1 of 13
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended May 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from ________
Commission File Number: 0-19945
NoFire Technologies, Inc.
(Name of small business issuer in its charter)
Delaware
22-3218682_____
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
21 Industrial Avenue, Upper Saddle River, New Jersey
07458_____
(Address of principal executive offices)
(Zip Code)
Issuer's telephone number (201) 818-1616
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the past 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES X NO
Check whether the issuer has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange
Act after the distribution of securities under a plan confirmed
by the Court.
YES X NO
State the number of shares of each of the issuer's classes of
common equity outstanding at the latest practicable date:
8,288,782 shares of Common Stock as of July 1, 1996.
Transitional Small Business Disclosure Format (check one):
Yes No X
NOFIRE TECHNOLOGIES, INC.
FORM 10-QSB
INDEX
PART I - FINANCIAL INFORMATION
PAGE
Item 1. Unaudited Consolidated Financial Statements:
Consolidated Balance Sheets as of
May 31, 1996 and August 31, 1995
3
Consolidated Statements of Operations for
the Nine Months ended May 31, 1996 and 1995;
and the Three Months Ended May 31, 1996
and 1995 5
Consolidated Statements of Cash Flows for the
Nine Months ended May 31, 1996 and 1995
6
Notes to Unaudited Consolidated Financial
Statements
8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
11
Part II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
13
Signatures
13
Part I - Financial Information
Item 1. Financial Statements
NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES
(Development Stage Companies)
CONSOLIDATED BALANCE SHEETS
May 31, August 31,
1996 1995
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $ $
12,506 103,288
Cash, restricted 0 1,393,154
Accounts receivable 1,035 --
Inventory 49,165 29,276
Prepaid expenses 14,319 16,600
Total Current Assets 77,025 1,542,318
EQUIPMENT, less accumulated 7,044 5,975
depreciation
OTHER ASSETS:
Patents, less accumulated
amortization of 1,275,000 1,500,000
$225,000 at May 31, 1996
Excess of reorganization value
over net assets,
less accumulated amortization 179,368 211,021
of $31,653 at
May 31, 1996
Security deposits 27,473 18,759
1,481,841 1,729,780
$ $
1,565,910 3,278,073
See accompanying notes to consolidated financial statements
NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES
(Development Stage Companies)
CONSOLIDATED BALANCE SHEETS
May 31, August 31,
1996 1995
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
CURRENT LIABILITIES:
Current portion of settled $ $
liabilities 592,250 1,254,630
Accrued expenses 498,289 709,826
Estimated provision for unsettled 49,000 50,000
liabilities
Due to officers 175,000 10,000
1,314,539 2,024,456
LONG TERM LIABILITIES:
Settled liabilities, less current 1,860,560 2,116,125
maturities
Convertible debentures - 8% due 436,002 --
January 31, 1999
2,296,562 2,116,125
Total Liabilities 3,611,101 4,140,581
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock $.20 par value:
Authorized - 25,000,000 shares
Issued and outstanding - 1,637,756 1,637,400
8,188,782 shares
Capital deficiency (2,405,265) (2,404,908)
Retained earnings (deficit) (1,277,682) --
Stock subscription receivable -- (95,000)
Total Stockholders' Equity (2,045,191) (862,508)
(Deficiency)
$ $
1,565,910 3,278,073
See accompanying notes to consolidated financial statements
NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES
(Development Stage Companies)
CONSOLIDATED STATEMENTS OF OPERATIONS
Cumulative
During
For the Nine For the Three Developmen
Months Months t Stage
Ended May 31 Ended May 31
1996 1995 1996 1995 (Since
Inception)
(UNAUDITED) (UNAUDITED)
NET SALES $ $ $ $ $
35,274 39,194 6,054 612 335,294
COSTS AND EXPENSES:
Cost of sales 21,650 23,619 3,694 2,771 216,297
Selling, general and 1,106,91 454,775 368,058 138,894 4,867,78
administrative 2 3
1,128,56 478,394 371,752 141,665 5,084,08
2 0
LOSS FROM OPERATIONS (1,093,2 (439,200 (365,698 (141,053 (4,748,7
88) ) ) ) 86)
OTHER EXPENSES:
Interest expense 184,394 -- 65,756 -- 204,792
Reorganization items -- -- -- -- 365,426
Litigation -- -- -- -- 198,996
settlement
184,394 -- 65,756 -- 769,214
LOSS BEFORE DISCONTINUED
OPERATIONS AND
EXTRAORDINARY ITEM (1,277,6 (439,200 (431,454 (141,053 (5,518,0
82) ) ) ) 00)
DISCONTINUED OPERATIONS -- -- -- -- (1,435,3
92)
LOSS BEFORE EXTRAORDINARY (1,277,6 (439,200 (431,454 (141,053 (6,953,3
ITEM 82) ) ) ) 92)
EXTRAORDINARY ITEM - Gain
on -- -- -- -- 449,583
debt discharge
NET LOSS $ $ $ $ $
(1,277,6 (439,200 (431,454 (141,053 (6,503,8
82) ) ) ) 09)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 8,188,78 3,466,39 8,188,78 3,466,39
2 5 2 5
EARNINGS (LOSS) PER SHARE $ $ $ $
(0.16) (0.13) (0.05) (0.04)
See accompanying notes to consolidated financial statements
NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES
(Development Stage Companies)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cumulativ
e During
For the Nine Months Developme
Ended May 31 nt Stage
1996 1995 (Since
Inception
)
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ $ $
(1,277,682 (439,200 (6,503,80
) ) 9)
Adjustments to reconcile net loss to
net cash flows from operating
activities:
Depreciation and amortization 259,068 15,759 352,009
Extraordinary gain on debt -- -- (449,583)
discharge
Revaluation of assets and
liabilities -- -- 482,934
to fair value
Litigation settlement -- -- 198,996
(Increases) decreases in assets
and
(decreases) increases in
liabilities: (net of
effects from reverse purchase
acquisition)
Accounts receivable (1,035) -- (1,035)
Inventory (19,889) (13,900) (49,165)
Prepaid expenses 2,280 -- (14,320)
Accrued expenses 15,385 26,627 3,032,198
Income taxes payable -- 1,080 --
Security deposits (8,714) (3,401) (27,473)
Obligation from discontinued -- -- 51,118
operations
Net cash flows from operating (1,030,587 (413,035 (2,928,13
activities ) ) 0)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (3,485) -- (26,770)
Increase in patent costs -- (4,093) (131,290)
Acquisition accounted for as a
reverse purchase -- -- (517,893)
Net cash flows from investing (3,485) (4,093) (675,953)
activities
See accompanying notes to consolidated financial statements
NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES
(Development Stage Companies)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cumulativ
e During
For the Nine Months Developme
Ended May 31 nt Stage
1996 1995 (Since
Inception
)
(UNAUDITED)
CASH FLOWS FROM FINANCING ACTIVITIES:
Receipt of payment on stock
subscriptions 95,000 -- 3,071,340
receivable
Proceeds from issuance of long- 436,002 -- 1,221,115
term debt
Proceeds of notes payable and 165,000 418,613 886,000
officer advances
Payment of settled liabilities (1,145,866 -- (1,486,86
) 6)
Payments on notes payable -- -- (75,000)
Net cash flows from financing (449,864) 418,613 3,616,589
activities
NET CHANGE IN CASH (1,483,936 1,485 12,506
)
CASH AT BEGINNING OF PERIOD 1,496,442 1,230 --
CASH AT END OF PERIOD $ $ $
12,506 2,715 12,506
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ $ - $
27,938 - 48,336
Income taxes paid $ - $ - $ -
- - -
Common stock issued in exchange for $ - $ - $
settlement of debt - - 46,750
Common stock issued in exchange
for subscriptions receivable $ - $ -- $
- 1,279,059
See accompanying notes to consolidated financial statements
NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES
(Development Stage Companies)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MAY 31, 1996
NOTE 1 - Basis of Presentation
The balance sheet at the end of the preceding fiscal year has
been derived from the audited consolidated balance sheet
contained in the Company's Form 10-KSB for the year ended August
31, 1995 (the "10-KSB") and is presented for comparative
purposes. All other financial statements are unaudited. 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 for all periods
presented, have been made. The results of operations for interim
periods are not necessarily indicative of the operating results
for the full year.
Footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been omitted in accordance with the published
rules and regulations of the Securities and Exchange Commission.
These financial statements should be read in conjunction with the
financial statements and notes thereto included in the 10-KSB for
the most recent fiscal year.
Loss per Share - Loss per share is based on the weighted average
number of shares outstanding during the periods. The effect of
warrants outstanding and shares issueable in connection with the
convertible debentures is not included since it would be anti-
dilutive.
NOTE 2 - Reorganization:
Prior to August 11, 1995, the effective date of its confirmed
Plan of Reorganization (the "Plan") pursuant to Chapter 11
proceedings under the United States Bankruptcy Code (the "Code"),
the Company operated under the name of PNF Industries, Inc.
("PNF") and subsidiaries.
PNF was organized under the laws of the State of Delaware on July
13, 1987. Effective February 27, 1990, PNF acquired all the
outstanding common stock of Portafone Communications, Inc.
("Portafone") with its wholly owned subsidiary, Unicell
Corporation ("Unicell"). Portafone was engaged in the business
of selling, installing and renting cellular telephones. Unicell
was licensed to act as a reseller of cellular services in New
York and Massachusetts. The cellular phone business was
discontinued during calendar year 1993.
NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES
(Development Stage Companies)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MAY 31, 1996
Effective August 6, 1991, PNF acquired 89% of the outstanding
common stock of both No Fire Engineering, Inc. and No Fire
Ceramic Products, Inc. in a transaction accounted for as a
reverse acquisition. Collectively, those two companies
developed, manufactured and sold fire retardant intumescent
products.
On Agust 31,1994, involuntary petitions for relief under Chapter
11of the Code were filed against the Company and certain of its
subsidiaries. Under the provisions of the Code, claims against
the Company in existence prior to the Petition Date were stayed.
The Company continued its business operations and was managed by
a Bankruptcy Trustee. On April 7, 1995 the Bankruptcy Court
confirmed the Plan. The Plan provided that virtually all pre-
petition claims of the Company would be paid in full over a four-
year period.
On August 11, 1995, the effective date of the Plan, PNF emerged
from Chapter 11 as a reorganized company under the name NoFire
Technologies, Inc. For financial reporting purposes, the Company
reported the effective date as of August 31, 1995.
As of August 11, 1995 the Company adopted "fresh start reporting"
and implemented the effects of such adoption in its balance sheet
as of August 31, 1995.
NOTE 3 - Fresh Start Reporting:
At August 31, 1995, under the principles of fresh start
reporting, the Company's total assets were recorded at their
estimated reorganization value of $1,750,000, with such value
allocated to identifiable assets on the basis of their estimated
fair value. The reorganization value included the patents for
intumescent fire retardant products which patents were valued at
$1,500,000.
NOTE 4 - Management's Actions to Overcome Operating and Liquidity
Problems:
The Company's financial statements have been presented on the
going concern basis which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of
business. The Company's viability as a going concern is
dependent upon its ability to achieve profitable operations
through increased sales and raising additional financing.
NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES
(Development Stage Companies)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MAY 31, 1996
The Company has a liability for settled claims payable to
creditors and accrued expenses incurred in connection with the
Plan. Without the achievement of profitable operations or
additional financing, funds for payment would not be available.
Management believes that actions currently being undertaken to
revise the Company's operations and marketing efforts will
provide it with the opportunity to realize profitable operations
and to attract the necessary financing and/or capital for the
payment of outstanding obligations.
NOTE 5 - Warrants:
The Company has issued warrants for the purchase of common stock
as follows:
Exercise
Shares Price
590,00 $
0 1.00
5,000
2.00
35,000
2.50
50,000
3.25
24,000
5.00
704,00
0
Warrants for an additional 400,000 shares at an exercise price of
$1.00 were authorized on August 16, 1995 but have not yet been
issued.
The warrants, including those not yet issued, will vest to the
holders in various intervals ranging from issue date to three
years from issuance.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
The Company continued its product improvement and testing. It
believes that it has developed products of sufficient
distinctiveness to enable it to apply for three additional
patents during the current fiscal year. In addition, the
Company accelerated its marketing efforts to develop new
applications and attract new customers. Although sales during
the first nine months were nominal, the Company believes it will
start to obtain more substantial commercial sales in the fourth
quarter of the current fiscal year. The Company's most pressing
need is a cash infusion to fund current operating expenses as
discussed below in the section on Liquidity and Capital
Resources. The Company's product line is now at the stage where
it can be sold commercially in a form that is safe, easy to use
and performs its intended function well. The Company intends to
continue to develop new related products and applications as
market opportunities dictate. The number of manufacturing
employees will increase with increased production. The salaried
administrative and marketing staff is anticipated to remain
constant. Additional sales and marketing efforts will be
provided by commissioned independent contractors.
Comparison Nine Months Ended May 31, 1996 and May 31, 1995
The Company remained a development stage company. Sales of
$35,274 for the nine months ended May 31, 1996 represented a
decline of 10% from the $39,194 sales for the comparable nine-
month period of the prior year. Cost of goods sold during the
same periods decreased 8%, from $23,619 to $21,650. Selling,
general and administrative expenses for the nine-months ended May
31, 1996 were $1,106,912, a 143% increase over the $454,775 from
the similar period in the prior year. In the earlier period, the
bankruptcy trustee limited expenditures to survival levels: there
was no building for the future. In the current period, the new
management continued expenditures aimed at putting the
reorganized company into a position to seek sales opportunities
through aggressive testing and marketing efforts and to have an
organization in place to properly administer a larger publicly
traded company. Additionally, accounting rules related to the
recent bankruptcy mandated that the reorganization values for
patents and excess of reorganization value over net assets be
amortized over a five-year period, resulting in a charge of
$256,653 which is included in selling, general and administrative
expenses for the current period. Those rules also required that
future annual payments of Chapter 11 claims be stated at their
net present value. The increase in that present value as the due
date gets closer is offset by a charge to interest expense. Such
charge in the current period is $164,504.
Comparison Three Months Ended May 31 1996 and May 31, 1995
Sales of $6,054 for the quarter ended May 31, 1996 represented an
889% increase from the $612 of the similar quarter of the prior
year. Cost of goods sold increased 33%, from $2,771 to $3,694
resulting in a Gross Profit of $2,360, as compared to a loss of
$2,159 in the prior year. Selling, general and administrative
expenses in the quarter ended May 31, 1996 totaled $368,058, an
increase of $229,164 or 165% from the $138,894 of the earlier
quarter. Comments relative to the changes are similar to those
above for the nine months ended May 31. In 1996 the amortization
of patents and excess reorganization were $85,551, and the
interest cost related to the value of Chapter 11 claims was
$54,834.
Liquidity and Capital Resources
At May 31, 1996 the Company had cash balances of $12,506.
During the second and third quarters of the current fiscal year,
the Company made a private placement of 8% debentures
convertible into shares of common stock at a price of $1.00 per
share. Interest accrues until the earlier of conversion or
maturity on January 31, 1999. Through May 31, 1996, $436,002 of
principal amount had been issued.
The Company will need additional cash infusion to fund its
operating costs until it is self-sustaining and to pay the next
installment of obligations to Chapter 11 claimants at the end of
the current fiscal year. Alternate sources of funding are being
considered to meet these requirements including exercise of
warrants, bank and other borrowings, issuance of convertible
debentures and the sale of equity securities in a public or
private offering.
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended May
31, 1996.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: July 12, 1996 NoFire Technologies,
Inc.
By: /S/ Sam Oolie
Sam Oolie
Chairman and Chief
Executive Officer
By: /S/ Charles R. Stone
Charles R. Stone
Vice
President and Chief Financial Officer
(Chief
Accounting Officer)
