<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 29, 2000
[ ] 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 (IRS 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: 16,595,151 shares of Common
Stock as of April 3, 2000.
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 February 29, 2000
and August 31, 1999 3
Statements of Operations for the Six Months
ended February 29/28, 2000 and 1999; and the
Three months ended February 29/28, 2000 and
1999 5
Statements of Cash Flows for the Six Months
ended February 29/28, 2000 and 1999 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
February 29, August 31,
2000 1999
----------- ----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $ 534,815 $ 338,089
Inventory 116,858 91,003
Prepaid expenses and other current assets 12,693 43,397
--------- ----------
Total Current Assets 664,366 472,489
--------- ----------
EQUIPMENT, less accumulated depreciation 14,363 7,333
--------- ----------
OTHER ASSETS:
Patents, less accumulated amortization of
$1,352,394 at February 29, 2000 and
$1,201,596 at August 31, 1999 155,586 306,384
Excess of reorganization value over net
assets, less accumulated amortization
of $189,918 at February 29, 2000 and
$168,816 at August 31, 1999 21,103 42,205
Security deposits 19,836 19,836
---------- ---------
196,525 368,425
---------- ---------
$ 875,254 $ 848,247
========== ==========
See accompanying notes to financial statements
Page 3
<PAGE>
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
February 29, August 31,
2000 1999
----------- ----------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
CURRENT LIABILITIES:
Current portion of settled liabilities $1,235,469 $1,395,037
Accounts payable and accrued expenses 610,023 647,535
Loans, and advances payable to
stockholders 10,250 26,250
Deferred salaries 650,226 650,226
8% convertible debentures - 436,002
---------- ---------
2,505,968 3,155,050
---------- ---------
SETTLED LIABILITIES, LESS CURRENT MATURITIES 12,227 23,912
---------- ---------
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock $.20 par value:
Authorized - 50,000,000 shares
Issued and outstanding - 16,595,151
shares at February 29, 2000 and
14,035,974 at August 31, 1999 3,319,030 2,807,195
Capital in excess of par value 2,319,748 1,158,217
Deficit accumulated in the development
stage (7,281,719) (6,296,127)
---------- ----------
Total Stockholders' Equity (Deficiency) (1,642,941) (2,330,715)
---------- ----------
$ 875,254 $ 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 Six Months For the Three Months Inception)
Ended February 29/28, Ended February 29/28, through
2000 1999 2000 1999 February 29, 2000
---------- ---------- ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET SALES $ 63,726 $ 115,900 $ 18,313 $ 108,740 $ 735,315
---------- ---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Cost of sales 31,388 47,300 9,835 44,078 408,682
Write-down of excess inventory - - - - 35,000
General and administrative 961,294 707,276 513,650 342,911 10,287,070
---------- ---------- ---------- ---------- ----------
992,682 754,576 523,485 386,989 10,730,752
---------- ---------- ---------- ---------- ----------
LOSS FROM OPERATIONS (928,956) (638,676) (505,172) (278,249) (9,995,437)
---------- ---------- ---------- ---------- ----------
OTHER EXPENSES:
Interest expense 58,441 91,216 26,729 52,548 1,032,064
Interest income (1,805) (706) (150) (14) (11,517)
Reorganization items - - - - 365,426
Litigation settlement - - - - 198,996
---------- ---------- ---------- ---------- ----------
56,636 90,510 26,579 52,534 1,584,969
---------- ---------- ---------- ---------- ----------
LOSS BEFORE DISCONTINUED OPERATIONS
AND EXTRAORDINARY ITEM (985,592) (729,186) (531,751) (330,783) (11,580,406)
DISCONTINUED OPERATIONS - - - - (1,435,392)
---------- ---------- ---------- ---------- ----------
LOSS BEFORE EXTRAORDINARY ITEM (985,592) (729,186) (531,751) (330,783) (13,015,798)
EXTRAORDINARY ITEM - Gain on
debt discharge - - - - 507,952
---------- ---------- ---------- ---------- ----------
NET LOSS $ (985,592) $ (729,186) $ (531,751) $ (330,783) $(12,507,846)
========== ========== ========== ========== ==========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 14,538,952 12,468,515 14,287,463 12,403,548
========== ========== ========== ==========
EARNINGS (LOSS) PER SHARE, BASIC
AND DILUTED $ (0.07) $ (0.06) $ (0.04) $ (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 Six Months Inception)
Ended February 29/28, through
2000 1999 February 29, 2000
--------- --------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (985,592) $ (729,186) $(12,507,846)
Adjustments to reconcile net loss to
net cash flows from operating activities:
Depreciation and amortization 172,798 171,385 1,644,292
Extraordinary gain on debt discharge - - (507,952)
Amortization of interest expense for
settled liabilities - 34,234 634,522
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 (25,855) (43,530) (151,858)
Prepaid expenses 30,704 (13,053) (12,693)
Accounts payable and accrued
expenses 99,852 13,129 2,994,374
Security deposits - - (19,836)
Deferred salaries - 70,005 650,226
Obligation from discontinued
operations - - 51,118
---------- --------- ----------
Net cash flows from operating activities (708,093) (497,016) (6,377,023)
---------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (7,928) (1,773) (40,712)
Increase in patent costs - - (139,270)
Acquisition accounted for as a
reverse purchase - - (517,893)
----------- --------- ----------
Net cash flows from investing activities (7,928) (1,773) (697,875)
----------- --------- ----------
</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 Six Months Inception)
Ended February 29/28, through
2000 1999 February 29, 2000
--------- --------- ----------
(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 (171,253) (100,994) (2,815,152)
Proceeds from issuance of common stock,
net of related expenses 1,100,000 498,481 8,547,500
Proceeds from issuance of long-term debt - - 785,113
Net loans and advances from stockholders (16,000) (6,619) 10,250
Issuance (repayment) of 8% convertible
debentures - 436,002
---------- ---------- ----------
Net cash flows from financing activities 912,747 390,868 7,609,713
---------- ---------- ----------
NET CHANGE IN CASH 196,726 (107,921) 534,815
CASH AT BEGINNING OF PERIOD 338,089 170,400 -
---------- ---------- ----------
CASH AT END OF PERIOD $ 534,815 $ 62,479 $ 534,815
========== ========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 27,485 $ 12,090 $ 89,859
========== ========== ==========
Income taxes paid $ - $ - $ -
========== ========== ==========
Common stock issued in exchange
for settlement of debt and
accrued interest $ 573,366 $ 18,481 $ 845,176
========== ========== ==========
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)
February 29, 2000
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)
February 29, 2000
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 obtaining additional financing.
The Company has a liability for settled claims payable to creditors 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 and improve its operating performance. 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)
February 29, 2000
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
4,104,480 .67
2,777,780 .72
22,500 .75
4,564,718 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
----------
20,478,753
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 naval and
commercial ships including high-speed ferries, wood product building
components, concrete and structural steel column protection and automotive.
The Company's principal product was recently listed on the U.S. Navy's
Qualified Products List (QPL). Aggressive marketing efforts have begun to
obtain orders for applications in the Navy and other military and governmental
agencies. 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 unaffiliated contractor
has been qualified to upgrade the fire protection of electrical cables at U.S.
nuclear power plants specifying the Company's product. The first purchase
orders, valued at $190,000, to provide materials for that application were
shipped in the last fiscal year. 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 SIX MONTHS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
Sales of $63,726 for the six months ended February 29, 2000 represented a
decrease of $52,174 from the $115,900 of the comparable six-month period of
the prior year. Cost of goods sold during the same periods were $31,388
compared to $47,300, resulting in a gross profit of $32,338 compared to
$68,600 in the prior year. General and administrative expenses for the six
months ended February 29, 2000 were $961,294 representing an increase of
$254,018 or 36% from the $707,276 of the similar period of the prior year.
The most significant increases were $129,100 in officers' salaries and $30,500
in testing expenses. These were partially offset by a reduction of $25,000 in
professional fees. The $32,775 reduction in interest expense is mainly the
result of the elimination in the later period of the amortization of interest
expense for settled Chapter 11 liabilities.
Page 11
<PAGE>
COMPARISON THREE MONTHS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
Sales of $18,313 for the three months ended February 29, 2000 represented a
decrease of $90,427 from the $108,740 for the comparable three-month period of
the prior year. The earlier year's sales included a shipment of $100,000 to a
contractor upgrading the fire protection of a U.S. nuclear power plant. Cost
of goods sold for the same periods decreased from $44,078 to $9,835, resulting
in a gross profit of $8,478 compared to $64,662 in the similar period of the
prior year. General and administrative expenses for the three months ended
February 29, 2000 were $513,650 representing an increase of $170,739 or 50%
from the $342,911 of the similar period of the prior year. The most
significant increases were $65,700 in officers' salaries and $25,000 in
testing expenses. These were partially offset by a reduction of $40,000 in
professional fees. The $25,819 reduction in interest expense is mainly the
result of the elimination in the later period of the amortization of interest
expense for settled Chapter 11 liabilities.
LIQUIDITY AND CAPITAL RESOURCES
At February 29, 2000 the Company had cash balances of $534,815. In order to
fund continuing operations during the six months ended on that date,
$1,100,000 was obtained by the sale of 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. This sale was to the group of accredited
investors noted below. 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 Schedule 13D and Forms 3 and 4. Because of the Company's limited
cash resources, it has deferred payment of $1,210,477 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. On January 31, 2000, the Company
exchanged 917,385 shares of its common stock for the conversion of $436,002 8%
debentures along with $137,364 of accrued interest on that debt. 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.
Page 12
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended February 29, 2000.
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 10, 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 February 29, 2000 and the unaudited Statement
of Operations for the six months then ended and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-2000
<PERIOD-END> FEB-29-2000
<CASH> 534,815
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 116,858
<CURRENT-ASSETS> 664,366
<PP&E> 40,712
<DEPRECIATION> 26,349
<TOTAL-ASSETS> 875,254
<CURRENT-LIABILITIES> 2,505,968
<BONDS> 0
0
0
<COMMON> 3,319,030
<OTHER-SE> (4,961,971)
<TOTAL-LIABILITY-AND-EQUITY> 875,525
<SALES> 63,726
<TOTAL-REVENUES> 63,726
<CGS> 31,388
<TOTAL-COSTS> 961,294
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 56,636
<INCOME-PRETAX> (985,592)
<INCOME-TAX> 0
<INCOME-CONTINUING> (985,592)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (985,592)
<EPS-BASIC> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
