For Release on November 14, 2007, Trading Symbol: NQB Pink Sheets: NNRI

NNRF, Inc. Files Form 10QSB Quarterly Report 11/14/07

Quarterly Report

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Statement on Forward-Looking Information

Certain information included herein contains statements that may be considered forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act, such as statements relating to plans for product development, product placement, capital spending and financing sources. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made herein. These risks and uncertainties include, but are not limited to, our inability to exercise significant influence or control over the management of the operations of ZAO Electro Machinery Building Plant ATOLL, limited operating history, history of operating losses, the inability to obtain additional capital, the failure to successfully expand our operations, the legal and regulatory requirements related to our industry, the inability to enter into strategic partnerships with state and private owned entities, the loss of key personnel, adverse economic conditions, adverse currency rate fluctuations, the inability to protect our proprietary information against unauthorized use by third parties, the control of our common stock by our management, the classification of our common stock as "penny stock," the absence of any right to dividends, the costs associated with the issuance of and the rights granted to additional securities, the unpredictability of the trading of our common stock and the ability of our Board of Directors to issue up to 10,000,000 shares, $0.001 par value, of Class A and Class B preferred stock, collectively.

Overview

Nucon, Inc. was organized on August 25, 2005 under the laws of the State of Nevada. On May 23, 2006, Stafford Energy, Inc., a Nevada corporation ("Stafford"), acquired 100% of the issued and outstanding capital stock of Nucon, Inc., a Nevada corporation, in exchange for 22,500,000 shares of common stock pursuant to that certain merger and share exchange agreement ("Merger Agreement"). At the closing, Stafford amended its articles of incorporation and changed its name to Nucon-RF, Inc. ("Nucon"), and its two wholly-owned subsidiaries, Abucco Technologies, Inc., a Canadian corporation ("Abucco"), and Stafford Energy Canada, Ltd., a Canadian corporation ("Stafford Canada"), became wholly owned subsidiaries of Nucon. Nucon, Inc., a Nevada corporation, remains a wholly owned subsidiary of Nucon. On July 19, 2007, we amended our articles of incorporation to change our name to "NNRF, Inc.".

As the shares of Stafford common stock issued to Nucon shareholders in the merger transaction represented a controlling interest, the transaction has been accounted for as a recapitalization, or reverse merger, with Nucon being considered the acquirer. The recapitalization has been accounted for at historical cost.

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Abucco Technologies Inc. is a developer and provider of embedded solutions that monitor and control remote devices and appliances using wireless and TCP/IP connections. Given that Abucco's business is not synergistic with that of the Company, NNRF will divest itself of Abucco in 2007. In addition, NNRF will dissolve Stafford Canada in 2007. Stafford Canada has had no operations since inception.

In addition to the two foregoing subsidiaries, the Company incorporated OOO Nucon-RUS ("Nucon-RUS"), a limited liability company formed under the laws of the Russian Federation ("RF") in 2007. Nucon-RUS is a wholly owned subsidiary of Nucon. In January 2007, Nucon became fully accredited to do business in the RF by the Russian Ministry of Justice.

In this report, the references to "we," "us" or "our" relate to Nucon, Inc. from its inception on August 25, 2005 to May 23, 2006, Nucon-RF, Inc. from May 23, 2006 to July 18, 2007, and NNRF, Inc. from July 19, 2007 forward.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect reported amounts and disclosures, some of which may require revision in future periods. The most sensitive estimates affecting our financial statements include, or may include in subsequent periods, future volatility used in valuing equity instruments, allowances for bad debts, depreciable lives of equipment in service and other equipment, amortization periods of intellectual property, deferred revenues, accrued liabilities and deferred tax valuation allowances. By their nature, these judgments are subject to an inherent degree of uncertainty. Our judgments are based on our historical experience, our observance of industry trends, information provided by or gathered from our customers and information available from other outside sources, as appropriate. There can be no assurance that actual results will not differ from our estimates. The most critical policies relate to revenue recognition. The following is a description of our revenues and our revenue recognition policies. The application of these policies, in some cases, requires our management to make subjective judgments regarding the effect of matters that are inherently uncertain.

Plan of Operation

NNRF is a technical solutions company focused on high-end environmental markets in the FSU, Eastern Europe and Asia. NNRF has offices in Moscow, Russia, and Berlin, Germany. Our mission is to provide cutting edge solutions for the management of nuclear waste and power quality challenges facing the Russian, European and Asian markets. We have licensed or acquired technologies in the high-end environmental impact areas of nuclear facility construction, safety and remediation, wastewater treatment, and power quality, and intend to market and either distribute to resellers or sell the products and services related to the foregoing technologies.

Our current clients and partners include Rosenergoatom, the operating utility of Russia's nuclear facilities; Atomstroyexport, established by the Russian government to promote the export of Russian construction, operation and modernization of nuclear power plants abroad; and Stroikomplektinvest, a construction supply distributor acting as NNRF's marketing partner for power quality equipment in the Republic of Tatarstan.

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We recently completed the purchase of 50% of ATOLL, a manufacturer of spare parts for the entire nuclear cycle, including spare parts and mechanisms for nuclear power plants, and handling equipment for nuclear waste containers designed for long term storage of radioactive wastes and spent fuel. We anticipate that our 50% ownership in ATOLL will result in us booking significant revenues and profits in fiscal year 2007 based on the existing on-hand orders of ATOLL. In addition, we recently entered into an agreement whereby we may acquire up to 25.5% of Velcont, a manufacturer operating in the automotive, aviation and nuclear industries As of September 30, 2007, the Company had invested $400,000 and acquired a 2.5% interest in Velcont. We are also in the due diligence phase of our proposed acquisition of 25.5% of JSC Electroprivod and are currently considering other potential acquisitions in the RF.

Historically, all of our revenues have been derived from the business of Abucco. It is our intention to divest ourselves of Abucco as soon as practicable in fiscal 2007 given that its revenues have declined precipitously and its operations are incongruent with the initiatives of NNRF.

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the notes to those statements included elsewhere in this statement. In addition to the historical consolidated financial information, the following discussion and analysis contains forward-looking statements that involve risks and uncertainties.

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors" and elsewhere in this statement.

RESULTS OF OPERATIONS

COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

Revenues. For the three months ended September 30, 2007 and 2006, the Company realized $0 and $1,803, respectively of revenue.

Operating Expenses. For the three months ended September 30, 2007, general and administrative expenses totaled $1,129,508, as compared to $2,586,316 for the three months ended September 30, 2006. The general and administrative expenses for the three months ended September 30, 2007 principally related to non-cash items consisting common stock issued for services valued at $596,500. During the three months ended September 30, 2006, non-cash items consisting of common stock issued for services were approximately $2,111,000

Interest Expense. Interest expense was $1,079,137 for the three months ended September 30, 2007, as compared to $4,820,929 for the three months ended September 30, 2006. The decrease in interest expense is directly related to issuance of common stock during the three months ended September 30, 2006, which was valued at $4,710,252 in excess of the accrued interest satisfied. Interest expense during the three months ended September 30, 2007, consists of $941,805 related to the excess fair value of common stock issued to replaced pledged shares used to satisfy the credit facility liability.

Net Loss. Net loss for the three months ended September 30, 2007 was $2,158,645, as compared to $7,405,621 for the three months ended September 30, 2006.

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COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

Revenues. For the nine months ended September 30, 2006 the Company recorded limited amounts of revenue and costs related to the sales of Abucco's wireless technology products. There were no such sales during the nine months ended September 30, 2007 and thus the Company did not realize any revenues and cost during such period.

Operating Expenses. For the nine months ended September 30, 2007, general and administrative expenses totaled $7,257,037, as compared to $6,121,004 for the nine months ended September 30, 2006. The general and administrative expenses for the nine months ended September 30, 2007 principally relate to non-cash items consisting of $3,492,566 of stock based compensation and stock issued for services of $2,045,225. Foreign currency exchange loss was zero for the nine months ended September 30, 2007, as compared to $1,187 for the nine months ended September 30, 2006.

Interest Expense. Interest expense was $5,871,418 for the nine months ended September 30, 2007, as compared to $4,820,929 for the nine months ended September 30, 2006. The increase in interest expense is directly related to the amortization of discounts and debt offering costs related to the convertible notes and the excess fair value of common stock issued in the settlement of accrued interest on the convertible notes and the Credit Facility.

Net Loss. Net loss for the nine months ended September 30, 2007 was $13,078,455, as compared to $10,939,514 for the nine months ended September 30, 2006.

The foregoing revenues, operating expenses and net losses are not indicative of what future operating results are anticipated to be. Management for the Company believes that revenues should increase measurably and outpace operating expenses, thereby resulting in net income for fiscal year 2007.

Liquidity and Capital Resources.

At September 30, 2007, our principal source of liquidity consisted of $307,629 of cash, as compared to $130,249 of cash at December 31, 2006. As of September 30, 2007, we had working capital of $5,100, as compared to a working capital deficit of $363,880 at December 31, 2006. In addition, our stockholders' equity was $4,980,192 at September 30, 2007, as compared to $335,810 at December 31, 2006.

Our operations used net cash of $1,723,776 during the nine months ended September 30, 2007, as compared to $602,516 during the nine months ended September 30, 2006. Our operations used net cash of $893,863 during the fiscal year ended December 31, 2006, as compared to $113,895 of net cash during the period from Inception to December 31, 2005.

Investing activities for the nine months ended September 30, 2007 used net cash of $1,400,000, as compared to used net cash of $1,121,511 in the nine months ended September 30, 2006. The $1,400,000 used in the nine months ended September 30, 2007 related to the cash payment made on the purchase of an additional 36.75% of ATOLL and the 2.5% interest of Velcont. Investing activities for the fiscal year ended December 31, 2006 used net cash of $1,161,591, as compared to $11,813 of net cash used in investing activities during the period from Inception through December 31, 2005. The majority of the cash used in the fiscal year ended December 31, 2006 related to the purchase of 13.25% of ATOLL for $1,166,250.

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Financing activities provided $3,301,185 during the nine months ended September 30, 2007, as compared to $1,801,826 during the nine months ended September 30, 2006. The majority of the financing provided during the nine months ended September 30, 2007 related to our private placement of 8% convertible promissory notes and $900,000 in proceeds received from the credit facility. Financing activities provided $2,162,060 during the fiscal year ended December 31, 2006 as compared to $152,601 of net cash provided by financing activities during the period from Inception through December 31, 2005. The significant increase related to the receipt by the Company during the fiscal year ended December 31, 2006 of $196,562 of proceeds from shareholder advances, $1,654,630 of proceeds from convertible debt, and $310,868 from the issuance of common stock.

Financing activities provided $900,000 during the three months ended September 30, 2007, as compared to $360,234 during the three months ended September 30, 2006. The majority of the financing provided during the three months ended September 30, 2007 relate to a revolving line of credit. Financing activities provided $2,162,060 during the fiscal year ended December 31, 2006 as compared to $152,601 of net cash provided by financing activities during the period from Inception through December 31, 2005. The significant increase related to the receipt by the Company during the fiscal year ended December 31, 2006 of $196,562 of proceeds from shareholder advances, $1,654,630 of proceeds from convertible debt, and $310,868 from the issuance of common stock.

We will require additional capital in the future to possibly expand the manufacturing facilities of ATOLL, to make acquisitions, and for general working capital. We anticipate that we will require a minimum of $3,500,000 to fund prospective acquisitions. While we hope to achieve some, or all, of the foregoing through cash flow, there can be no assurance that we will be successful in doing so. To the extent we are not, we will seek require additional capital to achieve our long-term business objectives from prior, and possibly other, funding sources. There can be no assurance that such financing will be available, or if available, on acceptable terms. If a future financing is procured in the form of equity, the shareholdings of the current stockholders of the Company will be diluted.

Going Concern Qualification

The Company's independent auditors have included an explanatory paragraph in their report on the December 31, 2006 financial statements discussing issues which raise substantial doubt about the Company's ability to continue as a "going concern." The going concern qualification is attributable to the Company's historical operating losses, the Company's lack of cash reserves and capital, and the amount of capital which the Company projects it needs to achieve profitable operations.

Outlook

We have incurred losses of $13,078,455 and $10,939,514 for the nine months ended September 30, 2007 and 2006, respectively. As of September 30, 2007, we had an accumulated deficit of $25,560,503.

In summary, until we generate sufficient cash from our operations, we will need to rely upon private and institutional sources of debt and equity financing. Based on our existing revolving credit facility with Professional Offshore Opportunity Fund, Ltd., in the amount up to $2,500,000, of which we have drawn down the sum of $900,000, we believe that we will be able to fund our existing operations and required expenditures through the second quarter of 2008. However, we will require additional financing to consummate our pending acquisitions of JSC Electroprivod, Velkont and RUAR. To this end, we estimate that we will need approximately $3,500,000 of additional equity or debt capital which we are currently seeking. There can be no assurance that we will be successful in this endeavor, and if not we will be unable to consummate the acquisitions of the foregoing entities, the result of which would likely have a material effect on our future results of operations.

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Safe Harbor Statement

Statements in this press release that are not historical facts are forward-looking statements, including statements regarding announcements of financial results, business potentiality and other prospective presentations by NUCON-RF, Inc. Such statements reflect management's current views, are based on certain assumptions and involve risks and uncertainties. Actual results, events, or performance may differ materially from the above forward-looking statements due to a number of important factors, and will be dependent upon a variety of factors, including, but not limited to, our ability to obtain additional financing that will allow us to continue our current and future operations and whether demand for our products in domestic and international markets will continue to expand. NUCON-RF undertakes no obligation to publicly update these forward-looking statements to reflect events or circumstances that occur after the date hereof or to reflect any change in NUCON-RF's expectations with regard to these forward-looking statements or the occurrence of unanticipated events.

CONTACT:

NNRF, Inc.
Shareholder Relations
706-201-8888