SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended November 30, 2008
[] 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.
-------------------------
(Name of small business issuer in its charter)
Delaware 22-3218682
--------- -----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
21 Industrial Avenue, Upper Saddle River, New Jersey 07458
-----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (201) 818-1616
-------------
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
--- ---
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large Accelerated Filer ___Accelerated Filer___ Smaller Reporting Company [X}
Non Accelerated Filer ____
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). YES [ ] NO [X}
State the number of shares of each of the issuer's classes of common equity
outstanding at the latest practicable date: 40,273,465 shares of Common
Stock as of January 15, 2009.
Page 1
NOFIRE TECHNOLOGIES, INC.
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements:
Balance Sheets as of November 30, 2008(unaudited)
and August 31, 2008 3
Statements of Operations for the Three Months
ended November 30, 2008 and 2007 (unaudited) 5
Statements of Cash Flows for the
Three Months ended November 30, 2008 and 2007
(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. Quantitative and Qualitative Disclosures about
Market Risk 12
Item 4(t). Controls and Procedures 12
Part II - OTHER INFORMATION
Item 1. Legal Proceeding 13
Item 2. Unregistered Sales of Equity Securities and
Use of Proceeds 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,
2008 2008
----------- ----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $ 919 $ 2,334
Accounts receivable - trade 47,640 83,451
Inventories 95,395 203,068
Prepaid expenses and other current assets 41,521 22,419
--------- ----------
Total Current Assets 185,475 311,272
--------- ----------
OTHER ASSETS:
Security deposits 37,065 37,065
---------- ---------
$ 222,540 $348,337
========== ==========
See accompanying notes to financial statements
Page 3
NOFIRE TECHNOLOGIES, INC.
BALANCE SHEETS
November 30, August 31,
2008 2008
----------- ----------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
CURRENT LIABILITIES:
Settled liabilities $ 378,031 $ 378,031
Accounts payable and accrued expenses 1,724,304 1,610,733
Loans and advances payable to
stock holders 209,530 247,874
Deferred salaries 2,543,444 2,449,900
Loans payable 404,583 408,583
Convertible Debentures 8% 595,928 595,928
Debt discount (266,086) -
---------- ---------
Total Current Liabilities 5,589,734 5,691,049
---------- ---------
LONG TERM LIABILITY
Deferred revenue-licences 12,223 12,550
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock $.01 par value:
Authorized - 150,000,000 shares
issued and outstanding 40,273,465
shares at November 30, 2008 and
August 31, 2008 402,735 402,735
Capital in excess of par value 19,072,919 18,778,157
Stock subscription receivable (13,250) (13,250)
Accumulated Deficit (24,841,821) (24,522,904)
---------- ----------
Total Stockholders' Equity (Deficiency) (5,379,417) (5,355,262)
---------- ----------
$ 222,540 $ 348,337
========== ==========
See accompanying notes to financial statements
Page 4
NOFIRE TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
For the Three Months
Ended November 30,
2008 2007
---------- ------
(UNAUDITED)
SALES
Sales Product $ 179,446 $ 83,842
Licenses 75,335 -
---------- ---------
NET SALES 254,781 83,842
---------- ----------
COSTS AND EXPENSES:
Cost of sales 187,668 30,596
General and administrative 277,833 282,010
Testing 12,017 15,418
---------- ----------
477,518 328,024
---------- ---------
LOSS FROM OPERATIONS (222,737) (244,182)
---------- ----------
OTHER EXPENSES:
Interest expense including
$28,676 and $16,500 of equity
based interest expense for the
three months ended November 2008
and 2007 respectively 117,652 81,831
Interest income (18) -
---------- ----------
TOTAL OTHER EXPENSES 117,634 81,831
----------- ----------
LOSS BEFORE INCOME TAXES (340,371) (326,013)
INCOME TAX BENEFIT 21,453 48,152
---------- ----------
NET LOSS $ (318,918) $ (277,861)
========== ==========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 40,273,465 39,616,185
========== ==========
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,
2008 2007
--------- ---------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (318,918) (277,861)
Adjustments to reconcile net loss to
cash flows from operating activities:
Amortization of interest expense for
discount on note payable 28,676 -
Amortization of deferred revenue (327)
Equities issued as interest and beneficial
conversion features on current and past
due loans payable 16,500
Changes in operating assets and liabilities
Inventory 107,673 (43,258)
Accounts receivable 35,811 288,708
Prepaid and other expenses (19,102) 77,450
Receivable for sale of state
tax loss (48,152)
Accounts payable and accrued expenses 113,571 (41,370)
Deferred salaries 93,544 74,040
---------- ---------
Net cash flows from operating activities 40,928 46,052
---------- ---------
See accompanying notes to financial statements
Page 6
NOFIRE TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
For the Three Months
Ended November 30,
2008 2007
--------- ---------
(UNAUDITED)
CASH FLOWS FROM INVESTING ACTIVITIES
---------- --------
Net cash flows from investment activities - -
---------- ---------
CADH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock
net of related expenses - 166,208
Proceeds on advances from stockholders - (59,000)
Repayment of short-term loans (4,000) (165,000)
Loans and advances paid to stockholders (38,343) -
---------- ----------
Net cash flows from financing activities (42,343) (57,792)
---------- ----------
NET CHANGE IN CASH (1,415) (11,735)
CASH AT BEGINNING OF PERIOD 2,334 31,416
---------- ----------
CASH AT END OF PERIOD
$ 919 $ 19,681
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 29,490 $ 29,369
========== ==========
Income taxes paid (received) $ (21,453) $ (48,152)
=========== ===========
See accompanying notes to financial statements
Page 7
NOFIRE TECHNOLOGIES, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
November 30, 2008
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, 2008 (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. There was $28,676 and
$16,500 of expense recorded for the quarters ended November 30, 2008 and
November 30, 2007, respectively.
Page 8
NOFIRE TECHNOLOGIES, INC
NOTES TO FINANCIAL STATEMENT
(Unaudited)
November 30, 2008
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,
2008 2009
Risk free interest rate 2.76% 4.76%
Expected life
Yrs 4.5 4.5
Dividend rate 0.0 0.0%
Expected volatility 211% 110%
New Accounting Pronouncements We have reviewed the issued but not yet
effective accounting pronouncements have deemed such accounting pronouncements
not to be relevant or the adoption of such accounting pronouncements once
effective will not have a material effective on the Company s financial
statements
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 9
NOFIRE TECHNOLOGIES, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
November 30, 2008
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
using the proceeds of the sale of the New Jersey tax carry forward for
the year 2007 for such payment.
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.
NOTE 6- Equity Transactions
Warrants were issued during the quarter as follows:
Name Issue Date Expiration Date Shares of Stock Exercise Price
Investors (2) October 08 October 2013 1,504,436 $.30
Investors (2) November 08 November 2013 550,000 $.25-$.30
During the quarters ended November 30, 2007 and November 30, 2008 900,000
and 2,349,436 warrants to purchase shares of the Company s common stock
expired.
NOTE 7- Subsequent Events
Warrants were issued in January 2009 as follows:
Name Issue Date Expiration Date Shares of Stock Price
Employees (5) January 09 January 14 561,000 $.10
Page 10
NOFIRE TECHNOLOGIES, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
November 30, 2008
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 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.
COMPARISON THREE MONTHS ENDED NOVEMBER 30, 2008 AND NOVEMBER 30, 2007
Sales of $254,781 for the three months ended November 30, 2008 represented an
increase of 206% from the $83,842 for the comparable three-month period of
the prior year. Cost of goods sold during the same period increased from
$30,596 to $187,668 resulting in a gross profit of $67,113 compared to
$53,246 in the prior year. Selling, general and administrative expenses for
the three months ended November 30, 2008 were $277.833, representing a
decrease of $4,177 or 1.5% from the $282,010 for the similar period of the
prior year.
Page 11
During the quarters ended November 30, 2008and 2007 the Company realized
approximately $21,453 and $48,152 , 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, 2008 the Company had cash a balance of $ 919.
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. Quantitative and Qualitative Disclosures about Market Risk
The Company does not issue or invest in financial instruments or derivatives
For trading or speculative purposes. Substantially all of the operations of
the Company are conducted in the United States, and as such are not subject to
Material foreign currency exchange rate risk.
Item 4(t). 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-Q. 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.
Page 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
A complaint was filed in the Superior Court of New Jersey, Law Division,
Bergen County on May 27, 2008. It is alleged by the plaintiff that the Company
entered into a contract with Otis and June Hastings and $250,000 remains due
and owing under said contract. The Company maintains that it has fully
satisfied the terms of the contract, including all monetary obligations. On
December 10, 2008 a mediation was held but the case was not resolved
Discovery is proceeding. The Company believes this lawsuit is without merit
and intends to vigorously dispute the claim.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 6. EXHIBITS
Exhibits 31.1 31.2 Certification of Financial Information
Exhibit 32.1 32.2 Sarbanes-Oxley Act Section 906 Certification
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 20, 2009 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