<PAGE>
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 February 28, 1997
[ ] 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
--- ---
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State the number of shares of each of the issuer's classes of common equity
outstanding at the latest practicable date: 9,289,500 shares of Common
Stock as of March 31, 1997.
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
February 28, 1997 and August 31, 1996 3
Consolidated Statements of Operations for
the Six Months ended February 28/29, 1997
and 1996; and the Three Months ended
February 28/19, 1997 and 1996 5
Consolidated Statements of Cash Flows for the
Six Months ended February 28/29, 1997 and 1996 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 12
Signatures 12
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Part I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES
(Development Stage Companies)
CONSOLIDATED BALANCE SHEETS
February 28, August 31,
1997 1996
------------ -----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $ 1,150 $ 2,474
Inventory 81,565 56,761
Prepaid expenses and other current assets 10,275 7,722
------------ ------------
Total Current Assets 92,990 66,957
------------ ------------
EQUIPMENT, less accumulated depreciation 5,513 6,240
------------ ------------
OTHER ASSETS:
Patents, less accumulated amortization
of $450,000 at February 28,1997 and
$300,000 at August 31, 1996 1,050,000 1,200,000
Security deposits 18,473 18,473
Excess of reorganization value over net
assets, less accumulated amortization
of $63,306 at February 28,1997 and
$42,204 at August 31, 1996 147,715 168,817
------------ -----------
1,216,188 1,387,290
------------ -----------
$ 1,314,691 $ 1,460,487
============ ===========
See accompanying notes to consolidated financial statements
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NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES
(Development Stage Companies)
CONSOLIDATED BALANCE SHEETS
February 28, August 31,
1997 1996
------------ -----------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
CURRENT LIABILITIES:
Current portion of settled liabilities $ 735,754 $ 592,853
Accounts payable and accrued expenses 435,673 323,773
Due to stockholders 71,253 76,253
Deferred salaries 295,974 200,970
Other current liabilities 20,000 20,000
------------ ----------
1,558,654 1,213,849
------------ ----------
OTHER LIABILITIES
Settled liabilities, less current
maturities 1,579,750 1,895,089
Convertible debentures - 8% due
January 31, 1999 436,002 436,002
------------ -----------
2,015,752 2,331,091
------------ -----------
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock $.20 par value:
Authorized - 25,000,000 shares
Issued and outstanding - 9,189,500 shares at
February 28, 1997 and 8,549,500
shares at August 31, 1996 1,837,900 1,709,900
Capital deficiency (1,602,910) (2,114,908)
Retained earnings (deficit) (2,494,705) (1,634,802)
Unearned stock compensation - (44,643)
----------- -----------
Total Stockholders' Equity (Deficiency) (2,259,715) (2,084,453)
----------- -----------
$ 1,314,691 $ 1,460,487
=========== ===========
See accompanying notes to consolidated financial statements
Page 4
<PAGE>
NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES
(Development Stage Companies)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
For the Six Months For the Three Months Development
Ended February 28/29 Ended February 28/29 Stage
1997 1996 1997 1996 (Since Inception)
---------- ---------- ---------- ---------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET SALES $ 27,583 $ 29,220 $ 5,470 $ 24,930 $ 385,508
COSTS AND EXPENSES:
Cost of sales 12,901 17,956 2,461 15,227 236,655
Selling, general and administrative 731,026 738,854 359,553 340,023 5,921,745
---------- ---------- ---------- ---------- ----------
743,927 756,810 362,014 355,250 6,158,400
---------- ---------- ---------- ---------- ----------
LOSS FROM OPERATIONS (716,344) (727,590) (356,544) (330,320) (5,772,892)
OTHER EXPENSES:
Interest expense 143,563 118,638 73,593 59,795 404,487
Interest income - - - - (6,774)
Reorganization items - - - - 365,426
Litigation settlement - - - - 198,996
---------- ---------- ---------- ---------- ----------
143,563 118,638 73,593 59,795 962,135
---------- ---------- ---------- ---------- ----------
LOSS BEFORE DISCONTINUED OPERATIONS
AND EXTRAORDINARY ITEM (859,907) (846,228) (430,137) (390,115) (6,735,027)
DISCONTINUED OPERATIONS - - - - (1,435,392)
---------- ---------- ---------- ---------- ----------
LOSS BEFORE EXTRAORDINARY ITEM (859,907) (846,228) (430,137) (390,115) (8,170,419)
EXTRAORDINARY ITEM - Gain on
debt discharge - - - - 449,583
---------- ---------- ---------- ---------- ----------
NET LOSS $ (859,907) $ (846,228) $ (430,137) $(390,115) $(7,720,836)
========== ========== ========== ========== ==========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 8,930,333 8,187,000 8,838,667 8,187,000
========== ========== ========== ==========
EARNINGS (LOSS) PER SHARE $ (0.10) $ (0.10) $ (0.05) $ (0.05)
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
Page 5
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NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES
(Development Stage Companies)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
During
For the Six Months Development
Ended February 28/29 Stage
1997 1996 (Since Inception)
---------- ---------- ---------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (859,907) $ (846,228) $(7,720,836)
Adjustments to reconcile net loss to
net cash flows from operating activities:
Depreciation and amortization 172,862 172,665 611,226
Extraordinary gain on debt discharge - - (449,583)
Interest expense incurred to state settled
liabilities at present value 115,841 - 324,099
Revaluation of assets and liabilities
to fair value - - 482,934
Litigation settlement - - 198,996
Common stock released in exchange for services 44,643 - 62,500
Changes in operating assets and liabilities
(net of effects from reverse purchase
acquisition)
Inventory (24,804) (15,949) (81,565)
Prepaid expenses (2,553) 446 (10,275)
Accounts payable and accrued expenses 111,902 (67,088) 2,702,662
Security deposits - (7,704) (18,473)
Deferred salaries 95,004 87,696 295,974
Obligation from discontinued operations - - 51,118
---------- ---------- ----------
Cash flows from operating activities (347,012) (676,162) (3,551,223)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (1,032) (1,880) (27,801)
Increase in patent costs - - (131,290)
Acquisition accounted for as a
reverse purchase - - (517,893)
---------- ---------- ---------
Net cash flows from investing activities (1,032) (1,880) (676,984)
---------- ---------- ---------
</TABLE>
See accompanying notes to consolidated financial statements
Page 6
<PAGE>
NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES
(Development Stage Companies)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
During
For the Six Months Development
Ended February 28/29 Stage
1997 1996 (Since Inception)
---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of notes payable - 75,000 721,000
Payments on notes payable - - (75,000)
Payment of settled liabilities (288,280) (1,188,816) (1,720,351)
Proceeds from issuance of common stock 640,000 - 3,916,340
Collection of stock subscription receivable - 95,000 95,000
Proceeds from issuance of long-term debt - - 785,113
Advances received from stockholders (5,000) - 71,253
Proceeds from issuance of 8% convertible
debentures - 286,002 436,002
---------- ---------- ----------
Net cash flows from financing activities 346,720 (732,814) 4,229,357
---------- ---------- ----------
NET CHANGE IN CASH (1,324) (1,410,856) 1,150
CASH AT BEGINNING OF PERIOD 2,474 1,496,442 -
---------- ---------- ----------
CASH AT END OF PERIOD $ 1,150 $ 85,586 $ 1,150
========== ========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 5,501 $ 24,888 $ 38,332
========== ========== ==========
Income taxes paid $ - $ - $ -
========== ========= ==========
Common stock issued in exchange
for settlement of debt $ - $ - $ 46,750
========== ========== ==========
Common stock issued in exchange
for subscriptions receivable $ - $ - $ 95,000
========== ========== ==========
Common stock issued in exchange for
services, net of unearned compensation $ 44,643 $ - $ 62,500
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
Page 7
<PAGE>
NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES
(Development Stage Companies)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
February 28, 1997
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, 1996 (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 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.
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. No Fire Engineering, Inc. was dissolved on March 14, 1997.
Page 8
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NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES
(Development Stage Companies)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
February 28, 1997
On August 31, 1994, involuntary petitions for relief under Chapter 11 of 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.
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
repayment would not be available.
Page 9
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NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES
(Development Stage Companies)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
February 28, 1997
Management believes that actions currently being undertaken to obtain
significant sales contracts 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:
Shares Exercise Price
------- --------------
990,000 $1.00
1,087,500 2.00
35,000 2.50
50,000 3.00
50,000 3.25
12,000 5.00
----------
2,224,500
The warrants will vest to the holders in various intervals ranging from
issue date to three years from issuance.
Page 10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company continued its product improvement and testing. It now has
several certifications for specific applications and had filed for two
additional patents. Continuing marketing efforts have brought the Company
closer to achieving significant sales for applications in such diverse
industries as high-speed ferries, nuclear generation plants, electric
utilities, low-cost manufactured homes, and automotive. The Company believes
that important supply contracts will be obtained from one or more of these
areas within the next year permitting the Company to leave the development
stage. The greatest obstacles to obtaining such contracts are the continuing
tests and approvals required and the high price of the product. The
Company's most pressing need is a cash infusion as discussed below in the
section on Liquidity and Capital Resources. The Company's product line has
been developed to 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 its research and testing efforts to meet market
opportunities. The number of manufacturing and quality control employees
will increase with increased production. The salaried administrative and
marketing staff is anticipated to remain constant with additional sales and
marketing efforts provided by commissioned independent contractors.
COMPARISON SIX MONTHS ENDED FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
The Company remained a development stage company. Sales of $27,583 for the
six months ended February 28, 1997 represented a decrease of 6% from the
$29,220 for the comparable six-month period of the prior year. Cost of goods
sold during the same periods decreased 28% from $17,956 to $12,901 resulting
in a gross profit of $14,682 compared to $11,264 in the prior year. Selling,
general and administrative expenses for the six-months ended February 28,
1997 were $731,026 representing a decrease of $7,828 or 1% from the $738,854
of the similar period of prior year. Interest expense of $143,563 in the
current period was an increase of $24,925 or 21% from the $118,638 of the
similar period of the prior year. The change is represented primarily by the
interest expense accrued on the convertible debentures issued in the prior
fiscal year.
COMPARISON THREE MONTHS ENDED FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
Sales of $5,470 for the three months ended February 28, 1997 represented a
decrease of 78% from the $24,930 for the comparable three-month period of the
prior year. Cost of goods sold during the same periods decreased 84% from
$15,227 to $2,461 resulting in a gross profit of $3,009 compared to $9,703 in
the prior year. Selling, general and administrative expenses for the three
months ended February 28, 1997 were $359,553 representing an increase of
$19,530 or 6% from the $340,023 of the similar period of the prior year.
Page 11
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Ongoing expenses were the same in each year with the difference represented
by a one-time financial public relations consulting fee of $17,856 in the
latter quarter. Interest expense of $73,593 in the current period was an
increase of $13,798 or 23% from the $59,795 of the similar period of the
prior year. The change is represented primarily by the interest expense
accrued on the convertible debentures issued in the prior fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
At February 28, 1997 the Company had cash balances of $1,150. In order to
fund continuing operations during the six months ended on that date, $640,000
was obtained by the private sales of unregistered common stock with warrants
to several accredited investors. Because of limited cash resources, the
Company has deferred payment of $282,544 of the second installment of the
Chapter 11 liability to unsecured creditors that was due in late September
1996. In order to meet that liability and meet working capital needs until
significant sales levels are achieved, the Company will continue to explore
alternative sources of funding including exercise of warrants, bank and other
borrowings, issuance of convertible debentures and the sale of equity
securities in a public or private offering. From March 1 to March 31, 1997,
an additional $75,000 was obtained in private sales of unregistered common
stock with warrants to accredited investors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended February 28, 1997.
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: April 14, 1997 NoFire Technologies, Inc.
By: _______________________
Sam Oolie
Chairman and Chief Executive
Officer
By: _______________________
Charles R. Stone
Vice President and Chief Financial
Officer
(Chief Accounting Officer)
Page 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited Balance Sheet as of February 28,1997 and the unaudited Statement of
Operations for the six months then ended and is qualified in its entirety by
reference to such financial statments.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> DEC-1-1996
<PERIOD-END> FEB-28-1997
<CASH> 1,150
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 81,565
<CURRENT-ASSETS> 92,990
<PP&E> 27,802
<DEPRECIATION> 22,289
<TOTAL-ASSETS> 1,314,691
<CURRENT-LIABILITIES> 1,558,654
<BONDS> 436,002
0
0
<COMMON> 1,837,900
<OTHER-SE> (4,097,615)
<TOTAL-LIABILITY-AND-EQUITY> 1,314,691
<SALES> 5,470
<TOTAL-REVENUES> 5,470
<CGS> 2,461
<TOTAL-COSTS> 362,014
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 73,593
<INCOME-PRETAX> (430,137)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (430,137)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
