-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Imo1C4uVI321CMtnM/E5bAOd0AVfF/2csRWp4KPNekosKwWMemjNnqywJN9MO04o A84p9b5jQirWCQDqcae7Sg== 0000823070-96-000006.txt : 19960715 0000823070-96-000006.hdr.sgml : 19960715 ACCESSION NUMBER: 0000823070-96-000006 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960531 FILED AS OF DATE: 19960712 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NOFIRE TECHNOLOGIES INC CENTRAL INDEX KEY: 0000823070 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 133421355 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-19945 FILM NUMBER: 96594110 BUSINESS ADDRESS: STREET 1: 21 INDUSTRIAL AVE CITY: UPPER SADDLE RIVER STATE: NJ ZIP: 07458 BUSINESS PHONE: 2018181616 10QSB 1 1 of 13 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 May 31, 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 State the number of shares of each of the issuer's classes of common equity outstanding at the latest practicable date: 8,288,782 shares of Common Stock as of July 1, 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 May 31, 1996 and August 31, 1995 3 Consolidated Statements of Operations for the Nine Months ended May 31, 1996 and 1995; and the Three Months Ended May 31, 1996 and 1995 5 Consolidated Statements of Cash Flows for the Nine Months ended May 31, 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 13 Signatures 13 Part I - Financial Information Item 1. Financial Statements NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES (Development Stage Companies) CONSOLIDATED BALANCE SHEETS May 31, August 31, 1996 1995 (UNAUDITED) ASSETS CURRENT ASSETS: Cash $ $ 12,506 103,288 Cash, restricted 0 1,393,154 Accounts receivable 1,035 -- Inventory 49,165 29,276 Prepaid expenses 14,319 16,600 Total Current Assets 77,025 1,542,318 EQUIPMENT, less accumulated 7,044 5,975 depreciation OTHER ASSETS: Patents, less accumulated amortization of 1,275,000 1,500,000 $225,000 at May 31, 1996 Excess of reorganization value over net assets, less accumulated amortization 179,368 211,021 of $31,653 at May 31, 1996 Security deposits 27,473 18,759 1,481,841 1,729,780 $ $ 1,565,910 3,278,073 See accompanying notes to consolidated financial statements NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES (Development Stage Companies) CONSOLIDATED BALANCE SHEETS May 31, August 31, 1996 1995 (UNAUDITED) LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) CURRENT LIABILITIES: Current portion of settled $ $ liabilities 592,250 1,254,630 Accrued expenses 498,289 709,826 Estimated provision for unsettled 49,000 50,000 liabilities Due to officers 175,000 10,000 1,314,539 2,024,456 LONG TERM LIABILITIES: Settled liabilities, less current 1,860,560 2,116,125 maturities Convertible debentures - 8% due 436,002 -- January 31, 1999 2,296,562 2,116,125 Total Liabilities 3,611,101 4,140,581 STOCKHOLDERS' EQUITY (DEFICIENCY): Common stock $.20 par value: Authorized - 25,000,000 shares Issued and outstanding - 1,637,756 1,637,400 8,188,782 shares Capital deficiency (2,405,265) (2,404,908) Retained earnings (deficit) (1,277,682) -- Stock subscription receivable -- (95,000) Total Stockholders' Equity (2,045,191) (862,508) (Deficiency) $ $ 1,565,910 3,278,073 See accompanying notes to consolidated financial statements NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES (Development Stage Companies) CONSOLIDATED STATEMENTS OF OPERATIONS Cumulative During For the Nine For the Three Developmen Months Months t Stage Ended May 31 Ended May 31 1996 1995 1996 1995 (Since Inception) (UNAUDITED) (UNAUDITED) NET SALES $ $ $ $ $ 35,274 39,194 6,054 612 335,294 COSTS AND EXPENSES: Cost of sales 21,650 23,619 3,694 2,771 216,297 Selling, general and 1,106,91 454,775 368,058 138,894 4,867,78 administrative 2 3 1,128,56 478,394 371,752 141,665 5,084,08 2 0 LOSS FROM OPERATIONS (1,093,2 (439,200 (365,698 (141,053 (4,748,7 88) ) ) ) 86) OTHER EXPENSES: Interest expense 184,394 -- 65,756 -- 204,792 Reorganization items -- -- -- -- 365,426 Litigation -- -- -- -- 198,996 settlement 184,394 -- 65,756 -- 769,214 LOSS BEFORE DISCONTINUED OPERATIONS AND EXTRAORDINARY ITEM (1,277,6 (439,200 (431,454 (141,053 (5,518,0 82) ) ) ) 00) DISCONTINUED OPERATIONS -- -- -- -- (1,435,3 92) LOSS BEFORE EXTRAORDINARY (1,277,6 (439,200 (431,454 (141,053 (6,953,3 ITEM 82) ) ) ) 92) EXTRAORDINARY ITEM - Gain on -- -- -- -- 449,583 debt discharge NET LOSS $ $ $ $ $ (1,277,6 (439,200 (431,454 (141,053 (6,503,8 82) ) ) ) 09) WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 8,188,78 3,466,39 8,188,78 3,466,39 2 5 2 5 EARNINGS (LOSS) PER SHARE $ $ $ $ (0.16) (0.13) (0.05) (0.04) See accompanying notes to consolidated financial statements NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES (Development Stage Companies) CONSOLIDATED STATEMENTS OF CASH FLOWS Cumulativ e During For the Nine Months Developme Ended May 31 nt Stage 1996 1995 (Since Inception ) (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ $ $ (1,277,682 (439,200 (6,503,80 ) ) 9) Adjustments to reconcile net loss to net cash flows from operating activities: Depreciation and amortization 259,068 15,759 352,009 Extraordinary gain on debt -- -- (449,583) discharge Revaluation of assets and liabilities -- -- 482,934 to fair value Litigation settlement -- -- 198,996 (Increases) decreases in assets and (decreases) increases in liabilities: (net of effects from reverse purchase acquisition) Accounts receivable (1,035) -- (1,035) Inventory (19,889) (13,900) (49,165) Prepaid expenses 2,280 -- (14,320) Accrued expenses 15,385 26,627 3,032,198 Income taxes payable -- 1,080 -- Security deposits (8,714) (3,401) (27,473) Obligation from discontinued -- -- 51,118 operations Net cash flows from operating (1,030,587 (413,035 (2,928,13 activities ) ) 0) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of equipment (3,485) -- (26,770) Increase in patent costs -- (4,093) (131,290) Acquisition accounted for as a reverse purchase -- -- (517,893) Net cash flows from investing (3,485) (4,093) (675,953) activities See accompanying notes to consolidated financial statements NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES (Development Stage Companies) CONSOLIDATED STATEMENTS OF CASH FLOWS Cumulativ e During For the Nine Months Developme Ended May 31 nt Stage 1996 1995 (Since Inception ) (UNAUDITED) CASH FLOWS FROM FINANCING ACTIVITIES: Receipt of payment on stock subscriptions 95,000 -- 3,071,340 receivable Proceeds from issuance of long- 436,002 -- 1,221,115 term debt Proceeds of notes payable and 165,000 418,613 886,000 officer advances Payment of settled liabilities (1,145,866 -- (1,486,86 ) 6) Payments on notes payable -- -- (75,000) Net cash flows from financing (449,864) 418,613 3,616,589 activities NET CHANGE IN CASH (1,483,936 1,485 12,506 ) CASH AT BEGINNING OF PERIOD 1,496,442 1,230 -- CASH AT END OF PERIOD $ $ $ 12,506 2,715 12,506 SUPPLEMENTAL CASH FLOW INFORMATION Interest paid $ $ - $ 27,938 - 48,336 Income taxes paid $ - $ - $ - - - - Common stock issued in exchange for $ - $ - $ settlement of debt - - 46,750 Common stock issued in exchange for subscriptions receivable $ - $ -- $ - 1,279,059 See accompanying notes to consolidated financial statements NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES (Development Stage Companies) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) MAY 31, 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, 1995 (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 the 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. NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES (Development Stage Companies) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) MAY 31, 1996 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. On Agust 31,1994, involuntary petitions for relief under Chapter 11of 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. NOFIRE TECHNOLOGIES, INC. AND SUBSIDIARIES (Development Stage Companies) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) MAY 31, 1996 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 payment would not be available. Management believes that actions currently being undertaken to revise the Company's operations and marketing efforts 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: Exercise Shares Price 590,00 $ 0 1.00 5,000 2.00 35,000 2.50 50,000 3.25 24,000 5.00 704,00 0 Warrants for an additional 400,000 shares at an exercise price of $1.00 were authorized on August 16, 1995 but have not yet been issued. The warrants, including those not yet issued, will vest to the holders in various intervals ranging from issue date to three years from issuance. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations General The Company continued its product improvement and testing. It believes that it has developed products of sufficient distinctiveness to enable it to apply for three additional patents during the current fiscal year. In addition, the Company accelerated its marketing efforts to develop new applications and attract new customers. Although sales during the first nine months were nominal, the Company believes it will start to obtain more substantial commercial sales in the fourth quarter of the current fiscal year. The Company's most pressing need is a cash infusion to fund current operating expenses as discussed below in the section on Liquidity and Capital Resources. The Company's product line is now at 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 to develop new related products and applications as market opportunities dictate. The number of manufacturing employees will increase with increased production. The salaried administrative and marketing staff is anticipated to remain constant. Additional sales and marketing efforts will be provided by commissioned independent contractors. Comparison Nine Months Ended May 31, 1996 and May 31, 1995 The Company remained a development stage company. Sales of $35,274 for the nine months ended May 31, 1996 represented a decline of 10% from the $39,194 sales for the comparable nine- month period of the prior year. Cost of goods sold during the same periods decreased 8%, from $23,619 to $21,650. Selling, general and administrative expenses for the nine-months ended May 31, 1996 were $1,106,912, a 143% increase over the $454,775 from the similar period in the prior year. In the earlier period, the bankruptcy trustee limited expenditures to survival levels: there was no building for the future. In the current period, the new management continued expenditures aimed at putting the reorganized company into a position to seek sales opportunities through aggressive testing and marketing efforts and to have an organization in place to properly administer a larger publicly traded company. Additionally, accounting rules related to the recent bankruptcy mandated that the reorganization values for patents and excess of reorganization value over net assets be amortized over a five-year period, resulting in a charge of $256,653 which is included in selling, general and administrative expenses for the current period. Those rules also required that future annual payments of Chapter 11 claims be stated at their net present value. The increase in that present value as the due date gets closer is offset by a charge to interest expense. Such charge in the current period is $164,504. Comparison Three Months Ended May 31 1996 and May 31, 1995 Sales of $6,054 for the quarter ended May 31, 1996 represented an 889% increase from the $612 of the similar quarter of the prior year. Cost of goods sold increased 33%, from $2,771 to $3,694 resulting in a Gross Profit of $2,360, as compared to a loss of $2,159 in the prior year. Selling, general and administrative expenses in the quarter ended May 31, 1996 totaled $368,058, an increase of $229,164 or 165% from the $138,894 of the earlier quarter. Comments relative to the changes are similar to those above for the nine months ended May 31. In 1996 the amortization of patents and excess reorganization were $85,551, and the interest cost related to the value of Chapter 11 claims was $54,834. Liquidity and Capital Resources At May 31, 1996 the Company had cash balances of $12,506. During the second and third quarters of the current fiscal year, the Company made a private placement of 8% debentures convertible into shares of common stock at a price of $1.00 per share. Interest accrues until the earlier of conversion or maturity on January 31, 1999. Through May 31, 1996, $436,002 of principal amount had been issued. The Company will need additional cash infusion to fund its operating costs until it is self-sustaining and to pay the next installment of obligations to Chapter 11 claimants at the end of the current fiscal year. Alternate sources of funding are being considered to meet these requirements including exercise of warrants, bank and other borrowings, issuance of convertible debentures and the sale of equity securities in a public or private offering. Part II - Other Information Item 6. Exhibits and Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended May 31, 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: July 12, 1996 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) -----END PRIVACY-ENHANCED MESSAGE-----