SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended November 30, 2001
[ ] 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.
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(Name of small business issuer in its charter)
Delaware 22-3218682
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
21 Industrial Avenue, Upper Saddle River, New Jersey 07458
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (201) 818-1616
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
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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
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State the number of shares of each of the issuer's classes of common equity
outstanding at the latest practicable date: 19,820,430 shares of Common
Stock as of December 31, 2001.
Transitional Small Business Disclosure Format (check one):
YES NO X
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Page 1
NOFIRE TECHNOLOGIES, INC.
FORM 10-QSB
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Unaudited Financial Statements:
Balance Sheets as of November 30, 2001
and August 31, 2001 3
Statements of Operations for the Three Months
ended November 30, 2001 and 2000 5
Statements of Cash Flows for the
Three Months ended November 30, 2001 and 2000 6
Notes to Unaudited Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Part II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 12
Page 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
November 30, August 31,
2001 2001
----------- ----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $ 21,749 $ 44,412
Accounts receivable - trade 14,383 22,453
Inventories 123,095 153 095
Prepaid expenses and other current assets 52,494 51,264
Receivable for sale of tax loss
carryforward 205,960 -
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Total Current Assets 417,681 271,224
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EQUIPMENT, less accumulated depreciation 10,563 11,143
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OTHER ASSETS:
Patents, less accumulated amortization of
$1,511,450 at November 30, 2001 and
$1,509,798 at August 31, 2001 21,581 23,233
Security deposits 19,379 19,379
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40,960 42,612
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$ 469,204 $ 324,979
========== ==========
See accompanying notes to financial statements
Page 3
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
November 30, August 31,
2001 2001
----------- ----------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
CURRENT LIABILITIES:
Settled liabilities $1,187,503 $1,187,503
Accounts payable and accrued expenses 786,305 768,485
Loans and advances payable to
stockholders 10,250 10,250
Deferred salaries 816,808 759,989
Loan payable - 8% due January 31, 2002
less unamortized discount of $6,742 143,258 -
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Total Current Liabilities 2,944,124 2,726,227
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock $.20 par value:
Authorized - 50,000,000 shares
Issued and outstanding - 19,820,430
shares at November 30, 2001 and
August 31, 2001 3,964,086 3,964,086
Capital in excess of par value 3,220,339 3,206,855
Deficit accumulated in the development
stage (9,659,345) (9,572,189)
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Total Stockholders' Equity (Deficiency) (2,474,920) (2,401,248)
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$ 469,204 $ 324,979
========== ==========
See accompanying notes to financial statements
Page 4
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
July 13, 1987
(Date of
For the Three Months Inception)
Ended November 30, through
2001 2000 November 30, 2001
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(UNAUDITED) (UNAUDITED)
NET SALES $ 61,088 $ 37,220 $ 1,114,186
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COSTS AND EXPENSES:
Cost of sales 34,038 16,758 590,231
Write-down of excess inventory - - 55,000
General and administrative 287,639 373,832 12,960,093
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321,677 390,590 13,605,324
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LOSS FROM OPERATIONS (260,589) (353,370) (12,491,138)
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OTHER EXPENSES:
Interest expense 32,629 50,361 1,338,984
Interest income (102) (1,993) (23,785)
Reorganization items - - 365,426
Litigation settlement - - 198,996
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32,527 48,368 1,879,621
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LOSS BEFORE DISCONTINUED OPERATIONS
AND EXTRAORDINARY ITEM (293,116) (401,738) (14,370,759)
DISCONTINUED OPERATIONS - - (1,435,392)
---------- ---------- ----------
LOSS BEFORE EXTRAORDINARY ITEM (293,116) (401,738) (15,806,151)
EXTRAORDINARY ITEM - Gain on
debt discharge - - 507,952
---------- ---------- ----------
LOSS BEFORE INCOME TAXES (293,116) (401,738) (15,298,199)
DEFERRED INCOME TAX BENEFIT 205,960 206,767 412,727
---------- ---------- ----------
NET LOSS $ (87,156) $ (194,971) $(14,885,472)
========== ========== ==========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 19,820,430 16,610,151
========== ==========
BASIC AND DILUTED EARNINGS LOSS
PER COMMON SHARE $ (0.00) $ (0.01)
========== ==========
See accompanying notes to financial statements
Page 5
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
July 13, 1987
(Date of
For the Three Months Inception)
Ended November 30, through
2001 2000 November 30, 2001
--------- --------- ----------
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (87,156) $ (194,971) $(14,885,472)
Adjustments to reconcile net loss to
net cash flows from operating activities:
Depreciation and amortization 2,232 2,232 1,828,250
Extraordinary gain on debt discharge - - (507,952)
Amortization of interest expense for
settled liabilities - - 634,522
Amortization of interest expense for
discount on note payable 6,742 - 6,742
Revaluation of assets and liabilities
to fair value - - 482,934
Litigation settlement - - 198,996
Common stock issued in exchange for
services - 10,080 141,780
Write-down of excess inventory - - 55,000
Changes in operating assets and liabilities
(net of effects from reverse purchase
acquisition)
Accounts receivable - trade 8,070 20,872 (14,383)
Inventories 30,000 (24,372) (178,095)
Prepaid expenses (1,230) 5,047 (52,494)
Receivable for sale of state
tax loss carryforward (205,960) - (205,960)
Accounts payable and accrued
expenses 17,820 (88,136) 3,265,296
Security deposits - - (19,379)
Deferred salaries 56,819 - 816,808
Obligation from discontinued
operations - - 51,118
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Net cash flows from operating activities (172,663) (269,248) (8,382,289)
---------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment - - (40,712)
Increase in patent costs - - (164,320)
Acquisition accounted for as a
reverse purchase - - (517,893)
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Net cash flows from investing activities - - (722,925)
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See accompanying notes to financial statements
Page 6
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
July 13,1987
(Date of
For the Three Months Inception)
Ended November 30, through
2001 2000 November 30, 2001
--------- --------- ----------
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt - - 1,506,113
Principal payments on long-term debt - - (75,000)
Principal payment on settled liabilities - (5,778) (2,857,210)
Proceeds from issuance of common stock,
net of related expenses - - 8,474,943
Payments on advances from stockholders - - (60,750)
Loans and advances from stockholders - - 79,053
Interest accrued on loans from
stockholders - - (8,053)
Proceeds from issuance of convertible
debentures - 600,000 1,936,002
Proceeds from short-term loans 150,000 - 150,000
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Net cash flows from financing activities 150,000 594,222 9,126,963
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NET CHANGE IN CASH (22,663) 324,974 21,749
CASH AT BEGINNING OF PERIOD 44,412 103,607 -
---------- ---------- ----------
CASH AT END OF PERIOD $ 21,749 $ 428,581 $ 21,749
========== ========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 817 $ 1,349 $ 74,938
========== ========== ==========
Income taxes paid (received) $ (205,960) $ (206,767) $ (412,727)
========== ========== ==========
Common stock issued in exchange
for settlement of debt $ - $ - $2,439,816
========== ========== ==========
Common stock issued in exchange
for subscriptions receivable $ - $ - $ 95,000
========== ========== ==========
Common stock issued in exchange for
services $ - $ 10,080 $ 141,780
========== ========== ==========
See accompanying notes to financial statements
Page 7
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
November 30, 2001
NOTE 1 - Basis of Presentation:
The balance sheet at the end of the preceding fiscal year has been derived
from the audited balance sheet contained in the Company's Form 10-KSB for the
year ended August 31, 2001 (the "10-KSB")and is presented for comparative
purposes. All other financial statements are unaudited. In the opinion of
management, all adjustments which include only normal recurring adjustments
necessary to present fairly the financial position, results of operations and
cash flows for all periods presented have been made. The results of
operations for interim periods are not necessarily indicative of the operating
results for the full year.
Footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States
of America have been omitted in accordance with the published rules and
regulations of the Securities and Exchange Commission. These financial
statements should be read in conjunction with the financial statements and
notes thereto included in the 10-KSB for the most recent fiscal year.
Loss per Share - Loss per share is based on the weighted average number of
shares outstanding during the periods. The effect of warrants outstanding and
shares issuable in connection with convertible debentures is not included
since it would be anti-dilutive.
NOTE 2 - Reorganization:
The Company owned 89% of the outstanding common stock of both No Fire Ceramic
Products, Inc. and No Fire Engineering, Inc. together with an option to
acquire the remaining 11% of such stock. Both of those subsidiaries were
dissolved during the fiscal year ended August 31, 1997.
Under a Chapter 11 proceeding, the Bankruptcy Court confirmed a Plan of
Reorganization for the Company which became effective on August 11, 1995.
Claims of creditors, to the extent allowed under the Plan, were required to be
paid over a four year period.
Page 8
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
November 30, 2001
NOTE 3 - Management's Actions to Overcome Operating and Liquidity
Problems:
The Company's financial statements have been presented on the going concern
basis which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company's viability as a
going concern is dependent upon its ability to achieve profitable operations
through increased sales and/or obtaining additional financing.
The Company has a liability for settled claims payable to creditors in
connection with its reorganization under the Plan. Without the achievement
of profitable operations or additional financing, funds for repayment would
not be available.
Management believes that successful passing of stringent tests, obtaining
various civil and government approvals, and actions it has undertaken to
revise the Company's operating and marketing structure should provide it
with the opportunity to generate revenues needed to realize profitable
operations and to attract the necessary financing and/or capital for the
payment of outstanding obligations.
NOTE 4 - Warrants:
In September 2001, the Company received $150,000 from an accredited investor
in exchange for a note bearing interest at 8% and payable no later than
January 31, 2002. The Company also granted to the investor a warrant for the
purchase of 100,000 shares of the Company's common stock at an exercise price
of $0.20 per share. Accordingly, the note has been discounted to reflect the
calculated fair value of the warrant issued.
In November 2001, the expiration date for warrants to purchse 885,000 shares
of the Company's common stock, granted from October 1966 to June 1997, was
extended to November 2006. In addition, these warrants were repriced
whereby the exercise price was reduced from $2.00 per share to $0.35 per
share. At November 30, 2001, no additional expense exists relating to the
repricing because the calculated fair value of the repriced warrants is less
than the fair value of the warrants as originally issued.
In November 2001, the Company issued warrants to the Chief Executive Officer
of the Company to purchase 100,000 shares of the Company's common stock for
$0.35 per share, expiring in five years. The warrants vest immediately.
Page 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company continued its product development and application testing, and now
has numerous certifications for specific applications. Since August 1995, the
Company has applied for eight patents, five of which have been issued. The
other three are pending. Additionally, one patent has been purchased by the
Company. The Company is substantially increasing its marketing efforts
principally by retaining the services of specialized distribution firms. The
Company's management believes that marketing efforts to date have brought the
Company closer to achieving greater sales for applications in many diverse
industries including: military, maritime, wood products, structural steel and
nuclear power plants. Significant tests have been passed and approvals
received to qualify the Company's products in naval and other military and
governmental applications. Aggressive marketing efforts are underway to
obtain orders in these applications. Obstacles encountered in obtaining
orders for most applications are the continuing tests and approvals required,
competition against well established and better capitalized companies, cost,
the slow process of specifying new products in highly regulated industrial
applications, and the decisions not to use any fire retardant product.
In general, the Company's products perform their intended uses well and are
in a form that is safe and easy to use. The Company's most pressing need
continues to be cash infusion as discussed below in the section on Liquidity
and Capital Resources. The Company is limiting its research and development
efforts in order to concentrate on sales of existing products. While new
market opportunities frequently arise, the Company has opted to concentrate on
targeting sales of present products rather than developing new products.
Efforts to establish additional U.S. distributors are being accelerated.
Additional efforts are also being directed to increase international sales by
establishing distributor relationships in strategic locations throughout the
industrialized world.
The number of manufacturing and quality control employees will increase with
increased production. The salaried administrative and marketing staff will be
evaluated and may be increased to support sales and marketing initiatives.
Additional support for direct sales is expected to be provided by independent
commission agents or employees compensated principally by commission.
COMPARISON THREE MONTHS ENDED NOVEMBER 30, 2001 AND NOVEMBER 30, 2000
Sales of $61,088 for the three months ended November 30, 2001 represented an
increase of 64% from the $37,220 for the comparable three-month period of the
prior year. Cost of goods sold during the same periods increased 103% from
$16,758 to $34,038 resulting in a gross profit of $27,050 compared to $20,462
in the prior year. Selling, general and administrative expenses for the three
months ended November 30, 2001 were $287,639, representing a decrease of
$86,193 or 23% from the $373,832 of the similar period of the prior year.
The most significant reductions were $24,000 in marketing costs and $18,000
in legal fees. The convertible debentures open during the quarter in 2000
were converted to common stock prior to the start of the quarter this year
which accounted for the principal part of the $17,732 decrease in interest
expense between the periods. During the quarters in both 2000 and 2001,
the Company realized about $206,000 through the sale of a portion of its
New Jersey Net Operating Loss Carry Forward under a program sponsored by
that state.
Page 10
LIQUIDITY AND CAPITAL RESOURCES
At November 30, 2001 the Company had cash balances of $21,749. In order to
fund continuing operations during the three months ended on that date,
$150,000 was obtained through a sale of a note to an accredited investor.
The note bears interest of 8%, is due no later than January 31, 2002, and
is secured by the assignment of the proceeds of the fiscal 2002 sale of the
state operating loss carryforward described above. Because of its limited
cash resources, the Company has deferred payment of $1,187,503 of the
installments of the Chapter 11 liability to unsecured creditors that were
due in September 1996, 1997, 1998 and 1999. Of that deferred amount,
$790,686 is due to officers and directors of the Company. In order to pay
those liabilities and meet working capital needs until significant sales
levels are achieved, the Company will continue to explore alternative
sources of funding including exercise of warrants, bank and other borrowings,
issuance of convertible debentures, issuance of common stock to settle debt,
and the sale of equity securities in a public or private offering. There is
no assurance that the Company will be successful in securing requisite
financing. On December 20, 2001, the Company received the $205,960 due from
the sale of the State net operating loss carryforward.
Page 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended November 30, 2001.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: January 8, 2002 NoFire Technologies, Inc.
By: /s/ William A. Retz
William A. Retz
Chief Executive Officer
By: /s/ Sam Oolie
Sam Oolie
Chairman of the Board,
Chief Operating Officer
and Treasurer
Page 12