          ---------
Total adjustments                                                          1,120,804          (632,692)            664,543
                                                                           ---------          ---------          ---------
Net cash provided by (used in)
 operating activities                                                      2,587,823          1,848,306            626,127

Investing activities:
Purchase of fixed assets                                                 (1,184,369)          (425,769)          (316,265)
Advances to officers                                                        (11,000)          (136,733)                  -
Repayment of officer advances                                                 30,000
                                                                           ---------          ---------          ---------
Net cash provided by (used in)
 investing activities                                                    (1,165,369)          (425,769)          (316,265)

Financing activities:
Acquisition of common shares                                               (120,000)            (1,000)                  -
Proceeds of new borrowings                                                         -                  -             60,665
Repayment of related party loans                                            (95,622)           (99,728)                  -
Repayment of notes and loans                                             (1,351,511)        (1,012,309)          (318,261)
                                                                           ---------          ---------          ---------


<PAGE>

Net cash provided by (used in)
 financing activities                                                    (1,567,133)        (1,112,037)          (257,596)

Net increase in cash and cash equivalents                                  (144,679)            310,500             52,266
Beginning cash                                                               250,751             76,984             24,718
                                                                           ---------          ---------          ---------
Ending cash                                                              $   106,072        $   387,484        $    76,984
                                                                         ===========        ===========        ===========

</TABLE>


<PAGE>



                            Spurlock Industries, Inc.
                      (Formerly Air Resources Corporation)
                      Consolidated Statements of Cash Flows
              For the Years Ended December 31, 1996, 1995 and 1994
                                   (Continued)
<TABLE>
<CAPTION>

                                                                         1996               1995               1994

<S>                                                                      <C>                <C>                <C>        
Supplemental cash flow information:

Cash paid for:  Interest                                                 $   667,942        $   605,825        $   391,054
                Income taxes                                             $   658,577        $   104,000        $         -

Non-cash financing and investing activities:
Acquisition of equipment with notes payable                              $ 3,305,168        $    50,818        $         -
Conversion of accounts payables to note                                  $         -        $   839,500        $         -


</TABLE>





The accompanying notes are an integral part of the financial statements.






<PAGE>



                            Spurlock Industries, Inc.
                      (Formerly Air Resources Corporation)
                 Consolidated Statement of Stockholders' Equity
              For the Years Ended December 31, 1996, 1995 and 1994

<TABLE>
<CAPTION>
                                 Common Shares                    Preferred                      Accumulated
                                                    Amount         Shares          Amount           Deficit

<S>                                 <C>           <C>            <C>             <C>             <C>         
Balance December 31, 1993           4,226,066     $ 2,599,814    $ 1,200,000     $ 2,400,000     $(4,452,288)

Net loss for the year                      -               -              -               -          (38,416)
                                    ---------    ------------    -----------    ------------     ------------

Balance December 31, 1994           4,226,066       2,599,814      1,200,000       2,400,000      (4,490,704)

Issuance of common shares for 
  services                            100,000           5,000             -               -                -
Share repurchase agreement            (1,000)        (76,000)             -               -                -
Net income for the year                    -               -              -               -         2,480,998
                                    ---------    ------------    -----------    ------------     ------------
 Balance December 31, 1995          4,325,066       2,528,814      1,200,000       2,400,000      (2,009,706)

Conversion of preferred shares      2,400,000       2,400,000     (1,200,000)    (2,400,000)               -
Acquisition and cancellation 
  of shares                         (153,000)       (120,000)             -               -                -
Net income for the year                    -               -              -               -         1,467,019
                                    ---------    ------------    -----------    ------------     ------------
 Balance December 31, 1996          6,572,066       4,808,814             -               -         (542,687)
                                  ===========     ===========    ===========     ===========     ============

</TABLE>

The accompanying notes are an integral part of the financial statements.



<PAGE>


                            Spurlock Industries, Inc.
                      (formerly Air Resources Corporation)
                   Notes to Consolidated Financial Statements


Note 1. Summary of Significant Accounting Policies

A. Organization and Operations

Spurlock  Industries,  Inc. (formerly Air Resources  Corporation) was originally
incorporated  on March 17,  1986 in  Colorado.  On January  27,  1996,  Spurlock
Industries,  Inc. was formed in Virginia.  A merger of the two  corporations was
completed on July 26, 1996.  The merger was accounted for as a  recapitalization
and no adjustments  were made to the carrying  amounts of assets and liabilities
of the combined companies. Shares of the combining companies were exchanged on a
one for one basis.  The Company is engaged in the development,  production,  and
distribution of resins, liquid fertilizers and formaldehyde.

B. Principles of Consolidation

The Company engages in the development,  production, and distribution of resins,
liquid fertilizers and formaldehyde through its wholly owned subsidiary Spurlock
Adhesives,   Inc.  All   inter-company   transactions   have  been   eliminated.
Substantially  all  of  the  Company's  revenues  have  been  derived  from  the
operations of Spurlock Adhesives.

C. Inventories

Inventory is stated at the lower of cost or market using the first in, first out
method.  Finished  goods include raw materials,  direct labor and overhead.  Raw
materials  include  purchase  and  delivery  costs.  Inventory  consists  of the
following at December 31,

                                                    1996              1995

               Raw materials                       $397,511          $403,273
               Work in process                        9,493             8,677
               Finished goods                       134,628           183,815
                                                   --------          --------
                                                   $541,632          $595,765
                                                   ========          ========


D. Property and Equipment

Property and equipment are carried at cost.  Depreciation  is computed using the
straight-line  method over the estimated useful lives of the assets. When assets
are  retired or  otherwise  disposed  of, the cost and the  related  accumulated
depreciation  are removed from the accounts,  and any resulting  gain or loss is
recognized in operations for the period.  The cost of repairs and maintenance is
charged to operations as incurred and  significant  renewals or betterments  are
capitalized.


<PAGE>

Useful lives for property and equipment are as follows:

               Buildings                                  20  -  30 years
               Machinery and equipment                     5  -  25 years
               Office equipment                                   7 years
               Vehicles                                    4  -   8 years



E. Intangible Assets

The cost of intangible assets are amortized using the straight-line  method over
their estimated useful economic lives.  They are stated at cost less accumulated
amortization.  The Company  reviews for the impairment of long-lived  assets and
certain  identifiable  intangibles  whenever events or changes in  circumstances
indicate that the carrying amount of an asset may not be recoverable.  Under FAS
121, an impairment  loss would be recognized  when  estimated  future cash flows
expected to result  from the use of the asset and its  eventual  disposition  is
less than its carrying amount. No such impairment losses have been identified by
the  Company  for the  1996 and 1995  fiscal  years.  During  1994  $23,372,  of
intangibles considered to be non-recoverable were charged to operations.

F. Revenue Recognition

The  Company  recognizes  revenue  on the sales of its  products  at the time of
shipment.

G. Cash

Cash  and  cash  equivalents,   consist  of  deposits  and  highly  liquid  debt
instruments with original maturities of less than 90 days.

H. Environmental Costs

The  Company's   business   activities   are  monitored  by  state  and  federal
environmental  agencies  and the Company is  required to obtain  permits for the
operation of its facilities.  Environmental  expenditures that relate to current
operations are expensed or capitalized as appropriate.  Liabilities are recorded
when  environmental  assessments and or remedial  efforts are probable,  and the
costs can be  reasonably  estimated.  Generally,  the  timing of these  accruals
coincides with the  completion of a feasibility  study or commitment to a formal
plan of action.  Environmental costs charged to operations  aggregated $202,076,
$277,349 and $261,932 for the years ended December 31, 1996, 1995 and 1994.

I.    Advertising

Advertising expenses are charged to expense upon first showing.  Amounts charged
to expense were $28,101, $27,880 and $648 for the years ended December 31, 1996,
1995 and 1994, respectively.


<PAGE>

J. Estimates

The preparation of the Company's  financial  statements  requires  management to
make estimates and assumptions that affect the amounts reported in the financial
statements  and  accompanying  notes.  Actual  results  could  differ from these
estimates.

K. Earnings Per Share

Earnings per share for periods  presented has been  computed  using the weighted
average  number of  shares  of  common  stock  outstanding  during  the  periods
presented.  Common stock  equivalents,  as determined  using the treasury  stock
method,  are  excluded  from the  computation  during loss years as their effect
would be anti-dilutive.

L. Concentration of Credit Risk

The  Company's  short-term  financial  instruments  consist  of  cash  and  cash
equivalents,  accounts and loans  receivable,  and payables  and  accruals.  The
carrying amounts of these financial instruments  approximates fair value because
of their short-term  maturities.  Financial instruments that potentially subject
the Company to a  concentration  of credit risk consist  principally of cash and
accounts  receivable,  trade.  During the year the Company did not maintain cash
deposits at financial  institutions  in excess of the $100,000  limit covered by
the Federal  Deposit  Insurance  Corporation.  The  Company  has  several  major
customers,  (see  Note 12) the loss of any one of which  could  have a  material
negative impact upon the Company.  Additionally, the Company maintains a line of
credit  and a  significant  portion  of its  long-term  debt with one  financial
institution.   The  maintenance  of  a  satisfactory   relationship   with  this
institution  is of significant  importance to the Company.  The Company does not
hold or issue  financial  instruments  for trading  purposes nor does it hold or
issue interest rate or leveraged derivative financial instruments

M. Stock-based Compensation

The Company  adopted  Statement  of Financial  Accounting  Standard No. 123 (FAS
123), Accounting for Stock-Based Compensation beginning with the Company's first
quarter of 1996.  Upon  adoption of FAS 123,  the Company  continued  to measure
compensation expense for its stock-based  employee  compensation plans using the
intrinsic value method  prescribed by APB No. 25, Accounting for Stock Issued to
Employees,  and has provided in Note 11 pro forma  disclosures  of the effect on
net income and earnings per share as if the fair value-based  method  prescribed
by FAS 123 had been applied in measuring compensation expense.

N. Recent Pronouncements

In 1996 Financial Accounting Standards No. 125 (FAS 125) Accounting for Transfer
and Servicing of Financial Assets and Extinguishments of Liabilities was issued.
FAS 125 is  effective  for  transfers  and  servicing  of  financial  assets and
extinguishments  of liabilities  occurring  after December 31, 1996. The Company
will  adopt  FAS 125 in  1997.  Adoption  of FAS 125 is not  expected  to have a
material effect on the Company's  consolidated  financial  position or operating
results.

Note 2. Accounts Receivable

During  January,  1994 the Company  entered  into a factoring  agreement  with a
financial  institution  whereby  the factor  agreed to advance the Company up to
$1,200,000  with recourse by purchasing  accounts  receivable  less than 90 days
old. The  advanced  amount was computed on 80% of  acceptable  receivables.  The
Company  



<PAGE>


agreed to pay the factor a percentage of the face amount of the  receivable  for
the advances as follows:  2% for items  collected  within 30 days;  4% for items
collected  between  31 and 60 days;  and 6% for items  collected  after 61 days.
Factoring fees charged to expense pursuant to this arrangement for 1995 and 1994
amounted to $94,156 and $425,684, respectively.

During  February,  1995 the Company replaced its accounts  receivable  factoring
agreement with a line of credit.  The line of credit is secured by the Company's
accounts  receivable  and  inventory.  Under  the terms of the  credit  line the
Company may borrow up to 85% of accounts receivable up to 90 days old and 50% of
inventory up to a maximum of $3,500,000. The line of credit was replaced in July
1996 with a new line of credit (see Note 6).

Note 3. Investments

The Company's securities that are bought and held principally for the purpose of
selling  them in the near term are  classified  as trading  securities.  Trading
securities are recorded at fair value as a current asset with the change in fair
value during the period included in earnings.

At December 31, 1995 the Company  held debt  securities  bearing  interest at 6%
with a fair value and cost basis of $200,000.  The Company had no sales proceeds
from trading securities during the year ended December 31, 1995.



The  Company  purchased  additional  trading  securities  during  the year ended
December 31, 1996 for cash aggregating $397,500.  The Company had sales proceeds
from trading  securities  during the year ended  December 31, 1996  amounting to
$581,167 and realized a (loss) for this period amounting to $(16,333).

Note 4. Property and Equipment.

Property and equipment consist of the following:

                                                    1996       1995 

Land                                         $    69,233   $    69,233
Buildings                                        547,041       543,601
Machinery and equipment                       12,399,116     8,315,648
Construction in progress                         305,913       107,133
Vehicles                                         285,189       132,437
Furniture and fixtures                           150,640       104,269
                                             -----------   -----------
                                              13,757,132     9,272,321
Accumulated depreciation and  amortization     4,313,075     3,559,436
                                             -----------   -----------
                                             $ 9,444,057   $ 5,712,885
                                             ===========   ===========

Depreciation  charged to operations  was $758,365  $700,240 and $560,599 for the
years ended December 31, 1996, 1995 and 1994, respectively.

 
<PAGE>

Substantially all of the Company's fixed assets secure debt described in Note 7.

The  Company  owns vacant  land  adjacent  to its  Waverly VA facility  which is
suitable for plant expansion. The cost of the land $150,000 is included in other
investments in the accompanying balance sheet.

Note 5. Accounts and Notes Receivable - Officers

Accounts and notes receivable officers consisted of the following at December 
31,

                                                        1996             1995
Notes receivable, with interest at
 9% due in annual payments
 of $38,595 through 1999                                $139,639        $158,639
Less: current portion                                     38,595          40,520
                                                        --------        --------
                                                        $101,044        $118,119
                                                        ========        ========

Note 6. Notes Payable.

Notes  payable - line of credit at December 31, 1995  consisted  of  outstanding
indebtedness pursuant to an accounts receivable financing agreement as described
in Note 2. At December 31, 1995 the outstanding  balance was $1,329,096  bearing
interest at prime plus 2.5% (11% at December 31,  1995) per annum.  The line was
repaid in July 1996 pursuant to a new credit facility with a bank which includes
an accounts  receivable  and inventory  line of credit and  long-term  financing
secured by plant and equipment.  The new credit line is secured by the Company's
accounts receivable and inventory and contains certain financial covenants which
the Company is currently in compliance  with.  At December 31, 1996,  borrowings
outstanding amounted to $1,420,801 at a year end interest rate of 8.25%.

The year end  balance  is equal to the  maximum  amount  of  borrowing  based on
available accounts receivable and inventory.

Notes payable - other at December 31, 1995 consists of following:

Promissory notes, with interest at 12% per annum,  originally due in March, 1993
with a balance due of $82,447 at December 31, 1995, repaid in 1996.

Note 7. Long-term Debt

Long-term debt consists of the following at December 31,

                                              1996          1995

Note payable bank, payable in monthly
 installments of $8,621 plus interest
 at 10%, repaid in July 1996               $     --     $  206,897


<PAGE>

Note payable bank, payable in monthly
 installments of $8,924 with interest
 at 8%, repaid in June 1996                      --         77,362

Note payable to a bank payable
 $50,542 monthly including interest
 at prime + .5% or LIBOR  rate + 2.75%
(8.25%   at December 31, 1996)
 secured  by plant and equipment
 due July, 2002                             3,436,832      509,138

Note payable to a bank with
 interest at 12% payable $1,832
 monthly  secured by real property
 due in August, 2004                          109,295      117,583

Note payable vendor, payable in monthly
 installments of $23,320 with interest
 at Prime + 1.5% (10% at December 31,
 1995) due March, 1998                        349,780      629,620

Note payable supplier, payable in
 monthly installments of $12,861, with
 interest at 8%, repaid in June 1996             --        379,831

Note payable supplier, payable in
 monthly installments of $14,814, with
 interest at 8.25%, through August 1999       400,504         --

Various notes payable,  payable in
 monthly  installments of $4,634
 with interest from 8% to 10% due
 December 1997 to November 1999
 secured by personal property                 135,300       56,811
                                            ---------    ---------
                                            4,431,711    1,977,242
Less: current portion                       1,029,090      993,590
                                            ---------    ---------
                                           $3,402,621    $ 983,652
                                           ==========    =========


<PAGE>

Maturities of long-term debt are as follows:

                  December 31, 1997                  $1,029,090
                  December 31, 1998                  $  966,087
                  December 31, 1999                  $  740,822
                  December 31, 2000                  $  619,942
                  December 31, 2001                  $  621,647
                  Thereafter                         $  454,123

Note 8. Related Party Transactions.

Through 1993 certain  directors  and  shareholders  made advances to the Company
bearing  interest at 10% per annum  aggregating  $195,350.  These  advances were
unpaid at December 31, 1994.  During 1995 $99,728 of these  advances were repaid
and the remaining balance was repaid in full in 1996.

During 1994 the Company  purchased raw materials  used at the Malvern,  AR plant
from a company that owned  533,333  shares of the $2 par value  preferred  stock
issued by the  Company to effect  the  purchase  of the  Malvern  facility.  The
purchases are considered to be at arms length and at prices and terms  available
from other suppliers of the material. Purchases aggregated $527,073 for the year
ended December 31, 1994.

During September, 1994 a shareholder of the Company entered into an agreement to
repurchase the 533,333 shares  described above for $250,000 payable in quarterly
payments  through  September,   1995.  During  January,  1996  this  shareholder
converted  these  shares and the  666,667  shares of  preferred  stock  which he
previously owned into common stock (see Note 12).

In July 1996, the Company  entered into an employment  contract with its founder
and former chief  executive  officer to serve as its vice  president for product
development  through August 31, 1999. The contract provides for an annual salary
of $180,000  during the  contract  term.  The  contract  also  provides for post
retirement  benefit  payments  of  $100,000  per  year  for a five  year  period
beginning  August 31,  1999.  The  Company  intends to fund the post  retirement
payments currently by depositing monthly payments of approximately  $12,000 into
an interest bearing account.

The  estimated  payment  assumes an earned  interest  rate of 5% per year on the
deposit  amounts and a discount rate of 8% per year to arrive at the net present
value of the annual  retirement  benefit due at August 31, 1999. The Company has
recorded  $42,667 of expense  for post  retirement  benefits  for the year ended
December  31, 1996 and  estimates  that its net  commitment  for the period from
January  1,  1997  to  August  31,  1999  pursuant  to  this  contract  will  be
approximately $864,000 for both salary and post retirement benefits.

Note 9. Description of Leasing Arrangements

The Company leased rail cars, trucking equipment, and a formaldehyde plant under
operating  leases  expiring in various  years  through  2003.  The lease for the
formaldehyde plant ($660,000 per year) commenced upon successful start up, which
was in  February,  1993.  The Company had an option to purchase the plant at the
expiration  of the initial 10 year lease for the greater of fair market value or
$3,580,000,  or to renew the lease for an additional 10 years. During July 1996,
the plant was purchased for $3,200,000.

During the fourth quarter of 1993 the Company began deferring  certain  payments
on the plant  lease due to  operational  problems  with the plant.  The  Company
maintained  that the  plant  did not  produce  the  quantities  of  formaldehyde
specified  in  the  lease  and  that a  renegotiation  of the  lease  terms  was
appropriate. The amount 



 
<PAGE>


deferred at December 31, 1995 amounted to $510,070. This amount was converted to
a long-term note payable as described  above in connection  with the purchase of
the plant.

The Company has remaining  operating  leases for trucking and rail car equipment
which have fixed annual payments as follows:  $100,802 in 1997, $34,824 in 1998,
$33,000 in each year thereafter through 2001.

Rent expense was  $395,627,  $761,997 and $931,242 for the years ended  December
31, 1996, 1995 and 1994.

Note 10. Income Taxes

Deferred income taxes arise from temporary differences resulting from income and
expense  items  (principally  accelerated  depreciation)  reported for financial
accounting and tax purposes in different periods.  Deferred taxes are classified
as  current  or  non-current,  depending  on the  classification  of assets  and
liabilities  to  which  they  relate.  Deferred  taxes  arising  from  temporary
differences  that are not related to an asset or  liability  are  classified  as
current  or  non-current  depending  on  the  periods  in  which  the  temporary
differences are expected to reverse.

Deferred tax assets and  liabilities at December 31, 1996 and 1995 resulted from
the following:

                                                  1996               1995
         Deferred Tax assets:
           Operating loss carryforward             $ -                $ 98,300
           Post retirement liability               $ 14,507           $ -
         Deferred tax liabilities:
           Accelerated depreciation                $157,983           $109,900



<PAGE>

The  provision  for income taxes at December  31, 1996 and 1995  consists of the
following:

                                             1996                   1995

         Current                            $987,910                 $81,600
         Deferred                             26,323                  34,000
                                          ----------                --------
                                          $1,021,487                $115,600

A  reconciliation  of the federal taxes at statutory  rates to the tax provision
for the year ended December 31, 1996 and 1995 is as follows:

                                                  1996                 1995

         Federal statutory rate                   $846,091            $882,843
         State income taxes                        149,415             104,000
         Utilization of loss carryforward          (13,912)           (801,532)
         Surtax exemption                           -                  (11,750
         Book/tax depreciation difference          (48,083)            (34,000)
         Post retirement benefits                   14,507              -
         Other                                      73,469             (23,961)
                                                ----------            --------
         Provision for income taxes             $1,021,487            $115,600

The Company did not record  income tax expense for the year ended  December  31,
1994 due to the loss incurred in that year.  The Company has fully  utilized its
net operating loss carryforward in the current year.

Note 11. Stockholders' Equity

During 1990,  the Board  authorized  5,000,000  shares of preferred  stock.  The
preferred  stock will be callable at the  discretion  of the Company at par ($2)
plus accrued dividends. The stock is convertible into two shares of common stock
after one year.  The conversion  rights will expire after five years.  Dividends
are  payable  at 200% of any  dividends  paid on  common  stock per  annum.  The
preferred  stock has  preference in liquidation to the common shares and has two
votes per share at shareholder meetings.

During  February,  1995 the Company  issued  100,000  shares of common  stock to
certain officers for services valued at $5,000.

During 1995 the Company  adopted a stock  option plan for the benefit of certain
employees,  officers  and  directors.  The number of  restricted  common  shares
reserved under the plan is 500,000. The option price on the grant date shall not
be less than the fair market value on such date  provided  that an owner of more
than 10% of the common  stock  shall not have an option  granted at a price less
than 110% of the fair  market  value on the date of the grant.  During  1995 the
Company  issued  210,000  options  exercisable  at $.50 per share under the plan
which expire 100,000 in 2000 and 110,000 in 2005.  During June 1996, the Company
granted  additional options under the plan for 75,000 shares exercisable at $.55
for a ten year period.


<PAGE>

Following is a summary of the transactions in the plan:

                                                                   Weighted
                                                   Shares       Average Price
               Balance December 31, 1994             -
               Granted                             210,000           $.50
               Canceled                              -
               Exercised                             -    
                                                 ---------
               Balance December 31, 1995           210,000           $.50
               Granted                              75,000           $.55
               Canceled                              -
               Exercised                             -    
                                                 ---------
               Balance December 31, 1996           285,000           $.51

               Options available at
                 December 31, 1996                 215,000


At December 31, 1996,  the Company also had the  following  other stock  options
granted in prior years outstanding:

           Description        Shares         Exercise Price      Expiration Date

           Shareholder        225,000          $.75                  01/21/97
           Shareholder        230,000         $1.00                  02/28/97

As of the  date  of the  financial  statements  none  of the  options  had  been
exercised.

The weighted  average fair value at the date of grant for options granted during
1996 was $.25 per option. The fair value of the options at the date of grant was
estimated using the Black-Scholes model with assumptions as follows:


            Market value                         $.51
            Expected life                          10
            Interest rate                        6.96%
            Volatility                          19.56%
            Dividend yield                       0.00%

No stock based  compensation  costs would be recorded by the Company as a result
of the foregoing.

During January,  1996 the holder of the 1,200,000  preferred shares described in
Note 8  converted  these  shares  into  2,400,000  shares  of common  stock.  In
connection with the recapitalization  described in Note 1, the Company agreed to
reacquire  80,000  shares  of  the  Air  Resources  Corp.  common  stock  from a
dissenting  shareholder  for  $120,000 in cash.  Also during  1996,  the Company
acquired 73,000 shares of common stock of Air Resources from a former officer as
described in Note 13.



<PAGE>

Note 12. Sales to Major Customers and Concentration of Credit Risk

The Company,  whose  customers  produce raw materials  used in the  construction
industry  made sales in excess of 10% of its gross  revenues  for the year ended
December 31, 1996, 1995 and 1994 as follows:

              Customer                         Sales/%             Receivable at
                                                                       12/31
              1996:
              International Paper         $4,537,102     16%          $108,000
              Union Camp                  $3,865,062     13%          $162,000
              Schenectady                 $3,521,857     12%           $57,000
              Willamette                  $7,478,831     26%          $424,000

              1995:
              International Paper         $4,964,000     15%          $124,000
              Union Camp                  $3,900,000     12%          $166,000
              Schenectady                 $5,124,000     15%           $41,000
              Willamette                  $7,454,000     22%          $636,000

              1994:
              International Paper         $5,147,000     17%          $156,000
              Union Camp                  $3,759,000     12%          $175,000
              Norbord                     $2,233,000      7%          $161,000
              Willamette                  $7,198,000     24%          $678,000

Note 13. Commitments and Contingencies

On  September  16,  1996 the Company  contracted  to  purchase  land,  plant and
equipment owned by Niagara Mohawk Power  Corporation  (NMPC) located in the Town
of Bethlehem, New York. The Company intends to use the site to construct a third
processing  plant for the manufacture of adhesive resins and  formaldehyde.  The
contract specifies a purchase price of $775,000 for the premises and $65,000 for
equipment.  The contract also provides that the purchase  price for the premises
will be reduced to $1 should the Company promise to remediate the premises under
the direction of the New York State  Department of  Environmental  Conservation.
The Company has placed a $50,000  purchase  deposit in escrow  which will become
the property of NMPC should the Company not use its best  efforts to  effectuate
closing of the purchase by April 1, 1997. The Company has undertaken discussions
with  the  state  conservation  agency  and  has  prepared  an  estimate  of the
remediation  costs  associated with the project,  which estimate  projects total
costs not in excess of the contract purchase price.

In  connection  with the plant  acquisition  described  above,  the  Company has
entered  into a turnkey  plant  construction  agreement  with DB  Western,  Inc.
whereby the Company will pay an aggregate of $6,568,100 of  construction  costs.
The  Company  paid a deposit  of $66,000  at  October  1, 1996 to  initiate  the
contract.  Construction  will not begin until the Company has completed the NMPC
purchase or has secured another acceptable plant location.

Should the  Company be unable to complete  the  contract,  the deposit  would be
forfeit and any additional  costs incurred by DB Western in connection  with the
project would become due by the Company.


<PAGE>

The Company purchases substantially all of its three raw material components for
its resin,  formaldehyde,  and fertilizer  operations from four  suppliers.  The
Company purchased $15,158,111,  $19,232,831 and $20,136,843 from these suppliers
during  1996,  1995 and 1994 and had a  balance  due to them of  $1,089,433  and
$1,522,204 at December 31, 1996 and 1995.

During  1993,  the  Company  was made aware of a claim by two  former  directors
requesting that the Company  repurchase  381,000 shares of its common stock from
said directors pursuant to a reorganization  agreement entered into during 1992.
Subsequently,  one of these former directors sold his holdings of 233,000 common
shares. The purchase agreement set the repurchase price at $2.81 per share or an
aggregate of $418,280  after  considering  the above  described  disposition  of
shares by the former director.  The Company settled these claims by paying these
individuals  $84,690 in cash in 1995 and by  repurchasing  73,000  common shares
from one of the  individuals  for  $75,000 in 1996.  The Company had accrued the
potential  maximum  liability of $75,000 at December 31, 1995. In addition,  the
Company  repurchased  and  retired  1,000  shares  of  common  stock  from  this
individual for $1,000.

Note 14. Pension Plan

The Company has a 401(k) retirement plan for the benefit of eligible  employees.
Contributions  are  funded  by the  Company  and  established  by the  Board  of
directors  annually.  Contributions  for  1996,  1995  and 1994  were  $132,476,
$113,114 and $128,376, respectively.



<PAGE>

                                    PART III

Item 10. Directors and Executive Officers of the Registrant
   
         The  information  required by this item is incorporated by reference to
the  Registrant's  definitive  Proxy  Statement  for its 1997 Annual  Meeting of
Shareholders,  under the heading  "ELECTION OF DIRECTORS" to be filed within 120
days of the end of the 1996 fiscal year.
    

Item 11. Executive Compensation
   
         The  information  required by this item is incorporated by reference to
the  Registrant's  definitive  Proxy  Statement  for its 1997 Annual  Meeting of
Shareholders,   under  the   headings   "ELECTION  OF   DIRECTORS,"   "EXECUTIVE
COMPENSATION" and "TRANSACTIONS  WITH MANAGEMENT" to be filed within 120 days of
the end of the 1996 fiscal year.
    

Item 12. Security Ownership of Certain Beneficial Owners and Management
   
         The  information  required by this item is incorporated by reference to
the  Registrant's  definitive  Proxy  Statement  for its 1997 Annual  Meeting of
Shareholders, under the heading "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT" to be filed within 120 days of the end of the 1996 fiscal year.
    

Item 13. Certain Relationships and Related Transactions
   
         The  information  required by this item is incorporated by reference to
the  Registrant's  definitive  Proxy  Statement  for its 1997 Annual  Meeting of
Shareholders, under the headings "ELECTION OF DIRECTORS," "SECURITY OWNERSHIP OF
CERTAIN  BENEFICIAL OWNERS AND MANAGEMENT" and "TRANSACTIONS WITH MANAGEMENT" to
be filed within 120 days of the end of the 1996 fiscal year.
    



<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements of Sections 13 or 15(d) of the Securities
Exchange  Act of 1934,  the  Registrant  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                 SPURLOCK INDUSTRIES, INC.


Date:    April 29, 1997     By:  /s/ Irvine R. Spurlock
                                 ----------------------------------------------
                                 Irvine R. Spurlock
                                 Chairman, President and Chief Executive Officer

         Pursuant to the  requirements  of the  Securities  and  Exchange Act of
1934,  this report has been signed below by the  following  persons on behalf of
the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

                Signature                          Title                                           Date
                ---------                          -----                                           ----


<S>                                       <C>                                                 <C>
 /s/ Irvine R. Spurlock                   Chairman, President, Chief Executive                April 29, 1997
 -------------------------------------
           Irvine R. Spurlock             Officer and Director
                                          (Principal Executive Officer)

 /s/ Phillip S. Sumpter                   Executive Vice President, Chief Financial           April 29, 1997
 -------------------------------------
           Phillip S. Sumpter             Officer and Director
                                          (Principal Financial Officer)

 /s/ Warren E. Beam, Jr.                  Treasurer and Controller                            April 29, 1997
 -------------------------------------
           Warren E. Beam, Jr.            (Principal Accounting Officer)


 /s/ H. Norman Spurlock, Jr.              Director                                            April 29, 1997
 -------------------------------------
         H. Norman Spurlock, Jr.


                                          Director                                            
 -------------------------------------
             Glen S. Whitwer


 /s/ Harold N. Spurlock                   Director                                            April 29, 1997
 -------------------------------------
           Harold N. Spurlock


                                          Director                                           
 -------------------------------------
            Raymond G. Tuttle

</TABLE>