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, 2002
[] 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: 20,622,352 shares of Common
Stock as of January 08,2003.
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. Financial Statements:
Balance Sheets as of November 30, 2002(unaudited)
and August 31, 2002 3
Statements of Operations for the Three Months
ended November 30,2002 and 2001 (unaudited) 5
Statements of Cash Flows for the
Three Months ended November 30, 2002 and 2001 6
(unaudited)
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
Certification of Financial Information 13
Sarbanes-Oxley Act Section 906 Certification Exhibit 1
Page 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
November 30, August 31,
2002 2002
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(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $ 1,587 $ 483
Accounts receivable - trade 2,417 26,086
Inventories 121,485 138,285
Prepaid expenses and other current assets 40,692 52,219
Receivable for sale of tax loss
carryforward 179,719 -
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Total Current Assets 345,900 217,073
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EQUIPMENT, less accumulated depreciation 8,238 8,819
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OTHER ASSETS:
Patents, less accumulated amortization of
$1,518,057 at November 30, 2002 and
$1,516,404 at August 31, 2002 14,974 16,627
Security deposits 19,379 19,379
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34,353 36,006
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$ 388,491 $ 261,898
========== ==========
See accompanying notes to financial statements
Page 3
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
November 30, August 31,
2002 2002
----------- ----------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
CURRENT LIABILITIES:
Settled liabilities $1,178,432 $1,178,432
Accounts payable and accrued expenses 1,077,422 1,022,456
Loans and advances payable to
stockholders 15,595 10,550
Deferred salaries 1,154,176 1,071,639
Loan payable 135,000 60,000
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Total Current Liabilities 3,560,625 3,343,077
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock $.20 par value:
Authorized - 50,000,000 shares
Issued and outstanding - 20,627,530
shares at November 30, 2002 and
August 31, 2002 $4,125,505 $ 4,125,506
Capital in excess of par value 3,308,919 3,352,919
Deficit accumulated in the development
stage (10,606,558) (10,559,604)
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Total Stockholders' Equity (Deficiency) (3,172,134) (3,081,179)
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$ 388,491 $ 261,898
========== ==========
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
2002 2001 November 30, 2002
---------- --------- ----------
(UNAUDITED) (UNAUDITED)
NET SALES $ 101,593 $ 61,088 $ 1,403,793
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COSTS AND EXPENSES:
Cost of sales 52,636 34,038 734,378
Write-down of excess inventory - - 55,000
General and administrative 238,617 287,639 14,112,391
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291,253 321,677 14,901,769
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LOSS FROM OPERATIONS (89,660) (260,589) (13,497,976)
---------- ---------- ----------
OTHER EXPENSES:
Interest expense 37,088 32,629 1,459,508
Interest income ( 75) ( 102) (24,215)
Reorganization item - - 365,426
Litigation settlement - - 198,996
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37,013 32,5 1,999,715
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LOSS BEFORE DISCONTINUED OPERATIONS
AND EXTRAORDINARY ITEM (226,673) (293,116 (15,497,691)
DISCONTINUED OPERATIONS - (1,435,392)
---------- ---------- ----------
LOSS BEFORE EXTRAORDINARY ITEM (226,673) (293,116) (16,933,083)
EXTRAORDINARY ITEM - Gain on
debt discharge - - 507,952
---------- --------- ----------
LOSS BEFORE INCOME TAES (226,673) (293,11 (16,425,131)
DEFERRED INCOME TAX BENEFIT 179,719 205,960 592,446
---------- ---------- ----------
NET LOSS $ (46,954) $ (87,156) $(15,832,685)
========== ========= ==========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 20,627,530 19,820,430
========== ==========
BASIC AND DILUTED EARNINGS LOSS
PER COMMON SHARE $ (0.00) $ (0.00)
========== ==========
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
2002 2001 November 30, 2002
--------- --------- ----------
(UNAUDITED) (UNAUDITED)
<C
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (46,954) $ ( 87,156) $(15,832,685)
Adjustments to reconcile net loss to
net cash flows from operating activities:
Depreciation and amortization 2,234 2,232 1,837,182
Extraordinary gain on debt dischare - - (507,952)
Amortization of interest expense for
Settled liabilities - 634,522
Amortization of interest expense for
discount on note payable - 6,742 13,484
Revaluation of assets and liabilities
to fair value - - 482,934
Litigation settlement - - 198,996
Common stock issued in exchange for
services - - 141,780
Repricing of warrants (44,000)
Write-down of excess inventory - - 55,000
Changes in operating assets and liabilities
(net of effects from reverse purchase
acquisition)
Accounts receivable - trade 23,668 8,070 ( 2,418)
Inventories 16,800 30,000 (176,485)
Prepaid expenses 11,526 (1,230) (40,693)
Receivable for sale of state
tax loss carryforward (179,719) (205,960) (179,719)
Accounts Payable and accrued exp. 60,012 17,820 3,561,459
Security deposits - - (19,379)
Deferred salaries 82,537 56,819 1,154,476
Obligation from discontinued
operations - - 51,118
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Net cash flows from operating activities ( 73,896) (172,663) (8,628,380)
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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
2002 2001 November 30, 2002
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(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt - - 1,506,113
Principal payments on notes payable - - (75,000)
Principal payment on settled liabilities - - (2,884,416)
Proceeds from issuance of common stock,
net of related expenses - - 8,724,943
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 - - 1,936,002
Proceeds from short-term loans 75,000 150,000 135,000
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Net cash flows from financing activities 75,000 150,000 9,352,892
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NET CHANGE IN CASH 1,104 (22,663) 1,587
CASH AT BEGINNING OF PERIOD 483 44,412 -
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CASH AT END OF PERIOD $ 1,587 $ 21,749 $ 1,587
========== ========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ - $ 817 $ 80,253
========== ========== ==========
Income taxes paid (received) $ $ (205,960) (592,446)
========== ========== ==========
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 $ - $ - $ 131,700
========== ========== ==========
See accompanying notes to financial statements
Page 7
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
November 30, 2002
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, 2002 (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
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, 2002
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. Without achieving
these, there is substantial doubt about the Company's ability to continue as a
going concern.
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 - Loan Payable:
In November 2002,the company borrowed $75,000 from an accredited investor. The
loan bears interest of 12% and is secured by the assignment of the proceeds of
the fiscal 2003 sale of the state operating loss carryforward.
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.
William A. Retz, R. Adm., USN (Ret) resigned effective January 2, 2003 as chief
executive officer, director, and employee of the Company for personal reasons
Admiral Retz has not had any disagreements with the management of the
Company. Admiral Retz is continuing to perform servies for the Company, and
Admiral Retz and the Company are negotiating an agreement pursuant to which
such services will be rendered.
Dr. Samuel Gottfried, President of the Company has been selected by the Board of
Directors to serve as chief executive officer.
COMPARISON THREE MONTHS ENDED NOVEMBER 30, 2002 AND NOVEMBER 30, 2001
Sales of $101,593 for the three months ended November 30, 2002 represented an
increase of 66% from the $61,088 for the comparable three-month period of the
prior year. Cost of goods sold during the same periods increased 55.5% from
$34,038 to $52,636 resulting in a gross profit of $48,957 compared to $27,050
in the prior year. Selling, general and administrative expenses for the three
months ended November 30, 2002 were $238,617, representing a decrease of
$49,022 or 17.3% from the $287,639 of the similar period of the prior year.
The most significant reduction was $44,000 in repricing warrants.
Page 10
During the quarters ended November 30, 2002 and 2001 the Company realized
approximately $181,000 and $206,000, respectively, through the sale of a
portion of its New Jersey Net Operating Loss Carry Forward under a
program sponsored by that state.
LIQUIDITY AND CAPITAL RESOURCES
At November 30, 2002 the Company had cash balances of $ 1,587. In order to
fund continuing operations during the three months ended on that date,
$ 75,000 was obtained through a sale of a note to an accredited investor.
The note bears interest of 12% and is secured by the assignment of the proceeds
of the fiscal 2003 sale of the state operating loss carryforward described
above. On December 17,2002, the Company received approximately $180,000due from
the sale of their New Jersey State net operating loss carryforward, and
repayment of this obligation was made.
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.
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, 2002.
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 12,2003 NoFire Technologies, Inc.
By: /s/ Samuel Gottfreid
Samuel Gottfreid
Chief Executive Officer
By: /s/ Sam Oolie
Sam Oolie
Chairman of the Board,
Chief Financial Officer
Page 12
I, Sam Oolie, certify that:
1. I have reviewed this annual report on Form 10-KSB of NoFire
Technologies, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit tostate a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered
by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report,fairly present in all material
respects the financial condition, results of operations and cash flows
of
the registrant as of, and for, the periods presented in this annual
report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's board of directors (or
persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified auditors
any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I indicated in this
quarterly report that there were no significant changes in internal
controls or in other factors that could significantly affect internal
control subsequent to the date of our most recent evaluation, including
any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date:January 12, 2003 /s/Sam Oolie
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Sam Oolie,
Chief Financial Officer
Page 13
I, Samuel Gottfried certify that:
1. I have reviewed this annual report on Form 10-KSB of NoFire
Technologies, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report,fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for theregistrant and
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's board of directors (or
persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in
this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: January 12,2002 /s/ Samuel Gottfreid
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Samuel Gottfreid
Chief Executive Officer
Page 14
CERTIFICATION
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and
(b) of section 1350, chapter 63 of title 18, United States Code), each of the
undersigned officers of NoFire Technologies, Inc., a Delaware corporation (the
company), does hereby certify, to the best of such officer's knowledge and
belief, that:
The Quarterly Report on Form 10-QSB for the Quarter ended November
30,2002 of the Company fully complies with the requirements of section
(a) or 15 (d) of the Securities Exchange Act of 1934: and
The information contained in the Form 10-QSB fairly presents in all
material respects, the financial condition and results of operations
the Company.
Dated: January 12, 2003 /s/ Samuel Gottfreid
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Chief Executive Officer
Dated: January 12, 2003 /s/ Sam Oolie
-----------------------
Chief Financial Officer
EXHIBIT 1