<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, 1999
[ ] 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: 14,035,974 shares of Common
Stock as of December 31, 1999.
Transitional Small Business Disclosure Format (check one):
YES NO X
--- ---
Page 1
<PAGE>
NOFIRE TECHNOLOGIES, INC.
FORM 10-QSB
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Unaudited Financial Statements:
Balance Sheets as of November 30, 1999
and August 31, 1999 3
Statements of Operations for the Three Months
ended November 30, 1999 and 1998 5
Statements of Cash Flows for the
Three Months ended November 30, 1999 and 1998 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 13
Signatures 13
Page 2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
November 30, August 31,
1999 1999
----------- ----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $ 112,674 $ 338,089
Inventory 106,852 91,003
Prepaid expenses and other current assets 12,579 43,397
--------- ----------
Total Current Assets 232,105 472,489
--------- ----------
EQUIPMENT, less accumulated depreciation 12,917 7,333
--------- ----------
OTHER ASSETS:
Patents, less accumulated amortization of
$1,276,995 at November 30, 1999 and
$1,201,596 at August 31, 1999 230,985 306,384
Excess of reorganization value over net
assets, less accumulated amortization
of $179,367 at November 30, 1999 and
$168,816 at August 31, 1999 31,654 42,205
Security deposits 19,836 19,836
---------- ---------
282,475 368,425
---------- ---------
$ 527,497 $ 848,247
========== ==========
See accompanying notes to financial statements
Page 3
<PAGE>
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
November 30, August 31,
1999 1999
----------- ----------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
CURRENT LIABILITIES:
Current portion of settled liabilities $1,307,515 $1,395,037
Accounts payable and accrued expenses 679,424 647,535
Loans, and advances payable to
stockholders 220,750 26,250
Deferred salaries 650,226 650,226
8% convertible debentures 436,002 436,002
---------- ---------
3,293,917 3,155,050
---------- ---------
SETTLED LIABILITIES, LESS CURRENT MATURITIES 18,136 23,912
---------- ---------
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock $.20 par value:
Authorized - 50,000,000 shares
Issued and outstanding - 14,035,974
shares at November 30, 1999 and
at August 31, 1999 2,807,195 2,807,195
Capital in excess of par value 1,158,217 1,158,217
Deficit accumulated in the development
stage (6,749,968) (6,296,127)
---------- ----------
Total Stockholders' Equity (Deficiency) (2,784,556) (2,330,715)
---------- ----------
$ 527,497 $ 848,247
========== ==========
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
1999 1998 November 30, 1999
---------- --------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
NET SALES $ 45,413 $ 7,160 $ 717,002
---------- ---------- ----------
COSTS AND EXPENSES:
Cost of sales 21,553 3,222 398,847
Write-down of excess inventory - - 35,000
General and administrative 447,644 364,365 9,773,420
---------- ---------- ----------
469,197 367,587 10,207,267
---------- ---------- ----------
LOSS FROM OPERATIONS (423,784) (360,427) (9,490,265)
---------- ---------- ----------
OTHER EXPENSES:
Interest expense 31,712 38,668 1,005,335
Interest income (1,655) (692) (11,367)
Reorganization items - - 365,426
Litigation settlement - - 198,996
---------- ---------- ----------
30,057 37,976 1,558,390
---------- ---------- ----------
LOSS BEFORE DISCONTINUED OPERATIONS
AND EXTRAORDINARY ITEM (453,841) (398,403) (11,048,655)
DISCONTINUED OPERATIONS - - (1,435,392)
---------- ---------- ----------
LOSS BEFORE EXTRAORDINARY ITEM (453,841) (398,403) (12,484,047)
EXTRAORDINARY ITEM - Gain on
debt discharge - - 507,952
---------- ---------- ----------
NET LOSS $ (453,841) $ (398,403) $(11,976,095)
========== ========== ==========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 14,035,974 12,142,107
========== ==========
EARNINGS (LOSS) PER SHARE, BASIC
AND DILUTED $ (0.03) $ (0.03)
========== ==========
</TABLE>
See accompanying notes to financial statements
Page 5
<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
1999 1998 November 30, 1999
--------- --------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (453,841) $ (398,403) $(11,976,095)
Adjustments to reconcile net loss to
net cash flows from operating activities:
Depreciation and amortization 86,366 85,692 1,557,860
Extraordinary gain on debt discharge - - (507,952)
Amortization of interest expense for
settled liabilities - 17,117 634,522
Revaluation of assets and liabilities
to fair value - - 482,934
Litigation settlement - - 198,996
Common stock issued in exchange for
services - - 131,700
Write-down of excess inventory - - 35,000
Changes in operating assets and liabilities
(net of effects from reverse purchase
acquisition)
Inventory (15,849) (9,134) (141,852)
Prepaid expenses 30,818 (5,706) (12,579)
Accounts payable and accrued
expenses 31,889 (28,245) 2,926,411
Security deposits - - (19,836)
Deferred salaries - 37,695 650,226
Obligation from discontinued
operations - - 51,118
---------- --------- ----------
Net cash flows from operating activities (320,617) (300,984) (5,989,547)
---------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (6,000) (1,773) (38,784)
Increase in patent costs - - (139,270)
Acquisition accounted for as a
reverse purchase - - (517,893)
----------- --------- ----------
Net cash flows from investing activities (6,000) (1,773) (695,947)
----------- --------- ----------
</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
1999 1998 November 30, 1999
--------- --------- ----------
(UNAUDITED) (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 (93,298) (46,171) (2,737,197)
Proceeds from issuance of common stock,
net of related expenses - 260,000 7,447,500
Proceeds from issuance of long-term debt - - 785,113
Net loans and advances from stockholders 194,500 (7,102) 220,750
Proceeds from issuance of 8% convertible
debentures - - 436,002
---------- ---------- ----------
Net cash flows from financing activities 101,202 206,727 6,798,168
---------- ---------- ----------
NET CHANGE IN CASH (225,415) (96,030) 112,674
CASH AT BEGINNING OF PERIOD 338,089 170,400 -
---------- ---------- ----------
CASH AT END OF PERIOD $ 112,674 $ 74,370 $ 112,674
========== ========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 1,370 $ 9,524 $ 63,744
========== ========== ==========
Income taxes paid $ - $ - $ -
========== ========== ==========
Common stock issued in exchange
for settlement of debt $ - $ 18,481 $ 271,810
========== ========== ==========
Common stock issued in exchange
for subscriptions receivable $ - $ - $ 95,000
========== ========== ==========
Common stock issued in exchange for
services $ - $ - $ 131,700
========== ========== ==========
</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, 1999
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, 1999 (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.
Effective August 6, 1991, PNF acquired 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. Both of those subsidiaries were
dissolved during the fiscal year ended August 31, 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. On April 7, 1995 the Bankruptcy Court
confirmed the Plan. The Plan provided for a fixed amount that would pay in
full over a four year period virtually all pre-petition claims known on the
confirmation date. With additional claims approved after that date
considered, the fixed amount covered 94% of final approved claims.
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. As of
that date, the Company adopted "fresh start reporting" and implemented the
effects of such adoption in its balance sheet as of August 31, 1995.
Page 8
<PAGE>
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
November 30, 1999
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 its reorganization under the
Plan. Without the achievement of profitable operations or additional
financing, funds for repayment would not be available.
Management believes that actions it has undertaken to revise the Company's
operating and marketing structure will provide it with the opportunity to
generate revenues needed to realize profitable operations and to attract the
necessary financing and/or capital for the payment of outstanding obligations.
Agreements for future infusion of capital are discussed in the Management's
Discussion of Liquidity and Capital Resources section.
Page 9
<PAGE>
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
November 30, 1999
NOTE 5 - Warrants:
The Company has issued warrants for the purchase of common stock as follows:
Shares Exercise Price
---------- --------------
2,400,000 $ .50
800,000 .5625
2,800,280 .75
4,544,718 1.00
52,000 1.25
978,500 1.50
3,459,275 2.00
35,000 2.50
1,222,500 3.00
50,000 3.25
12,000 5.00
----------
16,354,273
The warrants vest to the holders in various intervals ranging from issue date
to seven 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, and now
has several certifications for specific applications. Since August 1995, the
Company has applied for eight patents, two of which have been issued and two
others have been allowed so that patents will be issued shortly. The other
four are pending. Additionally, one patent has been purchased. The Company
is substantially increasing its marketing efforts by employing an experienced
marketing executive and retaining the services of specialized marketing firms.
Marketing efforts to date, have brought the Company closer to achieving
significant sales for applications in such diverse industries as high-speed
ferries, naval and commercial ships, wood product building components,
concrete and structural steel column protection, automotive, aircraft and
consumer products. In the high-speed ferry project, the Company's fire
protection system has passed stringent tests and was approved for use by
Transport of Canada. In the nuclear power generating industry, an unrelated
contractor has been awarded a contract to upgrade the fire protection of
electrical cables at a large U.S. nuclear power plant specifying the Company's
product. The first purchase orders, valued at $190,000, to provide materials
for that contract were shipped in the last fiscal year. The Company expects
to qualify its products and make aggressive marketing efforts to obtain orders
from the military and other governmental agencies. Obstacles encountered in
obtaining orders are the continuing tests and approvals required, competition
against well established and better capitalized companies, cost, and the slow
process of specifying new products in highly regulated industrial
applications. In general, the Company's products perform their intended uses
well and are beginning to be sold commercially in a form that is safe and easy
to use. The Company's most pressing need continues to be cash infusion as
discussed below in the section on Liquidity and Capital Resources. The
Company intends to continue its research and testing efforts to meet new
market opportunities. The number of manufacturing and quality control
employees will increase with increased production. The salaried
administrative and marketing staff will be evaluated and may be increased to
support sales and marketing initiatives. Additional sales and marketing
support is expected to be provided by commissioned independent agents.
COMPARISON THREE MONTHS ENDED NOVEMBER 30, 1999 AND NOVEMBER 30, 1998
Sales of $45,413 for the three months ended November 30, 1999 represented an
increase of 534% from the $7,160 for the comparable three-month period of
the prior year. Cost of goods sold during the same periods increased 569%
from $3,222 to $21,553 resulting in a gross profit of $23,860 compared to
$3,938 in the prior year. Selling, general and administrative expenses for
the three months ended November 30, 1999 were $447,644, representing an
increase of $83,279 or 23% from the $364,365 of the similar period of the
prior year. The most significant changes were increases in officers' salaries
of $70,000 and marketing efforts of $42,000. These were partially offset by a
reduction of $40,000 in professional fees. The $6,956 reduction in interest
expense is mainly the result of the elimination in the present year of the
amortization of interest expense for settled Chapter 11 liabilities.
Page 11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At November 30, 1999 the Company had cash balances of $112,674. In order to
fund continuing operations during the three months ended on that date,
$200,000 was obtained through a loan bearing interest at an 8% annual rate
from the group of accredited investors noted below. These funds are to be
applied to an agreement to invest a total of $1,100,000 in exchange for
1,641,791 units consisting of one share of common stock and five-year
warrants to purchase two and one-half shares at an exercise price of $.67
per share. Under this arrangement, funds will be invested from time to time
as required by the Company. In another agreement, at their option or when
certain sales criteria are met, that same investment group will invest an
additional $650,000 in exchange for 866,667 units consisting of one share of
common stock and five-year warrants for two and one-half shares at an exercise
price of $0.75 per share. The investment group has advised the Company that it
has and will continue to file all reports with the SEC that it deems
appropriate including Schedules 13D and Forms 3 and 4. Because of its limited
cash resources, the Company has deferred payment of $1,281,964 of the
installments of the Chapter 11 liability to unsecured creditors that were due
in September 1996, 1997, 1998 and 1999. Of that deferred amount, $790,686 is
due to officers and directors of the company. In order to meet its
liabilities and 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, issuance of common stock to settle debt, and the sale
of equity securities in a public or private offering such as sales under the
agreements noted above.
YEAR 2000 ISSUE
The Company has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the "Year 2000" issue. The
Year 2000 problem is the result of computer programs being written using two
digits rather than four to define the year. Any programs that have time-
sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in major system failure or
miscalculations. The Company presently believes that the Year 2000 problem
will not pose significant operational problems for the Company's computer
systems. However, there can be no assurance that the systems of other
companies on which the Company's systems rely also will be timely converted or
that any such failure to convert by another company would not have an adverse
effect on the Company's systems.
Page 12
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended November 30,1999.
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 6, 2000 NoFire Technologies, Inc.
By: /s/ Robert R. Isen
Robert R. Isen
Chief Executive Officer
By: /s/ Sam Oolie
Sam Oolie
Chairman of the Board,
Chief Operating Officer
and Treasurer
Page 13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited Balance Sheet as of November 30, 1999 and the unaudited Statement
of Operations for the nine 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-31-2000
<PERIOD-END> NOV-30-1999
<CASH> 112,674
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 106,852
<CURRENT-ASSETS> 232,105
<PP&E> 37,784
<DEPRECIATION> 25,867
<TOTAL-ASSETS> 527,497
<CURRENT-LIABILITIES> 3,293,917
<BONDS> 0
0
0
<COMMON> 2,807,195
<OTHER-SE> (5,591,751)
<TOTAL-LIABILITY-AND-EQUITY> 527,497
<SALES> 45,413
<TOTAL-REVENUES> 45,413
<CGS> 21,553
<TOTAL-COSTS> 447,644
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,057
<INCOME-PRETAX> (453,841)
<INCOME-TAX> 0
<INCOME-CONTINUING> (453,841)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (453,841)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
