SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

     (Mark One)

     [X]   QUARTERLY  REPORT  UNDER  SECTION  13 OR 15 (d)  OF  THE  SECURITIES
EXCHANGE ACT OF 1934

     For Quarter Ended: September 30, 1999; or

     [ ]  TRANSITION  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES
EXCHANGE ACT OF 1934

     For the transition period _________ to __________

     Commission File Number: 000-26261

                          AMERICAN FIRE RETARDANT CORP.
             ------------------------------------------------------
             (Exact name of Registrant as specified in its charter)


            NEVADA                                            88-03826245
------------------------------                          -----------------------
State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                            Identification No.)

9337 Bond Avenue, El Cajon, California                          92021
----------------------------------------------------    ------------------------
(Address of principal executive offices)                      Zip Code)


                                 (619) 390-6888
              ----------------------------------------------------
              (Registrant's telephone number, including area code)


     Indicate by check mark  whether the  registrant:  (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the  Securities  Exchange Act of
1934  during  the  preceding  12  months  (or for  such  shorter  period  that a
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

     On  September  30,  1999 there were  2,343,788  shares of the  registrant's
Common Stock, $0.01 par value, issued and outstanding.

     Transitional Small Business Disclosure Format: Yes [ ] No [X]

     This Form 10-QSB has 23 pages, the Exhibit Index is located at page 22.

<PAGE>
                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements.

     The financial statements included herein have been prepared by the Company,
without  audit  pursuant  to the rules and  regulations  of the  Securities  and
Exchange  Commission.  Certain  information  and  footnote  disclosure  normally
included in financial  statements prepared in accordance with generally accepted
accounting  principles have been condensed or omitted pursuant to such rules and
regulations,  although the Company believes that the disclosures are adequate to
make the information presented not misleading.

     In the opinion of the Company,  all adjustments,  consisting of only normal
recurring adjustments, necessary to present fairly the financial position of the
Company as of September 30, 1999 and the results of its  operations  and changes
in its financial  position from inception  through  September 30, 1999 have been
made.  The results of  operations  for such  interim  period is not  necessarily
indicative of the results to be expected for the entire year.

                          Index to Financial Statements
                          -----------------------------
                                                                          Page
                                                                          ----
Balance Sheets...........................................................  3
Statements of Operations.................................................  5
Statements of Stockholders' Equity (deficit).............................  6
Statements of Cash Flows.................................................  7
Notes to Financial Statements for Period.................................  9

     All other  schedules are not submitted  because they are not  applicable or
not required or because the information is included in the financial  statements
or notes thereto.

              [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]


                                       2
<PAGE>
                       AMERICAN FIRE RETARDANT CORPORATION
                                 AND SUBSIDIARY
                           Consolidated Balance Sheets



                                     ASSETS
<TABLE>
<CAPTION>
                                                       September 30,       December 31,
                                                           1999               1998
                                                       -------------       -------------
                                                       (Unaudited)
<S>                                                    <C>                 <C>
CURRENT ASSETS

   Cash                                                $         -         $         -
   Inventory                                                 211,371             140,495
   Accounts receivable, net                                  840,056             472,302
   Prepaid expenses                                           10,000                 -
                                                       -------------       -------------

     Total Current Assets                                  1,061,427             612,797
                                                       -------------       -------------

PROPERTY AND EQUIPMENT                                       247,166             196,603
                                                       -------------       -------------

OTHER ASSETS

   Restricted cash                                           138,649              71,519
   Deferred charges, net                                      46,750              72,500
   Deposits and other assets                                  28,194              16,372
                                                       -------------       -------------

     Total Other Assets                                      213,593             160,391
                                                       -------------       -------------

     TOTAL ASSETS                                      $   1,522,186       $     969,791
                                                       =============       =============

 The accompanying notes are an integral part of these consolidated financial statements.

</TABLE>

                                       3
<PAGE>
                       AMERICAN FIRE RETARDANT CORPORATION
                                 AND SUBSIDIARY
                     Consolidated Balance Sheets (Continued)

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
                                                       September 30,       December 31,
                                                           1999               1998
                                                       -------------       -------------
                                                       (Unaudited)
<S>                                                    <C>                 <C>
CURRENT LIABILITIES

   Cash overdraft                                      $      43,716       $       9,462
   Accounts payable                                          336,748              65,887
   Accrued expenses                                          327,041             229,321
   Unearned revenue                                           87,690              42,690
   Shareholder loans                                         203,714             215,700
   Notes payable, current portion                            291,696             225,697
   Line of credit                                            646,460             418,869
                                                       -------------       -------------

     Total Current Liabilities                             1,937,065           1,207,626
                                                       -------------       -------------

LONG-TERM LIABILITIES

   Notes payable                                             100,000              94,668
                                                       -------------       -------------

     Total Liabilities                                     2,037,065           1,302,294
                                                       -------------       -------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY (DEFICIT)

   Common stock, 0.001 par value; 25,000,000
    shares authorized, 2,343,788 and 2,278,661
    shares issued and outstanding, respectively                2,344               2,279
   Additional paid-in capital                                917,614             872,090
   Accumulated deficit                                    (1,434,837)         (1,206,872)
                                                       -------------       -------------

     Total Stockholders' Equity (Deficit)                   (514,879)           (332,503)
                                                       -------------       -------------

     TOTAL LIABILITIES AND STOCKHOLDERS'
      EQUITY (DEFICIT)                                 $   1,522,186       $     969,791
                                                       =============       =============

 The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>



                                       4
<PAGE>
                       AMERICAN FIRE RETARDANT CORPORATION
                                 AND SUBSIDIARY
                      Consolidated Statements of Operations
                                   (Unaudited)


<TABLE>
<CAPTION>

                                                                    For the                                For the
                                                                Nine Months Ended                      Three Months Ended
                                                                  September 30,                            September 30,
                                                       ---------------------------------       ---------------------------------
                                                           1999                 1998               1999                1998
                                                       -------------       -------------       ------------        -------------
<S>                                                    <C>                      <C>            <C>                 <C>
NET SALES                                              $   1,914,924       $   1,301,496       $     893,380       $     451,982

COST OF SALES                                                648,375             470,608             309,291             194,004
                                                       -------------       -------------       -------------       -------------

GROSS MARGIN                                               1,266,549             830,888             584,089             257,978
                                                       -------------       -------------       -------------       -------------

EXPENSES

 Selling, general and administrative                       1,201,485           1,055,420             475,549             231,229
 Depreciation and amortization expense                        27,300              14,769               8,554               9,908
 Bad debt expense                                              7,711              20,995              (3,148)              8,537
                                                       -------------       -------------       -------------       -------------

  Total Expenses                                           1,236,496           1,091,184             480,955             249,674

INCOME (LOSS) FROM OPERATIONS                                 30,053            (260,296)            103,134               8,304
                                                       -------------       -------------       -------------       -------------
OTHER EXPENSES
Interest expense                                            (258,018)           (113,029)           (113,567)            (30,923)
                                                       -------------       -------------       -------------       -------------

  Total Other Expenses                                      (258,018)           (113,029)           (113,567)            (30,923)
                                                       -------------       -------------       -------------       -------------

LOSS BEFORE INCOME TAXES                                    (227,965)           (373,325)            (10,433)            (22,619)

PROVISION FOR INCOME TAXES                                       -                   -                   -                   -
                                                       -------------       -------------       -------------       -------------

NET LOSS                                               $    (227,965)      $    (373,325)      $     (10,433)      $     (22,619)
                                                       =============       =============       =============       =============

BASIC LOSS PER SHARE                                   $       (0.10)      $       (0.18)      $       (0.00)      $       (0.01)
                                                       =============       =============       =============       =============

FULLY DILUTED LOSS PER SHARE                           $       (0.10)      $       (0.18)      $       (0.00)      $       (0.01)
                                                       =============       =============       =============       =============

BASIC WEIGHTED AVERAGE SHARES                              2,322,556           2,021,010           2,343,788           2,022,738
                                                       =============       =============       =============       =============

FULLY DILUTED WEIGHTED
 AVERAGE SHARES                                            2,322,556           2,021,010           2,343,788           2,022,738
                                                       =============       =============       =============       =============


 The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>



                                       5
<PAGE>
                       AMERICAN FIRE RETARDANT CORPORATION
                                 AND SUBSIDIARY
            Consolidated Statements of Stockholders' Equity (Deficit)


<TABLE>
<CAPTION>

                                   Common Stock                  Additional     Stock
                                   ----------------------        Paid-In        Subscription   Accumulated
                                   Shares         Amount         Capital        Receivable     Deficit
                                   ------------------------------------------------------------------------
<S>                                <C>            <C>            <C>            <C>            <C>
Balance, December 31, 1997         2,018,333      $  2,018       $  730,369     $ (30,000)     $ (695,768)

Common stock issued for cash           4,785             5           18,495             -               -

Receipt of stock subscription              -             -                -        30,000               -

Common stock issued for
 services and interest               255,543           256           52,726             -               -

Contributed capital for
 services rendered                         -             -           70,500             -               -

Net loss for the year ended
 December 31, 1998                         -             -                -             -        (511,104)
                                   ------------------------------------------------------------------------

Balance, December 31, 1998         2,278,661         2,279          872,090             -      (1,206,872)

Common stock issued for
 debt conversion (unaudited)          49,159            49          34,362              -               -

Common stock issued for
 interest (unaudited)                 15,968            16          11,162              -               -

Net loss for the nine months
 ended September 30, 1999
 (unaudited)                             -               -              -               -        (227,965)
                                   ------------------------------------------------------------------------
Balance, September 30, 1999
 (unaudited)                       2,343,788      $  2,344       $  917,614     $       -     $(1,434,837)
                                   ========================================================================

              The accompanying  notes are an integral part of these consolidated financial statements.
</TABLE>




                                       6
<PAGE>
                       AMERICAN FIRE RETARDANT CORPORATION
                                 AND SUBSIDIARY
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                    For the                                For the
                                                                Nine Months Ended                      Three Months Ended
                                                                  September 30,                            September 30,
                                                       ---------------------------------       ---------------------------------
                                                           1999                 1998               1999                1998
                                                       -------------       -------------       ------------        -------------
<S>                                                    <C>                      <C>            <C>                 <C>
CASH FLOWS FROM OPERATING
ACTIVITIES

Net income (loss)                                      $    (227,965)      $    (373,325)      $     (10,433)      $     (22,619)
Adjustments to reconcile net loss to net cash
   provided (used) by operating activities:
     Common stock issued for services and
       interest expense                                       11,178              48,586                 -                17,625
    Depreciation and amortization                             54,600              25,408              18,584              18,912
    Allowance for bad debts                                   10,859              12,548              17,100                 -
   Change in Assets and Liabilities:
    (Increase) decrease in accounts receivable              (378,613)            (24,500)           (455,895)            (26,870)
    (Increase) decrease in deposits                              -                (6,683)                -                   -
    (Increase) decrease in inventory                         (70,876)            (45,814)            (88,120)            (31,314)
    (Increase) decrease in prepaid expenses
      and deferred charges                                   (10,000)             (8,281)            (10,000)            (13,506)
    (Increase) decrease in notes receivable                  (11,822)                -               (11,822)
    Increase (decrease) in accounts payable                  270,861             (14,904)            247,979             (15,207)
    Increase (decrease) in accrued expenses                   97,720             114,456              68,717              38,366
    Increase (decrease) in unearned revenue                   45,000               3,170              45,000               3,170
                                                       -------------       -------------       -------------       -------------

       Net Cash Provided (Used) by
     Operating Activities                                   (209,058)           (269,339)           (178,890)            (31,443)
                                                       -------------       -------------       -------------       -------------

CASH FLOWS FROM INVESTING
 ACTIVITIES

  Purchase of fixed assets                                   (79,413)            (12,290)            (69,994)                -
                                                       -------------       -------------       -------------       -------------

       Net Cash (Used) by Investing Activities               (79,413)            (12,290)            (69,994)                -
                                                       -------------       -------------       -------------       -------------

CASH FLOWS FROM FINANCING
 ACTIVITIES

  Proceeds from notes payable - related                       48,000              90,500              10,000              45,000
  Payments on notes payable - related                        (25,575)            (56,150)             (7,949)            (23,150)
  Proceeds from sale of common stock                             -                48,500                 -                   -
  Proceeds from notes payable                                157,500             160,500              85,000              85,000
  Payment on notes payable                                   (86,169)           (108,468)            (30,306)            (11,591)
  Proceeds from lines of credit                              227,591             233,592             267,823                 -
  Paydown on line of credit                                      -               (86,257)                -               (86,257)
                                                       -------------       -------------       -------------       -------------

       Net Cash Provided (Used) by
     Financing Activities                              $     321,347       $    282,217        $     324,568       $       9,002
                                                       -------------       -------------       -------------       -------------



 The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                       7
<PAGE>
                       AMERICAN FIRE RETARDANT CORPORATION
                                 AND SUBSIDIARY
                Consolidated Statements of Cash Flows (Continued)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                    For the                                For the
                                                                Nine Months Ended                      Three Months Ended
                                                                  September 30,                            September 30,
                                                       ---------------------------------       ---------------------------------
                                                           1999                 1998               1999                1998
                                                       -------------       -------------       ------------        -------------
<S>                                                    <C>                      <C>            <C>                 <C>
NET INCREASE (DECREASE) IN CASH                        $      32,876       $         588       $      75,684       $     (22,441)

CASH AND CASH EQUIVALENTS AT
  BEGINNING OF PERIOD                                         62,057              83,911              19,249             106,940
                                                       -------------       -------------       -------------       -------------

CASH AND CASH EQUIVALENTS AT
  END OF PERIOD                                        $      94,933       $      84,499       $      94,933       $      84,499
                                                       =============       =============       =============       =============

SUPPLEMENTAL CASH FLOW
 INFORMATION

CASH PAID FOR

  Interest                                             $     174,038       $     103,665       $      58,345       $      52,520
  Income taxes                                         $         -         $         -         $         -         $         -

NON-CASH FINANCING ACTIVITIES

  Common stock issued for debt                         $      34,411       $         -         $         -         $         -
  Common stock issued for interest and
   services                                            $      11,178       $      48,586       $         -         $      17,625


 The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>



                                       8
<PAGE>
                       AMERICAN FIRE RETARDANT CORPORATION
                                 AND SUBSIDIARY
                 Notes to the Consolidated Financial Statements
                    September 30, 1999 and December 31, 1998


NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

     The accompanying  consolidated  financial  statements have been prepared by
     the Company  without audit.  In the opinion of management,  all adjustments
     (which  include  only normal  recurring  adjustments)  necessary to present
     fairly the  financial  position,  results of  operations  and cash flows at
     September 30, 1999 and 1998 and for all periods presented have been made.

     Certain   information  and  footnote   disclosures   normally  included  in
     consolidated  financial  statements  prepared in accordance  with generally
     accepted  accounting  principles  have been  condensed  or  omitted.  It is
     suggested that these condensed consolidated financial statements be read in
     conjunction with the financial statements and notes thereto included in the
     Company's December 31, 1998 audited consolidated financial statements.  The
     results of operations for the periods ended September 30, 1999 and 1998 are
     not necessarily indicative of the operating results for the full years.



                                       9
<PAGE>
Item 2. Management's  Discussion and Analysis of Financial Condition and Results
of Operations.

     The following  discussion and analysis  should be read in conjunction  with
the financial statements and notes thereto appearing elsewhere herein.

THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
30, 1998.

     NET SALES  increased  $441,398 or 97.7% over the  comparable  period a year
earlier.  For  such  three-month  periods  the  increase  was from  $451,982  to
$893,380. The increase in net sales is due to additional contracts signed in the
course of doing normal business

     GROSS PROFIT  increased 126.4% in the three months ended September 30, 1999
to $584,089 from  $257,978.  Gross profit as a percentage of sales was 65.4% for
the third  quarter of fiscal  1999  compared  to 57.1% for the third  quarter of
fiscal 1998. The increase in percentage  gross profit is mainly due to increased
sales in chemicals  which the company has a higher percent of profit.  Also, the
Company now controls the  manufacturing of its main chemical,  FIREXTRA 238 at a
savings of $12/gallon. In addition, the Company is now pricing its products more
competitively.

     OPERATING  EXPENSES  increased  to  $480,955  for the  three  months  ended
September 30, 1999 from $249,674 for the three months ended  September 30, 1998.
This is a 92.63% increase for those two three month periods ending September 30.
The  increase in the  operating  expenses is due in large part to a  substantial
increase  in travel and also  legal and  accounting  fees for the third  quarter
1999. The legal and  accounting  fees for the third quarter 1999 were $30,585 as
compared  to $13,239  for the third  quarter  1998.  The  increase  in legal and
accounting  fees were incurred in preparation  for the Company's Form 10 Filing.
There was also an  increase  in travel  expenses  in  association  with  various
meetings  with the  attorneys and  accountants  in the same matter.  Travel also
included trips for maintaining due diligence in future  acquisitions in addition
to normal  business  trips to  Louisiana  and  Florida,  setting up the  Florida
satellite office and sending crews to Florida and Louisiana for particular jobs.
The travel for the third quarter 1999 was $61,983 as compared to $11,754 for the
same  period  in  1998.   Other  Operating   Expenses  such  as  shop  supplies,
advertising, office expense, etc. went up proportionally with Net Sales and Cost
of Sales.

     OTHER EXPENSES  increased to $113,567 for the three months ended  September
30, 1999 from $30,923 for the same three months in 1998. This increase is due to
the use of factoring and additional interest on loans received by the Company to
assist in cash flow.

     As a result of the foregoing factors, the Company had a NET LOSS of $10,433
for the three  months  ended  September  30,  1999 as  compared to a NET LOSS of
$22,619 for the three months ended September 30, 1998, a decrease of 53.8%.

NINE MONTHS ENDED  SEPTEMBER 30, 1999 COMPARED WITH NINE MONTHS ENDED  SEPTEMBER
30, 1998.

     NET SALES  increased  $613,428 or 47.1% for the nine months ended September
30, 1999 to $1,914,924  from  $1,301,496 for the nine months ended September 30,
1998.  The increase in net sales is  attributable  to a significant  increase in
overall  business.  The sale of  chemicals  increased  82.1% for the nine months
ended  September 30, 1999 from $208,249 for the nine months ended  September 30,
1998 to $379,306 for the nine months ended September 30, 1999. The firefilm jobs
increased from $155,476 for the nine months ended September 30, 1998 to $518,091
for the same period in 1999.  That is a 233.2%  increase from 1998 to 1999.  Our
fabric  treatment  sales  increased  8.1% in the  nine-month  period for 1999 as
compared to the same  nine-month  period in 1998.  It was  $187,445 for the nine
months  ended  September  30, 1998 as  compared to $202,714  for the nine months
ended September 30, 1999.  However,  all of these  increases were  significantly
offset by a decrease in firestop  sales due to the completion of the Beau Rivage
job prior to 1999.  The firestop  sales for the nine months ended  September 30,
1999 were  $428,932 as compared to $627,950 for the nine months ended  September
30,  1998.  That is a 31.7%  decrease in those  nine-month  periods from 1998 to
1999.  As a result of the  foregoing  factors,  the NET  SALES  for the  Company
increased  $613,428 for the nine months ended  September 30, 1999 as compared to
the nine months ended September 30, 1998.

                                       10
<PAGE>
     GROSS PROFIT increased 52.4% in the nine months ended September 30, 1999 to
$1,266,549  from  $830,888.  Gross profit as a percentage of sales was 66.1% for
the first half of 1999 as compared  to 63.8% for the first half of fiscal  1998.
This increase is primarily  due to the the cost of sales as that cost  decreased
similarly as a percentage  for the two periods.  Also,  the Company now controls
the manufacturing of its main chemical, FIREXTRA 238 at a savings of $12/gallon.
In addition, the Company is now pricing its products more competitively.

     OPERATING  EXPENSES  increased  to  $1,236,496  for the nine  months  ended
September 30, 1999 from $1,091,184 for the nine months ended September 30, 1998.
This  increase was  primarily  due to a very  significant  increase in legal and
accounting  fees  incurred.  As shown in the table below,  interest,  travel and
advertising  also had  significant  increases  that  contributed  to the overall
increase in operating expenses.

                                                      %
          EXPENSE                                 INCREASE
          -------------------                     --------
          Accounting and Legal                    360.0%
          Travel                                  128.4%
          Advertising                             443.9%

     The  accounting  and legal  expenses  are  directly  related to the Company
preparing to go public. The travel increase is because of the number of meetings
with the attorneys and  accountants in preparation  for the Company going public
in addition to the other reasons stated above.  The advertising has increased in
an effort to better publicize the Company to a larger market.

     OTHER  EXPENSES  increased to $258,018 for the nine months ended  September
30, 1999 from  $113,029  for the nine  months  ended  September  30,  1998.  The
interest  increase is due to the use of  factoring  and  additional  interest on
loans received by the Company to assist in cash flow.

     As a  result  of the  foregoing  factors,  the  Company  had a NET  LOSS of
$227,965 for the nine months ended  September 30, 1999 as compared to a NET LOSS
of $373,325 for the nine months ended September 30, 1998.

LIQUIDITY AND CAPITAL RESOURCES

     The  Company's  primary  needs  for funds are to  provide  working  capital
associated  with  forecasted  growth in sales volumes.  Specifically,  funds are
required to provide  materials  and manpower  required for the larger  contracts
which the Company has been signing  beginning in July of 1999.  Working  capital
for the nine months ended  September 30, 1999 was funded  primarily  through the
sale of accounts receivable and proceeds from private lenders.

     Net cash used by operating  activities  was  ($209,058) for the nine months
ended  September  30, 1999 as compared to  ($269,339)  for the nine months ended
September 30, 1998.

     Net  cash  provided  by  financing  activities  for the nine  months  ended
September  30, 1999 was  $321,347  compared  to $282,217  during the nine months
ended  September  30,  1998.  The first three  quarters of fiscal 1999  included
$157,500  proceeds  from notes  payable and $227,591  from lines of credit.  The
repayment of notes  payables and lines of credit offset these  amounts.  For the
first three  quarters of fiscal  1998,  $48,500 was  provided  from  issuance of
capital stock.  No such issuance  occurred in the first three quarters of fiscal
1999.

                                       11
<PAGE>
CAUTIONARY FORWARD - LOOKING STATEMENT
-------------------------------------

     Statements  included  in  the  Management's   Discussion  and  Analysis  of
Financial  Condition  and Results of  Operations,  and in future  filings by the
Company with the  Securities  and Exchange  Commission,  in the Company's  press
releases  and in  oral  statements  made  with  the  approval  of an  authorized
executive officer which are not historical or current facts are "forward-looking
statements" and are subject to certain risks and uncertainties  that could cause
actual results to differ materially from historical earnings and those presently
anticipated  or projected.  The Company  wishes to caution  readers not to place
undue reliance on any such  forward-looking  statements,  which speak only as of
the date made. The following important factors, among others, in some cases have
affected and in the future could affect the Company's  actual  results and could
cause the Company's actual financial  performance to differ materially from that
expressed  in any  forward-looking  statement:  (i)  the  extremely  competitive
conditions that currently exist in the fire retardant and fireproofing  industry
are  expected to  continue,  placing  further  pressure  on pricing  which could
adversely  impact sales and erode  profit  margins;  (ii) many of the  Company's
major  competitors in its channels of distribution  have  significantly  greater
financial  resources  than the  Company;  and (iii) the  inability  to carry out
marketing  and  sales  plans  would  have a  materially  adverse  impact  on the
Company's projections.  The foregoing list should not be construed as exhaustive
and  the  Company   disclaims  any   obligation   subsequently   to  revise  any
forward-looking  statements to reflect events or circumstances after the date of
such  statements or to reflect the occurrence of  anticipated  or  unanticipated
events.

RISKS FACTORS
-------------

     The  Company's  present and  proposed  business  operations  will be highly
speculative  and  subject  to the same  types of  risks  inherent  in any new or
unproven venture,  as well as risk factors particular to the industries in which
it will  operate,  and will  include,  among other  things,  those types of risk
factors outlined below.

YEAR 2000 PROBLEMS MAY DISRUPT THE COMPANY'S OPERATIONS AND HARM ITS BUSINESS

RISK  ASSOCIATED WITH YEAR 2000 ISSUES - THE COMPANY IS UNCERTAIN OF THE EFFECTS
OF THE YEAR 200O ON ITS COMPUTER PROGRAMS AND SYSTEMS.

     Many  currently  installed  computer  systems and  software  programs  were
designed to use only a two digit date field. These date code fields will need to
accept four digit  entries to  distinguish  21st century dates from 20th century
dates. Until the date fields are updated, the systems and programs could fail or
give erroneous results when referencing dates following December 31, 1999. Given
that the Company's  products  operate on certain  hardware  platforms and within
certain software operating systems and environments,  the Company must rely upon
the efforts of the hardware and software vendors and  manufacturers to be in the
vanguard with respect to operating  systems and platform  issues relating to the
Year 2000 compliance.

PRESENT YEAR 2000 STATUS

     The Company has assessed the impact of the year 2000 issue on the Company's
products,  services,  platforms  systems  and  internal  information  technology
systems (IT systems) and non-information technology systems (non-IT systems), in
use,  and has  found  them to be Year  2000  compliant.  The  Company  has  also
contacted  its major vendors and  suppliers  and has received  confirmation  and
verification  that  their  respective   computer  systems  are  also  Year  2000
compliant.  The Company does not expect the  Company's  financial  results to be
materially  affected by the need to  continue  to monitor and address  year 2000
issues,  but if the costs  associated with  addressing  these issues are greater
than  planned,  the  Company's  earnings  and  results  of  operations  could be
affected.  Due to the Company's dependence on computer technology to conduct the
Company's  business,  the nature and impact of year 2000 processing  failures on
the Company's  business,  financial  condition  and  operating  results could be
material.

                                       12
<PAGE>
BUSINESS CONTINUITY AND CONTINGENCY PLANNING

     The Company continues the process of identifying the reasonably likely year
2000  problem  failures  that  the  Company  could  experience  with the goal of
revising,  to the extent practical,  the Company's existing business  continuity
and  contingency  plans to address the internal and external  issues specific to
those  problems.  Thus far, the Company has focused as planned on reviewing  the
Company's  critical business  processes and although the Company conducted tests
on the various and  Platform  systems in use, and has found them to be Year 2000
compliant,  the Company's  expect to  continuously  review,  test and revise the
Company's existing business  continuity and contingency plans to ensure that all
systems are and  maintain  year 2000  compliant.  This will  include as required
repairing or obtaining replacement systems;  changing suppliers; and reducing or
suspending certain non-critical aspects of our operations.

POSSIBLE CONSEQUENCES OF YEAR 2000 PROBLEMS

     The Company  believes  that the Company has put in place the  processes and
are devoting the resources necessary to achieve a level of readiness to meet the
Company's  year 2000  challenges in a timely and  appropriate  manner.  However,
there can be no assurance that the Company's  internal systems or the systems of
others  on which we rely  will be year 2000  ready in a timely  and  appropriate
manner  or that the  Company's  contingency  plans or the  contingency  plans of
others on which the  Company  relies  will  mitigate  the  effects  of year 2000
problem  failures.  Currently,  the Company believes the most reasonably  likely
worst  case  scenario  would be a  sustained,  concurrent  failure  of  multiple
critical systems  (internal and external) that support the Company's  operations
(i.e.  vendors and suppliers of the Company).  While the Company does not expect
that  scenario to occur,  that  scenario if it occurs  could,  even  despite the
successful execution of the Company's business continuity and contingency plans,
result in the reduction or suspension  of a material  portion of our  operations
and  accordingly  have a material  adverse effect on the Company's  business and
financial condition.

     The "Year 2000  Information"  discussion  contains various  forward-looking
statements that represent the Company's beliefs or expectations regarding future
events.  When  used  in  the  "Year  2000  Information"  discussion,  the  words
"believes,"  "expects,"  "estimates,"  "plans," "goals," and similar expressions
are intended to identify forward-looking statements.  Forward-looking statements
include,  without limitation,  the Company's expectations as to when the Company
will  complete  the   identification  and  assessment,   remediation   planning,
remediation,  and testing  activities of the Company's year 2000 program as well
as the Company's year 2000 contingency planning; the Company's estimated cost of
achieving  year 2000  readiness;  and the  Company's  belief that the  Company's
internal  systems  and  equipment  will be  year  2000  ready  in a  timely  and
appropriate manner. All forward-looking statements involve a number of risks and
uncertainties  that could cause the actual results to differ materially from the
projected results. Factors that may cause those differences include availability
of information technology resources;  customer demand for the Company's products
and services;  continued availability of materials,  services, and data from the
Company's  suppliers;  the ability to identify and remediate all date  sensitive
lines of  computer  code and to  replace  embedded  computer  chips in  affected
systems and equipment;  the failure of others to timely achieve appropriate year
2000 readiness;  and the actions or inaction of governmental agencies and others
with respect to year 2000 problems.

RISK THAT THE COMPANY'S COMMON STOCK MAY BE DEEMED A "PENNY STOCK."

     The  Company's  common stock may be deemed to be "penny stock" as that term
is defined in Reg. Section 240.3a51-1 of the Securities and Exchange Commission.
Penny  stocks are stocks (i) with a price of less than five  dollars  per share;
(ii) that are not traded on a "recognized" national exchange; (iii) whose prices
are not quoted on the NASDAQ automated  quotation system  (NASDAQ-listed  stocks
must still meet  requirement (i) above);  or (iv) of an issuer with net tangible
assets less than  US$2,000,000  (if the issuer has been in continuous  operation
for at least three years) or US$5,000,000  (if in continuous  operation for less
than three years), or with average annual revenues of less than US$6,000,000 for
the last three years.

     Section 15(g) of the 1934 Act and Reg. Section  240.15g-2 of the Commission
require  broker-dealers  dealing in penny stocks to provide potential  investors
with a document  disclosing  the risks of penny  stocks and to obtain a manually
signed  and  dated  written  receipt  of  the  document  before   effecting  any
transaction in a penny stock for the investor's account.  Potential investors in
the  Company's  common  stock  are  urged to  obtain  and read  such  disclosure
carefully before purchasing any shares that are deemed to be "penny stock."



                                       13
<PAGE>
PATENTS AND PROPRIETARY  RIGHTS - THE UNAUTHORIZED USE OF INTELLECTUAL  PROPERTY
BY THIRD PARTIES MAY HARM THE COMPANY'S BUSINESS.

     The  Company  relies  on  patents,   contractual  rights,   trade  secrets,
trademarks,  and copyrights to establish and protect its  proprietary  rights in
its products and its components. The Company has patented the technology that is
incorporated  into its  products  and  believes  that,  since it is a technology
patent,  competitors  will  have  a  more  difficult  time  developing  products
functionally  similar to the  Company's.  To further  protect its products,  the
Company  will  apply  for   additional   patents  for  its  inventions  and  for
non-commercial  available  components designed and developed by the Company that
are integral to product performance.

PROSECUTING ANY  INTELLECTUAL  PROPERTY  INFRINGEMENT  CLAIMS COULD BE EXPENSIVE
AND, IF THE COMPANY IS NOT SUCCESSFUL, COULD DISRUPT ITS BUSINESS.

     The Company intends to closely monitor competing product  introductions for
any infringement of the Company's proprietary rights. The Company believes that,
as the demand for products  such as those  developed  by the Company  increases,
infringement of intellectual  property rights may also increase. If infringement
of the  Company's  proprietary  rights  is by  industry  competitors,  they have
substantially greater financial, technical, and legal resources than the Company
which could  adversely  affect the  Company's  ability to defend its rights.  In
addition, the Company could incur substantial costs in defending its rights.

     Further,  the Company's patents are U.S. patents,  and the Company does not
have patent protection  outside the United States. The Company will be unable to
obtain patent  protection in most non-U.S.  jurisdictions,  including Europe and
Japan.  Some  competitors may have non-U.S.  operations where U.S. Patent rights
are not effective  which could permit  competitors  to infringe on the Company's
proprietary rights without violating U.S. law.

     The  Company  anticipates,  based  on the size  and  sophistication  of its
competitors  and the history of rapid  technological  advances in its  industry,
that  several  competitors  may be  working to develop  the  Company's  patented
technology.  The  Company  intends to closely  monitor any  infringement  of the
Company's  proprietary  rights.  Competitors  may have  patent  applications  in
progress in the United  States that,  if issued,  could relate to the  Company's
products.  If such  patents were to issue,  there can be no  assurance  that the
patent  holders or licensees  will not assert  infringement  claims  against the
Company or that such claims  will not be  successful.  The  Company  could incur
substantial costs in defending itself and its customers against any such claims,
regardless of the merits of such claims.  Parties making such claims may be able
to obtain injunctive or other equitable relief which could effectively block the
Company's ability to sell its products,  and each claim could result in an award
of substantial damages. In the event of a successful claim of infringement,  the
Company and its  customers  may be required to obtain one or more  licenses from
third parties. There can be no assurance that the Company or its customers could
obtain necessary  licenses from third parties at a reasonable or acceptable cost
or at all. Patent litigation could be very expensive,  and there is no assurance
that it would not have an adverse  effect on the Company's  business,  financial
condition and results of operations.

                                       14
<PAGE>
     Moreover,  Reg. Section 240.15g-9 of the Commission requires broker-dealers
in penny stocks to approve the account of any investor for  transactions in such
stocks before selling any penny stock to that investor.  This procedure requires
the broker-dealer to (i) obtain from the investor information  concerning his or
her financial situation,  investment experience and investment objectives;  (ii)
reasonably  determine,  based on that  information,  that  transactions in penny
stocks are  suitable  for the  investor  and that the  investor  has  sufficient
knowledge and experience as to be reasonably  capable of evaluating the risks of
penny stock  transactions;  (iii) provide the investor with a written  statement
setting forth the basis on which the  broker-dealer  made the  determination  in
(ii) above;  and (iv) receive a signed and dated copy of such statement from the
investor,  confirming  that it  accurately  reflects  the  investor's  financial
situation,  investment  experience and investment  objectives.  Compliance  with
these  requirements  may make it more  difficult  for investors in the Company's
common stock to resell their shares to third parties or to otherwise  dispose of
them.

THE COMPANY IS DEPENDANT ON CERTAIN KEY EMPLOYEES.

     Historically,  the Company  has been  heavily  dependent  on the ability of
Bruce E. Raidl, to contribute essential technical and management experience.  In
the  event of future  growth in  administration,  marketing,  manufacturing  and
customer  support  functions,  the Company  may have to  increase  the depth and
experience of its management team by adding new members.  The Company's  success
will depend to a large degree upon the active  participation of its key officers
and  employees.  Loss of services of any of the current  officers and  directors
could have a significant  adverse  effect on the operations and prospects of the
Company.  There can be no  assurance  that it will be able to  employ  qualified
persons on acceptable terms to replace officers that become unavailable.

IF THE COMPANY IS UNABLE TOO HIRE AND RETAIN NECESSARY SPECIALIZED KEY PERSONNEL
THE COMPANY'S BUSINESS AND GROWTH WILL SUFFER.

     Although  the  management  of the Company is  committed to the business and
continued  development  and growth of the business,  the addition of specialized
key  personnel  and sales  persons to assist the Company in its expansion of its
national  operations  will be  necessary.  There  can be no  assurance  that the
Company will be able to locate and hire such specialized personnel on acceptable
terms.

IF THE COMPANY IS UNABLE TO MAINTAIN  ADEQUATE LEVELS OF INVENTORY THE COMPANY'S
BUSINESS MAY BE DISRUPTED.

     The size of the fire  retardant  and fire  protection  markets  and need to
maintain  adequate  inventories  with  regard to such  products  could force the
Company into implementing  additional  manufacturing  and warehousing  programs.
There can be no  assurance  that the  Company  will have the  necessary  capital
resource or man power to implement such manufacturing and warehousing programs.

IF THE COMPANY IS UNABLE TO MARKET ITS PRODUCTS  AND SERVICES ITS BUSINESS  WILL
SUFFER.

     Due to the  Company's  limited  resources,  the sales and  marketing of the
Company's  products  has been  limited to date.  The  success of the  Company is
dependent  upon its ability to market and sell the  products and services of the
Company with such limited resources.

IF THE GOVERNMENT  IMPLEMENTS  NEW OR ADDITIONAL  REGULATIONS IN THE INDUSTRY IN
WHICH THE COMPANY OPERATES, THESE REGULATIONS MAY BE COSTLY OR DIFFICULT FOR THE
COMPANY TO COMPLY WITH AND COULD RESULT IN LOSS OF SALE.

     While the Company is unaware of any new regulations  being  contemplated by
the subject  agencies,  it remains  possible that these agencies could institute
new  guidelines  which could  affect all similar  companies  in this field.  The
implementation  of new  regulatory  compliance  factors could  restrict sales of
certain  products.  Additional  testing  could be required  and such  additional
testing could cause delays in the  introduction  of products into certain market
sectors, which delays could adversely affect the Company's revenues.

                                       15
<PAGE>
IF THE  COMPANY  DOES  NOT  OBTAIN  ADDITIONAL  FINANCING  IT MAY NOT BE ABLE TO
IMPLEMENT ALL OF ITS BUSINESS PLAN.

     The Company's plan of operation calls for additional  capital to facilitate
growth and support its  long-term  development  and  marketing  programs.  It is
likely  that  the  Company  would  need to  seek  additional  financing  through
subsequent  future public or private sales of its securities,  including  equity
securities.  The Company may also seek funding for the development and marketing
of its products  through  strategic  partnerships  and other  arrangements  with
investment partners. There can be no assurance, however, that such collaborative
arrangements  or  additional  funds will be available  when needed,  or on terms
acceptable to the Company,  if at all. Any such additional  financing may result
in  significant  dilution to existing  stockholders.  If adequate  funds are not
available,  the  Company  may be  required  to curtail one or more of its future
programs.

COMPETITION AND RAPID TECHNOLOGICAL CHANGE COULD HARM THE COMPANY'S BUSINESS.

     The industry in which the Company operates is highly  competitive,  rapidly
growing  and the  Company  will have to  compete  with a  multitude  of  similar
companies, possessing substantially greater financial, personnel,  technological
and marketing  resources.  It is  particularly  difficult for small  independent
companies to compete with such major  companies  in the  automobile  industries,
fabric manufacturers, mills, etc. There is no assurance that the Company will be
able to compete in such an environment.

SUBSTANTIAL DOUBT THAT THE COMPANY CAN CONTINUE AS A GOING CONCERN.

     The Company expects to continue to incur  significant  capital  expenses in
pursuing its plans to increase  sales volume,  the expansion of its product line
and to obtain  additional  financing  through stock  offerings or other feasible
financing  alternatives.  Additional  financing  may not be  available  on terms
favorable to the Company,  or at all. If adequate funds are not available or are
not  available on acceptable  terms,  the Company may not be able to execute its
business plan or take  advantage of business  opportunities.  The ability of the
Company to obtain such  additional  financing and to achieve its operating goals
is uncertain.  In the event that the Company does not obtain additional  capital
or is not able to increase  cash flow through the increase of sales,  there is a
substantial doubt of its being able to continue as a going concern.

                                       16
<PAGE>
                         PART II - OTHER INFORMATION.

Item 1. Legal Proceedings.

Alman v. AFRC Florida
---------------------
     The Company was  involved in  litigation  in the  calendar  year 1997.  The
Company's  former  subsidiary,  AFRC Florida was a party defendant in the matter
Allen E. Alman and Phyllis S. Alman v. American Fire  Retardant  Corporation  of
Florida and Stephen F. Owens,  Dade County Florida,  Case No. 97-7203 CA 09. The
matter was a dispute over the terms of a Stock Purchase  Agreement  entered into
in  September  1993 with regard to the purchase by AFRC Florida of all the stock
and assets of Apco Equipment Sale  Corporation  dba  Thoro-Sheen  Company.  This
matter was  resolved in July 1997  wherein  AFRC Florida and Mr. Owens agreed to
pay to Mr. And Mrs.  Almans the total sum of $51,550,  payable  $5,775.00  on or
before July 15, 1997,  $5,775.00 on or before August 30, 1997 and the balance of
$40,000 in  installments  of  $1,800.00  per month for 24 months  commencing  on
September 30, 1997, until paid in full.

     All  payments  were made in a timely  manner  pursuant  to the terms of the
Joint Stipulation and the final payment was made on September 15, 1999.

Halvelin v. AFRC
----------------

     The Company is a party  defendant in the matter of Havelin v. American Fire
Retardant  Corporation,  United  States  District  Court,  Southern  District of
Mississippi,  Case No. 1-99CV156GR. The Plaintiff, Jennifer L. Havelin was suing
the Company  alleging  that the  Company  discriminated  against  the  Plaintiff
because of Plaintiff's  sex, a female.  The Plaintiff  originally  filed a claim
with Equal Employment  Opportunity  Commission ("EEOC") in May 15, 1998 alleging
discrimination and that Plaintiff had been laid off because she was a female. On
January 29, 1999 the EEOC  dismissed  Plaintiffs  claim as being without  merit.
This action  arose from the same facts set forth by  Plaintiff in her claim with
the EEOC.  Further,  pursuant to Title VII the Plaintiff had 90 days (i.e. until
May 1, 1999) to file a lawsuit in Federal Court with regard to this matter.  The
Plaintiff filed her action beyond the prescribed time period.

     On August 25,  1999,  the  Company  settled  this matter for a total sum of
$5,000 paid by the Company to Ms. Havelin.

     As a result of the resolution of the above matters, the costs of litigation
associated  with those  matters  have ceased and  therefore  there is no further
effect on the results of operations and liquidity.

Delinquent Payroll Taxes
------------------------

     The Company owes the Internal Revenue Service $219,582 for prior delinquent
payroll  taxes by the  Company's  former  subsidiaries,  AFRC  Florida  and AFRC
Louisiana.  These payroll taxes became delinquent starting in the 3rd quarter of
1997  through  the 4th  quarter  of  1998.  The  total  delinquent  payroll  tax
liabilities are $101,403  attributed to AFRC Florida and $118,178  attributed to
AFRC Louisiana.  The Company has retained the tax counsel of Royston & Hebert in
Lafayette,  Louisiana  to  represent  the Company  before the  Internal  Revenue
Service and the Company is currently submitting an Offer and Compromise work-out
agreement  to obtain a  substantial  reduction  of the  outstanding  payroll tax
balance due.  The Company has since kept  current  with all present  payroll and
other tax obligations.

     With the exception of the legal proceedings and tax matter set forth above,
the Company is not presently a party to any  litigation,  claim,  or assessment.
Further,  the Company is unaware of any unasserted  claim or  assessment,  which
will have a material  effect on the financial  position or future  operations of
the Company.

Item 2. Changes in Securities.

     Not required.

Item 3. Defaults Upon Senior Securities.

     Not required.


                                       17
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.

     None.

Item 5. Other Information.

     Engagement of Capstone Partners.
     -------------------------------

     On September 27, 1999, the Company  entered into an Investment  Banking and
Consulting Agreement with Capstone Partners. A copy of the Agreement between the
Company and  Capstone  Partners is attached  hereto and  incorporated  herein by
reference. See Exhibit List Index.

     Recent Issuance of Securities
     -----------------------------

     On September 27, 1999,  pursuant to the terms of the Investment Banking and
Consulting  Agreement with Capstone Partners the company issued 5,859 restricted
shares to Capstone Partners.

Item 6. Exhibits and Reports on Form 8-K.

     (a) List of Exhibits  attached or  incorporated  by referenced  pursuant to
Item 601 of Regulation S-B.

               (2)  2.1(a)  Certificate  of  Merger  from the  State of  Wyoming
                    regarding  Merger AFRC  Louisiana with and into AFRC Wyoming
                    (Incorporated  by reference from the Company's  Registration
                    Statement on Form 10-SB filed June 4, 1999;  Commission File
                    No. 000-26261).

                    2.1(b)  Certificate  of Merger  from the State of  Louisiana
                    regarding  Merger  of AFRC  Louisiana  with  and  into  AFRC
                    Wyoming.  (Incorporated  by  reference  from  the  Company's
                    Registration  Statement  on Form  10-SB  filed June 4, 1999;
                    Commission File No. 000-26261).

                    2.1(c) Articles of Merger regarding Merger of AFRC Louisiana
                    with and into AFRC Wyoming.  (Incorporated by reference from
                    the  Company's  Registration  Statement  on Form 10-SB filed
                    June 4, 1999; Commission File No. 000-26261).

                    2.1(d)  Acquisition  Agreement and Plan of Merger  regarding
                    Merger  of  AFRC  Louisiana  with  and  into  AFRC  Wyoming.
                    (Incorporated  by reference from the Company's  Registration
                    Statement on Form 10-SB filed June 4, 1999;  Commission File
                    No. 000-26261).

                    2.2(a)  Certificate  of  Merger  from the  State of  Florida
                    regarding   Merger  of  AFRC  Florida  with  and  into  AFRC
                    Wyoming.(Incorporated   by  reference   from  the  Company's
                    Registration  Statement  on Form  10-SB  filed June 4, 1999;
                    Commission File No. 000-26261).

                    2.2(b)  Certificate  of  Merger  from the  State of  Wyoming
                    regarding  Merger  of AFRC  Louisiana  with  and  into  AFRC
                    Wyoming.  (Incorporated  by  reference  from  the  Company's
                    Registration  Statement  on Form  10-SB  filed June 4, 1999;
                    Commission File No. 000-26261).

                    2.2(c) Florida  Articles of Merger  regarding Merger of AFRC
                    Louisiana  with  and  into  AFRC   Wyoming.(Incorporated  by
                    reference from the Company's  Registration Statement on Form
                    10-SB filed June 4, 1999; Commission File No. 000-26261).

                    2.2(d) Wyoming  Articles of Merger  regarding Merger of AFRC
                    Louisiana  with  and  into  AFRC   Wyoming.(Incorporated  by
                    reference from the Company's  Registration Statement on Form
                    10-SB filed June 4, 1999; Commission File No. 000-26261).

                                       18
<PAGE>
                    2.2(e)  Acquisition  Agreement and Plan of Merger  regarding
                    Merger  of  AFRC  Florida   with  and  into  AFRC   Wyoming.
                    (Incorporated  by reference from the Company's  Registration
                    Statement on Form 10-SB filed June 4, 1999;  Commission File
                    No. 000-26261).

                    2.3(a) Articles of Merger  regarding Merger regarding Merger
                    of AFRC Wyoming with and into AFRC Nevada (the "Company") to
                    change  the  Domicile  of  the  Company.   (Incorporated  by
                    reference from the Company's  Registration Statement on Form
                    10-SB filed June 4, 1999; Commission File No. 000-26261).

                    2.3(b)  Acquisition  Agreement and Plan of Merger  regarding
                    Merger  of AFRC  Wyoming  with and  into  AFRC  Nevada  (the
                    "Company")   to  change  the   Domicile   of  the   Company.
                    (Incorporated  by reference from the Company's  Registration
                    Statement on Form 10-SB filed June 4, 1999;  Commission File
                    No. 000-26261).

               (3)  3.1 Articles of  Incorporation  of American  Fire  Retardant
                    Corp. filed on January 20, 1998.  (Incorporated by reference
                    from the  Company's  Registration  Statement  on Form  10-SB
                    filed June 4, 1999; Commission File No. 000-26261).

                    3.2  Restated  By-laws  of  American  Fire  Retardant  Corp.
                    (Incorporated  by reference from the Company's  Registration
                    Statement on Form 10-SB filed June 4, 1999;  Commission File
                    No. 000-26261).

                    3.3  Qualification  of American Fire Retardant  Corp.,  as a
                    Foreign  Corporation in the State of Florida.  (Incorporated
                    by reference  from the Company's  Registration  Statement on
                    Form  10-SB  filed  June  4,  1999;   Commission   File  No.
                    000-26261).

                    3.4  Qualification  of American Fire Retardant  Corp.,  as a
                    Foreign Corporation in the State of Louisiana. (Incorporated
                    by reference  from the Company's  Registration  Statement on
                    Form  10-SB  filed  June  4,  1999;   Commission   File  No.
                    000-26261).

                    3.5 Statement  and  Designation  of American Fire  Retardant
                    Corp., as a Foreign Corporation in California. (Incorporated
                    by reference  from the Company's  Registration  Statement on
                    Form  10-SB  filed  June  4,  1999;   Commission   File  No.
                    000-26261).

                    3.6  Qualification  of American Fire Retardant  Corp.,  as a
                    Foreign Corporation in the State of Colorado.  (Incorporated
                    by reference  from the Company's  Registration  Statement on
                    Form  10-SB  filed  June  4,  1999;   Commission   File  No.
                    000-26261).

                    3.7  Qualification  of American Fire Retardant  Corp.,  as a
                    Foreign   Corporation   in   the   State   of   Mississippi.
                    (Incorporated  by reference from the Company's  Registration
                    Statement on Form 10-SB filed June 4, 1999;  Commission File
                    No. 000-26261).

               (10) 10.1(a)  Letter of Intent  Between  American Fire  Retardant
                    Corp.,  and  Fabritek  Industries,   LLC.  (Incorporated  by
                    reference from the Company's  Registration Statement on Form
                    10-SB filed June 4, 1999; Commission File No. 000-26261).

                    10.1(b)  Amendment to Letter of Intent Between American Fire
                    Retardant Corp., and Fabritek Industries, LLC. (Incorporated
                    by reference  from the Company's  Registration  Statement on
                    Form  10-SB  filed  June  4,  1999;   Commission   File  No.
                    000-26261).

                                       19
<PAGE>
                    10.2  Royalty  Agreement  between  American  Fire  Retardant
                    Corp., and Norman O. Houser. (Incorporated by reference from
                    the  Company's  Registration  Statement  on Form 10-SB filed
                    June 4, 1999; Commission File No. 000-26261).

                    10.3  Sale,  Assignment  and  Assumption  Agreement  between
                    American Fire  Retardant  Corp. and Patrick L. Brinkman with
                    regard to the  purchase of  manufacturing  rights to De-Fyre
                    X-238.(Incorporated   by   reference   from  the   Company's
                    Registration  Statement  on Form  10-SB  filed June 4, 1999;
                    Commission File No. 000-26261).

                    10.4(a)  Merchant  Service  Agreement  between American Fire
                    Retardant  Corp.  and  St.  Martin  Bank.  (Incorporated  by
                    reference from the Company's  Registration Statement on Form
                    10-SB filed June 4, 1999; Commission File No. 000-26261).

                    10.4(b) St. Martin Bank $100,090 Promissory Note Dated March
                    11,  1997.(Incorporated  by  reference  from  the  Company's
                    Registration  Statement  on Form  10-SB  filed June 4, 1999;
                    Commission File No. 000-26261).

                    10.4(c) Edward E. Friloux Commercial  Guaranty to St. Martin
                    Bank re:$100,090 Promissory Note. (Incorporated by reference
                    from the  Company's  Registration  Statement  on Form  10-SB
                    filed June 4, 1999; Commission File No. 000-26261).

                    10.4(d) Stephen F. Owens  Commercial  Guaranty to St. Martin
                    Bank re:$100,090 Promissory Note. (Incorporated by reference
                    from the  Company's  Registration  Statement  on Form  10-SB
                    filed June 4, 1999; Commission File No. 000-26261).

                    10.4(e)  Angela M. Raidl  Commercial  Guaranty to St. Martin
                    Bank re:$100,090 Promissory Note. (Incorporated by reference
                    from the  Company's  Registration  Statement  on Form  10-SB
                    filed June 4, 1999; Commission File No. 000-26261).

                    10.4(f) St. Martin Bank $250,000  Promissory  Note Dated May
                    21,  1998.(Incorporated  by  reference  from  the  Company's
                    Registration  Statement  on Form  10-SB  filed June 4, 1999;
                    Commission File No. 000-26261).

                    10.4(g) St. Martin Bank Business Loan Agreement Dated August
                    18,  1998.  (Incorporated  by reference  from the  Company's
                    Registration  Statement  on Form  10-SB  filed June 4, 1999;
                    Commission File No. 000-26261).

                    10.4(h) St. Martin Bank  $172,725.73  Promissory  Note Dated
                    August  18,  1998.   (Incorporated  by  reference  from  the
                    Company's Registration Statement on Form 10-SB filed June 4,
                    1999; Commission File No. 000-26261).

                    10.4(i) Edward E. Friloux Commercial  Guaranty to St. Martin
                    Bank  re:$172,725.73   Promissory  Note.   (Incorporated  by
                    reference from the Company's  Registration Statement on Form
                    10-SB filed June 4, 1999; Commission File No. 000-26261).

                    10.4(j) Stephen F. Owens  Commercial  Guaranty to St. Martin
                    Bank  re:  $172,725.73  Promissory  Note.  (Incorporated  by
                    reference from the Company's  Registration Statement on Form
                    10-SB filed June 4, 1999; Commission File No. 000-26261).

                    10.4(k)  Angela M. Raidl  Commercial  Guaranty to St. Martin
                    Bank  re:  $172,725.73  Promissory  Note.  (Incorporated  by
                    reference from the Company's  Registration Statement on Form
                    10-SB filed June 4, 1999; Commission File No. 000-26261).

                    10.4(l) St.  Martin Bank  Commercial  Pledge  Agreement  re:
                    $172,725.72 Promissory Note. (Incorporated by reference from
                    the  Company's  Registration  Statement  on Form 10-SB filed
                    June 4, 1999; Commission File No. 000-26261).

                                       20
<PAGE>
                    10.4(m) St. Martin Bank Pledge of  Collateral  Mortgage Note
                    re: $172,725.72 Promissory Note.  (Incorporated by reference
                    from the  Company's  Registration  Statement  on Form  10-SB
                    filed June 4, 1999; Commission File No. 000-26261).

                    10.4(n) St. Martin Bank  Agreement to Provide  Insurance re:
                    $172,725.72 Promissory Note. (Incorporated by reference from
                    the  Company's  Registration  Statement  on Form 10-SB filed
                    June 4, 1999; Commission File No. 000-26261).

                    10.4(o)  St.   Martin  Bank  -   Collateral   Mortgage   re:
                    $172,725.72 Promissory Note. (Incorporated by reference from
                    the  Company's  Registration  Statement  on Form 10-SB filed
                    June 4, 1999; Commission File No. 000-26261).

                    10.4(p) St. Martin Bank - $54,059.29  Promissory  Note Dated
                    February  4,  1999.  (Incorporated  by  reference  from  the
                    Company's Registration Statement on Form 10-SB filed June 4,
                    1999; Commission File No. 000-26261).

                    10.5(a)  Private  Capital,  Inc.  -  Purchase  and  Security
                    Agreement Dated April 17, 1997.  (Incorporated  by reference
                    from the  Company's  Registration  Statement  on Form  10-SB
                    filed June 4, 1999; Commission File No. 000-26261).

                    10.5(b) Private  Capital,  Inc. - Angela M. Raidl Continuing
                    Guaranty  &  Waiver.  (Incorporated  by  reference  from the
                    Company's Registration Statement on Form 10-SB filed June 4,
                    1999; Commission File No. 000-26261).

                    10.5(c) Private Capital,  Inc. - Stephen F. Owens and Edward
                    E. Friloux  Continuing  Guaranty & Waiver.  (Incorporated by
                    reference from the Company's  Registration Statement on Form
                    10-SB filed June 4, 1999; Commission File No. 000-26261).

                    10.6(a) Bank of Erath $15,030 Promissory Note Dated June 16,
                    1997.   (Incorporated   by  reference   from  the  Company's
                    Registration  Statement  on Form  10-SB  filed June 4, 1999;
                    Commission File No. 000-26261).

                    10.6(b)  Bank of Erath  of Loan  Extension  Agreement  Dated
                    October  20,   1998.(Incorporated   by  reference  from  the
                    Company's Registration Statement on Form 10-SB filed June 4,
                    1999; Commission File No. 000-26261).

                    10.7 American Fire  Retardant  Corp. - El Cajon,  California
                    Industrial  Lease.   (Incorporated  by  reference  from  the
                    Company's Registration Statement on Form 10-SB filed June 4,
                    1999; Commission File No. 000-26261).

                    10.8(a)  Whitney  Bank - $74,400  Secured  Promissory  Note.
                    (Incorporated  by reference from the Company's  Registration
                    Statement on Form 10-SB filed June 4, 1999;  Commission File
                    No. 000-26261).

                    10.8(b)  Whitney  Bank  -  Collateral   Mortgage,   Security
                    Agreement and Assignment of Leases and Rents.  (Incorporated
                    by reference  from the Company's  Registration  Statement on
                    Form  10-SB  filed  June  4,  1999;   Commission   File  No.
                    000-26261).

                    10.9  American  Fire  Retardant  Corp. - Standard  Lease for
                    Louisiana  Corporate  Apartment.  (Incorporated by reference
                    from the  Company's  Registration  Statement  on Form  10-SB
                    filed June 4, 1999; Commission File No. 000-26261).

                    10.10 Oil,  Gas & Mineral  Lease with  Penwell  Energy  Inc.
                    (Incorporated  by reference from the Company's  Registration
                    Statement on Form 10-SB filed June 4, 1999;  Commission File
                    No. 000-26261).

                    10.11(a) Whitney National Bank - $42,888.46 Promissory Note.
                    (Incorporated  by reference from the Company's  Registration
                    Statement on Form 10-SB filed June 4, 1999;  Commission File
                    No. 000-26261).


                                       21
<PAGE>
                    10.11(b)  Whitney   National  Bank  -  Security   Agreement.
                    (Incorporated  by reference from the Company's  Registration
                    Statement on Form 10-SB filed June 4, 1999;  Commission File
                    No. 000-26261).

                    10.12 Presidio Capital Consulting  Agreement.  (Incorporated
                    by reference  from the Company's  Registration  Statement on
                    Form  10-SB  filed  June  4,  1999;   Commission   File  No.
                    000-26261).

                    10.13 Warren Guidry Letter Promissory Note. (Incorporated by
                    reference from the Company's  Registration Statement on Form
                    10-SB filed June 4, 1999; Commission File No. 000-26261).

                    10.14(a) Agreement with Richard Rosenberg.  (Incorporated by
                    reference from the Company's  Registration Statement on Form
                    10-SB filed June 4, 1999; Commission File No. 000-26261).

                    10.14(b)  Amendment  to Agreement  with  Richard  Rosenberg.
                    (Incorporated  by reference from the Company's  Registration
                    Statement on Form 10-SB filed June 4, 1999;  Commission File
                    No. 000-26261).

                    10.14(c)  Richard  Rosenberg - $43,134.39  Promissory  Note.
                    (Incorporated  by reference from the Company's  Registration
                    Statement on Form 10-SB filed June 4, 1999;  Commission File
                    No. 000-26261).

                    10.15 Capstone  Partners  Investment  Banking and Consulting
                    Agreement dated September 27, 1999, attached hereto

               (27) Financial Data Schedule

                    27.1. Financial Data Schedule (submitted  electronically for
                    SEC information only).

     (b) There were no other reports on Form 8-K filed during the quarter of the
period covered.

     The following Exhibit Index sets forth the Exhibits attached hereto.

                                  EXHIBIT INDEX

          Exhibit   Description
          10.15     Capstone Partners Investment Banking and Consulting
                    Agreement dated September 27, 1999.

                                       22
<PAGE>
                                   SIGNATURES
                                   ----------

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

                                        AMERICAN FIRE RETARDANT CORP.
                                        A Nevada Corporation


Date: November 12, 1999                 /S/ Stephen F. Owens
                                        ---------------------------------------
                                        By:  Stephen F. Owens
                                        Its: President


Date: November 12, 1999                 /S/ Angela M. Raidl
                                        ---------------------------------------
                                        By:  Angela M. Raidl
                                        Its: Vice President, Chief Financial
                                             Officer, Secretary


                                       23
<PAGE>
                                  EXHIBIT 10.15

               Capstone Partners Investment Banking and Consulting
              Agreement dated September 27, 1999, attached hereto.

<PAGE>
                   INVESTMENT BANKING AND Consulting AgreemenT
                                       FOR
                          American Fire Retardant Corp.

     This  Agreement  ("Agreement")  is made as of September  27,  1999,  by and
between American Fire Retardant Corp., a Nevada corporation,  with its principal
place of business at 9337 Bond Avenue, El Cajon,  California 92021  ("Company"),
and Capstone Partners, Inc., a Utah limited liability company, ("CAPSTONE") with
its principal offices at 3475 Lenox Road, Suite 400, Atlanta, Georgia 30326.

                                   Witnesseth

     WHEREAS,  Company  requires  expertise  in the areas of  corporate  finance
consulting,  securities compliance and regulation,  securities markets awareness
and  support,  and general  investment  banking  services to support its further
development and growth: and

     WHEREAS,  CAPSTONE,  an NASD-member  broker dealer,  through its Investment
Banking Department, is in the business of providing corporate finance advice and
services,  investment  banking  services,  and other related  advisory  services
including  business  development,   advice  on  mergers  and  acquisitions,  and
strategic planning; and

     WHEREAS,  The  Company  and  CAPSTONE  intend  that  this  Agreement  shall
supercede and replace all other written investment banking or financial services
agreements  previously  entered  in  to  by  the  parties  or  their  respective
affiliates.

     NOW,  THEREFORE,  in  consideration  of the  premises  above and the mutual
promises  and  covenants  contained  herein  and  subject  specifically  to  the
conditions hereof, and intending to be legally bound thereby,  the parties agree
as follows:

1. Certain  Definitions- When used in this Agreement,  the following terms shall
have the meanings set forth below:

     1.1  Affiliate  - any  persons or entities  controlled  by or under  common
          control of a party to this Agreement.

     1.2  Company  - the  Company  who uses the  services  of  CAPSTONE.  Unless
          specifically  stated otherwise,  the term "Company" shall also include
          any other business enterprises which are affiliated with the Company.

     1.3  Contact  Person - The persons who shall be primarily  responsible  for
          carrying  out the duties of the  parties  hereunder.  The  Company and
          CAPSTONE  shall each appoint a Contact  Person to be  responsible  for
          their respective  duties.  In the event that one party gives notice to
          the other party in writing  that,  in their  reasonable  opinion,  the
          other party's  Contact  Person is not able to fulfill their duties and
          responsibilities  hereunder,  both parties shall mutually agree upon a
          replacement Contact Person within 10 days of the said notice.

<PAGE>

     1.4  Extraordinary  Expenses - are expenses that are beyond those  expenses
          that are usual,  regular,  or  customary  towards the  performance  of
          CAPSTONE's duties in fulfillment of the scope of this Agreement.

     1.5  Equity - cash,  securities or liquid  assets,  specifically  excluding
          real property.

     1.6  Payment or Payable in Kind - distribution  or delivery of compensation
          in the same type and form as was given as valuable consideration for a
          transaction.

2. Contact  Persons.  The Contact  Persons for the Company are Stephen F. Owens,
President and Angela M. Raidl, Vice President and Secretary. The Contact Persons
for CAPSTONE are Gregory Bartko,  Esq.,  Chief  Executive  Officer and Ronald P.
Ardt, President.

3. Services to be Rendered by CAPSTONE.  Services to be rendered by CAPSTONE are
as follows:

     3.1  Advice and Counsel. CAPSTONE will participate with the Company's other
          professionals  and advisors to provide  advice and counsel in relation
          to the Company's  strategic  business and financial  plans,  and other
          strategies,   including  but  not  limited  to,   identification   and
          negotiations  with  potential  lenders  and  investors,   mergers  and
          acquisition candidates,  joint ventures, corporate partners and others
          involving financial and financially related  transactions,  as well as
          marketing  and public  relation  matters as  requested by the Company.
          CAPSTONE may provide additional mergers and acquisition candidates and
          strategies so as to assist the Company in its corporate  expansion and
          development.

          In addition,  CAPSTONE will assist in creating one or more  securities
          offering structures for the Company, either debt and equity offerings,
          will assist in identifying  one or more funding sources and strategies
          designed  to  locate   investment   capital  for  the   Company,   and
          specifically  will use its best efforts to identify and  negotiate the
          placement of a "bridge capital" facility currently being undertaken by
          the Company.  This Agreement  shall  specifically  include  investment
          banking  services  related to the  Company's  planned Rule 506 private
          placement  offering  to be  structured  for  the  purpose  of  placing
          sufficient  debt  and/or  equity  securities  to enable the Company to
          raise a minimum  of $2.0  million  and a maximum  of $3.0  million  of
          investment  capital,  on terms and  according  to a corporate  finance
          structure hereinafter to be agreed upon by the parties.

     3.2  Introductions  to the  Securities  Brokerage  Community.  CAPSTONE has
          developed an association with a multitude of other NASD-member  broker
          dealers and investment professionals.  In the event the utilization of
          such association becomes necessary or desirable,  CAPSTONE will enable
          and  facilitate  contact  with  the  Company  to  facilitate  business
          transactions  among them. In this event,  CAPSTONE shall use it's best
          efforts  to assist  the  Company in  establishing  relationships  with
          securities   dealers  and  to  provide   the  most  recent   corporate
          information to interested securities

<PAGE>
          dealers on a regular and continuous basis.  CAPSTONE  understands that
          this is in keeping with the Company's  business objective to establish
          a nationwide network of securities dealers, market professionals,  and
          market makers, who have an interest in the Company's securities.

     3.3  Market-making Intelligence.  CAPSTONE also has close associations with
          numerous marketing and public relations professionals and will use its
          best efforts to introduce and  facilitate  contacts and  relationships
          between the Company to facilitate business  transactions and marketing
          expertise among them. By sharing  marketing ideas and networking among
          contacts  introduced by CAPSTONE,  the Company can increase its public
          markets exposure and expertise by establishing these relationships.

     3.4  Company  Transaction  Due Diligence.  CAPSTONE will  participate  with
          other companies, professionals and advisors to undertake due diligence
          on  all  proposed  financial   transactions   affecting  the  Company,
          including  investigation  and advice on the  financial,  valuation and
          stock price implications thereof.

     3.5  Additional Duties.  Company and CAPSTONE shall mutually agree upon any
          additional  duties that CAPSTONE may provide for compensation  paid or
          payable by Company under this Agreement. Such additional agreement(s),
          although there is no requirement to do so, may be attached  hereto and
          made a part hereof as Exhibits beginning with Exhibit A.

     3.6  Best Efforts and Non-exclusive.

          (a) Except as to specific time deadlines imposed pursuant to the terms
          of this  Agreement  as set forth in Exhibit 1,  CAPSTONE  shall devote
          such time and best efforts as may be  reasonably  necessary to perform
          its services as agreed  herein.  CAPSTONE is not  responsible  for the
          performance of any services that may be rendered hereunder without the
          Company providing the necessary  information  prior thereto.  CAPSTONE
          cannot  guarantee  results on behalf of Company,  but shall pursue all
          reasonable   avenues   available  through  its  network  of  financial
          contacts.  At such time as  interest  is  expressed  in the  Company's
          business and capital raising objectives, CAPSTONE shall notify Company
          and advise it as to the  source of such  interest  or capital  and any
          terms and conditions of such.  The  acceptance and  consumption of any
          transaction  is subject to acceptance  of the terms and  conditions by
          the Company. It is understood that a portion of the compensation to be
          paid  hereunder  is being  paid by  Company  to have  CAPSTONE  remain
          available  to  assist it with  transactions  on an "as  needed"  basis
          during the term of this Agreement.

          (b) The  parties  further  acknowledge  that this  Agreement  is being
          entered  into by the Company on a  non-exclusive  basis,  meaning that

<PAGE>
          there is no prohibition in this Agreement restraining the Company from
          receiving like services from any third party to this Agreement.

4.  Legality of  Transactions  and  Services.  CAPSTONE  hereby  represents  and
warrants the services  contemplated  herein, the consideration  received and the
services to be rendered are and will be in compliance with all federal and state
laws of the United States. Upon request, CAPSTONE shall provide an opinion of an
attorney  licensed to practice law within the United States,  that the foregoing
is correct.

5.  Compensation  to CAPSTONE.  Initially,  CAPSTONE shall receive  compensation
under this Agreement for: (i) successfully  placing the Company's bridge capital
facility  in an  amount of at least  $250,000  and (ii) for  ongoing  investment
banking  services  separate  from and in addition to the placement of the bridge
capital  facility.  Fees for the combination of the services  referenced in this
section shall be payable as follows:

          5.1  Compensation and Fees.

               A.   Retainer  Fee.   CAPSTONE  shall  be  paid  a  retainer  fee
                    ("Retainer")  equal to 25% of the total  number of shares of
                    Common Stock of the Company as provided in paragraph 5.1(B),
                    below, upon the execution of this Agreement  (one-quarter of
                    1%). This Retainer is in lieu of CAPSTONE'S  customary  cash
                    retainer fee.

               B.   Monthly  Fee.  In  addition,  for a period of six (6) months
                    from the date of  execution of this  Agreement,  the Company
                    agrees to pay  CAPSTONE  $2,500 per month during the term of
                    this  Agreement  commencing on execution of this  Agreement,
                    with each subsequent  monthly payment due on the 15th day of
                    each month  thereafter,  provided that  CAPSTONE  meets that
                    specific time deadlines set forth in Exhibit 1. In the event
                    that  the  Company  is  delinquent  in  making  any  monthly
                    payment,  the amount which is delinquent  may be paid either
                    in cash or by  transferring  an  appropriate  number  of the
                    Company's  restricted  Common Stock valued at a 50% discount
                    to the market  inside bid price to CAPSTONE per month,  upon
                    the due date, in lieu of cash, at CAPSTONE's option (i.e. if
                    a $2,500 fee is not paid,  $5,000 of restricted Common Stock
                    shall  be  delivered  to  CAPSTONE).

                    If CAPSTONE fails to complete a project, through no fault of
                    the Company,  by a specific deadline set forth in Exhibit 1,
                    then the  Company  shall  not be  obligated  to pay the next
                    months  fee of $2,500 and said  monthly  fee shall be deemed
                    waived by CAPSTONE.

                    Should the Company become  delinquent in keeping the monthly
                    consulting  fees current by more than 15 days,  CAPSTONE may
                    discontinue work on the Company's behalf.
<PAGE>
                    If CAPSTONE fails to complete a project within 15 days after
                    its designated  deadline as set forth in Exhibit 1, then the
                    Company, at the election of the Company,  may terminate this
                    Agreement.

               C.   Shares. As partial  consideration  for CAPSTONE'S  services,
                    expertise,  and  introductions  to sources of debt or equity
                    capital,  the Company shall cause to be delivered and issued
                    to  CAPSTONE  (or  CAPSTONE'S  assignee(s)),   a  number  of
                    restricted  shares of the Company's Common Stock equal to 1%
                    of the  total  number of  outstanding  shares at the date of
                    this Agreement, being 23,438 shares ("Shares"). These Shares
                    shall be  earned,  issued  and  delivered  according  to the
                    following delivery and issuance schedule:

                    (i)  25%  of  the  restricted  Shares   deliverable  on  the
                         execution  date  of  this  Agreement  as  the  Retainer
                         pursuant to  paragraph  5.1(A).  These  Shares shall be
                         subject to the resale limitations contained in Rule 144
                         promulgated  under  the  Securities  Act  of  1933,  as
                         amended ("Act").

                    (ii) 50% of the  restricted  Shares  deliverable at the time
                         that CAPSTONE delivers a draft of the Private Placement
                         Documents pursuant to Exhibit 1 attached hereto.  These
                         Shares  shall be  restricted  under Rule 144 of the Act
                         and  shall  be  subject   to  the  resale   limitations
                         contained in Rule 144 promulgated under the Act.

                    (iii)25% of the  restricted  Shares  deliverable at the time
                         that  CAPSTONE  delivers  a draft of the final  Private
                         Placement  Documents and Required  Notices  pursuant to
                         Exhibit 1 attached  hereto.  These  Shares and shall be
                         subject to the resale limitations contained in Rule 144
                         promulgated under the Act.

          D.   Warrants.  Warrants shall be granted to CAPSTONE from the Company
               entitling  CAPSTONE  (or its  assignee(s))  to  purchase an equal
               number of shares of Common  Stock as are the  subject  of section
               5.1(B)  of this  Agreement  (i.e.  1.0% of the  total  number  of
               outstanding  shares  of  Common  Stock  as of the  date  of  this
               Agreement)  ("Warrant").  The Warrants  shall not be  exercisable
               until 180 days from the date of grant thereof. The Warrants shall
               be  exercisable at a price equal to 75% of the average inside bid
               price of the  Company's  Common  Stock for the five  trading  day
               trading period prior to the actual exercise of the Warrant or any
               part  thereof.  The term of the  Warrants  shall be for three (3)
               years from the date of grant,  and they will  include a "cashless
               exercise" (i.e.,  conversion  provision.  The Warrants and shares
               received by CAPSTONE,  if the Warrants  are  exercised,  shall be
               subject  to  the  resale  restrictions   contained  in  Rule  144
               promulgated   under  the  Act,   unless   they  are   subject  to
               registration in accordance with this Agreement.

<PAGE>
          E.   Provisions Governing the Warrant Shares. The following provisions
               are  applicable  to the Shares which are to be issued to CAPSTONE
               in the event that the  Warrants  are  exercised  pursuant to this
               agreement ("Warrant Shares"):

               (i)  All   Warrant   Shares   shall  be  subject   to   piggyback
                    registration   rights  whenever  the  Company   proposes  to
                    register any of its  securities  under the Securities Act of
                    1933,  (excluding the Company's  initial  registered  public
                    offering,  and any  Registration  on Form  S-8 for  employee
                    benefit  plans or Form  S-4,  or  successor  forms)  with no
                    proceeds from the  registration of said Warrant Shares going
                    to the Company. CAPSTONE may register all, a portion or none
                    of its  Warrant  Shares  along with  other of the  Company's
                    shareholders,   subject  to  approval  of  any   Underwriter
                    representing the Company.

               (ii) The Company shall provide, at its own expense at the time of
                    exercise  of this  Agreement,  or within a  reasonable  time
                    thereafter,  the  necessary  documents  for CAPSTONE (or its
                    assignee(s)) to receive the following:

                    (x) Form of Warrant  Agreement  containing  the grant of the
                    Warrants; and

                    (y) Piggyback  Registration  Rights  Agreement  covering the
                    Warrant Shares.

          F.   Bridge Funding and Private Placement Commissions. As compensation
               to CAPSTONE  for  successfully  locating and placing a minimum of
               $250,000 in bridge  financing  on behalf of the  Company,  and in
               addition to the other  compensation  payable to Capstone  for its
               investment  banking  services  provided  for in  this  Agreement,
               CAPSTONE  shall  receive a cash  commission  of 3.0% of the gross
               aggregate  amount of  funding  received,  payable  at the time or
               times  that the  Company  receives  proceeds  from any  source or
               sources  for  any  bridge  financing  placed  through  CAPSTONE'S
               efforts or introductions.

               The  placement  by  CAPSTONE  of the  Company's  debt  or  equity
               securities,  in addition to the bridge financing referenced above
               (such as the Company's planned Rule 506 offering), shall be based
               upon  the  terms  of  a  separate  placement  agents  or  dealers
               agreement  hereinafter to be entered into by the parties prior to
               the time of such offering(s).


<PAGE>
               G.   Shares for  introduction  Broker-Dealer  Upon  Quotation  of
                    Common Stock. In consideration  for the consulting  services
                    and  introductions  provided by CAPSTONE to the Company with
                    regard to assisting  the Company in locating a qualified and
                    reputable  Broker  Dealer to submit  and file the  requisite
                    Form  211 with the Over  the  Counter  Bulletin  Board,  the
                    Company  hereby  agrees  that  at such  time as the  Company
                    begins  price  quotations  on the  NASD's  Over the  Counter
                    Electronic  Bulletin  Board  market,  or such  other  public
                    securities  market, the Company shall cause to be issued and
                    delivered to CAPSTONE, or its assignee(s) 100,000 restricted
                    shares of the Company's Common Stock.

          5.2  Optional Form of Payment.  CAPSTONE may at its sole election,  on
               the  due  date  of  any  payment  due  in  accordance  with  this
               Agreement,  elect to receive  all or a portion of its fees in the
               form of restricted  securities,  equity, or financing instruments
               issued by Company to CAPSTONE  on terms  agreed by the Company in
               writing.

          5.3  Extraordinary Expenses.  Extraordinary expenses of CAPSTONE shall
               be submitted to the Company for approval prior to expenditure and
               shall be paid by the Company,  within ten (10)  business  days of
               receipt of CAPSTONE'S request for payment. Extraordinary expenses
               shall include,  but not be limited to, business travel,  business
               accommodations  expenses,  printing,  regulatory fees,  overnight
               delivery or courier services.

          5.4  Finder Fees.

               5.4(a) In the event CAPSTONE  introduces the Company or a Company
               affiliate to any third party funding  source(s),  underwriter(s),
               merger  partner(s)  or joint  venturers who enter into a funding,
               underwriting, merger, joint venture or similar agreement with the
               Company,  the Company  hereby  agrees to pay CAPSTONE an advisory
               finder's  fee  according  to  industry  standards  based  on  the
               industry standard known as the "Lehman's  Formula",  on the gross
               proceeds or dollar value derived from such funding,  payable upon
               the  consummation of such funding,  underwriting,  merger,  joint
               venture or similar  agreement  with the Company,  even though the
               term of this Agreement may have expired  pursuant to the terms of
               this Agreement.  Capstone shall not be entitled to a finder's fee
               for any proceeds or financing arranged directly by the Company or
               from Monsoon International  Manufacturing and Distribution,  Inc.
               ("Monsoon"), or any parties introduced by Monsoon to the Company.
               For the purposes of this Agreement  Lehman's Formula is set forth
               below:

                    (i)   5.0% of the first $1,000,000 of Financing;
                    (ii)  4.0% of the next $1,000,000 of Financing;
                    (iii) 3.0% of the next $1,000,000 of Financing;
                    (iv)  2.0% of the next $1,000,000 of Financing; and
                    (v) 1.0% of any amount in excess of $4,000,000 of Financing.

               "Financing," as used herein,  shall mean all amounts furnished to
               or  for  the  use of  the  Company  with  Investors  directed  or
               introduced  by, or through the efforts of,  Finder after the date
               of this  Agreement,  whether  by  investment  in  equity  or debt
               securities of the Company, loans, loan commitments, guarantees of
               indebtedness,  leasing,  sale and  leaseback,  joint  ventures or
               licensing.
<PAGE>

               5.5(b) CAPSTONE may, at its sole option,  elect to receive all or
               a portion of said advisory fee as payment in kind, i.e., pro-rata
               in the same form and type of  securities,  equity,  or  financing
               instruments  issued to the funding  source or  underwriter by the
               Company.  In the event the  exercise  of this  option  results in
               additional  expenses  over and above the  expenses of the funding
               and/or underwriting,  then the additional expenses shall be borne
               by CAPSTONE. In addition, the exercise of this option by CAPSTONE
               shall  not  impede or  otherwise  have a  negative  effect on any
               funding or underwriting.

6.  Indemnification.  Each party  shall hold the other party  harmless  from and
against,  and shall  indemnify the other party,  for any  liability,  loss,  and
costs,  expenses or damages howsoever caused by reason of any injury (whether to
body, property,  personal or business character or reputation)  sustained by any
person or to any person or  property by reason of any act,  neglect,  default or
omission of it or any of its agents, employees, or other representatives arising
out of or in relation to this Agreement. Nothing herein is intended to nor shall
it relieve either party from liability for its own acts,  omissions or their own
negligence.  All remedies  provided by law or in equity shall be cumulative  and
not in the alternative.

7. Company Representations. Company hereby represents, covenants and warrants to
CAPSTONE as follows:

     7.1  Authorization.  The Company and its signatories herein have full power
          and  authority  to enter  into  this  Agreement  and to carry  out the
          transactions contemplated hereby.

     7.2  No Violation. Neither the execution and delivery of this Agreement nor
          the consummation of the transactions  contemplated hereby will violate
          any  provision  of the charter or by-laws of  Company,  or violate any
          term or provision  of any other  agreement or any statute or law which
          binds the Company.

     7.3  Agreement in Full Force and Effect. All contracts,  agreements, plans,
          leases,  policies and licenses  referenced herein to which the Company
          is a party are valid and in full force and effect.

     7.4  Consents. No consent of any person, other than the signatories hereto,
          is  necessary to the  consummation  of the  transactions  contemplated
          hereby, including, without limitation, consents from parties to loans,
          contracts,  lease or other  agreements and consents from  governmental
          agencies, whether federal, state, or local.

<PAGE>
     7.5  CAPSTONE Reliance. That CAPSTONE has and will rely upon the documents,
          instruments  and  written  information  furnished  to  CAPSTONE by the
          Company's officers, or designated employees.

     7.6  Services NOT EXPRESSED OR IMPLIED.

          7.6(a)  That  CAPSTONE  has  not  agreed  with  the  Company,  in this
          Agreement or any other agreement,  either verbal or written,  that any
          associate  of  CAPSTONE  will  be  a  market-maker   in  any  specific
          securities  or  securities  that the Company may have an interest  in:
          and,

          7.6(b) That any  payments  made to CAPSTONE  are not, and shall not be
          construed  as  compensation  to CAPSTONE  for the purposes of having a
          referral  or  associate  of CAPSTONE  make a market or write  research
          reports,  or to cover CAPSTONE'S  out-of-pocket  expenses for having a
          referral  of  CAPSTONE  make a  market,  or for  the  submission  by a
          referral  of  CAPSTONE  of an  application  to  make a  market  in any
          securities; and,

          7.6(c)  That no  payments  made to  CAPSTONE  are for the  purpose  of
          affecting the price of any security or influencing  any  market-making
          functions.

          7.6(d) That no payment  made to CAPSTONE  shall be for making false or
          exaggerated  representations about the Company or any of the Company's
          customers or products.

          7.6(e)  That  no  payment  made  to  CAPSTONE  shall  be for  research
          reporting coverage or securities purchase recommendations.  CAPSTONE'S
          research  department may or may not decide to initiate coverage of the
          Company's  stock based on its due  diligence,  independently  from any
          form of contractual agreement.

8. CAPSTONE Representations.  CAPSTONE hereby represents, covenants and warrants
to Company as follows:

     8.1  Authorization. CAPSTONE and its signatories herein have full power and
          authority  to  enter  into  this   Agreement  and  to  carry  out  the
          transactions contemplated hereby.

     8.2  No Violation. Neither the execution and delivery of this Agreement nor
          the consummation of the transactions  contemplated hereby will violate
          any  provision  of the charter or by-laws of  Company,  or violate any
          term or provision of any other agreement or any statute or law.

     8.3  Agreement in Full Force and Effect. All contracts,  agreements, plans,
          leases,  policies and licenses referenced herein to which Company is a
          party are valid and in full force and effect.

<PAGE>
     8.4  Consents. No consent of any person, other than the signatories hereto,
          is  necessary to the  consummation  of the  transactions  contemplated
          hereby, including, without limitation, consents from parties to loans,
          contracts,  lease or other  agreements and consents from  governmental
          agencies, whether federal, state, or local.

     8.5  Company  Reliance.  That Company has and will rely upon the documents,
          instruments  and  written  information  furnished  to  Company  by the
          CAPSTONE'S officers, or designated employees.

9.  Confidentiality.  CAPSTONE and the Company each agree to provide  reasonable
security  measures  to  keep  information  confidential  whose  release  may  be
detrimental  to the  stability  and  confidentiality  of either  CAPSTONE or the
Company.

10. Miscellaneous Provisions.

     10.1 Amendment and Modification.  This Agreement may be amended,  modified,
          and supplemented only by written agreement of CAPSTONE and Company.

     10.2 Waiver of Compliance. Any failure of CAPSTONE or the Company to comply
          with any  obligation,  agreement or condition  herein may be expressly
          waived in  writing,  but such  waiver of failure to insist upon strict
          compliance  with such  obligation,  covenant,  agreement  or condition
          shall not  operate as a waiver of, or  estoppel  with  respect to, any
          subsequent or other failure.

     10.3 Expenses:  Transfer  Taxes,  Etc.  Whether  or  not  the  transactions
          contemplated by this Agreement are  consummated,  CAPSTONE agrees that
          all fees and expenses  incurred by CAPSTONE,  in connection  with this
          Agreement  shall be borne by CAPSTONE and the Company  agrees that all
          fees and  expenses  incurred  by the Company in  connection  with this
          Agreement shall be borne by the Company, including, without limitation
          as to CAPSTONE or Company, all fees of counsel and accountants.

     10.4 Other  Business  Opportunities.  Except as expressly  provided in this
          Agreement,  each party  hereto shall have the right  independently  to
          engage in and receive full benefits from other business activities. In
          case of business  activities which would be competitive with the other
          party,  notice  shall be given  prior to this  Agreement  or,  if such
          activities are proposed,  then within 10 days prior to any competitive
          engagement.  The  doctrines of  "corporate  opportunity"  or "business
          opportunity" shall not be applied to any other activity,  venture,  or
          operation of either party.

     10.5 Compliance with Regulatory Agencies.  Each party hereby represents and
          warrants  that all actions,  direct or indirect,  taken by it and it's
          respective  agents,  employees and affiliates in connection  with this
          Agreement  and  any  financing  or  underwriting   arising  from  this
          Agreement,   shall  conform  to  all  applicable   Federal  and  state
          securities laws.
<PAGE>
     10.6 Notices.  Any notices to be given  hereunder by any party to the other
          may be effected by personal delivery in writing or by mail, registered
          or certified,  postage prepaid with return receipt  requested.  Mailed
          notices shall be addressed to the parties at the  addresses  appearing
          in the  introductory  paragraph of this  agreement,  but any party may
          change  his  address  by  written  notice  in  accordance   with  this
          subsection.  Notices delivered personally shall be deemed communicated
          as of actual receipt;  mailed notices shall be deemed  communicated as
          of three (3) days after mailing.

     10.7 Assignment. This Agreement, and all of the provisions hereof, shall be
          binding upon and inure to the benefit of the parties  hereto and their
          respective   successors  and  permitted  assigns,   but  neither  this
          Agreement nor any right,  interests or obligations  hereunder shall be
          assigned by either of the  parties  hereto  without the prior  written
          consent of the other party, except by operation of law.

     10.8 Delegation. Neither party shall delegate the performance of its duties
          under this  Agreement  without the prior written  consent of the other
          party.

     10.9 Publicity.  Neither  CAPSTONE nor the Company shall make or issue,  or
          cause to be made or issued,  any  announcement  or  written  statement
          concerning this Agreement or the transactions  contemplated hereby for
          dissemination  to the general  public without the prior consent of the
          other  party.  This  provision  shall  not  apply,   however,  to  any
          announcement  or written  statement  required to be made by law or the
          regulations of any federal or state governmental  agency,  except that
          the party  concerning  the  timing and  consent  of such  announcement
          before such announcement is made.

     10.10 Governing  Law. This  Agreement  and the  legal  relations  among the
          parties  hereto shall be governed by and construed in accordance  with
          the laws of the State of Georgia,  without  regard to its conflicts of
          law  doctrine.  The  Company  and  CAPSTONE  agree  that if  action is
          instituted to enforce or interpret  any  provision of this  Agreement,
          then jurisdiction and venue shall be in Fulton County, Georgia.

     10.11 Counterparts. This Agreement may be executed simultaneously in two or
          more counterparts,  each of which shall be deemed an original, but all
          of which together shall constitute one and the same instrument.

     10.12 Headings. The heading of the sections of this  Agreement are inserted
          for convenience  only and shall not constitute a part hereto or affect
          in any way the meaning or interpretation of this Agreement.

     10.13 Entire Agreement. This Agreement,  including any exhibits hereto, and
          the other documents and certificates  delivered  pursuant to the terms
          hereto,  set forth  the  entire  agreement  and  understanding  of the
          parties hereto in respect of the subject matter contained herein,  and
          supersedes all prior agreements,  promises,  covenants,  arrangements,
          communications,   representations  or  warranties,   whether  oral  or
          written,  by any  officer,  employee  or  representative  of any party
          hereto.

     10.14 Third Parties.  Except  as  specifically  set  forth or  referred  to
          herein,  nothing  herein  expressed or implied is intended or shall be
          construed  to confer upon or give to any person or  corporation  other
          than the parties hereto and their successors or assigns, any rights or
          remedies under or by reason of this Agreement.

     10.15 Attorneys' Fees  and  Costs.  If  any  legal  action  or  arbitration
          proceeding  is  necessary to enforce,  interpret,  or collect upon the
          terms of this  Agreement,  the  prevailing  party in that  controversy
          shall be entitled to recover from the non-prevailing party, reasonable
          attorneys'  fees and costs in  addition  to any other  relief to which
          that party may be  entitled.  This  provision  shall be  construed  as
          applicable to the entire Agreement.

     10.16 Survivability. If any part of this Agreement is found, or deemed by a
          court of competent  jurisdiction to be invalid or unenforceable,  that
          part shall be severable from the remainder of this Agreement.

     10.17 Further Assurances. Each of the parties agree that it shall from time
          to time take such actions and execute such  additional  instruments as
          may be  reasonably  necessary or convenient to implement and carry out
          the intent and purpose of this Agreement.


<PAGE>
     10.18 Right to Data After Termination.  After termination of this Agreement
          each party  shall be entitled  to copies of all  information  acquired
          hereunder as of the date of termination  and not previously  furnished
          to it.

     10.19 Relationship of the  Parties.  Nothing  contained  in this  Agreement
          shall be deemed to cause  either party to be the partner of the other,
          nor, except as otherwise  herein expressly  provided,  to cause either
          party to be the agent or legal representative of the other, nor create
          any  fiduciary  relationship  between them. It is not the intention of
          the  parties  to create,  nor shall this  Agreement  be  construed  to
          create, any commercial or other partnership.  Neither party shall have
          any authority to act for or to assume any obligation or responsibility
          on behalf of the other party,  except as otherwise  expressly provided
          herein..  The  rights,  duties,  obligations  and  liabilities  of the
          parties shall be several not joint or collective.  Each party shall be
          responsible  only for its  obligations  as herein set out and shall be
          liable  only for its  share of the  costs  and  expenses  as  provided
          herein. Each party shall indemnify, defend and hold harmless the other
          party, its directors, officers, and employees from and against any and
          all losses,  claims, damages and liabilities arising out of any act or
          any  assumption  of liability by the  indemnify  party,  or any of its
          directors,  officers or employees,  done or undertaken,  or apparently
          done or undertaken,  on behalf of the other parties.  Each party shall
          be responsible for the acts of its agents and affiliates.

11.  Arbitration;  Indemnification.  WITH  RESPECT  TO  THE  ARBITRATION  OF ANY
DISPUTE, THE UNDERSIGNED HEREBY ACKNOWLEDGE THAT:

     11.1 Arbitration is final and binding on the parties;

     11.2 The  parties  are  waiving  their  right to seek a  remedy  in  court,
     including the right to jury trial;

     11.3 Pre-arbitration discovery is generally more limited and different from
     court proceeding;

     11.4 The arbitrator's  award is not required to include factual findings or
     legal reasoning and any party's right to appeal or to seek  modification of
     a ruling by the arbitrators is strictly limited;

     11.5 The  panel  of  arbitrators  will  typically  include  a  minority  of
     arbitrators who were or are affiliated with the securities industry; and

     11.6 This arbitration agreement is specifically intended to include any and
     all statutory claims which might be asserted by any party.

     11.7 All  disputes,  controversies,  or  differences  between the  company,
     capstone  or any  of  their  officers,  directors,  legal  representatives,
     attorneys,  accountants,  agents or  employees,  or any  customer  or other
     person or entity, arising out of, in connection with or as a result of this
     agreement,  shall be  resolved  through  arbitration  rather  than  through
     litigation.

     11.8 The undersigned  hereby agrees to submit the dispute for resolution to
     either the American Arbitration  Association,  in Atlanta,  Georgia, or the
     national  association  of securities  dealers,  inc., in Atlanta,  Georgia,
     whichever association may assert jurisdiction over the dispute, within five
     (5) business  days after  receiving a written  request to do so from any of
     the aforesaid parties.

     11.9 If any party  fails to submit the dispute to  arbitration  on request,
     then the requesting party may commence an arbitration proceeding.

<PAGE>
     11.10 That any hearing  scheduled  after an arbitration is initiated  shall
     take place in Fulton County,  Georgia and the federal arbitration act shall
     govern the proceeding and all issues raised by this agreement to arbitrate.
     If any party shall  institute  any court  proceeding in an effort to resist
     arbitration  and  be   unsuccessful  in  resisting   arbitration  or  shall
     unsuccessfully contest the jurisdiction of any arbitration forum located in
     Fulton  County,  Georgia,  over any  matter  which is the  subject  of this
     agreement,  the  prevailing  party shall be  entitled  to recover  from the
     non-prevailing party its legal fees and any out-of-pocket expenses incurred
     in connection  with the defense of such legal  proceeding or its efforts to
     enforce its rights to arbitration as provided for herein.

         11.12  Each  party  will  sign any  required  NASD  uniform  submission
         agreement at the time any dispute is submitted for arbitration.  Or the
         applicable paperwork for the American Arbitration  Association,  at the
         time  any  dispute  is  submitted  for  arbitration  whichever  one  is
         applicable.

         11.13 The  parties  shall  accept the  decision  of any award as being,
         final and conclusive and agree to abide thereby.

         11.14  Any   decision   may  be  filed  with  any  court  of  competent
         jurisdiction as a basis for judgment and execution for collection.

12. Term of Agreement and  Termination.  This Agreement  shall be effective upon
execution, shall continue for six (6) months unless terminated sooner, by either
party,  pursuant  to the terms of this  Agreement,  upon  giving the other party
thirty (30) days written notice,  after which time this Agreement is terminated.
CAPSTONE  shall be entitled to the finder's fees described in this Agreement for
funding or  underwriting  commitments  entered into by the Company's  within one
year after the termination of this Agreement if said funding or underwriting was
the result of CAPSTONE'S efforts or introductions to other funding sources prior
to the termination of this Agreement.

13. Renewal. Provided that this agreement has not been otherwise terminated, and
that all  specific  deadlines  have  been met and all  services  to be  provided
hereunder  have been  completed in a timely  fashion and all payments to be made
hereunder have been made, then this agreement shall  automatically renew for one
(1) additional  period of six (6) months under the same terms and conditions and
compensation set forth in paragraph 5.1(B), 5.1(F) and 5.4, hereof.

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
duly executed as of the day and year first above written.

                                         THE COMPANY
                                         American Fire Retardant Corp.
                                         A Nevada Corporation


Date: September 29, 1999                /S/ Stephen F. Owens
                                        ---------------------------------------
                                        By:  Stephen F. Owens
                                        Its: President


Date: September 30, 1999                /S/ Angela M. Raidl
                                        ---------------------------------------
                                        By:  Angela M. Raidl
                                        Its: Vice President, Chief Financial
                                             Officer, Secretary

                                        CAPSTONE

                                        Capstone Partners, L.C.
                                        A Utah Limited Liability Company



Dated:   September 27, 1999             /S/ Greg Bartko
                                        ---------------------------------------
                                        By: Greg Bartko, Esq.
                                       Its: Chief Executive Officer
<PAGE>
                                    EXHIBIT 1

                             Specific Time Deadlines


Item 1. Private Placement  Memorandum.  Capstone as part of the compensation and
     fees set forth in the  Investment  Banking and Consulting  Agreement  shall
     prepare a Private Placement  Memorandum  pursuant to the provisions of Rule
     506 of  Regulation  D along  with  the  requisite  subscription  agreement,
     investor questionnaire, investor representative questionnaire (Collectively
     the  "Private  Placement  Documents"),  and the  Form D  Notice  of Sale of
     Securities  and  requisite  state Blue Sky filings and notices  pursuant to
     Rule 506 and Sec.  18(b)(4)(D) of the Securities Act of 1933, for up to six
     (6) states designated by the Company (the "Required Notices").

     Any  additional  requisite  Blue Sky  filings  and notices in excess of the
     initial six (6) designated  states shall be an additional  cost of $250 per
     state.

     Due Dates:

     (1) The draft of Private  Placement  Documents  shall be completed no later
     than 14 days following the execution of this Agreement.

     (2) The final and  completed  Private  Placement  Documents  along with the
     Required  Notices  shall be completed no later than 10 days  following  the
     approval of the draft of the Private Placement Document by the Company.

     Costs:

     The Company  shall pay all required  State Blue Sky filing fees  associated
     with the Private Placement,  in addition to all other  out-of-pocket  costs
     associated  with the  Private  Placement  Memorandum,  such as copying  and
     binding  charges,  and the costs of distribution and mailing of the Private
     Placement Memorandum.