<PAGE>               

                U.S. SECURITIES AND EXCHANGE COMMISSION

                        Washington, D.C.  20549

                              FORM 10-KSB

           [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR   15(d)
                OF THE SECURITIES EXCHANGE ACT OF 1934
               For the Fiscal Year Ended August 31, 1997

       [  ]  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


Securities registered under Section 12(b) of the Exchange Act: 

                               None


Securities registered under Section 12(g) of the Exchange Act:

                   Common Stock, par value $0.20 per share






                                     Page 1
<PAGE>

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___


Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 if there is no disclosure of delinquent filers contained in this
form in response to Item 405 of Regulation S-B, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III
of the Form 10-KSB or any amendment to this Form 10-KSB. [X]


Issuer's revenues for it fiscal year ended August 31, 1997     $42,042


Aggregate market value of the voting stock held by
non-affiliates as of November 7, 1997:                      $5,830,125


Number of shares of common stock outstanding as of as of
November 7, 1997:                                            9,867,200


Documents incorporated by reference:

                                 NONE


Transitional small business disclosure format.

                             YES___  NO X





                                     Page 2
<PAGE>
                                PART I

Item 1.  DESCRIPTION OF BUSINESS

BACKGROUND OF THE COMPANY; REORGANIZATION

     NoFire Technologies, Inc. ("NoFire" or the "Company") is a
development stage company engaged in the development, manufacture and
marketing of fire retardant, intumescent products.  The Company was
organized under the laws of the State of Delaware on July 13, 1987 and
was formerly known as PNF Industries, Inc., and prior to that, Portafone
International Cellular Communications, Inc. and NFW Capital Group, Inc.

     Effective February 27, 1990 the Company acquired all of the
outstanding common stock of Portafone Communications, Inc. ("Portafone")
and its wholly-owned subsidiary, Unicell Corporation ("Unicell"), in
exchange for newly issued shares of the Company's common stock.
Portafone was engaged in the business of selling, installing, renting and
operating cellular telephones.  Unicell was a licensed reseller of
cellular services in New York and Massachusetts.

     On August 6, 1991, the Company acquired 89% of the outstanding
common stock of both No Fire Ceramic Products, Inc. and No Fire
Engineering, Inc. (collectively the "No Fire Companies") in exchange for
newly issued shares of PNF common stock together with an option to
acquire the remaining 11% of such shares.  The No Fire Companies were
engaged in the business of developing and manufacturing fire retardant,
intumescent products.  For financial reporting purposes, the acquisition
of the No Fire Companies was accounted for as a reverse acquisition of
the Company by the No Fire Companies.  Both these subsidiaries were dissolved
in fiscal year 1997.

     The Company ceased operations in the cellular telephone business and
sold the assets of Unicell, consisting essentially of customer accounts
and accounts receivable, to Nationwide Cellular Services, Inc.
("Nationwide") in December, 1993 in exchange for Nationwide's assumption
of certain indebtedness of Unicell.

     On August 31, 1994, involuntary petitions in bankruptcy were filed
against the Company and certain of its subsidiaries in the U.S.
Bankruptcy Court for the District of New Jersey. In late September 1994,
the actions were consolidated and converted into a voluntary Chapter 11
reorganization proceeding in respect of the Company.  On April 7, 1995,
the Bankruptcy Court confirmed a Plan of Reorganization for the Company,
which Plan became effective on August 11, 1995.

     Under the Plan, (i) all then outstanding Common Stock and other
equity securities of the Company (including warrants, options and
convertible securities) were canceled, (ii) new investors made an
aggregate equity contribution of $2 million to the Company and thereby
acquired 7,546,400 shares of new Common Stock at an average purchase



                              Page 3
<PAGE>

price of $0.265 per share, (iii) public shareholders (defined as 
shareholders who (a) acquired their shares either in the Company's initial 
public offering or on the open market, (b) are not current or former 
members of the Company's management and (c) held more than ten shares of 
the Company's Common Stock prior to the effective date of the Plan (the 
"Effective Date")) received an aggregate of 433,600 shares of new Common 
Stock, and (iv) certain class action claimants received 20,000 shares of 
Common Stock.  Claims of creditors, to the extent allowed under the Plan, 
are required to be paid over a four year period. (See Note 3 to 
Consolidated Financial Statements, page F-9.)

     The confirmed Plan also provided that the Board of Directors will
consist of between five and nine individuals, that Sam Oolie, one of the
new investors in the Company, shall be Chairman of the Board of Directors
and Chief Executive Officer of the Company and shall have the right to
designate a majority of the members of the Company's Board of Directors
for a period of two years following the Effective Date, that Dr. Samuel
Gottfried shall be President and Chief Technical Officer of the Company
and that Charles R. Stone shall be Vice President and Chief Financial
Officer of the Company upon the Effective Date.  In addition, pursuant to
the Plan, the Company amended and restated its Certificate of
Incorporation and, as part of such amendment and restatement, changed its
name to "NoFire Technologies, Inc."


BUSINESS OF THE COMPANY

     Since the disposition of its cellular telephone business in 1993,
the sole business of the Company has been the development, manufacture
and marketing of fire retardant products.  The Company manufactures a
fire retardant product for use as a coating material on many different
kinds of substances to render them fire and heat resistant.  The product
can be manufactured in various liquid forms, specifically adapted for the
particular substrate, application and degree of protection required; or as
a textile product, typically a woven fiberglass material, coated with the
NoFire liquid product.

     The NoFire liquid product belongs to a class of materials called
intumescents, which means that they expand in size when heated.
Intumescents, which have been produced since the 1950's, have a high
degree of fire retardancy and add significant heat protection to a
coated surface upon expansion.  The major performance characteristics of
intumescent products include: useful temperature range; degree of fire
and heat protection; adhesion to substrate; degree of toxicity in both
the liquid state and during combustion; amount of smoke developed during
combustion; ease of application; durability; resistance to weather; and
price.  Early intumescent products, as well as many current products,
have had significant deficiencies with respect to several of these
important performance characteristics (primarily the degree of fire and
heat protection, useful temperature range, and/or toxicity) that have
limited their usefulness.



                                 Page 4
<PAGE>

     The Company has developed intumescent products intended to eliminate
or minimize these deficiencies and (i) provide significant protection for
a wide range of substrates with relatively thin coats of fire protective
material, (ii) be useful over a wider temperature range and (iii) utilize
a waterbased, nontoxic formula.  The NoFire products are manufactured
based on two basic formulas, electrically conductive and nonconductive.
Both formulas combine a fluid intumescent with ceramic fibers of various
sizes and types, which together provide the desired fire retardancy.
Most applications require the nonconductive formula, while the
conductive formula is useful for specific applications where electrical
conductivity of the surface is advantageous. The NoFire formulas are
covered by two United States Patents and corresponding patents and patent
applications in over 30 foreign countries. The United States Patents
are:

     Patent No.4,879,320 - Intumescent Fire-Retardant Coating Material,
        issued November 7, 1989 and
     Patent No.4,965,296 - Intumescent Fire-Retardant and Electrically-
        Conductive Coating Material, issued October 23,1990.

     Although the Company believes such patents are valid and
enforceable, in the event of a challenge to their validity or an
infringement of such patents, the Company's limited financial resources
may restrict its ability to defend or enforce its rights under such
patents in legal proceedings.

     During fiscal years 1996 and 1997 the Company applied for four 
additional United States Patents. 

     The NoFire products are potentially useful on many different
substrates, including wood and wood products, metals (steel, aluminum,
and various alloys), certain plastics, fabrics and textiles (fiberglass,
natural and synthetic fibers).  Industries that are presently using these 
types of product or are developing applications for them include the 
construction, public and private housing, maritime, automotive, railway 
cars, airports, nuclear power plants and military.  The Company is 
actively pursuing business opportunities in these and other markets, has 
passed numerous tests and obtained several certifications, but has not yet 
obtained contracts for, or achieved sales of, significant amounts of its 
products.


MARKETING/DISTRIBUTION

     The Company markets its products using several different methods,
depending upon the applications, industry, product, or territory being
targeted.  These methods include: direct marketing; use of independent
agents/distributors; and exclusive and nonexclusive licensing
arrangements.  Because the Company has limited resources, it expects to
rely primarily upon independent third parties to market and distribute
its products.




                                  Page 5
<PAGE>

COMPETITION

     There are many types of fire retardant products in general use today
for many different applications.  In addition to intumescent products,
ablative, insulative and cementitious products are used, depending on the
particular application, severity of fire retardancy requirements, weight,
space restrictions, and cost.  Competition for the NoFire products may
include all of these types of fire retardants and will depend on the
particular application targeted.  Typically, each application has a
product or fire retardant technique of choice, which is usually the least
expensive fire protection that meets the necessary requirements.  Among
the Company's primary competitors (products) are: W.R. Grace & Co.
(Monocote); Carboline Company (Pyrocrete, Pyrolite, Intumescent 285);
U.S. Gypsum (gypsum board); Stanchem Manufacturing (Albiclad); A/D
Fireproofing (A/D Firefilm); PPG Industries (PettChar); DuPont (Nextel);
Textron, Inc. (Chartex); Minerals Technology, Inc. (Firex); Herbert Co.
(Unitherm); Nullifire; and various wood coatings manufactured by Albi,
American Vamag, 3M, and DuPont. Such products may have a substantial
competitive advantage over the NoFire products because they either have
an established share of the market, are well publicized and recognized,
have passed the required tests and achieved the required approvals for
use and/or are manufactured by substantial companies having far greater
resources than the Company.


SOURCES OF SUPPLY

     The NoFire liquid products are a blend of numerous liquids and
solids, purchased from various third party suppliers.  Many of such
components are currently available only from a small number of suppliers.
In the event that such suppliers were to terminate the manufacture or
sale of such components for any reason, then the manufacture of NoFire
products could be interrupted.  The Company is developing alternative
sources of supply for components and intends to continue to do so as the
demand for its products warrants.


MAJOR CUSTOMERS

     The three largest customers during the most recent fiscal year
represented 25%, 23% and 12% of total sales respectively.  Because sales
in the development stage are minimal, the Company is not dependent on any
one of these customers for future sales.


GOVERNMENT REGULATIONS AND APPROVALS; RESEARCH AND DEVELOPMENT

     For most applications, fire retardant products are required to
undergo testing for approvals by government or independent laboratories.
These requirements are typically determined either by government
agencies, such as the U.S. Nuclear Regulatory Commission, or nationally
recognized organizations, such as the American Society for Testing and


                                  Page 6
<PAGE>

Material ("ASTM") or Underwriters Laboratories, Inc. ("UL").  Product
development is continuing in many different areas, and the NoFire product
has been tested and certified by independent laboratories for various
applications in the areas of building materials and construction (ASTM
E84-87, UL94, UL746C, ASTM E152 and UBC 42-2), transportation (NFPA 417,
FAR 25.855(c)) and utilities (ASTM E81488).  To date, the Company has
not yet obtained approvals for use on such applications as structural
steel, roofing and others.  Such approvals must be obtained before the
NoFire product can be used for any of these applications.  There is no
assurance that the NoFire product will satisfy these testing requirements
or meet other performance criteria established by prospective customers.
The Company conducts in-house fire and heat endurance tests exclusively
for research and development and feasibility studies.  These tests are
used to develop applications and solutions to problems, but are not a
substitute for tests by independent laboratories or government agencies
that are generally required before the product can be sold for particular
applications.  The Company's direct costs for research and development
(which has been conducted primarily by its president and chief technical
officer, Dr. Gottfried, as a part of his overall duties) have not been
material and have not been segregated for accounting purposes.


EMPLOYEES

     As of November 7, 1997, the Company had seven employees, six of whom
were full-time employees.


Item 2.  DESCRIPTION OF PROPERTY

     The Company occupies 12,700 square feet of space at 21 Industrial
Avenue, Upper Saddle River, New Jersey.  The facility includes office
space, storage space and an area for the mixing and testing of products
and is adequate for the Company's current requirements.  The Company
rents such space at an approximate monthly rental of $8,200 pursuant to a
lease expiring August 31, 1998.


Item 3.  LEGAL PROCEEDINGS

     Except for the bankruptcy reorganization proceeding described in
Item 1 in which the Bankruptcy Court has continuing jurisdiction relative
to (i) the approval and payment of certain claims and expenses and (ii)
disposition of the Company's two issued patents, the Company is a party to 
two pending legal proceedings.  Both proceedings are claims made by a 
former stockholder of the pre-petition companies for (1) the Company's 
deposit held by the landlord of the leased premises and (2) certain 
furniture and equipment used by the Company.  The estimated amount of the 
claims is less than $30,000. It is the opinion of counsel that both claims 
are without merit.




                                   Page 7
<PAGE>

Item 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

               None


                                PART II

Item 5.     MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
     According to information provided by the National Quotation Bureau, 
Inc., no bid or ask prices were reported for the Company's Common Stock 
prior to September 14, 1995.  Beginning with transactions on that date, 
the Company's shares were quoted on the "OTC Bulletin Board".  The 
National Quotation Bureau reported the following high and low bid 
quotations which reflect inter-dealer prices, without retail markup, 
markdown or commission and may not represent actual transactions.

                          1996-1997             1995-1996
     Quarter Ended      High      Low         High      Low
     -------------      ----      ---         ----      ---
     November 30       $1.625    $0.875      $4.75     $3.375
     February 28/29    $0.938    $0.594      $4.25     $3.00
     May 31            $2.25     $0.375      $3.25     $1.50
     August 31         $2.063    $0.813      $2.375    $1.125

     (b)  HOLDERS

     As of November 7, 1997, there were approximately 169 holders of
record of the Company's outstanding Common Stock.

     (c)  DIVIDENDS

     The Company has not paid any cash dividends and intends to retain
earnings, if any, during the foreseeable future for use in its operations.
Payment of cash dividends in the future will be determined by the 
Company's Board of Directors based upon the Company's earnings, financial 
condition, capital requirements and other relevant factors.


Item 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS

GENERAL

     After emerging from Chapter 11 bankruptcy on August 11, 1995, and 
through fiscal years 1996 and 1997, the Company continued product 
development and application testing.  As a result, several certifications 
have been obtained for specific applications and four additional patent 
applications have been filed.  Marketing efforts to develop new 
applications and establish new customers continued.  Though these efforts 
did not result in significant sales in fiscal years 1996 and 1997, several 
events give promise for fiscal 1998 and beyond.  Those events include: 
highest rated intumescent product in U.S. Navy tests; receipt of an MEA 
(Materials and Equipment Acceptance Division) acceptance from the City of  


                                 Page 8
<PAGE>

New York and specification by their Department of Housing Preservation and 
Development; approval by the State Fire Marshall of California; successful 
demonstration at Underwriters Laboratory of heat barrier and upgrades for 
applications in the nuclear power generating industry; successful 
demonstration of sixty-minute heat barriers for high-speed ferry boats; 
successful demonstration of heat barrier protection for composite panels 
for use in the rail transportation industry; and successful demonstration 
in laboratory tests of underbody protection for automobiles.  The greatest 
obstacles to obtaining major sales contracts are the multitude of tests 
and approvals required, competition against well established and better 
capitalized companies, and the slow process of specifying a new product in 
highly regulated applications.  The Company intends to continue its 
research efforts to develop and improve its products 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 as sales increase, with 
additional sales and marketing efforts being provided by commissioned 
independent contractors. 


LIQUIDITY AND  CAPITAL RESOURCES

During fiscal years 1996 and 1997, funds needed to continue the Company's 
product development and marketing efforts were provided by the sale of
convertible debentures and the private sale of common stock with warrants 
in the respective amounts of $436,000 and $300,000 in fiscal 1996, and the 
private sale of common stock with warrants of $1,092,700 in fiscal 1997.

As discussed in Note 3 to the Financial Statements, and because of limited 
cash resources, the Company has deferred payment of $245,178 of the second 
installment of the Chapter 11 liability to unsecured creditors that was 
due in late September 1996.  As of November 7, 1997, it has also deferred 
$559,656 of the third installment due in late September and early October 
1997.  In order to pay those liabilities and meet working capital needs 
until significant sales levels are achieved, the Company's continued 
viability will depend on alternative sources of funding including exercise 
of warrants, and sale of debentures and/or equity securities in a public 
offering or private investment transactions.  There is no assurance that 
such alternative funding efforts will be successful.  After the end of 
fiscal 1997 and through November 7, 1997, an additional amount of $200,000 
was obtained in private sales of common stock with warrants.


RESULTS OF OPERATIONS FOR FISCAL YEARS ENDED AUGUST 31, 1997 AND 1996

The Company remained a development stage company in fiscal year 1997.
Sales of $42,042, represented a decrease of $15,863 or 27% from the 
$57,905 in the prior year.

The net loss of $1,599,841 for fiscal year 1997 was $34,961 or 2.1%
smaller than the loss of $1,634,802 in the prior year.



                                   Page 9
<PAGE>

General and administrative expenses of $1,318,319 in fiscal year 1997
were $111,529 or 8% less than the prior year. In fiscal 1997 testing 
expenses of $57,600 were $33,500 or 37% less than the prior year. 
Insurance costs of $48,300 were a reduction of $16,800 or 26% from the 
prior year mainly as a result of favorable premium rates.  In fiscal 1997 
the remaining reserves of $48,300 for unknown expenses that might result 
from the Chapter 11 era were written off.  This credit against expenses 
compared to $20,000 written off in the prior year.

Accounting rules related to future annual payments of Chapter 11 claims
require that such claims be stated at their net present value.  As a
result, the Company recognizes interest expense over the scheduled
repayment term of the claims.  The expense recognized was $208,258 in 
fiscal year 1996 and $231,680 in fiscal year 1997.


Item 7.    FINANCIAL STATEMENTS

The Company's annual financial statements for the fiscal year ended
August 31, 1997, together with the report thereon by the Company's
independent auditors, Wiss & Company, LLP, ("Wiss"), are set forth
herein commencing on page F-1 of this Form 10-KSB and are incorporated
herein by reference.


Item 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURES.

None






                                  Page 10
<PAGE>

                                PART III

Item 9.  DIRECTORS AND EXECUTIVE OFFICERS

                              MANAGEMENT

     The following table sets forth the names of all directors and
officers of the Company and the position in the Company held by them:

Name                         Age        Position

Dr. Samuel Gottfried          51        Director, President,
                                        Chief Technical
                                        Officer and
                                        Assistant Treasurer

Bernard J. Koster             64        Director

Gerald H. Litwin              55        Director

Sam Oolie                     61        Director, Chairman
                                        of the Board and
                                        Chief Executive Officer

Charles R. Stone              65        Director, Vice
                                        President,
                                        Secretary, Treasurer
                                        and Chief Financial
                                        Officer

     Mr. Stone has advised the Company of his intention to retire from 
active employment on November 30, 1997 and resign from his elected 
positions on that same date.  As may be required, he will make himself 
available to assist the Company after that date.

     Directors are elected to serve until the next annual meeting of 
stockholders and until their successors have been elected and have
qualified.  Officers are elected by the Board of Directors and serve at
the pleasure of the Board of Directors.

Dr. Samuel Gottfried

     Dr. Gottfried was named a director of the Company and appointed
President of its fire retardant products subsidiaries in August 1991.
He was appointed Interim Chairman of the Board and Chief Executive
Officer on August 14, 1992.  On August 16, 1995 he was elected
President, Chief Technical Officer and Assistant Treasurer of the
Company.  Dr. Gottfried holds a doctorate in electrical engineering
from New York University and a Ph.D. in electrophysics from the
Polytechnic Institute of New York.




                                 Page 11
<PAGE>

Bernard J. Koster

          Mr. Koster has served as a Director of the Company since
September, 1993.  Mr. Koster is an attorney and accountant and since
January 1, 1993 has been of counsel to the law firm of Gerald H.
Litwin, P.A. formerly Litwin and Holsinger, Hackensack, New Jersey.
Since 1993, Mr. Koster has also served as a Director of Tofutti Brands,
Inc., a health food manufacturer.

Gerald H. Litwin

     Mr. Litwin has served as a Director of the Company since August 16, 
1995.  During the past five years, Mr. Litwin, an attorney, has been the 
principal of Gerald H. Litwin, P.A. and previously a partner in the law 
firm of Litwin & Holsinger, Hackensack, New Jersey.  Mr. Litwin's firms 
served as the Company's General Counsel and continues to provide certain 
legal services to the Company.

Sam Oolie

     Mr. Oolie has served as a Director of the Company since September,
1993 and as Chairman of the Board and Chief Executive Officer since
August 16, 1995.  Since 1985, Mr. Oolie has been Chairman of Oolie
Enterprises, a privately owned investment company. Mr. Oolie also
serves as a Director of Avesis, Inc., a provider of optical and dental
services to employee groups, since March, 1985; Comverse Technology,
Inc., a manufacturer of voice storage and forwarding systems and
message management computer services, since May, 1985; and Noise
Cancellation Technologies, Inc., a company developing and manufacturing
electronic noise cancellation devices, since April, 1987.

Charles R. Stone

     Mr. Stone became a Director of the Company on August 16, 1995. On
the same date he assumed the offices of Vice President, Chief Financial
Officer and Treasurer.  In September 1995, he assumed the additional
office of Secretary.  Since May, 1987 Mr. Stone was the principal of
C.R. Stone Associates, a consulting firm advising the management of
small and start-up companies in the area of finance and administration.


     During the past five years, except as set forth in the next
succeeding paragraph, none of the foregoing persons (a) has served as a
general partner, or an executive officer of any business as to which a
bankruptcy petition was filed during his service in such capacity or
within two years thereafter; (b) was convicted in a criminal proceeding
or is subject to a pending criminal proceeding (excluding traffic
violations and other minor offenses); or (c) has been subject to any
order, judgment or decree, not subsequently reversed, suspended or




                                   Page 12
<PAGE>

vacated, by any court of competent jurisdiction, permanently or
temporarily barring, suspending or otherwise limiting his involvement
in any type of business, securities or banking activity.

     Dr. Gottfried, Mr. Koster and Mr. Oolie were members of the Company's 
Board of Directors in 1994 when bankruptcy proceedings were commenced 
against the Company.  In addition, Dr. Gottfried was a defendant in an 
action commenced by the Securities and Exchange Commission against the 
Company, Dr. Gottfried and certain former shareholders, officers, 
directors and accountants of the Company in the United States District 
Court for the District of New Jersey on September 27, 1994 alleging 
various violations of the federal securities laws by the defendants.  Dr. 
Gottfried did not admit or deny any wrongdoing.  The action was resolved 
through the entry of consent judgments against the defendants permanently 
enjoining the defendants, including the Company and Dr. Gottfried, against 
future securities laws violations.

     The Board of Directors of the Company has established an Executive
Committee (Dr. Gottfried, Mr. Oolie and Mr. Stone), an Audit Committee
(Mr. Koster, Mr. Litwin and Mr. Stone), and a Compensation Committee
(Mr. Koster, Mr. Litwin and Mr. Oolie).


Item 10. EXECUTIVE COMPENSATION

     The Company's Summary Compensation Table is set forth below.  Except 
as discussed in Notes 2, 3 and 4 to such table, the Company had no 
Option/SAR Grants, Aggregated Option/SAR Exercises or Fiscal Year End 
Option/SAR's for the years ended August 31, 1997, 1996 and 1995, nor were 
there any long-term incentive plan awards, or stock options or stock 
appreciation rights.

     Non-employee Directors are not compensated for Board of Directors
meetings or committee meetings attended.




                                 Page 13
<PAGE>

                         SUMMARY COMPENSATION TABLE

                    For the Years Ended August 31, 1997, 1996 and 1995

Name and               Year Ended   Salary  Salary       Options  All Other
Principal Position     August 31    Paid    Deferred(1)  SAR's    Compensation
------------------     ----------   ------  -----------  -----    ------------

Sam  Oolie                1997      $53,118   $75,010     (4)        None
Chairman  of the Board    1996      $50,678   $75,010     None       None
and Chief Executive       1995       $2,885    $4,327     None       None
Officer since
August 16, 1995

Samuel Gottfried          1997      $98,820   $39,998     (4)        None
Chairman of the Board     1996      $96,290   $39,988     None       None
through  August 15, 1995  1995      $96,900    $2,308     (2)        None
President and Chief
Technical Officer
since August 16, 1995

Charles R. Stone          1997      $49,870   $49,998     (4)        None
Vice President,           1996      $54,488   $49,998     (3)        None
Secretary, Treasurer      1995       $2,885    $2,885     (2)        None
and Chief Financial
Officer since
August 16, 1995

Note (1)  Amounts shown as salary deferred for fiscal years 1997, 1996 and 
1995 represent amounts payable to such executives in the future commencing 
when the Company achieves sales at an annualized rate over $2 million and 
such payments are authorized by the Board of Directors.

Note (2)  At a meeting of the Company's Board of Directors held on August 16,
1995, the Board authorized the issuance of warrants to Dr. Gottfried and to 
Mr. Stone to purchase respectively 400,000 shares and 75,000 shares of Common
Stock at a purchase price of $1.00 per share, such warrants to vest in equal 
installments over a three-year period commencing in August, 1996.  Both 
warrants were issued during the fiscal year ended August 31, 1996.

Note (3)  In consideration of loans, advances and other considerations, the 
Company granted to Mr. Stone on February 9, 1996 a warrant to purchase 
50,000 shares of Common Stock at a purchase price of $3.25 per share with 
immediate vesting.

Note (4)  At a meeting of the Company's Board of Directors held on June 18, 
1997, the Board authorized the issuance of warrants at an exercise price of 
$2.00 per share with immediate vesting to Mr. Oolie, 300,000 shares; Dr. 
Gottfried, 160,000 shares and Mr. Stone, 200,000 shares.


EMPLOYMENT AGREEMENTS

The Company has entered into an employment agreement with Dr. Gottfried for 
a term of three years effective August 11, 1995 at an annual salary not to 
exceed $135,000 in the first year. The Company has no other employment 
agreements.



                              Page 14
<PAGE>

Item 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
          AND MANAGEMENT

     The following table sets forth as of November 7, 1997 the number
of shares of Common Stock owned of record or beneficially owned by each
of the Company's officers, directors, and stockholders owning at least
5% of the Company's issued and outstanding shares of Common Stock, by all 
of the Company's officers and directors as a group, and the percentage of 
the total outstanding shares represented by such shares.

Name and Address           Shares Beneficially      Approximate
Beneficial Owner           Owned (1)                Percent of Class (2)
----------------           -------------------      ---------------------
Sam Oolie                        1,900,000                18.69%
NoFire Technologies, Inc.
21 Industrial Avenue
Upper Saddle River, NJ  07458

Samuel Gottfried                 1,626,667                15.80%
NoFire Technologies, Inc.
21 Industrial Avenue
Upper Saddle River, NJ  07458

Charles R. Stone                   620,400                 6.10%
NoFire Technologies, Inc.
21 Industrial Avenue
Upper Saddle River, NJ  07458

Bernard J. Koster                  126,300                 1.27%
7 Old Smith Road
Tenafly, NJ  07670

Gerald H. Litwin                   125,000                 1.25%
Two University Plaza
Hackensack, NJ  07601

All officers and directors       4,398,367                39.76%
as a group (five persons)

Note (1)  On August 16, 1995, the Company's Board of Directors authorized 
the issuance of warrants to purchase Common Stock at a price of $1.00 per 
share to Dr. Gottfried (400,000 shares with 133,333 shares vested 
annually), Mr. Stone (75,000 shares with 25,000 shares vested annually), 
Mr. Koster (17,500 shares with 8,750 shares vested annually), and Mr. 
Litwin (25,000 shares with 12,500 shares vested annually).  Only the 
Common Stock represented by such warrants exercisable on the first and 
second anniversary dates are included in the amounts shown in the table. 
Also included are the warrants for 50,000 shares granted to Mr. Stone as 
discussed in Note 3 to the Summary Compensation Table in Item 10; warrants 
for 75,000 shares granted to Mr. Litwin on October 23, 1996; the warrants 



                                Page 15
<PAGE>

discussed in Note 4 to the Summary Compensation Table in Item 10 in the 
amounts of 300,000 for Mr. Oolie, 160,000 for Dr. Gottfried, and 200,000 
for Mr. Stone; and warrants authorized by the Board of Directors on June 
18,1997 for 25,000 shares for Mr. Koster and 25,000 shares for Mr. Litwin.

Note (2)  As of November 7,1997, there were 9,867,500 shares of Common 
Stock issued and outstanding.  Percentage of Class for All officers and 
directors as a group is computed on 11,061,367 shares which includes 
1,194,167 shares exercisable within 60 days pursuant to warrants owned by 
all the persons listed.


COMPLIANCE WITH SECTION 16(A) OF THE 1934 ACT

     Section 16(a) of the 1934 Act requires the Company's directors and
executive officers and persons who own more than 10% of a registered
class of the Company's equity securities to file with the Commission
initial reports of ownership and reports of changes in ownership of the
Company's Common Stock. Officers, directors and greater than 10%
stockholders are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file. Based on (i) a review
of copies of Forms 3, 4 and 5 and amendments thereto furnished to the
Company during or with respect to its fiscal year ended August 31,1997, 
and (ii) statements signed by each responsible person, the Company 
believes that no director or officer of the Company or beneficial owner of 
more than 10% of the Company's Common Stock failed to file on a timely 
basis reports required by Section 16(a) of the Exchange Act during such 
fiscal year.

Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     As a result of loans made to fund the Company's operations during its 
trusteeship under the Chapter 11 bankruptcy that ended on August 11, 1995 
plus accrued interest to that date, there were balances due at September 
1, 1995 of $275,207 to Mr. Oolie, $137,290 to Mr. Stone and $27,662 to Mr. 
Koster.  In September 1995 the first disbursements under the Chapter 11 
Reorganization Plan were made and included payments of $91,542 to Mr. 
Oolie, $43,774 to Mr. Stone and $15,958 to Mr. Koster leaving unsecured 
gross claims in the Chapter 11 settlement of $183,458 for Mr. Oolie, 
$93,516 for Mr. Stone and $11,704 for Mr. Koster.  No subsequent payments 
have been made against these balances which are included in the company's 
liability for settled claims at net present value.

     As an accommodation to the Company in fiscal year 1995, Mr. Oolie 
purchased a third party Chapter 11 claim for $24,959.  He received payment 
of $13,572 in the first distribution under the plan leaving a net cost to 
him of $11,387.  The Company purchased the claim from Mr. Oolie on 
February 2, 1996 for that amount.  The balance of the claim at the time of 
purchase was $20,688 with a net present value of $14,880.



                               Page 16
<PAGE>

     Messrs. Oolie and Stone have made loans and advances to the Company,
and partial repayments have been made.  At September 1, 1995 the balance
due to Mr. Oolie was $59,064 and to Mr. Stone $10,000.  At August 31, 1996 
the balance due to Mr. Oolie was $41,253 and to Mr. Stone $35,000, and at
August 31, 1997 the balances were $36,000 and $35,000 respectively.  The
balance due to Mr. Stone is represented by a note dated December 19, 1995 
with an 8% interest rate.  No interest has been paid.  To August 31, 1997, 
$4,764 has been accrued.  Refer to Note 3 to the Summary Compensation 
Table in Item 10 relative to warrants awarded to Mr. Stone in fiscal year 
1996.

     In connection with reorganization of the Company in August, 1995,
under the federal bankruptcy laws, Dr. Gottfried and Messrs. Koster,
Oolie and Stone acquired 1,200,000, 83,800, 1,600,000 and 320,400 shares
of the Company's Common Stock, respectively for a cash purchase price of
$0.24074 per share ($0.2786 per share in the case of Dr. Gottfried).  
Those persons borrowed the funds to effect such purchases from other 
investors pursuant to non recourse notes bearing interest at an annual 
rate of 7.75% (7.19% for Dr. Gottfried), which notes are payable by 
September 18, 1999 (September 18, 1998 for Dr. Gottfried) and are secured 
by a pledge of such shares.  On June 18,1997, the Company's Board of 
Directors authorized the issuance of warrants to Mr. Oolie, Dr. Gottfried, 
Mr. Stone, Mr. Koster, and Mr. Litwin entitling such holders to purchase 
respectively 300,000, 160,000, 200,000, 25,000 and 25,000 shares of the 
Company's Common Stock at a price of $2.00 per share. (See Item 11, Note 
1.)  At that same meeting, a warrant to purchase 100,000 shares of Common 
Stock at $2.00 per share was granted to a key employee.

     Mr. Litwin is the principal of the law firm of Gerald H. Litwin, 
P.A., which served as the Company's general counsel to November 4, 1996, 
and continues to provide certain legal services to the Company.  The 
Company is obligated to that firm in the amount of $270,620 as a balance 
due in respect of fees of $158,851 for legal services rendered during the 
pendency of the Company's bankruptcy reorganization proceedings, $87,824 
for legal services rendered in fiscal 1996, $53,872 for legal services 
rendered in fiscal 1997 and $20,166 for interest charges in 1997. In 
addition, Litwin & Holsinger, the predecessor firm, filed a claim as an 
unsecured creditor in the bankruptcy proceedings in the gross amount of 
$140,403 in respect of pre-petition legal services rendered and has 
received one distribution in the amount of $15,584 in respect thereof.

     Under the confirmed Plan of Reorganization, Mr. Oolie has been 
granted the right to designate a majority of the members of the Company's 
Board of Director's for a period of two years following the Effective Date 
of the Plan and, as a result of his ability thereby to control the 
Company's Board of Directors, Mr. Oolie may be deemed a "parent" of the 
Company.



                               Page 17
<PAGE>


Item 13. EXHIBITS AND REPORTS ON FORM 8-K

A.   THE FOLLOWING FINANCIAL STATEMENTS OF THE COMPANY ARE BEING FILED
     PURSUANT TO ITEM 7 AS PART OF THIS ANNUAL REPORT ON FORM 10-KSB

1.  FINANCIAL STATEMENTS

    Index to Financial Statements                            F-1

    Independent Auditors' Report                             F-2

    Financial Statements:

      Balance Sheet as of August 31, 1997                    F-3

      Statements of Operations for the Years
        Ended August 31, 1997 and 1996                       F-4

      Statements of Changes in Stockholders' Equity
        (Deficiency) for the Years Ended August 31,
        1989 through August 31, 1997                         F-5

      Statements of Cash Flows for the Years
        Ended August 31, 1997 and 1996                       F-6

      Notes to Financial Statements                          F-7 to F-15


2.  EXHIBITS

     None


3.  REPORTS ON FORM 8-K

     None




                               Page 18
<PAGE>



                              SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                        NOFIRE TECHNOLOGIES, INC.

Date: November 25, 1997                 By: /s/ Sam Oolie
                                        ------------------------
                                        Sam Oolie,
                                        Chairman of the Board and
                                        Chief Executive Officer

Date: November 25, 1997                 By: /s/ Charles R. Stone
                                        -------------------------
                                        Charles R. Stone,
                                        Vice President, Treasurer, and
                                        Chief Financial and Accounting
                                        Officer

     In accordance with the Exchange Act, this report has been signed 
below by the following persons on behalf of the registrant and in the 
capacities and on the dates indicated. 

SIGNATURE                                   DATE

/s/ Samuel Gottfried
----------------------------                November 25, 1997
Samuel Gottfried, Director


/s/ Bernard J. Koster
-----------------------------               November 24, 1997
Bernard J. Koster, Director


/s/ Gerald H. Litwin
-----------------------------               November 24, 1997
Gerald H. Litwin, Director


/s/ Sam Oolie
-----------------------------               November 25, 1997
Sam Oolie, Director


/s/ Charles R. Stone
----------------------------                November 25, 1997
Charles R. Stone, Director 



                               Page 19
<PAGE>



                     INDEX TO FINANCIAL STATEMENTS



                                                                  Page
 
Report of Independent Auditors                                     F-2
 
Financial Statements: 
 
  Balance sheet at August 31, 1997                                 F-3

  Statements of operations for the years ended August 31, 1997 
   and 1996 and the period July 13, 1987 (date of inception) 
   through August 31, 1997                                         F-4
 
  Statements of changes in stockholders' equity for the years
   ended August 31, 1989 through August 31, 1997                   F-5

  Statements of cash flows for the years ended August 31, 1997
   and 1996 and the period July 31, 1987 (date of inception)
   through August 31, 1997                                         F-6
 
  Notes to financial statements                                F-7 to F-14





                           F-1
<PAGE>



                      INDEPENDENT AUDITORS' REPORT


Board of Directors
NoFire Technologies, Inc.

We have audited the accompanying balance sheet of NoFire Technologies, 
Inc. (A Development Stage Company) as of August 31, 1997 and the related 
statements of operations, changes in stockholders' equity and cash flows 
for the years then ended as listed in the accompanying index.  These 
financial statements are the responsibility of the Company's management.  
Our responsibility is to express an opinion on these financial statements 
based on our audits.

We conducted our audits in accordance with generally accepted auditing 
standards.  Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are 
free of material misstatement.  An audit includes examining, on a test 
basis, evidence supporting the amounts and disclosures in the financial 
statements.  An audit also includes assessing the accounting principles 
used and significant estimates made by management, as well as evaluating 
the overall financial statement presentation.  We believe that our audits 
provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, 
in all material respects, the financial position of NoFire Technologies, 
Inc. at August 31, 1997, and the results of its operations and its cash 
flows for the aforementioned periods in conformity with generally accepted 
accounting principles.

The accompanying financial statements have been prepared assuming that the 
Company will continue as a going concern.  As discussed in Note 2 to the 
financial statements, the Company incurred substantial losses from 
operations since inception and at August 31, 1997 had a stockholders' 
deficiency of $2,546,951 and a working capital deficiency of $1,627,182.  
These factors raise substantial doubt about the Company's ability to 
continue as a going concern.  Management's plans in regard to these 
matters are also described in Note 2.  The financial statements do not 
include any adjustments that might result from the outcome of this 
uncertainty.

                                                 WISS & COMPANY, LLP
Livingston, New Jersey
October 30, 1997



                                         F-2
<PAGE>


                          NOFIRE TECHNOLOGIES, INC.
                        (A Development Stage Company)

                              BALANCE SHEET
                             AUGUST 31, 1997

                                  ASSETS
CURRENT ASSETS:
  Cash                                              $      505
  Inventories                                           96,842
  Prepaid expenses and other current assets             15,093
                                                    ----------     
   Total Current Assets                                        $  112,440

EQUIPMENT, LESS ACCUMULATED DEPRECIATION OF $24,053                 3,749

OTHER ASSETS:
  Patents, less accumulated amortization of $600,000   900,000
    Excess of reorganization value over net assets,
        less accumulated amortization of $84,408       126,613
  Security deposits                                     18,473
                                                    ----------
                                                                1,045,086
                                                               ----------  
                                                               $1,161,275
                                                               ==========
          LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
  Current portion of settled liabilities            $  839,357
  Accounts payable and accrued expenses                438,287
  Due to stockholders                                   71,000
  Deferred salaries                                    390,978
                                                    ----------
    Total Current Liabilities                                   1,739,622

OTHER LIABILITIES:
  Settled liabilities, less current maturities       1,532,602
  8% convertible debentures                            436,002
                                                    ----------
                                                                1,968,604
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY (DEFICIENCY):
  Common stock $.20 par value:
    Authorized - 25,000,000 shares 
    Issued and outstanding - 9,667,200 shares        1,933,440
  Capital deficiency                                (1,245,748)
  Retained earnings (deficit)                       (3,234,643)
                                                    ---------- 
    Total Stockholders' Equity (Deficiency)                    (2,546,951)
                                                               ---------- 
                                                               $1,161,275
                                                               ==========

See accompanying notes to financial statements

                                F-3
<PAGE>

                          NOFIRE TECHNOLOGIES, INC.
                        (A Development Stage Company)

                          STATEMENTS OF OPERATIONS

                                                          July 13, 1987
                                                             (Date of
                                                             Inception)
                                Year Ended August 31,          through
                                 1997           1996     August 31, 1997
                              ----------    ----------       ----------
NET SALES                     $   42,042    $   57,905       $  399,967

COSTS AND EXPENSES:
  Cost of sales                   18,958        29,107          242,712
  General and administrative   1,318,319     1,429,848        6,509,036
                              ----------    ----------       ----------
                               1,337,277     1,458,955        6,751,748
                              ----------    ----------       ----------
LOSS FROM OPERATIONS          (1,295,235)   (1,401,050)      (6,351,781)

OTHER EXPENSES (INCOME):
  Interest expense               304,606       240,526          565,532
  Interest income                   -           (6,774)          (6,774)
  Reorganization items              -             -             365,426
  Litigation settlement             -             -             198,996
                              ----------    ----------       ----------
                                 304,606       233,752        1,123,180

LOSS BEFORE DISCONTINUED OPERATIONS
 AND EXTRAORDINARY ITEM       (1,599,841)   (1,634,802)      (7,474,961)

DISCONTINUED OPERATIONS             -             -          (1,435,392)
                              ----------    ----------       ----------

LOSS BEFORE EXTRAORDINARY
 ITEM                         (1,599,841)   (1,634,802)      (8,910,353)

EXTRAORDINARY ITEM -
  Gain on debt discharge            -             -             449,583
                              ----------    ----------       ----------
NET LOSS                     $(1,599,841)  $(1,634,802)     $(8,460,770)
                              ==========    ==========       ==========

WEIGHTED AVERAGE COMMON SHARES
 OUTSTANDING                   9,199,271     8,368,250
                              ==========    ==========

NET LOSS PER COMMON SHARE    $      (.17)  $      (.19)
                              ==========    ==========

See accompanying notes to financial statements.
                              F-4
<PAGE>

                          NOFIRE TECHNOLOGIES, INC.
                        (A Development Stage Company)

        STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
                                                                      Retained Earnings (Deficit)
                                       Common Stock                       Accumulated During          Stock       Unearned 
                                   Number of              Capital     the Development Stage      Subscription      Stock
                                    Shares     Amount    Deficiency     (Since Inception)         Receivable    Compensation
                                ---------   ---------    ----------     -----------------          ----------    ------------  
<S>                            <C>         <C>          <C>                <C>                    <C>           <C>
BALANCES, SEPTEMBER 1, 1988                 $    -       $     -            $     -                $     -       $      -     
YEAR ENDED AUGUST 31, 1989:
  Issuance of common stock          3,000       1,500          -                  -                      -              -     
  Net loss                           -           -             -               (45,844)                  -              -         
                                ---------  ----------    ----------         ----------             ----------     ----------    
BALANCES, AUGUST 31, 1989           3,000       1,500          -               (45,844)                  -              -     
YEAR ENDED AUGUST 31, 1990:
  Issuance of common stock             50       1,000          -                  -                      -              -     
  Net loss                           -           -             -              (278,916)                  -              -     
                                ---------  ----------    ----------         ----------             ----------     ----------    
BALANCES, AUGUST 31, 1990           3,050       2,500          -              (324,760)                  -              -     
YEAR ENDED AUGUST 31, 1991:
  Adjustment due to reverse
    acquisition                    (3,050)     (2,500)        2,500               -                      -              -     
  Acquisition accounted for as
    a reverse purchase          3,071,659         307          (307)          (517,893)                  -              -     
  Net loss                           -           -             -              (592,276)                  -              -     
                                ---------  ----------    ----------         ----------             ----------     ----------    
BALANCES, AUGUST 31, 1991       3,071,659         307         2,193         (1,434,929)                  -              -     
YEAR ENDED AUGUST 31,1992:
  Issuance of common stock        394,736          39     2,252,860               -                (1,184,059)          -     
  Net loss                           -           -             -            (1,414,562)                  -              -     
                                ---------  ----------    ----------         ----------             ----------     ----------    
BALANCES, AUGUST 31, 1992       3,466,395         346     2,255,053         (2,849,491)            (1,184,059)          -     
YEAR ENDED AUGUST 31, 1993:
  Net loss                           -           -             -            (1,357,669)                  -              -     
                                ---------  ----------    ----------         ----------             ----------     ----------    
BALANCES, AUGUST 31, 1993       3,466,395         346     2,255,053         (4,207,160)            (1,184,059)          -     
YEAR ENDED AUGUST 31, 1994:
  Net loss                           -           -             -              (699,650)                  -              -     
                                ---------  ----------    ----------         ----------             ----------     ----------    
BALANCES, AUGUST 31, 1994       3,466,395         34      2,255,053         (4,906,810)            (1,184,059)          -     
YEAR ENDED AUGUST 31, 1995:
  Shares canceled in connection
    with the consummation of the
    reorganization plan        (3,466,395)       (346)   (2,255,053)              -                 1,184,059           -     
  Net loss                           -           -             -              (837,210)                  -              -     
  Effect of adoption of
    fresh-start reporting            -           -       (2,814,258)         5,744,020                   -              -     
  Shares issued in connection
    with debt discharge at
    $.25 per share                187,000      37,400         9,350               -                      -              -     
  Shares issued in connection
    with reorganization plan
    at $.25 per share           8,000,000   1,600,000       400,000               -                   (95,000)          -     
                                ---------  ----------   -----------         ----------             ----------     ----------    
BALANCES, AUGUST 31, 1995       8,187,000   1,637,400    (2,404,908)              -                   (95,000)          -     
YEAR ENDED AUGUST 31, 1996:
  Issuance of common stock under
    private placement at $1.00
    per share                     300,000      60,000       240,000               -                      -              -     
  Issuance of common stock in
    exchange for services at 
    $1.00 per share                62,500      12,500        50,000               -                      -           (44,643)
  Collection of stock 
    subscription receivable          -           -             -                  -                    95,000           -     
  Net loss                           -           -             -            (1,634,802)                  -              -      
                                ---------  ----------    ----------         ----------             ----------     ----------    
BALANCES, AUGUST 31, 1996       8,549,500   1,709,900    (2,114,908)        (1,634,802)                  -           (44,643)
YEAR ENDED AUGUST 31, 1997:
  Issuance of common stock under
    private placement at a range
    of $.75 to $1.00 per share  1,117,700     223,540       869,160               -                      -              -     
  Recognition of unearned 
    compensation                     -           -             -                  -                      -            44,643
  Net loss                           -           -             -            (1,599,841)                  -              -     
                                ---------  ----------    ----------         ----------             ----------     ----------    
BALANCES, AUGUST 31, 1997       9,667,200  $1,933,440   $(1,245,748)       $(3,234,643)            $     -        $     -     
                                =========  ==========   ===========         ==========             ==========     ==========
</TABLE>
See accompanying notes to consolidated financial statements.

                                                  F-5
<PAGE>

                          NOFIRE TECHNOLOGIES, INC.
                        (A Development Stage Company)

                          STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                 July 31, 1987
                                                                             (Date of inception)
                                                       Year Ended August 31,       through
                                                         1997         1996     August 31, 1997
                                                      ----------   ----------      ----------  CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                 <C>          <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                            $(1,599,841) $(1,634,802)    $(8,460,770)
 Adjustments to reconcile net loss to net
  Cash flows from operating activities:
   Depreciation and amortization                         345,727      345,423         784,091
   Extraordinary gain on debt discharge                     -            -           (449,583)
   Amortization of interest expense for      
     settled liabilities                                 231,681      208,258         439,939
   Revaluation of assets and liabilities to
     fair value                                             -            -            482,934
   Litigation settlement                                    -            -            198,996
   Common stock issued in exchange for services           44,643       17,857          62,500
   Changes in operating assets and liabilities
   (net of effects from reverse purchase acquisition):
      Inventories                                        (40,081)     (27,485)        (96,842)
      Prepaid expenses                                    (7,371)       8,878         (15,093)
      Accounts payable and accrued expenses               94,514     (405,091)      2,685,274
      Security deposits                                     -             286         (18,473)
      Deferred salaries                                  190,008      190,008         390,978
      Obligation from discontinued operations               -            -             51,118
                                                      ----------   ----------      ---------- 
       Net cash flows from operating activities         (740,720)  (1,296,668)     (3,944,931)
                                                      ----------   ----------      ---------- 

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of equipment                                  (1,032)      (3,484)        (27,801)
   Increase in patent costs                                 -            -           (131,290)
   Acquisition accounted for as a reverse purchase          -            -           (517,893)
                                                      ----------   ----------      ---------- 

       Net cash flows from investing activities           (1,032)       3,484)       (676,984)
                                                      ----------   ----------      ---------- 

CASH FLOWS FROM FINANCING ACTIVITIES: 
   Proceeds from notes payable                              -            -            721,000
   Principal payments on notes payable                      -            -            (75,000)
   Principal payments on settled liabilities            (347,664)  (1,091,071)     (1,779,735)
   Proceeds from issuance of common stock              1,092,700      300,000       4,369,040
   Collection of stock subscription receivable              -          95,000          95,000
   Proceeds from issuance of long-term debt                 -            -            785,113
   Advances received from stockholders                      -          66,253          76,253
   Interest accrued on advance from stockholders          (5,253)        -             (5,253)
   Proceeds from issuance of 8% convertible debentures      -         436,002         436,002
                                                      ----------   ----------      ---------- 
 Net cash flows from financing activities                739,783     (193,816)      4,622,420
                                                      ----------   ----------      ---------- 
NET CHANGE IN CASH                                        (1,969)  (1,493,968)            505

CASH AT BEGINNING OF YEAR                                  2,474    1,496,442            -  
                                                      ----------   ----------      ---------- 
CASH AT END OF YEAR                                    $     505   $    2,474      $      505
                                                      ==========   ==========      ========== 

SUPPLEMENTAL CASH FLOW INFORMATION:
   Interest paid                                       $  10,847   $   12,433     $    43,678
                                                      ==========   ==========     =========== 

  Income taxes paid                                   $    -       $     -        $    -
                                                      ==========   ==========     =========== 

   Common stock issued in exchange for
    settlement of debt                                $    -       $     -        $    46,750
                                                      ==========   ==========     =========== 

   Common stock issued in exchange for
    subscriptions receivable                          $    -       $     -        $    95,000
                                                      ==========   ==========     =========== 

   Common stock issued in exchange for
    services                                          $  44,643    $   17,857     $    62,500
                                                      ==========   ==========     =========== 
</TABLE>

See accompanying notes to financial statements.

                                    F-6
<PAGE>


                          NOFIRE TECHNOLOGIES, INC.
                        (A Development Stage Company)

                        NOTES TO FINANCIAL STATEMENTS



Note 1 - Nature of the Business and Summary of Significant Accounting 
Policies:

Nature of the Business - The Company manufactures and markets intumescent 
fire retardant products.  The Company, which has realized limited sales 
while it continues to develop a market for its products, has been 
operating as a development stage enterprise since inception.

Estimates and Uncertainties - The preparation of financial statements in 
conformity with generally accepted accounting principles requires 
management to make estimates and assumptions that affect the reported 
amounts of assets and liabilities and disclosure of contingent assets and 
liabilities at the date of the financial statements and the reported 
amounts of revenues and expenses during the reporting period.  Actual 
results, as determined at a later date, could differ from those estimates.

Financial Instruments - Financial instruments include cash, other assets, 
accounts payable, accrued expenses, settled liabilities, due to 
stockholders and convertible debentures.  The amounts reported for 
financial instruments are considered to be reasonable approximations of 
their fair values.  The fair value estimates presented herein were based 
on market or other information available to management.  The use of 
different market assumptions and/or estimation methodologies could have a 
material effect on the estimated fair value amounts.

Inventories - Inventories are stated at the lower of cost (first-in, 
first-out method) or market.

Equipment - Equipment is recorded at cost and is depreciated primarily 
using the straight-line method over the estimated useful lives of 5 to 7 
years for furniture and fixtures, manufacturing equipment and data 
processing equipment.  Depreciation expense was $3,523 and $3,219 for the 
years ended August 31, 1997 and 1996, respectively.

Intangible Asset - Patents and the excess of reorganization value over net 
assets are amortized on a straight-line basis over 5 years.  Amortization 
expense totaled $342,204 for the years ended August 31, 1997 and 1996.

Income Taxes - Deferred income taxes arise from temporary differences 
between financial and tax reporting, principally for deferred 
compensation, imputed interest on settled claims and net operating loss 
carry forwards.


                                    F-7
<PAGE>

                          NOFIRE TECHNOLOGIES, INC.
                        (A Development Stage Company)

                        NOTES TO FINANCIAL STATEMENTS


Stock-Based Compensation - Statement of Financial Accounting Standards No. 
123 "Accounting for Stock-Based Compensation," ("FAS 123") encourages, but 
does not require companies to record compensation cost for stock-based 
employee compensation plans at fair value.  The Company has chosen to 
continue to account for stock-based compensation using the intrinsic value 
method prescribed in Accounting Principles Board Opinion No. 25, 
"Accounting for Stock Issued to Employees," and related Interpretations.  
Accordingly, compensation cost for warrants is measured as the excess, if 
any, of the quoted market price of the Company's stock at the date of the 
grant over the amount an employee must pay to acquire the stock.

Net Loss Per Share - Loss per share is based on the weighted average number 
of common shares outstanding during the year.

The warrants issued and convertible debentures outstanding are not 
considered since their impact would be anti-dilutive.

New Accounting Pronouncements - Effective in 1998, the Company will be 
required to adopt Statement of Financial Accounting Standards Board FAS 
128 ("Earning Per Share").  The impact of the adoption of FAS 128 is not 
expected to have a  material effect on the Company's financial statements.


Note 2 - Basis of Presentation and 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 
has reported substantial losses since inception.  The Company's viability 
as a going concern is dependent upon its ability to achieve profitable 
operations through increased sales, raising additional financing or 
receiving additional capital.

On August 11, 1995, the Company emerged from Chapter 11 of the United 
States Bankruptcy Code pursuant to a plan of reorganization (the "Plan").  
As of August 11, 1995, in accordance with AICPA Statement of Position 90-7 
"Financial Reporting by Entities in Reorganization Under the Bankruptcy 
Code" (SOP 90-7), the Company adopted "fresh start reporting" and 
implemented the effects of such adoption in its balance sheet as of August 
31, 1995.

Under the principles of fresh start reporting, the Company's total assets 
were recorded at their estimated reorganization value, with the 
reorganization value allocated to identifiable assets on the basis of 
their estimated fair value.

                                      F-8
<PAGE>

                          NOFIRE TECHNOLOGIES, INC.
                        (A Development Stage Company)

                        NOTES TO FINANCIAL STATEMENTS


The Company's reorganization value of $1,750,000 included its patents for 
its intumescent fire retardant products which were valued at $1,500,000.
On August 31, 1997, the Company had a net book value recorded for patents 
and excess of reorganization value over net assets totaling $1,026,613. 
Future recoverability of these intangible assets continues to be 
evaluated.  At August 31, 1997, future recoverability has been evaluated 
based on an independent appraisal conducted by a valuation specialist to 
determine marketability of the Company's product to customers and in the 
alternate, marketability of the patents to outside parties possessing the 
ability to utilize the technology supported in the intangibles.  As a 
result, no impairments have been recognized at August 31, 1997.

As discussed in Note 3, the Company has a liability for settled claims 
payable to creditors and incurred accrued expenses in connection with its 
reorganization.  Certain settled claims, including accrued interest, due 
on September 27, 1997 and 1996 remain unpaid.  Without additional 
financing/capital or the achievement of profitable operations, funds for 
repayment of these installments or future ones 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 the revenues needed to realize profitable operations and obtain 
the necessary financing and/or capital for the payment of outstanding 
obligations.


Note 3 - Settled Claims:

Settled claims consist of claims payable to creditors for which payment 
has been deferred beyond the Plan's effective date pursuant to the terms 
and conditions of the Plan, as agreed upon between the Company and its 
creditors.  During the year ended August 31, 1996 the payment dates due 
under the Plan were modified and extended by approximately one month for 
each annual payment.  At August 31, 1997, settled liabilities of 
$2,371,959, net of deferred interest of approximately $263,000 (to state 
the claims at present value) is payable as follows:

     Year Ended August 31,
     1998                    $   839,357
     1999                        446,538
     2000                      1,062,152
     2001                         23,912
                              ----------  
                              $2,371,959
                              ==========

                                        F-9
<PAGE>

                          NOFIRE TECHNOLOGIES, INC.
                        (A Development Stage Company)

                        NOTES TO FINANCIAL STATEMENTS


The Company is currently delinquent on its scheduled payments to certain 
creditors due September 27, 1997 and 1996 in the gross amount of 
approximately $815,000.  The Company does not have funds available for 
repayment and without additional capital or financing, payments cannot be 
made.


Note 4 - Accounts Payable and Accrued Expenses:

Accounts payable and accrued expenses consist of the following:

                                                  August 31,
                                              1997        1996   
                                             --------    --------
Legal fees                                   $303,737    $241,520
Interest                                       59,306      22,024
Payroll and payroll taxes                      35,060      12,476
Other                                          40,184      47,753
                                             --------    --------
                                             $438,287    $323,773
                                             ========    ========


Note 5 - Convertible Debentures:

During the year ended August 31, 1996 the Company issued to various 
accredited investors $436,000 in 8% convertible debentures each having a 
maturity date of January 31, 1999.

The debentures entitle the holders, on or before December 30, 1998, to 
convert the debt into common stock at a rate of one share for each $1 
principal amount plus any outstanding accrued interest.  As of August 31, 
1997 no debentures have been converted and unpaid interest has been 
accrued in the amount of $53,000.


Note 6 - Related Party Transactions:

The following summarizes related party transactions for the year ended 
August 31, 1997:

Due to Stockholders - Due to stockholders at August 31, 1997 includes a 
note for $35,000 due to an officer/stockholder which bears interest at 8% 
per annum and non-interest bearing advances totaling $36,000 due to 
another officer/stockholder.  Interest associated with the loans, totaling 
$4,764, has been accrued at August 31, 1997.

                                   F-10
<PAGE>


                          NOFIRE TECHNOLOGIES, INC.
                        (A Development Stage Company)

                        NOTES TO FINANCIAL STATEMENTS


Settled Claims - At August 31, 1997, the present value of settled claims 
payable includes amounts due to current officers, key employees and 
members of the Board of Directors of the Company totaling approximately 
$791,000 (Note 3).

Warrants - During the year ended August 31, 1996, the Company issued 
warrants to various officers and directors for the purchase of 572,500 
shares of common stock at exercise prices of $1.00 and $3.25.  The 
warrants are exercisable at intervals ranging from immediately upon 
issuance to ratably over a 3 year period.  During the year ended August 
31, 1997, the Company issued additional warrants to various officers, key 
employees and directors for the purchase of 885,000 shares at an exercise 
price of $2.00 excercisable over a five year period (Note 12).


Note 7 - Commitments and Contingencies:

Lease - The Company leases its facilities for a period of one year with 
total lease commitments for August 31, 1998 approximating $98,000.

Rent expense, inclusive of taxes and insurance, was approximately $94,000 
and $90,000 for the years ended August 31, 1997 and 1996, respectively.

Employment Contract - On June 27, 1996 the Company entered into an 
employment contract with its president.  The contract is for a term of 
three years, effective August 11, 1995, at $135,000 per year.

The terms of this contract specify payment of a base salary of $95,000 per 
annum with the balance deferred and due once the Company achieves certain 
defined sales levels.

At August 31, 1997, the Company has recognized a liability for the portion 
of salary not yet paid under this contract plus additional salaries not 
yet paid to other officers/employees who are not under formal contract 
with the Company.

Consulting Agreement - Effective on July 1, 1996 the Company entered into 
a consulting agreement expiring January 31, 1997 for among other 
consideration, public relation activities performed on behalf of the 
Company.  The Company issued 62,500 shares of its common stock in exchange 
for these services and recognized expense, on a pro rata basis, for the 
years ended August 31, 1997 and 1996 of approximately $45,000 and $17,500, 
respectively.


                                    F-11
<PAGE>

                          NOFIRE TECHNOLOGIES, INC.
                        (A Development Stage Company)

                        NOTES TO FINANCIAL STATEMENTS


Note 8 - Sources of Supply:

Numerous components of the Company's products are available from a small 
number of suppliers.  In the event that these suppliers were to terminate 
the manufacture or sale of such components for any reason, then the 
manufacture of the Company's products could be interrupted.


Note 9 - Income Taxes:

As a result of the issuance of common stock pursuant to the Plan, the 
Company experienced a greater than 50% change of ownership as defined in 
Internal Revenue Code Section 382 ("Section 382").  Consequently, the 
Company's ability to utilize net operating losses generated prior to the 
effective date of the Plan is limited during the carryforward periods.  
The Company has determined that the annual limitation under Section 382 on 
its ability to utilize net operating loss carry forwards, totaling 
approximately $4,000,000, to be approximately $150,000 per year expiring 
in 2010.

Subsequent to the effective date of the Plan, the Company has generated 
approximately $2,345,000 in net operating losses which expire in 2012.

The Company has a deferred tax asset of approximately $1,925,000 at August 
31, 1997, representing principally the tax benefit of the loss carry 
forwards under Section 382 and for periods subsequent to the effective 
date of the Plan.  This deferred tax asset has been offset by a 100% 
valuation allowance.  A valuation allowance is provided when it is more 
likely than not that some portion of the deferred tax asset will not be 
realized.  Based on the Company's operating results to date, a full 
valuation allowance has been recorded at August 31, 1997.


Note 10 - Major Customers:
Sales to four customers represented 25%, 23%, 12% and 10% of net sales for 
the year ended August 31, 1997.  Sales to three other customers 
represented 34%, 28% and 16% of net sales for the year ended August 31, 
1996.


Note 11 - Joint Venture:

On December 1, 1994 the Company entered into a licensing agreement with a 
German entity ("licensee") for producing, manufacturing, marketing and 
distributing the Company's products using the technology protected by the 


                                  F-12
<PAGE>

                          NOFIRE TECHNOLOGIES, INC.
                        (A Development Stage Company)

                        NOTES TO FINANCIAL STATEMENTS


Company's patents.  The licensing agreement applies to motor vehicles, 
industrial and agricultural vehicles and any similar transportation 
vehicles, including their components in a territory defined as worldwide.  
Included in the agreement was a provision for the future establishment of 
a joint venture with the licensee.

The licensing agreement is to expire on June 30, 2000.  As of August 31, 
1997 the joint venture has had no material activity.


Note 12 - Warrants:

During the years ended August 31, 1997 and August 31, 1996, the Company 
issued warrants for the purchase of common stock as follows:

     Exercise        Outstanding;         Warrants      Outstanding;
      Price        September 1, 1996      Granted      August 31, 1997  
      -----        -----------------     ---------     ---------------
      $1.00             990,000               -            990,000
       2.00             229,000          2,180,200       2,409,200
       2.50              35,000               -             35,000
       3.00              25,000            135,000         160,000
       3.25              50,000               -             50,000
       5.00              12,000               -             12,000
                      ---------          ---------       ---------
                      1,341,000          2,315,200       3,656,200
                      =========          =========       =========

Warrants issued prior to August 31, 1997 vest to the holders in various 
intervals ranging from issue date to three years from the date of issue 
and expire five years from grant date.  Warrants issued during the year 
ended August 31, 1997 are exercisable over a period of five years with 
vesting ranging from issue date to one year from issue date.  No warrants 
had been exercised by holders as of August 31, 1997.

As discussed in Note 6, the Company has issued warrants to certain 
officers.  For the years ended August 31, 1997 and 1996, no compensation 
cost has been recognized as the exercise price to acquire the stock 
exceeded the stocks quoted market price at the grant date.


                                 F-13
<PAGE>



                          NOFIRE TECHNOLOGIES, INC.
                        (A Development Stage Company)

                        NOTES TO FINANCIAL STATEMENTS


To report the impact of reporting in accordance with FAS 123, warrants 
granted to officers and key employees are summarized as follows:

Exercise    Warrants     Outstanding;     Outstanding;     Exercisable at
 Price      Granted    August 31, 1997  September 1, 1997  August 31, 1997
 -----      -------    ---------------  -----------------  ---------------
 $1.00         -          475,000          475,000           316,666
  3.25         -           50,000           50,000            50,000
  2.00      760,000       760,000             -              760,000

For purposes of computing compensation expense under FAS 123, the 760,000 
warrants granted during August 31, 1997 were valued at the stock market 
price of $1.75 on grant date.  

Proforma results of operations, had FAS 123 been used to account for 
stock-based compensation cost, would have resulted in additional 
compensation expense of approximately $1,130,000 and $250,000 for the 
years ended August 31, 1997 and 1996, resulting in proforma net losses of 
approximately $2,730,000 and $1,884,000 for those same reporting periods.

The fair value of the warrants were estimated at the date of grant using a 
Black-Scholes option pricing model with the following weighted-average 
assumptions, respectively:  risk-free interest rates of 6.0%, dividend 
yield of 0.0%, volatility factors of the expected market price of the 
Company's Common Stock of 100% and an expected life equaling the warrants 
exercise periods.

The Black-Scholes option valuation model was developed for use in 
estimating the fair value of traded options which have no vesting 
restrictions and are fully transferable.  In addition, option valuation 
models require the input of highly subjective assumptions including the 
expected stock price volatility.  Because the Company's warrants have 
characteristics significantly different from those of normal publicly 
traded stock, and because changes in the subjective input assumptions can 
materially affect the fair value estimate, in management's opinion, the 
existing models do not necessarily provide a reliable single measure of 
the fair value of its employee stock warrants.








                                 F-14
<PAGE>