<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 November 30, 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
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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: 9,104,500 shares of Common
Stock as of December 31, 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
November 30, 1996 and August 31, 1996 3
Consolidated Statements of Operations for
the Three Months ended November 30, 1996
and 1995 5
Consolidated Statements of Cash Flows for the
Three Months ended November 30, 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 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
November 30, August 31,
1996 1996
------------ ----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $ 1,037 $ 2,474
Inventory 63,112 56,761
Prepaid expenses and other current assets 6,825 7,722
--------- ----------
Total Current Assets 70,974 66,957
--------- ----------
EQUIPMENT, less accumulated depreciation 6,836 6,240
--------- ----------
OTHER ASSETS:
Patents, less accumulated amortization of
$375,000 at November 30, 1996 and
$300,000 at August 31, 1996 1,125,000 1,200,000
Security deposits 18,473 18,473
Excess of reorganization value over net
assets, less accumulated amortization
of $52,755 at November 30,1996 and
$42,204 at August 31, 1996 158,266 168,817
---------- ---------
1,301,739 1,387,290
---------- ---------
$1,379,549 $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
November 30, August 31,
1996 1996
----------- ----------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
CURRENT LIABILITIES:
Current portion of settled liabilities $ 751,878 $ 592,853
Accounts payable and accrued expenses 383,672 323,773
Due to stockholders 72,253 76,253
Deferred salaries 244,818 200,970
Other current liabilities 20,000 20,000
---------- --------
1,472,621 1,213,849
---------- ---------
OTHER LIABILITIES
Settled liabilities, less current
maturities 1,553,360 1,895,089
Convertible debentures - 8% due
January 31, 1999 436,002 436,002
---------- ----------
1,989,362 2,331,091
---------- ----------
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock $.20 par value:
Authorized - 25,000,000 shares
Issued and outstanding - 8,954,500
shares at November 30, 1996 and
8,549,500 shares at August 31, 1996 1,790,900 1,709,900
Capital deficiency (1,790,909) (2,114,908)
Retained earnings (deficit) (2,064,569) (1,634,802)
Unearned stock compensation (17,856) (44,643)
---------- ----------
Total Stockholders' Equity (Deficiency) (2,082,434) (2,084,453)
---------- ----------
$1,379,549 $1,460,487
========== ==========
See accompanying notes to consolidated financial statements
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NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES
(Development Stage Companies)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
During
For the Three Months Development
Ended November 30, Stage
1996 1995 (Since Inception)
--------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C>
NET SALES $ 22,113 $ 4,290 $ 380,038
COSTS AND EXPENSES:
Cost of sales 10,440 2,729 234,194
Selling, general and administrative 371,473 398,831 5,562,192
--------- --------- ---------
381,913 401,560 5,796,386
--------- --------- ---------
LOSS FROM OPERATIONS (359,800) (397,270) (5,416,348)
--------- --------- ---------
OTHER EXPENSES:
Interest expense 69,970 58,843 330,894
Interest income - - (6,774)
Reorganization items - - 365,426
Litigation settlement - - 198,996
--------- --------- ----------
69,970 58,843 888,542
--------- --------- ----------
LOSS BEFORE DISCONTINUED OPERATIONS
AND EXTRAORDINARY ITEM (429,770) (456,113) (6,304,890)
DISCONTINUED OPERATIONS - - (1,435,392)
--------- --------- ----------
LOSS BEFORE EXTRAORDINARY ITEM (429,770) (456,113) (7,740,282)
EXTRAORDINARY ITEM - Gain on
debt discharge - - 449,583
--------- --------- -----------
NET LOSS $(429,770) $(456,113) $(7,290,699)
========= ========= ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 8,747,000 8,187,000
========= =========
EARNINGS (LOSS) PER SHARE $ (0.05) $ (0.06)
========= =========
</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>
Cumulative
During
For the Three Months Development
Ended November 30, Stage
1996 1995 (Since Inception)
--------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(429,770) $(456,113) $(7,290,699)
Adjustments to reconcile net loss to
net cash flows from operating activities:
Depreciation and amortization 86,439 86,301 524,803
Extraordinary gain on debt discharge - - (449,583)
Interest expense incurred to state settled
liabilities at present value 57,921 55,659 266,179
Revaluation of assets and liabilities
to fair value - - 482,934
Litigation settlement - - 198,996
Common stock released in exchange for
services 26,787 - 44,644
Changes in operating assets and liabilities
(net of effects from reversed purchase
acquisition)
Inventory (6,351) (6,065) (63,112)
Prepaid expenses 897 10,822 (6,825)
Accounts payable and accrued
expenses 59,900 (71,493) 2,650,660
Security deposits - (3,204) (18,473)
Deferred salaries 43,848 43,848 244,818
Obligation from discontinued
operations - - 51,118
---------- --------- ---------
Net cash flows from operating activities (160,329) (340,245) (3,364,540)
---------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (1,483) - (28,252)
Increase in patent costs - - (131,290)
Acquisition accounted for as a
reverse purchase - - (517,893)
---------- ---------- ----------
Net cash flows from investing activities (1,483) - (677,435)
---------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements
Page 6
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NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES
(Development Stage Companies)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
During
For the Three Months Development
Ended November 30, Stage
1996 1995 (Since Inception)
---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of notes payable - - 721,000
Payments on notes payable - - (75,000)
Payment of settled liabilities (240,625) 1,105,035) (1,672,696)
Proceeds from issuance of common stock 405,000 - 3,681,340
Collection of stock subscription receivable - 95,000 95,000
Proceeds from issuance of long-term debt - - 785,113
Advances received from stockholders (4,000) 50,000 72,253
Proceeds from issuance of 8% convertible
debentures - - 436,002
---------- ---------- ----------
Net cash flows from financing activities 160,375 (960,035) 4,043,012
---------- ---------- ----------
NET CHANGE IN CASH (1,437) (1,300,280) 1,037
CASH AT BEGINNING OF PERIOD 2,474 1,496,442 -
---------- ---------- ----------
CASH AT END OF PERIOD $ 1,037 $ 196,162 $ 1,037
========== ========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 2,809 $ 21,111 $ 35,640
========== ========== ==========
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 $ 26,787 $ - $ 44,644
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
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NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES
(Development Stage Companies)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
November 30, 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, 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 issuable 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.
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NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES
(Development Stage Companies)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
November 30, 1996
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.
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NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES
(Development Stage Companies)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
November 30, 1996
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
802,500 2.00
35,000 2.50
50,000 3.00
50,000 3.25
12,000 5.00
---------
1,939,500
The warrants will vest to the holders in various intervals ranging
from issue date to three years from issuance.
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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 has 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 in this fiscal 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 THREE MONTHS ENDED NOVEMBER 30, 1996 AND NOVEMBER 30, 1995
The Company remained a development stage company. Sales of $22,113 for
the three months ended November 30, 1996 represented an increase of 416%
from the $4,290 for the comparable three-month period of the prior year.
Cost of goods sold during the same periods increased 283% from $2,729 to
$10,440 resulting in a gross profit of $11,673 compared to $1,561 in the
prior year. Selling, general and administrative expenses for the three-
months ended November 30, 1996 were $371,473 representing a decrease of
$27,358 or 7% from the $398,831 of the similar period of the prior year.
The difference is generally represented by modest excess expenses in the
earlier period to bring the operating company out of the bankruptcy
trusteeship. Interest expense of $69,970 in the current period was an
increase of $11,127 or 19% from the $58,843 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 November 30, 1996 the Company had cash balances of $1,037. In order
to fund continuing operations during the quarter ended on that date,
$405,000 was obtained by the private sales of unregistered common stock
with warrants to several qualified investors. Because of limited cash
resources, the Company has deferred payment of $334,594 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
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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. Through December 31, 1996, an additional
$150,000 was obtained in private sales of unregistered common stock with
warrants to qualified investors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended November 30,
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: January 7, 1997 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)
Page 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited Balance Sheet as of November 30, 1996 and the unaudited Statement of
Operations for the three months then ended and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> NOV-30-1996
<CASH> 1,037
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 63,112
<CURRENT-ASSETS> 70,974
<PP&E> 6,836
<DEPRECIATION> 21,417
<TOTAL-ASSETS> 1,379,549
<CURRENT-LIABILITIES> 1,472,621
<BONDS> 436,002
0
0
<COMMON> 1,790,900
<OTHER-SE> (3,873,334)
<TOTAL-LIABILITY-AND-EQUITY> 1,379,549
<SALES> 22,113
<TOTAL-REVENUES> 22,113
<CGS> 10,440
<TOTAL-COSTS> 381,913
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69,970
<INCOME-PRETAX> (429,770)
<INCOME-TAX> 0
<INCOME-CONTINUING> (429,770)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (429,770)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
