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, 2006
[] 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: 37,287,499 shares of Common
Stock as of January 10,2007
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, 2006(unaudited)
and August 31, 2006 3
Statements of Operations for the Three Months
ended November 30, 2006 and 2005 (unaudited) 5
Statements of Cash Flows for the
Three Months ended November 30, 2006 and 2005.
(unaudited) 6
Notes to Unaudited Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Item 3. Controls and Procedures 12
Part II - OTHER INFORMATION
Item 1. Legal 13
Item 6. Exhibits 13
Signatures 13
Certification of Financial Information Exhibits 31.1 31.2
Sarbanes-Oxley Act Section 906 Certification Exhibits 32.1 32.2
Page 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NOFIRE TECHNOLOGIES, INC.
BALANCE SHEETS
November 30, August 31,
2006 2006
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(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $ 2,461 $18,107
Accounts receivable - trade 76,952 4,411
Inventories 68,450 67,403
Prepaid expenses and other current assets 5,617 -
Receivable-sale of state tax loss 37,976 -
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Total Current Assets 191,456 89,821
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EQUIPMENT, less accumulated depreciation 691 1,086
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OTHER ASSETS:
Security deposits 37,065 36,714
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$ 229,212 $127,721
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See accompanying notes to financial statements
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NOFIRE TECHNOLOGIES, INC.
BALANCE SHEETS
November 30, August 31,
2006 2006
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(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
CURRENT LIABILITIES:
Settled liabilities $ 378,031 $ 378,031
Accounts payable and accrued expenses 1,254,333 1,152,412
Loans and advances payable to
Stock holders 482,037 475,538
Deferred salaries 1,963,333 1,875,218
Loans payable 345,386 389,415
Convertible Debentures 8% 469,928 469,928
Convertible Debenture 10% 165,000 165,000
Debt discount (60,703) (120,243)
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Total Current Liabilities 4,997,345 4,785,299
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LONG TERM LIABILITY - -
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock $.01 par value:
Authorized - 150,000,000 shares
issued and outstanding 36,702,579
shares at November 30, 2006 and
35,806,621 at August 31, 2006 367,026 358,066
Capital in excess of par value 14,045,805 13,923,791
Accumulated Deficit (19,180,963) (18,939,435)
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Total Stockholders' Equity (Deficiency) (4,768,133) (4,657,578)
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$ 229,212 $ 127,721
========== ==========
See accompanying notes to financial statements
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NOFIRE TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
For the Three Months
Ended November 30,
2006 2005
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(UNAUDITED)
NET SALES $ 238,498 $ 62,231
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COSTS AND EXPENSES:
Cost of sales 127,518 36,232
General and administrative 248,972 226,992
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376,490 263,224
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LOSS FROM OPERATIONS (137,992) (200,993)
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OTHER EXPENSES:
Interest expense including
$62,224 of equity based interest
expense for the three months
ended Novermer 30, 2006 141,412 175,871
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LOSS BEFORE INCOME TAXES (279,404) (376,864)
DEFERRED INCOME TAX BENEFIT 37,876 35,856
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NET LOSS $ (241,528) $ (341,008)
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WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 36,583,944 32,198,933
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BASIC AND DILUTED EARNINGS LOSS
PER COMMON SHARE $ (0.006) $ (0.009)
========== ==========
See accompanying notes to financial statements
Page 5
NOFIRE TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
For the Three Months
Ended November 30,
2006 2005
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(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (241,528) (341,008)
Adjustments to reconcile net loss to
net cash flows from operating activities:
Depreciation and amortization 395 395
Amortization of interest expense for
discount on note payable 59,540 65,734
Equities issued for services 10,809 -
Warrants issued in exchange for loans
By officer 92,875
Equities issued as interest and beneficial
conversion features on current and past
due loans payable 2,684
Repricing of warrants - (35,310)
Changes in operating assets and liabilities
Inventory (1,047) (8,150)
Accounts receivable - (72,541) (1,033)
Prepaid expenses and other (5,617) (88,183)
Receivable for sale of state
tax loss (37,976) -
Accounts payable and accrued expenses 101,921 142,809
Deferred salaries 88,115 115,569
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Net cash flows from operating activities (95,245) (56,302)
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See accompanying notes to financial statements
Page 6
NOFIRE TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
For the Three Months
Ended November 30,
2006 2005
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(UNAUDITED)
CASH FLOWS FROM INVESTING ACTIVITIES
Security deposits (351) (2,048)
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Net cash flows from investment activities (351) (2,048)
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CADH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock,
net of related expenses 117,480 -
Net proceeds from short term loans - 56,335
Payments on advances from stockholders - (9,499)
Proceeds on advances from stockholders 6,499 -
Payments on short term loans (44,029) -
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Net cash flows from financing activities 79,950 46,836
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NET CHANGE IN CASH (15,646) (11,514)
CASH AT BEGINNING OF PERIOD 18,107 14,099
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CASH AT END OF PERIOD
$ 2,461 $ 2,585
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SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 19,254 $ 10,101
========== ==========
See accompanying notes to financial statements
Page 7
NOFIRE TECHNOLOGIES, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
November 30, 2006
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, 2006 (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.
NOTE 2 - Reorganization:
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.
NOTE 3- Summary Of Significant Accounting Policies:
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.
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 accounts
receivable, other assets, accounts payable, accrued expenses, settled
liabilities and due to stockholders. 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.
Equity Based Compensation- The Company adopted the provisions of SFAS
123R on September 1, 2005, under the modified prospective method.
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NOFIRE TECHNOLOGIES, INC
NOTES TO FINANCIAL STATEMENT
(Unaudited)
November 30, 2006
The equity-based employee compensation expense has been determined
utilizing a fair value method, the Black-Scholes option-pricing model.
The Company has recorded no compensation expense for stock options and
warrants granted to employees during the three months ended November 30, 2005.
During the quarter ended November 30, 2006 the Company recorded $10,809 in
compensation expense for the issuance of warrants, see note 6.
In accordance with SFAS 123, the fair value of each option grant has been
estimated as of the date of the grant using the Black-Scholes option pricing
model with the following weighted average assumptions:
For the Three Months ended November 30,
2006 2005
Risk free interest rate 5.25% 4.26%
Expected life
Yrs 5 10
Dividend rate 0.0% 0.0%
Expected volatility 112% 40.6%
NOTE 4 - Management's Actions to Overcome Operating and Liquidity
Problems:
The Company's financial statements have been presented on the going concern
basis which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company's viability as a
going concern is dependent upon its ability to achieve profitable operations
through increased sales and/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.
Page 09
NOFIRE TECHNOLOGIES, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
November 30, 2006
NOTE 5 - Convertible Debentures And Other Debt:
On September 2, 2005 the Company borrowed, from an accredited
investor, $100,000 at the interest rate of 15%. The note has a one year
maturity date.
In conjunction with the above $100,000 note, ten year $.14 warrants
were issued for the purchase of 1,000,000 shares of the Company's
common stock. The recorded debt was discounted for the allocated value
to the warrants issued of $65,734 and is shown on the balance sheet as
$50,700 as of November 30, 2005. The discount was amortized to
expense at approximately $16,000 per quarter.
During October 2005 the Company borrowed from two individuals $36,135.
These loans bore no interest and have no specific due date.
NOTE 6- Equity Transactions
Warrants were issued during the quarter as follows:
Name Issue Expire Amount Exercise Price
Investors September 06 September2011 $ 90,000 $.20
Individuals(3) October 06 October 2011 80,000 $.11 to $.20 (A)
Investors (11) October 06 October 2011 298,661 $.20
Individual November 06 November 2011 10,000 $.16 (A)
Investors (4) November 06 November 2011 59,318 $.20
(A) $13,493 was charged to interest expense in conjunction with 3 out of 4 of
these issuances.
In May 2006, $469,928 of Convertible Debentures previously
issued were reissued.
In conjunction with the above the Company issued 1,200,000 $0.20 five-
year warrants to purchase the Companys common stock. The warrants
vested immediately. The Company charged $269,968 to interest expense
on this transaction. $61,447 of debt discount is being written off at
approximately $5345 per month.
During the quarter ended November 30, 2006 900,000 warrants expired.
The Company raised $117,480 through the sale of 895,958 shares of unregistered
common stock and the issuance of 447,979 warrants to purchase common stock at
$.20 per share to accredited investors.
Page 10
NOFIRE TECHNOLOGIES, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
November 30, 2006
NOTE 7- Subsequent Events
In December 2006 the company received $37,876 in payment on the sale of
the Company's New Jersey Carry Forward Loss for 2005. The proceeds were
used to retire a portion of a loan, which was collaterized by the receivable.
On December 17, 2006 a note payable for $123,800 was extended for an
additional year. The interest rate of 12% remained the same. A late fee of
$12,000 will be paid on February 17,2007.
Warrants were issued in December and January as follows:
Name Issue Expire Amount Price
Officer (1) December 06 December 16 1,400,000 $.20 (A)
Investors (10)December 06 December 11 292,460 $.20
Individual(2) January 07 January 12 300,000 $.20
Employees (5) January 07 January 12 660,000 $.20
(A) In December 2006 the Company issued 1,400,000 warrants to an officer of
the Company. The warrants are convertible into the Company's common stock at
$.20 per share and expire in ten years. These warrants were issued in
recognition of the substantial loans made to the Company. The Company will
record $139,908 as interest expense in conjunction with this issuance.
The warrants vested immediately.
For the period December 1, 2006 through December 20, 2006, the Company sold
307,891 shares of unregistered common stock and warrants for $52,758.
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
have 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 has been 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 governmenta
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 decision 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.
Page 11
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, 2006 AND NOVEMBER 30, 2005
Sales of $238,498 for the three months ended November 30, 2006 represented an
increase of 283% from the $62,231 for the comparable three-month period of
the prior year. Cost of goods sold during the same period increased from
$36,232 to $127,518 resulting in a gross profit of $110,880 compared to
$25,999 in the prior year. Selling, general and administrative expenses for
the three months ended November 30, 2006 were $248,972, representing a
increase of $21,980 or 8.8% from the $226,992 of the similar period of the
prior year.
During the quarters ended November 30, 2006 and 2005 the Company realized
approximately $37,876 and $35,856, 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, 2006 the Company had cash a balance of $ 2,461.
On September 2, 2005 the Company borrowed, from an accredited investor,
$100,000 at the interest rate of 15%. The note had a one-year maturity
date.
In conjunction with the above $100,000 note, ten year $.14 warrants
were issued for the purchase of 1,000,000 shares of the Company's
common stock. The recorded debt was discounted for the allocated value
to the warrants issued of $65,734 and is shown on the balance sheet as
$50,700 as of November 30, 2005. The discount was amortized to
expense at approximately $16,000 per quarter.
During October 2005 the Company borrowed from two individuals $36,135.
These loans bore no interest and have no specific due date.
During the quarter the Company raised $117,480 through the sale of 895,958
shares of unregistered common stock and the issuance of 447,979 warrants to
purchase common stock at $.20 per share to accredited investors.
The Company has deferred payment of $378,031 of the installments of the
Chapter 11 liability to unsecured creditors that were due in September 1996,
1997, 1998 and 1999. 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.
Item 3. CONTROLS AND PROCEDURES
Our management, including the Chief Executive Officer and Chief Financial
Officer, have conducted an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures pursuant to Rule 13a-15
under the Securities Exchange Act of 1934, as amended, (the "1934 Act"), as of
the end of the period covered by this Quarterly Report on Form 10-QSB/A. Based
Page 12
on that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures are effective in
ensuringthat information required to be disclosed by us in the reports we file
or submit under the 1934 Act is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms.
There have been no changes in internal control over financial
reporting that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting during
the period covered by this report.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the quarter ended November 30, 2006 the Company sold to accredited
investors 895,958 shares of the Company s common stock for $117,480. In
conjunction the Company issued five-year warrants to purchase 447,979 shares
of the Company s common stock at an exercise price of $.20 per share.
Date Title Number Cash Price
9/06 common 180,000 $.14
10/06 common 361,557 $.10
10/06 common 99,999 $.11
10/06 common 135,776 $.17
11/06 common 118,636 $.10
The proceeds were used for working capital.
Item 6. EXHIBITS
Exhibits 31.1 31.2 Certification of Financial Information
Exhibit 32.1 32.2 Sarbanes-Oxley Act Section 906 Certification
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SIGNATURES
In accordance with the requirements of the 1934 Act, the registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: January 16, 2007 NoFire Technologies, Inc.
By: /s/ Samuel Gottfried
Sam Gottfried
Chief Executive Officer
By: /s/ Sam Oolie
Sam Oolie
Chairman of the Board,
Chief Financial Officer
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