-----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, FhgW2v2u6U00F6Z3bcaUnKtJTzHyO2a6Zgj7ZM91cxQdfprpxF40pRS5br57UJEA L8EK0I6wuiu2Vomir3OrlQ== 0000823070-99-000004.txt : 19990114 0000823070-99-000004.hdr.sgml : 19990114 ACCESSION NUMBER: 0000823070-99-000004 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981130 FILED AS OF DATE: 19990113 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: SEC FILE NUMBER: 000-19945 FILM NUMBER: 99505323 BUSINESS ADDRESS: STREET 1: 21 INDUSTRIAL AVE CITY: UPPER SADDLE RIVER STATE: NJ ZIP: 07458 BUSINESS PHONE: 2018181616 10QSB 1 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, 1998 [ ] 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: 12,704,859 shares of Common Stock as of December 31, 1998. Transitional Small Business Disclosure Format (check one): YES NO X --- --- Page 1 NOFIRE TECHNOLOGIES, INC. FORM 10-QSB INDEX PART I - FINANCIAL INFORMATION PAGE Item 1. Unaudited Financial Statements: Balance Sheets as of November 30, 1998 and August 31, 1998 3 Statements of Operations for the Three Months ended November 30, 1998 and 1997 5 Statements of Cash Flows for the Three Months ended November 30, 1998 and 1997 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 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS NOFIRE TECHNOLOGIES, INC. (A Development Stage Company) BALANCE SHEETS November 30, August 31, 1998 1998 ----------- ---------- (UNAUDITED) ASSETS CURRENT ASSETS: Cash $ 74,370 $ 170,400 Inventory 79,736 70,602 Prepaid expenses and other current assets 17,957 12,251 --------- ---------- Total Current Assets 172,063 253,253 --------- ---------- EQUIPMENT, less accumulated depreciation 5,869 4,238 --------- ---------- OTHER ASSETS: Patents, less accumulated amortization of $975,000 at November 30, 1998 and $900,000 at August 31, 1998 525,000 600,000 Excess of reorganization value over net assets, less accumulated amortization of $137,164 at November 30, 1998 and $126,613 at August 31, 1998 73,858 84,409 Security deposits 19,836 19,836 ---------- --------- 618,694 704,245 ---------- --------- $ 796,626 $ 961,736 ========== ========== See accompanying notes to financial statements Page 3 NOFIRE TECHNOLOGIES, INC. (A Development Stage Company) BALANCE SHEETS November 30, August 31, 1998 1998 ----------- ---------- (UNAUDITED) LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) CURRENT LIABILITIES: Current portion of settled liabilities $1,370,953 $ 803,811 Accounts payable and accrued expenses 495,238 523,483 Loans, accrued interest and advances due to stockholders 58,212 65,314 Deferred salaries 580,221 542,526 8% convertible debentures 436,002 436,002 ---------- --------- 2,940,626 2,371,136 ---------- --------- SETTLED LIABILITIES, LESS CURRENT MATURITIES 43,685 658,363 ---------- --------- STOCKHOLDERS' EQUITY (DEFICIENCY): Common stock $.20 par value: Authorized - 25,000,000 shares Issued and outstanding - 12,484,859 shares at November 30, 1998 and 11,945,634 shares at August 31, 1998 2,496,972 2,389,127 Capital in excess of par value 468,231 297,595 Deficit accumulated in the development stage (5,152,888) (4,754,485) ---------- ---------- Total Stockholders' Equity (Deficiency) (2,187,685) (2,067,763) ---------- ---------- $ 796,626 $ 961,736 ========== ========== See accompanying notes to financial statements Page 4 NOFIRE TECHNOLOGIES, INC. (A Development Stage Company) STATEMENTS OF OPERATIONS
July 13, 1987 (Date of For the Three Months Inception) Ended November 30, through 1998 1997 November 30, 1998 ---------- --------- ---------- (UNAUDITED) NET SALES $ 7,160 $ 5,606 $ 446,801 ---------- ---------- ---------- COSTS AND EXPENSES: Cost of sales 3,222 2,562 263,787 Write-down of excess inventory - - 35,000 General and administrative 364,365 300,386 8,222,440 ---------- ---------- ---------- 367,587 302,948 8,521,227 ---------- ---------- ---------- LOSS FROM OPERATIONS (360,427) (297,342) (8,074,426) ---------- ---------- ---------- OTHER EXPENSES: Interest expense 38,668 66,443 820,945 Interest income (692) - (8,218) Reorganization items - - 365,426 Litigation settlement - - 198,996 ---------- ---------- ---------- 37,976 66,443 1,377,149 ---------- ---------- ---------- LOSS BEFORE DISCONTINUED OPERATIONS AND EXTRAORDINARY ITEM (398,403) (363,785) (9,451,575) DISCONTINUED OPERATIONS - - (1,435,392) ---------- ---------- ---------- LOSS BEFORE EXTRAORDINARY ITEM (398,403) (363,785) (10,886,967) EXTRAORDINARY ITEM - Gain on debt discharge - - 507,952 ---------- ---------- ---------- NET LOSS $ (398,403) $ (363,785) $(10,379,015) ========== ========== ========== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 12,142,107 9,742,200 ========== ========== EARNINGS (LOSS) PER SHARE, BASIC AND DILUTED $ (0.03) $ (0.04) ========== ==========
See accompanying notes to financial statements Page 5 NOFIRE TECHNOLOGIES, INC. (A Development Stage Company) STATEMENTS OF CASH FLOWS
July 13, 1987 (Date of For the Three Months Inception) Ended November 30, through 1998 1997 November 30, 1998 --------- --------- ---------- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (398,403) $ (363,309) $(10,379,015) Adjustments to reconcile net loss to net cash flows from operating activities: Depreciation and amortization 85,692 85,676 1,212,558 Extraordinary gain on debt discharge - - (507,952) Amortization of interest expense for settled liabilities 17,117 46,084 581,527 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 (9,134) 6,430 (114,736) Prepaid expenses (5,706) (1,942) (17,957) Accounts payable and accrued expenses (28,245) (7,330) 2,749,789 Security deposits - (500) (19,836) Deferred salaries 37,695 43,848 580,221 Obligation from discontinued operations - - 51,118 ---------- --------- ---------- Net cash flows from operating activities (300,984) (191,519) (5,015,653) ---------- --------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of equipment (1,773) - (30,634) Increase in patent costs - - (131,290) Acquisition accounted for as a reverse purchase - - (517,893) ----------- --------- ---------- Net cash flows from investing activities (1,773) - (679,817) ----------- --------- ----------
See accompanying notes to financial statements Page 6 NOFIRE TECHNOLOGIES, INC. (A Development Stage Company) STATEMENTS OF CASH FLOWS
July 13,1987 (Date of For the Three Months Inception) Ended November 30, through 1998 1997 November 30, 1998 --------- --------- ---------- (UNAUDITED) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable - - 721,000 Principal Payments on notes payable - - (75,000) Principal Payment of settled liabilities (46,171) (15,924) (2,595,214) Proceeds from issuance of common stock, net of related expenses 260,000 200,000 6,447,291 Proceeds from issuance of long-term debt - - 785,113 Net loans and advances from stockholders (7,102) 7,850 50,648 Proceeds from issuance of 8% convertible debentures - - 436,002 ---------- ---------- ---------- Net cash flows from financing activities 206,727 191,926 5,769,840 ---------- ---------- ---------- NET CHANGE IN CASH (96,030) 407 74,370 CASH AT BEGINNING OF PERIOD 170,400 505 - ---------- ---------- ---------- CASH AT END OF PERIOD $ 74,370 $ 912 $ 74,370 ========== ========== ========== SUPPLEMENTAL CASH FLOW INFORMATION Interest paid $ 9,524 $ 2,303 $ 61,592 ========== ========== ========== 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 ========== ========== ==========
See accompanying notes to financial statements Page 7 NOFIRE TECHNOLOGIES, INC. (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS (Unaudited) November 30, 1998 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, 1998 (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 NOFIRE TECHNOLOGIES, INC. (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS (Unaudited) November 30, 1998 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 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. 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 its reorganization under the Plan. Without the achievement of profitable operations or additional financing, funds for repayment would not be available. Page 9 NOFIRE TECHNOLOGIES, INC. (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS (Unaudited) November 30, 1998 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. An agreement for future infusion of capital is discussed in the Management's Discussion of Liquidity and Capital Resources section. NOTE 5 - Warrants: The Company has issued warrants for the purchase of common stock as follows: Shares Exercise Price -------- -------------- 1,300,000 $ .50 4,544,718 1.00 170,000 1.50 3,447,275 2.00 35,000 2.50 422,500 3.00 50,000 3.25 12,000 5.00 --------- 9,981,493 The warrants vest to the holders in various intervals ranging from issue date to three years from issuance. Page 10 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 five additional patents, one of which has led to the issuance of a patent. Continuing marketing efforts have brought the Company closer to achieving significant sales for applications in such diverse industries as high-speed ferries and naval ships, electric utilities, wood product building components, concrete and structural steel column protection, and automotive. In the nuclear power generating industry, an unrelated contractor has been awarded a contract to upgrade the fire protection of control wiring at a large U.S. nuclear power plant specifying the Company's product. The first purchase order, valued at $100,000, has been issued to the Company for shipment scheduled for the second quarter of the present fiscal year. Additional orders totaling about $550,000 for material required to complete the contract are expected through this fiscal year and into the first quarter of the next fiscal year. The Company also believes that contracts will be awarded by other nuclear power plants as well as other industries in this fiscal year. The greatest obstacles to obtaining these other contracts are the continuing tests and approvals required, competition against well established and better capitalized companies, and the slow process of specifying new products in highly regulated industrial applications. The Company's most pressing need is 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 NOVEMBER 30, 1998 AND NOVEMBER 30, 1997 Sales of $7,160 for the three months ended November 30, 1998 represented an increase of 28% from the $5,606 for the comparable three-month period of the prior year. Cost of goods sold during the same periods increased 26% from $2,562 to $3,222 resulting in a gross profit of $3,938 compared to $3,044 in the prior year. Selling, general and administrative expenses for the three months ended November 30, 1998 were $364,365, representing an increase of $63,979 or 21% from the $300,386 of the similar period of the prior year. Most categories of expense remained at constant levels. The most significant change was an increase in consulting fees of $64,500, $55,300 of which was for marketing consultants and $9,200 for financial consultants. Expense reductions were $12,100 in officers' salaries resulting from the retirement on November 30, 1997, of the former Vice President and Chief Financial Officer. The $27,775 reduction in interest expense is represented mainly by the smaller amortization of interest expense for settled Chapter 11 liabilities. Page 11 LIQUIDITY AND CAPITAL RESOURCES At November 30, 1998 the Company had cash balances of $74,370. In order to fund continuing operations during the three months ended on that date, $260,000 was obtained by the private sales of unregistered common stock with warrants to a group of accredited investors. These funds were obtained under an agreement dated October 26, 1998 whereby up to $480,000 would be invested in increments as required in exchange for 960,000 units consisting of one share of common stock and five-year warrants to purchase 2.5 shares at an exercise price of $.50 per share. Because of limited cash resources, the Company has deferred payment of $760,957 of the second, third and fourth installments of the Chapter 11 liability to unsecured creditors that were due prior to the balance sheet date. In order to meet those liabilities and meet 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 agreement noted above. Subsequent to November 30, 1998, an additional $110,000 was obtained under that agreement. The investment group has advised the Company that it filed all reports with the SEC that they deemed appropriate including Schedules 13D and Forms 3 and 4. 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 hat any such failure to convert by another company would not have an adverse effect on the Company's systems. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K No reports on Form 8-K were filed during the quarter ended November 30,1998. 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 13, 1999 NoFire Technologies, Inc. By: /s/ Sam Oolie Sam Oolie Chairman and Chief Executive Officer Page 12 EX-27 2
5 This schedule contains summary financial information extracted from the unaudited Balance Sheet as of November 30, 1998 and the unaudited Statement of Operaions for the three months then ended and is qualified in its entirety by reference to such financial statements. 3-MOS AUG-31-1999 NOV-30-1998 74,370 0 0 0 79,736 172,063 30,634 24,765 796,626 2,940,626 0 0 0 2,496,972 (4,684,657) 796,626 7,106 7,106 3,222 364,365 (692) 0 38,668 (398,403) 0 (398,403) 0 0 0 (398,403) (0.03) (0.03)
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