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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, 2000
[ ] 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: 16,631,151 shares of Common
Stock as of December 31, 2000.
Transitional Small Business Disclosure Format (check one):
YES NO X
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NOFIRE TECHNOLOGIES, INC.
FORM 10-QSB
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Unaudited Financial Statements:
Balance Sheets as of November 30, 2000
and August 31, 2000 3
Statements of Operations for the Three Months
ended November 30, 2000 and 1999 5
Statements of Cash Flows for the
Three Months ended November 30, 2000 and 1999 6
Notes to Unaudited Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Part II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 12
Page 2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
November 30, August 31,
2000 2000
----------- ----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $ 428,581 $ 103,607
Accounts receivable - trade 2,840 23,712
Inventory 127,066 102 694
Prepaid expenses and other current assets 49,475 54,522
--------- ----------
Total Current Assets 607,962 284,535
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EQUIPMENT, less accumulated depreciation 12,886 13,466
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OTHER ASSETS:
Patents, less accumulated amortization of
$1,504,844 at November 30, 2000 and
$1,503,192 at August 31, 2000 28,187 29,839
Security deposits 19,379 19,379
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47,566 49,218
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$ 668,414 $ 347,219
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See accompanying notes to financial statements
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NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
November 30, August 31,
2000 2000
----------- ----------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
CURRENT LIABILITIES:
Current portion of settled liabilities $1,205,638 $1,211,416
Accounts payable and accrued expenses 707,723 795,859
Loans and advances payable to
stockholders 10,250 10,250
Deferred salaries 650,226 650,226
Convertible debentures - current 500,000 500,000
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Total Current Liabilities 3,073,837 3,167,751
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OTHER LIABILITIES:
Convertible debentures - 1/2%
over prime due April 30, 2002 600,000 -
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STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock $.20 par value:
Authorized - 50,000,000 shares
Issued and outstanding - 16,631,151
shares at November 30, 2000 and
16,595,151 at August 31, 2000 3,326,230 3,319,030
Capital in excess of par value 2,250,071 2,247,191
Deficit accumulated in the development
stage (8,581,724) (8,386,753)
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Total Stockholders' Equity (Deficiency) (3,005,423) (2,820,532)
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$ 668,414 $ 347,219
========== ==========
See accompanying notes to financial statements
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NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
July 13, 1987
(Date of
For the Three Months Inception)
Ended November 30, through
2000 1999 November 30, 2000
---------- --------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
NET SALES $ 37,220 $ 45,413 $ 851,133
---------- ---------- ----------
COSTS AND EXPENSES:
Cost of sales 16,758 21,553 466,730
Write-down of excess inventory - - 55,000
General and administrative 373,832 447,644 11,714,073
---------- ---------- ----------
390,590 469,197 12,235,803
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LOSS FROM OPERATIONS (353,370) (423,784) (11,384,670)
---------- ---------- ----------
OTHER EXPENSES:
Interest expense 50,361 31,712 1,156,940
Interest income (1,993) (1,655) (18,854)
Reorganization items - - 365,426
Litigation settlement - - 198,996
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48,368 30,057 1,702,508
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LOSS BEFORE DISCONTINUED OPERATIONS
AND EXTRAORDINARY ITEM (401,738) (453,841) (13,087,178)
DISCONTINUED OPERATIONS - - (1,435,392)
---------- ---------- ----------
LOSS BEFORE EXTRAORDINARY ITEM (401,738) (453,841) (14,522,570)
EXTRAORDINARY ITEM - Gain on
debt discharge - - 507,952
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LOSS BEFORE INCOME TAXES $ (401,738) $ (453,841) $(14,014,618)
DEFERRED INCOME TAX BENEFIT 206,767 - 206,767
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NET LOSS $ (194,971) $ (453,841) $(13,807,851)
========== ========== ==========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 16,610,151 14,035,974
========== ==========
EARNINGS (LOSS) PER SHARE, BASIC
AND DILUTED $ (0.01) $ (0.03)
========== ==========
</TABLE>
See accompanying notes to financial statements
Page 5
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NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
July 13, 1987
(Date of
For the Three Months Inception)
Ended November 30, through
2000 1999 November 30, 2000
--------- --------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (194,971) $ (453,841) $(13,807,851)
Adjustments to reconcile net loss to
net cash flows from operating activities:
Depreciation and amortization 2,232 86,366 1,819,321
Extraordinary gain on debt discharge - - (507,952)
Amortization of interest expense for
settled liabilities - - 634,522
Revaluation of assets and liabilities
to fair value - - 482,934
Litigation settlement - - 198,996
Common stock issued in exchange for
services 10,080 - 141,780
Write-down of excess inventory - - 55,000
Changes in operating assets and liabilities
(net of effects from reverse purchase
acquisition)
Accounts receivable - trade 20,872 - (2,840)
Inventories (24,372) (15,849) (182,066)
Prepaid expenses 5,047 30,818 (49,475)
Accounts payable and accrued
expenses (88,136) 31,889 3,092,074
Security deposits - - (19,379)
Deferred salaries - - 650,226
Obligation from discontinued
operations - - 51,118
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Net cash flows from operating activities (269,248) (320,617) (7,443,592)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment - (6,000) (40,712)
Increase in patent costs - - (164,320)
Acquisition accounted for as a
reverse purchase - - (517,893)
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Net cash flows from investing activities - (6,000) (722,925)
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</TABLE>
See accompanying notes to financial statements
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NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
July 13,1987
(Date of
For the Three Months Inception)
Ended November 30, through
2000 1999 November 30, 2000
--------- --------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt - - 1,506,113
Principal payments on notes payable - - (75,000)
Principal payment of settled liabilities (5,778) (93,298) (2,857,210)
Proceeds from issuance of common stock,
net of related expenses - - 8,474,943
Payments on advances from stockholders - - (60,750)
Loans and advances from stockholders - 194,500 79,053
Interest accrued on loans from
stockholders - - (8,053)
Proceeds from issuance of convertible
debentures 600,000 - 1,536,002
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Net cash flows from financing activities 594,222 101,202 8,595,098
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NET CHANGE IN CASH 324,974 (225,415) 428,581
CASH AT BEGINNING OF PERIOD 103,607 338,089 -
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CASH AT END OF PERIOD $ 428,581 $ 112,674 $ 428,581
========== ========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 1,349 $ 1,370 $ 72,575
========== ========== ==========
Income taxes paid (received) $ (206,767) $ - $ (206,767)
========== ========== ==========
Common stock issued in exchange
for settlement of debt $ - $ - $ 845,176
========== ========== ==========
Common stock issued in exchange
for subscriptions receivable $ - $ - $ 95,000
========== ========== ==========
Common stock issued in exchange for
services $ 10,080 $ - $ 141,780
========== ========== ==========
</TABLE>
See accompanying notes to financial statements
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NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
November 30, 2000
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, 2000 (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 generally accepted accounting principles have been omitted in
accordance with the published rules and regulations of the Securities and
Exchange Commission. These financial statements should be read in conjunction
with the financial statements and notes thereto included in the 10-KSB for the
most recent fiscal year.
Loss per Share - Loss per share is based on the weighted average number of
shares outstanding during the periods. The effect of warrants outstanding and
shares issuable in connection with convertible debentures is not included
since it would be anti-dilutive.
NOTE 2 - Reorganization:
The Company owned 89% of the outstanding common stock of both No Fire Ceramic
Products, Inc. and No Fire Engineering, Inc. together with an option to
acquire the remaining 11% of such stock. Both of those subsidiaries were
dissolved during the fiscal year ended August 31, 1997.
Under a Chapter 11 proceeding, the Bankruptcy Court confirmed a Plan of
Reorganization for the Company which became effective on August 11, 1995.
Claims of creditors, to the extent allowed under the Plan, were required to be
paid over a four year period.
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NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
November 30, 2000
NOTE 3 - Management's Actions to Overcome Operating and Liquidity
Problems:
The Company's financial statements have been presented on the going concern
basis which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company's viability as a
going concern is dependent upon its ability to achieve profitable operations
through increased sales and obtaining additional financing.
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 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.
Agreements for future infusion of capital are discussed in the Management's
Discussion of Liquidity and Capital Resources section.
NOTE 4 - Warrants:
The Company has issued warrants for the purchase of common stock as follows:
Shares Exercise Price
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40,000 $ .40
2,940,000 .50
700,000 .5625
4,104,480 .67
2,777,780 .72
22,500 .75
4,668,718 1.00
52,000 1.25
178,500 1.50
3,435,275 2.00
422,500 3.00
----------
19,341,753
The warrants vest to the holders in various intervals ranging from issue date
to seven years from issuance.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company continued its product development and application testing, and now
has numerous certifications for specific applications. Since August 1995, the
Company has applied for eight patents, five of which have been issued. The
other three are pending. Additionally, one patent has been purchased by the
Company. The Company is substantially increasing its marketing efforts
principally by retaining the services of specialized marketing 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, shipping, wood products, structural steel and
nuclear power plants. Significant tests were passed and approvals received in
the past fiscal year to qualify the Company's products in naval and other
military and governmental applications. Aggressive marketing efforts are
underway to obtain orders in these applications. Obstacles encountered in
obtaining orders for most applications are the continuing tests and approvals
required, competition against well established and better capitalized
companies, cost, and most importantly, the slow process of specifying new
products in highly regulated industrial applications.
In general, the Company's products perform their intended uses well and are
beginning to be sold commercially in a form that is safe and easy to use. The
Company's most pressing need continues to be cash infusion as discussed below
in the section on Liquidity and Capital Resources. The Company is limiting
its research and development efforts in order to concentrate on sales of
existing products. While new market opportunities frequently arise, the
Company has opted to concentrate on targeting sales of present products rather
than developing new products. Efforts to establish additional U.S.
distributors are being accelerated. Additional efforts are also being
directed to increase international sales by establishing distributor
relationships in strategic locations throughout the industrialized world.
The number of manufacturing and quality control employees will increase with
increased production. The salaried administrative and marketing staff will be
evaluated and may be increased to support sales and marketing initiatives.
Additional support for direct sales is expected to be provided by commissioned
independent agents.
COMPARISON THREE MONTHS ENDED NOVEMBER 30, 2000 AND NOVEMBER 30, 1999
Sales of $37,220 for the three months ended November 30, 2000 represented a
decrease of 18% from the $45,413 for the comparable three-month period of the
prior year. Cost of goods sold during the same periods decreased 22% from
$21,553 to $16,758 resulting in a gross profit of $20,462 compared to $23,860
in the prior year. Selling, general and administrative expenses for the three
months ended November 30, 2000 were $373,832, representing a decrease of
$73,812 or 16% from the $447,644 of the similar period of the prior year. The
most significant change was a decrease of $84,000 in the amortization of
patents and other assets. The value of those assets was established at the
conclusion of the Chapter 11 proceeding in 1995 and was amortized over five
years ending in fiscal 2000. This reduced expense was partially offset by an
increase of $33,900 in professional fees which included costs for resolution
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of matters related to the issuance of the new convertible debentures and
acceleration of the cost of the annual audit. The $18,311 increase in
interest expense mainly results from the interest accrued on the new
convertible debentures. During the quarter in 2000, the Company
realized $206,767 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, 2000 the Company had cash balances of $428,581. In order to
fund continuing operations during the three months ended on that date,
$600,000 was obtained through issuance of convertible debentures. The
debentures are convertible into common stock at a price of $0.50 per share,
bear interest at 1/2% over the prime rate and mature on April 30, 2002. If
interest payments are current, the Company may extend the maturity date to
December 31, 2002. The issuance was to an accredited investor. An additional
$206,767 was obtained through the sale of New Jersey Operating Loss Carry
Forward as described above. In an existing agreement, at their option or when
certain sales criteria are met, an investment group consisting of accredited
investors will invest an additional $650,000 in exchange for 866,667 units
consisting of one share of common stock and five-year warrants for two and
one-half shares at an exercise price of $0.75 per share. The investment group
has exercised prior agreements of this nature, and has advised the Company
that it has and will continue to file all reports with the SEC that it deems
appropriate including Schedules 13D and Forms 3 and 4. Because of its limited
cash resources, the Company has deferred payment of $1,187,503 of the
installments of the Chapter 11 liability to unsecured creditors that were due
in September 1996, 1997, 1998 and 1999. Of that deferred amount, $790,686 is
due to officers and directors of the Company. In order to pay those
liabilities and meet working capital needs until significant sales levels are
achieved, the Company will continue to explore alternative sources of funding
including exercise of warrants, bank and other borrowings, issuance of
convertible debentures, issuance of common stock to settle debt, and the sale
of equity securities in a public or private offering such as sales under the
agreement noted above. There is no assurance that the Company will be
successful in securing requisite financing.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended November 30, 2000.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: January 2, 2001 NoFire Technologies, Inc.
By: /s/ William A. Retz
William A. Retz
Chief Executive Officer
By: /s/ Sam Oolie
Sam Oolie
Chairman of the Board,
Chief Operating Officer
and Treasurer
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