-----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, RNdX2X7EhHrFLpGvRVPX7Yd8cI1DMuFbHf0SgFLtSeBbIY05jjlNHFkIqN6TSPPG hnoB0dXszDcJXVuW+AG7HA== 0000823070-99-000008.txt : 19990406 0000823070-99-000008.hdr.sgml : 19990406 ACCESSION NUMBER: 0000823070-99-000008 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990228 FILED AS OF DATE: 19990405 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NOFIRE TECHNOLOGIES INC CENTRAL INDEX KEY: 0000823070 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS CHEMICAL PRODUCTS [2890] 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: 99587622 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 February 28, 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: 13,105,415 shares of Common Stock as of March 31, 1999. 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 February 28, 1999 and August 31, 1998 3 Statements of Operations for the Six Months ended February 28, 1999 and 1998; and the Three Months ended February 28, 1999 and 1998 5 Statements of Cash Flows for the Six Months ended February 28, 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 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS NOFIRE TECHNOLOGIES, INC. (A Development Stage Company) BALANCE SHEETS February 28, August 31, 1999 1998 ----------- ---------- (UNAUDITED) ASSETS CURRENT ASSETS: Cash $ 62,479 $ 170,400 Inventories 114,132 70,602 Prepaid expenses and other current assets 25,304 12,251 --------- ---------- Total Current Assets 201,915 253,253 --------- ---------- EQUIPMENT, less accumulated depreciation 5,727 4,238 --------- ---------- OTHER ASSETS: Patents, less accumulated amortization of $1,050,000 at February 28, 1999 and $900,000 at August 31, 1998 450,000 600,000 Excess of reorganization value over net assets, less accumulated amortization of $147,714 at February 28, 1999 and $126,613 at August 31, 1998 63,307 84,409 Security deposits 19,836 19,836 ---------- --------- 533,143 704,245 ---------- --------- $ 740,785 $ 961,736 ========== ========== See accompanying notes to financial statements Page 3 NOFIRE TECHNOLOGIES, INC. (A Development Stage Company) BALANCE SHEETS February 28, August 31, 1999 1998 ----------- ---------- (UNAUDITED) LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) CURRENT LIABILITIES: Current portion of settled liabilities $1,353,893 $ 803,811 Accounts payable and accrued expenses 544,175 531,047 Loans and advances payable to stockholders 51,131 57,750 Deferred salaries 612,531 542,526 8% convertible debentures 436,002 436,002 ---------- --------- 2,997,732 2,371,136 ---------- --------- SETTLED LIABILITIES, LESS CURRENT MATURITIES 41,520 658,363 ---------- ---------- STOCKHOLDERS' EQUITY (DEFICIENCY): Common stock $.20 par value: Authorized - 25,000,000 shares Issued and outstanding - 12,924,859 shares at February 28, 1999 and 11,945,634 shares at August 31, 1998 2,584,972 2,389,127 Capital in excess of par value 600,232 297,595 Deficit accumulated in the development stage (5,483,671) (4,754,485) ---------- ---------- Total Stockholders' Equity (Deficiency) (2,298,467) (2,067,763) ---------- ---------- $ 740,785 $ 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 Six Months For the Three Months Inception) Ended February 28, Ended February 28, through 1999 1998 1999 1998 February 28 1999 ---------- --------- --------- --------- ---------- (UNAUDITED) (UNAUDITED) NET SALES $ 115,900 $ 6,401 $108,740 $ 795 $ 555,541 COSTS AND EXPENSES: Cost of sales 47,300 2,880 44,078 317 307,865 Write-down of excess inventory - - - - 35,000 Selling, general and administrative 707,276 611,083 342,911 310,698 8,565,351 ---------- ---------- --------- --------- ---------- 754,576 613,963 386,989 311,015 8,908,216 ---------- ---------- --------- --------- ---------- LOSS FROM OPERATIONS (638,676) (607,562) (278,249) (310,220) (8,352,675) ---------- ---------- --------- --------- ---------- OTHER EXPENSES: Interest expense 91,216 123,662 52,548 57,219 873,493 Interest income (706) - - - (8,232) Reorganization items - - - - 365,426 Litigation settlement - - - - 198,996 ---------- ---------- --------- --------- ---------- 90,510 123,662 52,534 57,219 1,429,683 ---------- ---------- --------- --------- ---------- LOSS BEFORE DISCONTINUED OPERATIONS AND EXTRAORDINARY ITEM (729,186) (731,224) (330,783) (367,439) (9,782,358) DISCONTINUED OPERATIONS - - - - (1,435,392) ---------- ---------- --------- --------- ---------- LOSS BEFORE EXTRAORDINARY ITEM (729,186) (731,224) (330,783) (367,439) (11,217,750) EXTRAORDINARY ITEM - Gain on debt discharge - - - - 507,952 ---------- ---------- --------- --------- ---------- NET LOSS $ (729,186) $ (731,224) $(330,783) $(367,439) $(10,709,798) ========== ========== ========= ========= ========== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 12,468,515 9,914,263 12,403,548 9,865,731 ========== ========== ========= ========= EARNINGS (LOSS) PER SHARE $ (0.06) $ (0.07) $ (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 Six Months Inception) Ended February 28, through 1999 1998 February 28, 1999 --------- --------- ---------- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(729,186) $(731,224) $(10,709,798) Adjustments to reconcile net loss to net cash flows from operating activities: Depreciation and amortization 171,385 172,509 1,298,251 Extraordinary gain on debt discharge - - (507,952) Amortization of interest expense for settled liabilities 34,234 80,648 598,644 Revaluation of assets and liabilities to fair value - - 482,934 Litigation settlement - - 198,996 Common stock released 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) Inventories (43,530) 10,603 (149,132) Prepaid expenses (13,053) 3,587 (25,304) Accounts payable and accrued expenses 13,129 15,451 2,791,163 Security deposits - - (19,836) Deferred salaries 70,005 76,158 612,531 Obligation from discontinued operations - - 51,118 ---------- --------- ---------- Net cash flows from operating activities (497,016) (373,268) (5,211,685) ---------- --------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of equipment (1,773) (1,060) (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) (1,060) (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 Six Months Inception) Ended February 28, through 1999 1998 February 28, 1999 --------- --------- ---------- (UNAUDITED) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable - - 721,000 Principal Payments on notes payable - - (75,000) Principal Payment of settled liabilities (100,994) (149,748) (2,650,037) Proceeds from issuance of common stock, net of related expenses 498,481 525,679 6,685,772 Proceeds from issuance of long-term debt - - 785,113 Net loans and advances from stockholders (6,619) 1,750 51,131 Proceeds from issuance of 8% convertible debentures - - 436,002 ---------- ---------- ---------- Net cash flows from financing activities 390,868 377,681 5,953,981 ---------- ---------- ---------- NET CHANGE IN CASH (107,921) 3,353 62,479 CASH AT BEGINNING OF PERIOD 170,400 505 - ---------- ---------- ---------- CASH AT END OF PERIOD $ 62,479 $ 3,858 $ 62,479 ========== ========== ========== SUPPLEMENTAL CASH FLOW INFORMATION Interest paid $ 12,090 $ 4,477 $ 64,158 ========== ========== ========== Income taxes paid $ - $ - $ - ========== ========== ========== Common stock issued in exchange for settlement of debt $ 18,481 $ 110,679 $ 271,810 ========== ========== ========== Common stock issued in exchange for subscriptions receivable $ - $ - $ 95,000 ========== ========== ========== Common stock issued in exchange for services, net of unearned compensation $ - $ - $ 131,700 ========== ========== ==========
See accompanying notes to financial statements Page 7 NOFIRE TECHNOLOGIES, INC. (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS (Unaudited) February 28, 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, 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) February 28, 1999 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 the 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 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) February 28, 1999 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 -------- -------------- 2,400,000 $ .50 4,544,718 1.00 40,000 1.25 178,500 1.50 3,447,275 2.00 35,000 2.50 422,500 3.00 50,000 3.25 12,000 5.00 ---------- 11,129,993 The warrants will 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 of which one was issued in 1998 and a second has been allowed so that a patent will be issued shortly. Continuing marketing efforts 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 protections and automotive. In the high-speed ferry project, the Company's fire protection system recently 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 order, valued at $100,000, to provide materials for that contract was shipped in the quarter ended February 28, 1999. Pre- production orders for about $10,000 were shipped for use in an application in the wood building products industry. The Company believes that additional orders in these two areas, as well as orders relative to several other projects, will be obtained in this fiscal year. Obstacles encountered in obtaining these orders 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 continues to be cash infusion as discussed below in the section on Liquidity and Capital Resources. 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 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 is anticipated to remain constant with additional sales and marketing efforts provided by commissioned independent contractors. COMPARISON SIX MONTHS ENDED FEBRUARY 28, 1999 AND FEBRUARY 28, 1998 The Company remained a development stage company. Sales of $115,900 for the six months ended February 28, 1999 represented an increase of $109,499 over the $6,401 of the comparable six-month period of the prior year. Cost of goods sold during the same periods were $47,300 compared to $2,880, resulting in a gross profit of $68,600 compared to $3,521 in the prior year. Selling, general and administrative expenses for the six months ended February 28, 1999 were $707,276 representing an increase of $96,193 or 16% from the $611,083 of the similar period of the prior year. Most categories of expense remained at relatively constant levels. The most significant change was an increase of $76,000 in marketing consulting fees. Administrative salaries were reduced by $47,000 which was partly offset by a $10,000 increase in a consulting expense category. Page 11 COMPARISON THREE MONTHS ENDED FEBRUARY 28, 1999 AND FEBRUARY 28, 1998 Sales of $108,740 for the three months ended February 28, 1999 represented an increase of $107,945 from the $795 for the comparable three-month period of the prior year. Cost of goods sold during the same periods increased $43,761 from $317 to $44,078 resulting in an increase in gross profit of $64,662 compared to $478. Selling, general and administrative expenses for the three months ended February 28, 1999 were $342,911, representing an increase of $32,213 or 10% from the $310,698 of the similar period of the prior year. Most categories of expense remained at relatively constant levels. The most significant change was an increase in marketing consulting fees of $21,000 and a reduction in administrative salaries of $15,000. LIQUIDITY AND CAPITAL RESOURCES At February 28, 1999 the Company had cash balances of $62,479. In order to fund continuing operations during the six months ended on that date, $480,000 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 whereby up to this $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 of common stock at an exercise price of $.50 per share. Because of limited cash resources, the Company has deferred payment of $730,617 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 more 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. On March 22, 1999, that same investment group agreed to provide up to an additional $800,000 in exchange for 1,111,112 investment units consisting of one share of common stock and warrants to purchase 2.5 shares of common stock at an exercise price of $.72 per unit. At the stockholders' meeting on March 19, the number of authorized shares of common stock was increased from 25,000,000 to 50,000,000 which accommodates this transaction as well as other stock issuances that may be necessary. On March 30,1999, $130,000 was invested under this agreement. The investment group has advised the Company that it has in the past and will continue to file all reports with the SEC that it deems 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 digits 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 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K No reports on Form 8-K were filed during the quarter ended February 28, 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: April 5, 1999 NoFire Technologies, Inc. By: /s/ Sam Oolie Sam Oolie Chairman and Chief Executive Officer Page 13 EX-27 2
5 This schedule contains summary financial information extracted from the unaudited Balance Sheet as of February 28, 1999 and the unaudited Statement of Operations for the six months then ended and is qualified in its entirety by reference to such financial statements. 6-MOS AUG-31-1999 SEP-01-1998 FEB-28-1999 62,479 0 0 0 114,132 201,915 30,634 24,907 740,785 2,997,732 0 0 0 2,584,972 (4,883,439) 740,785 115,900 115,900 47,300 707,276 0 0 90,510 (729,186) 0 (729,186) 0 0 0 (729,186) (0.06) (0.06)
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