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 February 28, 2010
[] 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
--- ---
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: 45,090,745 shares of Common
Stock as of March 31, 2010.
Page 1
NOFIRE TECHNOLOGIES, INC.
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements:
Balance Sheets as of February 28, 2010(unaudited)
and August 31, 2009 3
Statements of Operations for the Six Months
and Three months ended February 28, 2010 and 2009
(unaudited) 5
Statements of Cash Flows for the
Six Months ended February 28, 2010 and 2009
(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
February 28, August 31,
2010 2009
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(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $ 30,469 $ 6,089
Accounts receivable - trade 86,768 89,498
Inventories 186,968 90,563
Prepaid expenses and other current assets 13,325 4,848
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Total Current Assets 317,530 190,998
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OTHER ASSETS:
Security deposits 38,357 37,240
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$ 355,887 $228,238
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See accompanying notes to financial statements
Page 3
NOFIRE TECHNOLOGIES, INC.
BALANCE SHEETS
February 28, August 31,
2010 2009
----------- ----------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
CURRENT LIABILITIES:
Settled liabilities $ 378,031 $ 378,031
Accounts payable and accrued expenses 2,314,816 2,170,975
Loans and advances payable to
stock holders 103,548 189,148
Deferred salaries 3,106,543 2,915,870
Loans payable 486,163 452,890
Convertible Debentures 8% (net) 693,602 519,096
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Total Current Liabilities 7,082,703 6,626,010
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LONG TERM LIABILITY
Deferred revenue-licenses 10,588 11,242
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock $.01 par value:
Authorized - 150,000,000 shares
issued and outstanding 45,090,745
shares at February 28, 2010 and
41,761,715 at August 31, 2009 450,907 406,360
Capital in excess of par value 19,909,902 19,293,602
Stock subscription receivable (15,250) (13,250)
Accumulated Deficit (27,082,963) (26,095,778)
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Total Stockholders' Equity (Deficiency) (6,737,404) (6,409,014)
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$ 355,887 $ 228,238
========== ==========
See accompanying notes to financial statements
Page 4
NOFIRE TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
For the Six Months For the Three Months
Ended Ended
February 28, February 29, February 28, February 29,
2010 2009 2010 2009
---------- ------ ------ ------
(UNAUDITED) (UNAUDITED)
SALES
Product $ 381,962 $ 74,833 $ 299,173 $ 166,571
Licenses - 346,520 - -
Revenues 8,680 - 1,088 -
-------- --------- ---------- ---------
NET SALES 390,642 421,353 300,261 166,571
---------- --------- ---------- ----------
COSTS AND EXPENSES:
Cost of sales 197,829 247,791 99,246 60,242
Research and development costs 29,462 22,684 15,485 10,666
General and administrative (includes
equity based compensation expense of
$100,321 and $44,250 for the six
months ended February 28, 2010 and
February 28 2009 and $54,076 and
$44,250 for the three months ended
February 28, 2010 and February 28,
2009) 558,598 590,325 286,022 312,490
---------- ---------- ----------- ----------
785,889 860,800 400,753 383,278
---------- --------- ----------- ----------
LOSS FROM OPERATIONS (395,247) (439,447) (100,492) (216,707)
---------- ---------- ----------- ----------
OTHER EXPENSES:
Interest expense (includes
equity based interest expense of
$426,195 and $100,503 for the six
months ended February 28,2010 and
February 28, 2009 and $326,562 and
$71,827 for the three months ended
February 28,2010 and February 28,
2009) 633,430 286,187 409,984 168,566
---------- ---------- ------------ --------
LOSS BEFORE INCOME TAXES (1,028,677) (725,634) (510,476) (385,263)
INCOME TAX BENEFIT 41,492 21,453 42,036 -
---------- ---------- ------------- ---------
NET LOSS $ (987,185)) $ (704,181) $(468,440) $(385,263)
========== ========== ============= ==========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING BASIC AND DILUTED 42,507,191 40,281,798 43,629,223 40,285,965
========== ========== ============= ==========
BASIC AND DILUTED EARNINGS LOSS
PER COMMON SHARE $ (0.02) $ (0.02) $ (0.01) $ (0.01)
========== ========== ============== =========
See accompanying notes to financial statements
Page 5
NOFIRE TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
For the six Months
Ended
February 28, February 28,
2010 2009
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(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (987,185) $(704,181)
Adjustments to reconcile net loss to
cash flows from operating activities:
Equity issued in exchange for services 100,321 44,250
Warrants issued in exchange for debt
Extension -
Amortization of interest expense for
Discount on notes payable 174,506 100,503
Equities issued as interest and beneficial
Conversion features on current and past
Due loans payable 250,096 -
Changes in operating assets and liabilities
Amortization of deferred revenue (654) (654)
Inventory (96,405) 72,764
Accounts receivable 2,730 60,817
Prepaid and other expenses (8,477) (22,253)
Accounts payable and accrued expenses 141,179 311,910
Deferred salaries 190,673 221,049
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Net cash flows from operating activities (233,176) 84,205
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See accompanying notes to financial statements
Page 6
NOFIRE TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
For the six Months
Ended
February 28, February 28,
2010 2009
--------- ---------
(UNAUDITED)
CASH FLOWS FROM INVESTING ACTIVITIES
Security deposits (1,117) (174)
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Net cash flows from investment activities (1,117) (174)
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CADH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock
net of related expenses 311,000 -
Net proceeds (repayment of) short term loans 33,273 (26,848)
Payments on advances from stockholders (85,600) (59,145)
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Net cash flows from financing activities 258,673 (85,993)
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NET CHANGE IN CASH 24,380 (1,962)
CASH AT BEGINNING OF PERIOD 6,089 2,334
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CASH AT END OF PERIOD
$ 30,469 $ 372
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 9,026 $ 49,380
========== ==========
Income taxes paid (received) $ (42,036) $(21,453)
=========== ===========
See accompanying notes to financial statements
Page 7
NOFIRE TECHNOLOGIES, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
February 28, 2010
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-K for the
year ended August 31, 2009 (the 10-K) 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-K for the most recent fiscal year.
NOTE 2- 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 and fasb guidance for recording equity based compensation.
The weighted average fair value of warrants and shares has been estimated on
the date of grant using the Black-Scholes pricing model. There was $100,321 and
$44,250 of expense recorded for the six months ended February 28, 2010 and
February 28,2009, respectively
Page 8
NOFIRE TECHNOLOGIES, INC
NOTES TO FINANCIAL STATEMENT
(Unaudited)
February 28, 2010
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 six Months ended February 28,
2010 2009
Risk free interest rate 2.54% 1.67%
Expected life
Yrs 4.5 4.5
Dividend rate 0.0 0.0%
Expected volatility 161% 234%
New Accounting Pronouncements -
Revenue Recognition -Multiple Deliverable Revenue Arrangements
In October 2009, the FASB issued guidance for Revenue Recognition Multiple
Deliverable Revenue Arrangements (Subtopic 605-25 ) Subtopic. This
accounting standards update establishes the accounting and reporting guidance
for arrangements under which the vendor will perform multiple revenue
generating activities. Vendors often provide multiple products or services to
their customers. Those deliverables often are provided at different points in
time or over different time periods. Specifically, this Subtopic addresses how
to separate deliverables and how to measure and allocate arrangement
consideration to one or more units of accounting. The amendments in this
guidance will affect the accounting and reporting for all vendors that enter
into multiple-deliverable arrangements with their customers when those
arrangements are within the scope of this Subtopic. This Statement is
effective for fiscal years, and interim periods within those fiscal years,
beginning on or after June 15, 2010. Earlier adoption is permitted. If a
vendor elects early adoption and the period of adoption is not the beginning
of the entitys fiscal year, the entity will apply the amendments under this
Subtopic retrospectively from the beginning of the entitys fiscal year. The
presentation and disclosure requirements shall be applied retrospectively for
all periods presented. Management believes this Statement will have no impact
on the financial statements of the Company once adopted.
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 Companys financial
statements
NOTE 3 - Managements 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 Companys 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 Companys ability to
continue as a going concern.
Page 9
NOFIRE TECHNOLOGIES, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
February 28, 2010
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 Other Debt:
In September 2009 the Company borrowed $33,000 from a qualified
individual. The Company pledged the proceeds from the sale of the 2008
New Jersey tax loss carry forward.
In conjunction with the above the Company issued five year warrants to
purchase 50,000 shares of the Companys common stock at $.08 per share.
The warrants vested immediately.
In December 2009 the loan was repaid with the proceeds of the sale.
In November 2009 two qualified individuals loaned the Company a total
of $50,000 at the rate of 15%.
In conjunction with the above the Company issued five year warrants to
purchase 50,000 shares of the Company s common stock at $.12 and $.15per
share.
The warrants vested immediately.
In December 2009 a qualified individual loaned the Company a total
of $75,000 at the rate of 15%.
In conjunction with the above the Company issued five year warrants to
purchase 100,000 shares of the Company s common stock at $.11 per share.
The warrants vested immediately.
NOTE 5- Equity Transactions
Warrants were issued during the period as follows:
Type Issue Date Expiration Date Shares of Stock Exercise Price
Investors (2) October 08 October 13 1,504,436 $.30
Investors (2) November 08 November 13 550,000 $.25-$.30
Individual September 09 September 19 50,000 $.08
Investor October 09 October 11 300,000 $.0833
Individual (5) October 09 October 14 118,943 $.04-$.06
Individuals (3) November 09 November 14 67.000 $.10-$.14
Individuals (2) December 09 December 14 83,468 $.07-$.10
Employee s (5) December 09 December 14 700,000 $.08
Investors (4) December 09 December 11-14 1,141,250 $.08-$.11
Individuals(3) January 10 January 15 472,071 $.06-$.10
Employee s (4) January 10 January 15-17 3,392,575 $.10
Investor s (6) January 10 January 12-15 2,011,399 $.06-$.10
Individual February 10 February 15 39,666 $.105
Employee February 10 February 15 125,000 $.10
Page 10
NOFIRE TECHNOLOGIES, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
February 28, 2010
During the six months ended February 28, 2010 and February 28, 2009 362,000
and 970,000 warrants to purchase shares of the Company s common stock
expired.
NOTE 6 - COMMITMENTS AND CONTINGENCIES:
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. On December 18, 2009 a
summary judgment was entered against the Company .The Company believes this
lawsuit is without merit. The contract should have been voided for reason, and
intends to vigorously dispute the claim.
NOTE 7 - SUBSEQUENT EVENTS:
The Company has evaluated the subsequent disclosure through April 16, 2010
For its adequacy.
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.
Page 11
COMPARISON SIX MONTHS ENDED February 28, 2010 AND February 29, 2009:
Sales of $390,642 for the six months ended February 28, 2010 represented an
decrease of 7.3% from the $421,353 for the comparable six-month period of
the prior year. Cost of goods sold during the same period decreased from
$247,791 to $197,829 resulting in a gross profit of $192,816 compared to
$173,562 in the prior year. Selling, general and administrative expenses for
the six months ended February 28, 2010 were $463,549, representing a decrease
of $82,526 or 15.1% from the $546,075 of the similar period of the prior year.
COMPARISON THREE MONTHS ENDED February 28, 2010 and February 29, 2009:
Sales of $300,261 for the three months ended February 28, 2010 represented a
increase of 80.5% from the $166,571 for the comparable three-month period of
the prior year. Cost of goods sold during the same period increased from
$60,122 to $99,246 resulting in a gross profit of $201,015 compared to
$106,549 in the prior year. Selling, general and administrative expenses for
the three months ended February 28, 2010 were $231,946 representing a
decrease of $36,294 or 13.5 from the $268,240 of the similar period of the
prior year.
During the periods ended February 28, 2010 and February 29, 2009, the Company
realized approximately $41,492 and $21,453, 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 February 28, 2010 the Company had cash a balance of $ 30,469.
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. On December 18, 2009 a
summary judgement was entered against the Company .The Company believes this
lawsuit is without merit. The contract should have been voided for reason, and
intends to vigorously dispute the claim.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the period, 3,929,166 shares of common stock sold for $311,000.
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
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: April 16, 2010 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