<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, 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
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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: 9,898,800 shares of Common
Stock as of December 31, 1997.
Transitional Small Business Disclosure Format (check one):
YES NO X
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Page 1
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NOFIRE TECHNOLOGIES, INC.
FORM 10-QSB
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Unaudited Financial Statements:
Balance Sheets as of November 30, 1997
and August 31, 1997 3
Statements of Operations for the
Three Months ended November 30, 1997
and 1996 5
Statements of Cash Flows for the
Three Months ended November 30, 1997 and 1996 6
Notes to Unaudited 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
Page 2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
November 30, August 31,
1997 1997
----------- ----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $ 912 $ 505
Inventory 90,412 96,842
Prepaid expenses and other current assets 17,035 15,093
--------- ----------
Total Current Assets 108,359 112,440
--------- ----------
EQUIPMENT, less accumulated depreciation 3,624 3,749
--------- ----------
OTHER ASSETS:
Patents, less accumulated amortization of
$675,000 at November 30, 1997 and
$600,000 at August 31, 1997 825,000 900,000
Security deposits 18,973 18,473
Excess of reorganization value over net
assets, less accumulated amortization
of $94,959 at November 30,1997 and
$84,408 at August 31, 1997 116,062 126,613
---------- ---------
960,035 1,045,086
---------- ---------
$1,072,018 $1,161,275
========== ==========
See accompanying notes to financial statements
Page 3
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NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
November 30, August 31,
1997 1997
----------- ----------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
CURRENT LIABILITIES:
Current portion of settled liabilities $1,254,096 $ 839,357
Accounts payable and accrued expenses 430,958 438,287
Due to stockholders 78,850 71,000
Deferred salaries 434,826 390,978
---------- ---------
2,198,730 1,739,622
---------- ---------
OTHER LIABILITIES
Settled liabilities, less current
maturities 1,148,022 1,532,602
Convertible debentures - 8% due
January 31, 1999 436,002 436,002
---------- ----------
1,584,024 1,968,604
---------- ----------
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock $.20 par value:
Authorized - 25,000,000 shares
Issued and outstanding - 9,867,200
shares at November 30, 1997 and
9,667,200 shares at August 31, 1997 1,973,440 1,933,440
Capital deficiency (1,085,750) (1,245,748)
Retained earnings (deficit) (3,598,426) (3,234,643)
---------- ----------
Total Stockholders' Equity (Deficiency) (2,710,736) (2,546,951)
---------- ----------
$1,072,018 $1,161,275
========== ==========
See accompanying notes to financial statements
Page 4
<PAGE>
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
July 13, 1987
(Date of
For the Three Months Inception)
Ended November 30, through
1997 1996 November 30, 1997
--------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C>
NET SALES $ 5,606 $ 22,113 $ 405,573
COSTS AND EXPENSES:
Cost of sales 2,562 10,440 245,274
Selling, general and administrative 300,386 371,473 6,809,422
--------- --------- ----------
302,948 381,913 7,054,696
--------- --------- ----------
LOSS FROM OPERATIONS (297,342) (359,800) (6,649,123)
--------- --------- ----------
OTHER EXPENSES:
Interest expense 66,443 69,970 631,975
Interest income - - (6,774)
Reorganization items - - 365,426
Litigation settlement - - 198,996
--------- --------- ----------
66,443 69,970 1,189,623
--------- --------- ----------
LOSS BEFORE DISCONTINUED OPERATIONS
AND EXTRAORDINARY ITEM (363,785) (429,770) (7,838,746)
DISCONTINUED OPERATIONS - - (1,435,392)
--------- --------- ----------
LOSS BEFORE EXTRAORDINARY ITEM (363,785) (429,770) (9,274,138)
EXTRAORDINARY ITEM - Gain on
debt discharge - - 449,583
--------- --------- ----------
NET LOSS $(363,785) $(429,770) $(8,824,555)
========= ========= ==========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 9,742,200 8,747,000
========= =========
EARNINGS (LOSS) PER SHARE $ (0.04) $ (0.05)
========= =========
</TABLE>
See accompanying notes to financial statements
Page 5
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NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
July 13, 1987
(Date of
For the Three Months Inception)
Ended November 30, through
1997 1996 November 30, 1997
--------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(363,785) $(429,770) $(8,824,555)
Adjustments to reconcile net loss to
net cash flows from operating activities:
Depreciation and amortization 85,676 86,439 869,767
Extraordinary gain on debt discharge - - (449,583)
Interest expense incurred to state settled
liabilities at present value 46,084 57,921 486,023
Revaluation of assets and liabilities
to fair value - - 482,934
Litigation settlement - - 198,996
Common stock issued in exchange for
services - 26,787 62,500
Changes in operating assets and liabilities
(net of effects from reverse purchase
acquisition)
Inventory 6,430 (6,351) (90,412)
Prepaid expenses (1,942) 897 (17,035)
Accounts payable and accrued
expenses (7,330) 59,900 2,677,944
Security deposits (500) - (18,973)
Deferred salaries 43,848 43,848 434,826
Obligation from discontinued
operations - - 51,118
---------- --------- ----------
Net cash flows from operating activities (191,519) (160,329) (4,136,450)
---------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment - (1,483) (27,801)
Increase in patent costs - - (131,290)
Acquisition accounted for as a
reverse purchase - - (517,893)
----------- --------- ----------
Net cash flows from investing activities - (1,483) (676,984)
----------- --------- ----------
</TABLE>
See accompanying notes to financial statements
Page 6
<PAGE>
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
July 13, 1987
(Date of
For the Three Months Inception)
Ended November 30, through
1997 1996 November 30, 1997
--------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable - - 721,000
Principal Payments on notes payable - - (75,000)
Principal Payment of settled liabilities (15,924) (240,625) (1,795,659)
Proceeds from issuance of common stock 200,000 405,000 4,569,040
Collection of stock subscription receivable - - 95,000
Proceeds from issuance of long-term debt - - 785,113
Net Advances from stockholders 7,850 (4,000) 78,850
Proceeds from issuance of 8% convertible
debentures - - 436,002
---------- ---------- ----------
Net cash flows from financing activities 191,926 160,375 4,814,346
---------- ---------- ----------
NET CHANGE IN CASH 407 (1,437) 912
CASH AT BEGINNING OF PERIOD 505 2,474 -
---------- ---------- ----------
CASH AT END OF PERIOD $ 912 $ 1,037 $ 912
========== ========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 2,303 $ 2,809 $ 45,981
========== ========== ==========
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 $ - $ - $ 62,500
========== ========== ==========
</TABLE>
See accompanying notes to financial statements
Page 7
<PAGE>
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
November 30, 1997
NOTE 1 - Basis of Presentation:
The balance sheet at the end of the preceding fiscal year has been
derived from the audited balance sheet contained in the Company's Form
10-KSB for the year ended August 31, 1997 (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. Both of those subsidiaries were dissolved
during the fiscal year ended August 31,1997.
Page 8
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NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
November 30, 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.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
November 30, 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
2,736,700 2.00
35,000 2.50
260,000 3.00
50,000 3.25
12,000 5.00
---------
4,083,700
The warrants will vest to the holders in various intervals ranging
from issue date to three years from issuance.
Page 10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company continued its product development and application testing.
It now has several certifications for specific applications and has filed
for four additional patents. Continuing marketing efforts have brought the
Company closer to achieving significant sales for applications in such
diverse industries as nuclear power generation plants, high-speed ferries,
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, competition against well
established and better capitalized companies, and the slow process of
specifying a new product in a highly regulated application. The Company's
most pressing need is a cash infusion as discussed below in the section on
Liquidity and Capital Resources. The Company's products perform their
intended uses well and have been developed to the stage where they can be
sold commercially in a form that is safe and easy to use. 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, 1997 AND NOVEMBER 30, 1996
The Company remained a development stage company. Sales of $5,606 for
the three months ended November 30, 1997 represented a decrease of 75%
from the $22,113 for the comparable three-month period of the prior
year. Cost of goods sold during the same periods decreased 76% from
$10,440 to $2,562 resulting in a gross profit of $3,044 compared to
$11,673 in the prior year. Selling, general and administrative expenses
for the three months ended November 30, 1997 were $300,386 representing
a decrease of $71,087 or 19% from the $371,473 of the similar period of
the prior year. Almost all categories of expense remained at constant
levels or were reduced. The most significant change was a reduction of
$57,500 in professional fees.
LIQUIDITY AND CAPITAL RESOURCES
At November 30, 1997 the Company had cash balances of $912. In order
to fund continuing operations during the quarter ended on that date,
$200,000 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 $245,685 of the second
installment of the Chapter 11 liability to unsecured creditors that was
due in late September 1996, and $559,362 due in late September 1997. In
order to meet those liabilities and meet working capital needs until
significant sales levels are achieved, the Company will continue to
Page 11
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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. Through
December 31, 1997, an additional $25,000 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 November 30,
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: January 9, 1998 NoFire Technologies, Inc.
By: /s/ Sam Oolie
Sam Oolie
Chairman and Chief
Executive 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, 1997 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-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> NOV-30-1997
<CASH> 912
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 90,412
<CURRENT-ASSETS> 108,359
<PP&E> 27,802
<DEPRECIATION> 24,178
<TOTAL-ASSETS> 1,072,018
<CURRENT-LIABILITIES> 2,198,730
<BONDS> 436,002
0
0
<COMMON> 1,973,440
<OTHER-SE> (4,684,176)
<TOTAL-LIABILITY-AND-EQUITY> 1,072,018
<SALES> 5,606
<TOTAL-REVENUES> 5,606
<CGS> 2,562
<TOTAL-COSTS> 300,386
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 66,443
<INCOME-PRETAX> (363,785)
<INCOME-TAX> 0
<INCOME-CONTINUING> (363,785)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (363,785)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
