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, 2007
[] 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: 39,822,620 shares of Common
Stock as of January 10,2008.
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, 2007(unaudited)
and August 31, 2007 3
Statements of Operations for the Three Months
ended November 30, 2007 and 2006 (unaudited) 5
Statements of Cash Flows for the
Three Months ended November 30, 2007 and 2006
(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 12
Item 2. Unregistered sales of Equity securities and
Use of Proceeds 12
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,
2007 2007
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(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $ 19,681 $ 31,416
Accounts receivable - trade 12,578 301,286
Inventories 141,042 97,784
Prepaid expenses and other current assets 17,392 94,842
Receivable-sale of state tax loss 48,152 -
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Total Current Assets 238,845 525,328
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OTHER ASSETS:
Security deposits 37,065 37,065
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$ 275,910 $562,393
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See accompanying notes to financial statements
Page 3
NOFIRE TECHNOLOGIES, INC.
BALANCE SHEETS
November 30, August 31,
2007 2007
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(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
CURRENT LIABILITIES:
Settled liabilities $ 378,031 $ 378,031
Accounts payable and accrued expenses 1,322,308 1,363,228
Loans and advances payable to
stock holders 140,438 199,438
Deferred salaries 2,154,545 2,080,505
Loans payable 290,735 290,735
Convertible Debentures 8% 595,928 595,928
Convertible Debenture 10% - 165,000
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Total Current Liabilities 4,881,985 5,072,865
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LONG TERM LIABILITY - -
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock $.01 par value:
Authorized - 150,000,000 shares
issued and outstanding 39,762,620
shares at November 30, 2007 and
39,383,932 at August 31, 2007 397,626 393,830
Capital in excess of par value 18,055,970 17,877,058
Accumulated Deficit (23,059,671) (22,781,360)
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Total Stockholders' Equity (Deficiency) (4,606,075) (4,510,472)
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$ 275,910 $ 562,393
========== ==========
See accompanying notes to financial statements
Page 4
NOFIRE TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
For the Three Months
Ended November 30,
2007 2006
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(UNAUDITED)
SALES
Sales -Product $ 83,842 $ 222,988
Licenses _ 15,510
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NET SALES 83,842 238,498
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COSTS AND EXPENSES:
Cost of sales 30,596 127,518
General and administrative 282,010 238,163
Testing 15,418 10,809
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328,024 376,490
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LOSS FROM OPERATIONS (244,182) (137,992)
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OTHER EXPENSES:
Interest expense including
$62,224 of equity based interest
expense for the three months
ended November 30, 2006 81,831 141,412
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LOSS BEFORE INCOME TAXES (326,013) (279,404)
DEFERRED INCOME TAX BENEFIT 48,152 37,876
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NET LOSS $ (277,861) $ (341,528)
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WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 39,616,185 36,583,944
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BASIC AND DILUTED EARNINGS LOSS
PER COMMON SHARE $ (.01) $ (0.01)
========== ==========
See accompanying notes to financial statements
Page 5
NOFIRE TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
For the Three Months
Ended November 30,
2007 2006
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(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (277,861) (241,528)
Adjustments to reconcile net loss to
cash flows from operating activities:
Depreciation and amortization 395
Amortization of interest expense for
discount on note payable 59,540
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 16,500 2,684
Changes in operating assets and liabilities
Inventory (43,258) (1,047)
Accounts receivable 288,708 (72,541)
Prepaid expenses and other 77,450 (5,617)
Receivable for sale of state
tax loss (48,152) (37,976)
Accounts payable and accrued expenses (41,370) 101,921
Deferred salaries 74,040 88,115
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Net cash flows from operating activities 46,052 (95,245)
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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,
2007 2006
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(UNAUDITED)
CASH FLOWS FROM INVESTING ACTIVITIES
Security deposits - (351)
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Net cash flows from investment activities - (351)
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CADH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock
net of related expenses 166,208 117,480
Proceeds on advances from stockholders (59,000) 6,499
Payments on short-term loans (165,000) (44,029)
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Net cash flows from financing activities (57,792) 79,950
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NET CHANGE IN CASH (11,735) (15,646)
CASH AT BEGINNING OF PERIOD 31,416 18,10
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CASH AT END OF PERIOD
$ 19,681 $ 2,461
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SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 29,369 $ 19,254
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Income taxes paid (received) $ (48,152) $ (37,876)
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See accompanying notes to financial statements
Page 7
NOFIRE TECHNOLOGIES, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
November 30, 2007
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, 2007 (the "10-KSB") and is presented for comparative
purposes. All other financial statements are unaudited. In the opinion of
management, all adjustments that 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 affects 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- Effective September 1, 2006, the Company
adopted provisions of SFAS 123R for recording equity based compensation.
The weighted average fair value of warrants has been estimated on the date of
grant using the Black-Scholes warrants pricing model. The Company has granted
warrants to purchase common stock to employees in the quarter ended November
30, 2006 in the amount of $10,809. and such warrants vested immediately upon
issuance. No such expense was recorded for the quarter ended November 30,2007.
Page 8
NOFIRE TECHNOLOGIES, INC
NOTES TO FINANCIAL STATEMENT
(Unaudited)
November 30, 2007
In accordance with SFAS 123, the fair value of each warrant 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,
2007 2006
Risk free interest rate 4.76? 5.25%
Expected life
Yrs 4.5 5
Dividend rate 0.0 0.0%
Expected volatility 110% 112%
FASB 157 - Fair Value Measurements
In September 2006, the FASB issued FASB Statement No. 157. This
Statement defines fair value, establishes a framework for measuring
fair value in generally accepted accounting principles (GAAP), and
expands disclosures about fair value measurements. This Statement
applies under other accounting pronouncements that require or permit
fair value measurements, the Board having previously concluded in those
accounting pronouncements that fair value is a relevant measurement
attribute. Accordingly, this Statement does not require any new fair
value measurements. However, for some entities, the application of this
Statement will change current practices. This Statement is effective
for financial statements for fiscal years beginning after November 15,
2007. Earlier application is permitted provided that the reporting
entity has not yet issued financial statements for that fiscal year.
Management believes this Statement will have no impact on the financial
statements of the Company once adopted.
FASB 159 - Fair Value Option for Financial Assets and Financial Liabilities
In February 2007, the FASB issued FASB Statement No. 159, "The Fair Value
Option for Financial Assets and Financial Liabilities - Including an Amendment
of FASB Statement No. 115" (SFAS 159). This Statement provides companies with
an option to measure, at specified election dates, many financial instruments
and certain other items at fair value that are not currently measured at fair
value. A company that adopts SFAS 159 will report unrealized gains and losses
on items for which the fair value option has been elected in earnings at each
subsequent reporting date. This Statement also establishes presentation and
disclosure requirements designed to facilitate comparisons between entities
that choose different measurement attributes for similar types of assets and
liabilities. This Statement is effective for fiscal years beginning after
November 15, 2007, which for the Company is the first quarter of fiscal 2009.
Management doesn't believe that the adoption of SFAS 159 will have a material
impact.
SFAS 141 (revised) business combinations and SFAS 160 non-controlling
Interests in consolidated financial statements were issued in December 2007.
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
Page 9
NOFIRE TECHNOLOGIES, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
November 30, 2007
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 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 had a one-year
maturity date.
In October 2006 the Company paid $40,000 toward that debt plus accrued
interest to the date of payment.
In December 2007 the Company paid an additional $48,152 of the debt
from the proceeds of the sale of the New Jersey tax carry
forward(see subsequent events)
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.
In September 2007, the 10% Convertible Debenture in the amount of
$165,000 was repaid.
NOTE 6- Equity Transactions
Warrants were issued during the quarter as follows:
Name Issue Expire Amount Exercise Price
Investors (4) September 07 September2012 41,613 $.60
Investors (2) October 07 October 2012 24,551 $.60
Investors November 07 November 2012 86,806 $.50
During the quarters ended November 30, 2006 and November 30, 2007,900,000
and -0- warrants expired.
The Company raised $166,207 through the sale of 305,939 shares of unregistered
common stock and the issuance of 152,970 warrants to purchase common stock at
$.50 to $.60 per share to accredited investors.
The Company issued 43,685 shares of unregistered common stock for the exercise
of warrants and 30,000 shares of unregistered common stock in lieu of interest
in the amount of $16,500.
Page 10
NOFIRE TECHNOLOGIES, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
November 30, 2007
NOTE 7- Subsequent Events
In December 2007 the Company received $48,152 from the sale of the Company's
New Jersey Carry Forward Loss for 2006. The proceeds were used to retire a
portion of a loan, which was collaterized by the receivable.
On December 17, 2007 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 19,2008.
Warrants were issued in December and January as follows:
Name Issue Expire Amount Price
Investors (2) December 07 December 12 75,055 $.25 to.40
Employees (5) December 07 December 12 500,000 $.30
During December 2007 the Company sold to accredited investors 150,910 shares
of unregistered common stock and 75,055 warrants for $52,427.25.
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: utilities 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
government 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.
Any new product opportunity will be pursued if it is viable.
Additional efforts are also being directed to increase international sales
by establishing distributor relationships in strategic locations throughout
the industrialized and third world countries.
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.
Page 11
COMPARISON THREE MONTHS ENDED NOVEMBER 30, 2007 AND NOVEMBER 30, 2006
Sales of $83,842 for the three months ended November 30, 2007 represented a
decrease of 64.8% from the $238,498 for the comparable three-month period of
the prior year. Cost of goods sold during the same period decreased from
$127,518 to $30,596 resulting in a gross profit of $53,246 compared to
$110,980 in the prior year. Selling, general and administrative expenses for
the three months ended November 30, 2007 were $282,010, representing an
increase of $43,847 or 18.4% from the $238,163 for the similar period of the
prior year.
During the quarters ended November 30, 2007 and 2006 the Company realized
approximately $48,152 and $37,876, 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, 2007 the Company had cash a balance of $ 19,681.
During the quarter the Company raised $166,207 through the sale of 305,939
shares of unregistered common stock and the issuance of 152,970 warrants to
purchase common stock at $.50 to $.60 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. Based
on that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures are effective in
ensuring that 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 the Company raised $166,207 through the sale of 305,939
shares of unregistered common stock and the issuance of 152,970 warrants to
purchase common stock at $.50 to $.60 per share to accredited investors.
Page 12
The Company issued 43,685 shares of unregistered common stock for the exercise
of warrants and 30,000 shares of unregistered common stock in lieu of interest
in the amount of $16,500.
Date Title Number Cash Price
9/07 common 126,077 $.60
10/07 common 6,150 $.60
11/07 common 173,612 $.50
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
Page 13
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 22, 2008 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
Page 13