Attached files
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended August 31, 2009
[] 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
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $0.01 per share
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___
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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
Check if there is no disclosure of delinquent filers contained in this form in
response to Item 405 of Regulation S-K and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K. [X]
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 [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Issuer's revenues for its fiscal year ended August 31, 2009 $ 877,019
Aggregate market value of the voting stock held by
non-affiliates as of November 15, 2009 $19,763,074
Number of shares of common stock outstanding as of
November 15, 2009 40,635,715
Documents incorporated by reference: NONE
Transitional small business disclosure format.
YES___ NO X
PART I
Item 1. DESCRIPTION OF BUSINESS
BACKGROUND OF THE COMPANY; REORGANIZATION
NoFire Technologies, Inc. ("NoFire" or the "Company") is engaged in the
development, manufacture and marketing of fire retardant, intumescent products.
The Company was organized under the laws of the State of Delaware on
July 13, 1987.
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. (See Note 3 to Financial Statements.)
BUSINESS OF THE COMPANY
The business of the Company is the development, manufacture and marketing of
fire retardant products and related consulting services. The Company
manufactures a liquid fire retardant for use as a coating material, like paint,
on many different kinds of substances to render them fire and heat resistant.
The product can be manufactured in various liquid forms, specifically adapted
for the particular substrate, application and degree of protection required;
or as a coated textile product, typically a woven fiberglass material, coated
with the NoFire liquid product.
The NoFire liquid product belongs to a class of materials called intumescents,
which means that they expand in size when heated. Intumescents, which have been
produced since the 1950's, have a high degree of fire retardation and add
significant heat protection to a coated surface upon expansion. The major
performance characteristics of intumescent products include: useful
temperature range; degree of fire and heat protection; adhesion to substrate;
degree of toxicity in both the liquid state and during combustion; amount of
flame spread and smoke developed during combustion; ease of application;
durability; resistance to weather; and price. Early intumescent products,
as well as many current products, have had significant deficiencies with
respect to several of these important performance characteristics (primarily
the degree of fire and heat protection, useful temperature range, and/or
toxicity) that have limited their usefulness.
The Company has developed intumescent products intended to eliminate or
minimize these deficiencies and (i) provide significant protection for a wide
range of substrates with relatively thin coats of fire protective material,
(ii) be useful over a wide temperature range and (iii) utilize a water based,
nontoxic formula. The NoFire products are manufactured based on formulas that
combine a fluid intumescent with fibers of various sizes and types, which
together provide the desired fire protection. The NoFire liquid formulas are
covered by a United States Patent and corresponding patents and patent
applications in over 30 foreign countries. The United States Patent is:
No. 5,723,515 Intumescent Fire-Retardant Composition for High Temperature and
Long Duration Protection, issued March 3, 1998.
The Company also has obtained United States Patents on certain applications:
No. 5,985,385 - Fire and Heat Protection Wrap for Conduits, Cable Trays, Other
Electrical Transmission Lines and Gas and Oil Pipelines, issued November 16,
1999; No. 6,048,805 - Fire, Heat and Back Draft Protection Shield for
Firefighters, issued April 11, 2000; No. 6,074,714 - Fire and Heat Protection
Wrap for Structural Steel Columns, Beams and Open Web Joists, issued June 13,
2000; No. 6,114,003 - Insulation Blanket Having an Inner Metal Core Air Cell
and Adjoining Outer Insulation Layers, issued September 5, 2000; and
No. 6,510,807 Pre-Fabricated Fireproof Bulkhead with Special Interlocking
Joints for a Ship, issued January 28, 2003.
The Company has submitted two additional patent applications to the United
States Patent and Trademark Office.
Although the Company believes its patents are valid and enforceable, in the
event of a challenge to their validity or an infringement of such patents, the
Company's limited financial resources would restrict its ability to defend or
enforce its rights under such patents in legal proceedings.
The NoFire products are potentially useful on many different substrates,
including wood and wood products, metals (steel, aluminum, and various alloys),
certain plastics, fabrics and textiles (fiberglass, natural and synthetic
fibers). Industries that are presently using these types of product or are
evaluating applications for them include maritime, military, nuclear power
plants, construction, wood products manufacturing, public and private housing,
hotels, automotive, railway, and airports. In developing these opportunities,
the Company has passed numerous tests and obtained various certifications for
specific applications.
MARKETING/DISTRIBUTION
The Company markets its products using several different methods, depending
upon the applications, industry, product, or territory being targeted. These
methods include: direct marketing; use of independent agents/distributors; and
exclusive and nonexclusive licensing arrangements. Because the Company has
limited resources, it relies primarily upon independent parties to market and
distribute its products. In the past two fiscal years the Company has added
distributors for California, Hawaii, the South, Southwest and Middle Atlantic
States, as well as Europe, the Middle East, India, Korea, China, South East
Asia, Ghana and West Africa, Malaysia and Singapore, and Australia and Mexico.
COMPETITION
There are many types of fire retardant products in general use today for many
different applications. In addition to intumescent products, ablative,
insulative and cementitious products are used, depending on the particular
application, severity of fire retardant requirements, weight, space
restrictions and cost. Competition for the NoFire products may include all of
these types of fire retardants and will depend on the particular application
targeted. Typically, each application has a product or fire retardant
technique of choice, which is usually the least expensive fire protection that
meets the necessary requirements. Among the Company's primary competitors
(products) are: W.R. Grace & Co. (Monocote); Carboline Company (Pyrocrete,
Pyrolite, Nullifire); U.S. Gypsum (gypsum board); Stanchem Manufacturing
(Albiclad); A/D Fireproofing (A/D Firefilm); PPG Industries (PittChar); DuPont
(Nextel); Textron, Inc. (Chartek); Minerals Technology, Inc. (Firex); Herbert
Co. (Unitherm); and various wood coatings manufactured by Albi, American Vamag,
3M and DuPont. Such products have a competitive advantage over the NoFire
products because they either have an established share of the market, are well
publicized and recognized, and/or are manufactured by companies having far
greater resources than the Company.
SOURCES OF SUPPLY
The NoFire liquid products are a blend of numerous liquids and solids,
purchased from various third party suppliers. Several of such components
are currently available only from a small number of suppliers. In the event
that such suppliers were to terminate the manufacture or sale of such
components for any reason, then the manufacture of NoFire products could be
interrupted. The Company has developed alternative sources of supply for
components and intends to continue seeking additional alternatives as the
demand for its products warrants.
MAJOR CUSTOMERS
The Companys six largest customers during the most recent fiscal year
represented 13.5%, 12.0%, 11.2%, 9.4% 9.4% and 8.8% of total sales respectively
GOVERNMENT REGULATIONS AND APPROVALS; RESEARCH AND DEVELOPMENT
For most applications, fire retardant products are required to undergo testing
for approvals by government or independent laboratories. These requirements
are typically determined either by government agencies, such as the U.S.
Nuclear Regulatory Commission, U.S. Coast Guard or U.S. Navy; or nationally
recognized organizations, such as the American Society for Testing and
Material ("ASTM") or Underwriters Laboratories, Inc. ("UL"); or international
organizations such as the International Maritime Organization (IMO).
Product development is continuing in many different areas. New products have
been approved and introduced into the market. Some of these products are
S Barrier (structural steel fire protection), NoFire LP (lower price high
performance), NOFIRE/SAFTEE arc and fireproof tape and OEM products.
Various NoFire products have been tested and certified by independent
laboratories for various applications in the areas of: building materials
and construction (ASTM E84-87, UL94, UL723, UL746C, ASTM E152 and UBC 8-
2); transportation (NFPA 417, FAR 25.855(c)); utilities (ASTM E814-88 and
IEEE 383); nuclear power plants (NRC Generic Letter 86-10 Supplement 1); and
high-speed ferries (IMO A.754 (18)). In maritime, naval and other government
applications, products have been listed in the U.S. Navy s Qualified Product
List (QPL), were accepted for listing by the General Service Administration
for all U.S. Government applications, received type approval according to the
International Maritime Organization, SOLAS codes by the U.S. Coast Guard and
four of the world s major ship registries, and were approved by Det Norske
Veritas for distribution in the European Community (EC). The Company also
has state approvals from the states of California and Rhode Island and a MEA
(Material Equipment Acceptance) from the City of New York.
The Company also conducts in-house fire and heat endurance tests exclusively
for research and development and feasibility studies. These tests are used to
develop applications and solutions to problems, but are not a substitute for
tests by independent laboratories or government agencies that are generally
required before the product can be sold for particular applications.
EMPLOYEES
As of December 07, 2009, the Company had seven employees, five of whom were
full-time employees.
Item 2. DESCRIPTION OF PROPERTY
The Company occupies 12,700 square feet of space at 21 Industrial Avenue,
Upper Saddle River, New Jersey. The facility includes office space, storage
space and an area for the mixing and testing of products and is adequate for
the Company's current requirements. The Company rents such space pursuant to a
three year lease which expires December 31, 2012. Monthly rent payments for the
year ended August 31, 2008 were approximately $13,171. Monthly rent payments
for the year ended August 31, 2009 were approximately $12,795.
Item 3. 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. In December 2009 a
summary judgment was entered against the company.
The Company believes this lawsuit is without merit and intends to vigorously
dispute the claim.
As a result of the bankruptcy reorganization proceeding referred to in Item 1,
until unsecured creditors whose claims were recognized in the Plan are paid
in full, the Bankruptcy Court has continuing jurisdiction relative to (i) the
approval and payment of certain claims and expenses and (ii) the disposition
of the two patents owned by the Company at the time of the bankruptcy.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None
PART II
Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) MARKET INFORMATION The Company's shares are quoted on the "OTC Bulletin
Board". Pink Sheets, LLC, formerly The National Quotation Bureau, reported the
following high and low bid quotations, which reflect inter-dealer prices,
without retail markup, markdown or commission and may not represent actual
transactions.
2008-2009 2007-2008
Quarter Ended High Low High Low
------------- ---- --- ---- ---
November 30 $0.12 $0.10 $0.55 $0.38
February 28 $0.055 $0.055 $0.27 $0.22
May 31 $0.08 $0.06 $0.51 $0.24
August 31 $0.14 $0.08 $0.40 $0.13
(b) HOLDERS: As of December 3, 2009 there were approximately 287 holders of
record of the Company's outstanding Common Stock.
(c) DIVIDENDS: The Company has not paid any cash dividends and intends to
retain earnings, if any, during the foreseeable future for use in its
operations. Payment of cash dividends in the future will be determined by the
Company's Board of Directors based upon the Company's earnings, financial
condition, capital requirements and other relevant factors.
RECENT SALES OF UNREGISTERED SECURITIES
The following table sets forth information regarding sales or issuances of
Company securities without registration under the Securities Act of 1933, as
amended Securities Act) during the two years ended August 31, 2008 and
August 31, 2009. All sales were made solely to accredited investors, without
a broker, and were made in reliance on Section 4(2) or 4(6) of the Securities
Act, and Rule 506 under Regulation D.
Conversion
Price
Date Title Number Cash Price
09/07 common 126,077 0.60
10/07 common 179,862 0.50
11/07 common 30,000 0.55
12/07 common 60,000 0.40
1/08 common 62,500 0.25
2/08 common 90,909 0.235
6/08 common 272,500 0.202
2/09 common 250,000 0.10
6/09 common 112,500 0.03
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company continues product development and application testing. As a result
of these activities, certifications have been obtained for specific
applications as discussed in Item 1 - Government Regulations and Approvals;
Research and Development, and additional patent applications have been filed
resulting in the issuance of six patents since August 1995, and two
applications awaiting action by the U.S. Patent and Trademark Office.
Item 1 - Business of the Company. Marketing efforts to develop new
applications and establish new customers were continued in fiscal 2009. The
efforts undertaken by the Company in application development, product
approvals and marketing initiatives should assist it in creating greater sales
in fiscal 2010 and beyond.
The greatest obstacles encountered in obtaining major sales contracts are the
multitude of tests and approvals required, competition against well
established, better-capitalized companies, cost, the slow process of
specifying a new product in highly regulated applications and educating the
public on the existence of fire protection products and the advantages of
Nofire over other well publicized but low performance products. The Company
intends to continue its research efforts to adapt its products to meet market
requirements. Sales and marketing efforts will concentrate on current products
and applications through direct sales and distributor license agreements.
Continuing efforts are being made to obtain greater domestic and international
sales by enlarging the Companys distributor network.
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 or new full time employees on a heavily weighted
commission basis.
LIQUIDITY AND CAPITAL RESOURCES
During the fiscal year Mr. Oolie was repaid $58,726 by the Company.
The Company is accruing interest on Mr. Oolies outstanding advance at the rate
of 15% per annum.
During the year, the Companys officers deferred an additional $465,970 of their
salaries.
Also in fiscal 2009, $18,923 was obtained through an additional sale of a
portion of the Company s New Jersey Operating Loss Carry Forward under a
program sponsored by that state.
Because of limited cash resources, the Company has deferred payment of
$378,031 from 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 revenue from sales and/or financing efforts
described above will be sufficient to fund the Companys cash requirements in
the future.
RESULTS OF OPERATIONS FOR FISCAL YEARS ENDED AUGUST 31, 2009 AND 2008
Sales of $877,019 represented an increase of $154,550 or 21% from sales of
$722,469 in the prior year.
The net loss of $1,572,873 for fiscal year 2009 was $168,671 less than the
net loss of $1,741,544 in the prior year.
General and administrative expenses and research and development costs of
$1,293,132 in fiscal year 2009 were $48,939, or 4%, more than the prior year.
The main components of the changes are as follows:
8/31/2009 8/31/2008 Difference
Material $ 464,257 286,604 177,653
Testing 48,326 66,756 (18,430)
Mfg O/H 49,659 80,952 (31,293)
Rent 155,053 159,420 (4,367)
Professional Fees 102,958 136,929 (33,971)
Insurance 69,067 46,064 23,003
NJ Tax Refund 19,023 48,152 (29,129)
Interest Expense 376,367 336,915 39,452
Commissions 25,433 31,366 (5,933)
Salaries management 555,469 526,023 29,446
Salaries administrative 62,629 64,326 (1,697)
Equity based compensation 45,207 194,353 (149,146)
Equity based interest expense 271,033 419,016 (147,983)
During the fiscal years 2008 and 2009, the Company realized approximately
$48,152 and $18,923 through the sale of a portion of its New Jersey Net
Operating Loss Carry Forward under a program sponsored by that state.
CRITICAL ACCOUNTING POLICIES
The discussion and analysis of our financial condition and results of
operations are based upon the Companys financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements
requires the Company to make estimates and judgments that affect the reported
amount of assets and liabilities, revenues and expenses, and related
disclosure on contingent assets and liabilities at the date of the financial
statements. Actual results may differ from these estimates under different
assumptions and conditions.
Critical accounting policies are defined as those that are reflective of
significant judgments and uncertainties and potentially result in materially
different results under different assumptions and conditions. The Companys
critical accounting policies are limited to those described below. For detailed
discussion on the application of these and other accounting policies see note 1
to our financial statements.
Accounting for Income Taxes
As part of the process of preparing the Company s financial statements, the
Company is required to estimate its income tax position. Management judgment is
required in determining the provision of its deferred tax asset. The Company
recorded a valuation for the full-deferred tax asset from its net operating
losses carried forward due to the Company not demonstrating any consistent
profitable operations. In the event that the actual results differ from
these estimates or the Company adjusts these estimates in future periods
the Company may need to adjust such estimates to a going concern basis.
The financial statements of the Company have been prepared assuming that the
Company will continue as a going concern. The Company has had negative working
capital for each of the last two years ended August 31, 2009 and 2008. The
Company lacks sufficient capital to pay its debts timely. Those conditions
raise substantial doubt about the ability to continue as a going concern.
The financial statements of the Company do not include any adjustments that
might be necessary should the Company be unable to continue as a going concern.
Accounting for Stock Based Compensation
The computation of the expense associated with stock-based compensation
requires the use of a valuation model. The accounting guidance is a complex
accounting standard, the application of which requires significant judgment
and the use of estimates, particularly surrounding Black-Scholes assumptions
such as stock price volatility, expected option lives, and expected option
forfeiture rates, to value equity-based compensation. The Company currently
uses a Black-Scholes option pricing model to calculate the fair value of its
stock options. The Company primarily uses historical data to determine the
assumptions to be used in the Black-Scholes model and has no reason to believe
that future data are likely to differ materially from historical data. However,
changes in the assumptions to reflect future stock price volatility and future
stock award exercise experience could result in a change in the assumptions
used to value awards in the future and may result in a material change to the
fair value calculation of stock-based awards. The accounting guidance requires
the recognition of the fair value of stock compensation in net income.
Although every effort is madeto ensure the accuracy of our estimates and
assumptions, significant unanticipated changes in those estimates,
interpretations and assumptions may result in recording stock option
expense that may materially impact our financial statements.
Item 7. FINANCIAL STATEMENTS
The Company's annual financial statements for the fiscal years ended
August 31, 2009 and August 31, 2008, together with the report thereon by the
Company's independent auditors, are set forth herein commencing on page F-1 of
this Form 10-K and are incorporated herein by reference.
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
During the fiscal years ended August 31 2009 and August 31, 2008 there were no
disagreements on any matter of accounting principles or practice s, financial
statement disclosure, or auditing scope or procedure, which, if not resolved to
the accountant's satisfaction, would have caused it to make reference to the
subject matter of the disagreement in connection with its report.
ITEM 8A (T). CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our president and chief financial
officer, carried out an evaluation of the effectiveness of our disclosure
controls and procedures (as defined in the Securities Exchange Act of 1934
(the Exchange Act) Rules 13a-15(e) and 15-d-15(e)) as of the end of the
period covered by this report (the Evaluation Date). Based upon that
evaluation, the president and chief financial officer concluded
that as of the Evaluation Date, our disclosure controls and procedures are
effective to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act (i) is recorded
processed, summarized and reported, within the time periods specified in the
SECs rules and forms and (ii) is accumulated and communicated to our
management, including our president and chief financial officer, as
appropriate to allow timely decisions regarding required disclosure.
Our management, including our president and chief financial officer, does not
expect that our disclosure controls and procedures or our internal controls
will prevent all errors and all fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met.
Further, the design of a control system must reflect the fact that there are
resource constraints and the benefits of controls must be considered relative
to their costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within NoFire Technologies, Inc. will be
detected.
(b) Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting (as defined in Rule 13a-15(f) under
the Exchange Act). Our management assessed the effectiveness of our internal
control over financial reporting as of August 31, 2009. In making this
assessment, our management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission in Internal Control-
Integrated Framework. Our management has concluded that, as of August 31,
2009, our internal control over financial reporting is effective based on
these criteria. This annual report does not include an attestation report of
our registered public accounting firm regarding internal control over
financial reporting. Management's report was not subject to attestation by
our registered public accounting firm pursuant to temporary rules of the SEC
that permit us to provide only management's report in this annual report.
(c) Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting that
occurred during the period covered by this report that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
PART III
Item 9. DIRECTORS AND EXECUTIVE OFFICERS
MANAGEMENT
The following table sets forth the names of all directors and officers of the
Company and the position in the Company held by them:
Name Age Position
Samuel Gottfried 63 Director, Chief
Executive Officer,
Chief Technical
Officer and
Assistant Treasurer
Sam Oolie 73 Director, Chairman
of the Board, Chief
Operating Officer,
Chief Financial Officer
and Treasurer
Bernard J. Koster 76 Director
Gerald H. Litwin 67 Director
Directors are elected to serve until the next annual meeting of stockholders
and until their successors have been elected and have qualified. Officers are
elected by the Board of Directors and serve at the pleasure of the Board of
Directors.
Sam Oolie
Mr. Oolie has served as a Director of the Company since September 1993 and, as
Chairman of the Board and Chief Operating Officer and Chief Financial Officer
since August 16, 1995. He was Chief Executive Officer from August 16, 1995 to
July 26, 1999. Since 1985, Mr. Oolie has been Chairman of Oolie Enterprises, a
privately owned investment company.
Samuel Gottfried
Dr. Gottfried was named a director of the Company and appointed President of
its fire retardant products subsidiaries in August 1991. He was appointed
Interim Chairman of the Board and Chief Executive Officer on August 14, 1992
until August 15, 1995. On August 16, 1995 he was elected President, Chief
Technical Officer and Assistant Treasurer of the Company. On January 1, 2003
he was elected Chief Executive Officer. Dr. Gottfried holds a doctorate in
electrical engineering from New York University and a Ph.D. in electro physics
from the Polytechnic Institute of New York.
Bernard J. Koster
Mr. Koster has served as a Director of the Company since September 1993. Mr.
Koster is an attorney and accountant and since January 1, 1993 has been of
counsel to the law firm of Litwin & Tierman, P.A..
Gerald H. Litwin
Mr. Litwin has served as a Director of the Company since August 16, 1995.
During the past eight years, Mr. Litwin, an attorney, has been a principal in
the law firm of Litwin & Tierman, P.A., and previously was the principal of
Gerald H. Litwin, P.A. Mr. Litwin's firms served as the Company's Counsel, and
his current firm continues to provide certain legal services to the Company.
During the past five years none of the foregoing persons (a) has served as a
general partner or an executive officer of any business as to which a
bankruptcy petition was filed during his service in such capacity or within
two years thereafter; (b) was convicted in a criminal proceeding or is
subject to a pending criminal proceeding (excluding traffic violations and
other minor offenses); or (c) has been subject to any order, judgment or
decree, not subsequently reversed, suspended or vacated, by any court of
competent jurisdiction, permanently or temporarily barring, suspending or
otherwise limiting his involvement in any type of business, securities or
banking activity.
The Board of Directors of the Company has established an Executive Committee
(Dr. Gottfried, Mr. Oolie), an Audit Committee (Mr. Litwin and Mr. Koster),
and a Compensation Committee (Mr. Koster, Mr. Litwin and Mr. Oolie).
Item 10. EXECUTIVE COMPENSATION
The Company's Summary Compensation Table is set forth below. The Company had
no Option/SAR Grants, Aggregated Option/SAR Exercises or Fiscal Year End
Option/SAR's for the years ended August 31, 2009, 2008, and 2007, nor were
there any long-term incentive plan awards, stock options or stock appreciation
rights.
Non-employee Directors are not compensated for Board of Directors meetings or
committee meetings attended.
SUMMARY COMPENSATION TABLE
For the Years Ended August 31, 2009, 2008, and 2007
Name and Year Ended Salary Salary Options All other
Principal Position August 31 Paid Deferred(1) SAR's Compensation
------------------ ---------- ------ ----------- ----- -----------
Samuel Gottfried
Chief Executive Officer 2009 None $213,100
from January 1, 2003 2008 None $212,992
2007 None $213,100
and Chief Technical
Officer And Assistant
Treasurer from
August 1, 2003
Sam Oolie
Chairman of the Board, 2009 $ None $230,121
Chief Operating Officer 2008 $ None $230,022
2007 $ None $216,400
And Chief Executive Officer
until July 26, 1999, and
Chief Financial Officer
Since January 2, 2003
Note (1) Amounts shown as salary deferred are payable when revenues or
financings permit payment as determined by the Board of Directors.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of November 15, 2009 the number of shares
of Common Stock owned of record or beneficially by each of the Company's
officers, directors, and stockholders owning at least 5% of the Company's
issued and outstanding shares of Common Stock, by all of the Company's
officers and directors as a group, and the percentage of the total outstanding
shares represented by such shares.
Name and Address Shares Beneficially Approximate
Beneficial Owner Owned including Percent of Class
(1) Warrants
---------------- ------------------- ------------------
Sam Oolie
NoFire Technologies, Inc. 19,784,127 32.7%
21 Industrial Avenue
Upper Saddle River, NJ 07458
Samuel Gottfried
NoFire Technologies, Inc. 15,700,123 27.8%
21 Industrial Avenue
Upper Saddle River, NJ 07458
Bernard J. Koster
7 Old Smith Road 1,317,652 3.1%
Tenafly, NJ 07670
Gerald H. Litwin
Two University Plaza 7,621,600 15.8%
Hackensack, NJ 07601
Stephanie Cook
NoFire Technologies, Inc. 9,448,838 18.9%
21 Industrial Avenue
Upper Saddle River, NJ 07458
Lavin Holdings, LLC
483 Winthrop Road 8,354,632 17.0%
Teaneck, NJ 07666
Carole Salkind
18911 Collins Ave 8,140,436 16.7%
Sunny Isles Beach, FL. 33160
John Cavanna
2337 Lemoine Ave 4,747,480 10.5%
Fort Lee, NJ 07024
Iroquois Capital Management LLC 6,000,000 12.9%
641 Lexington Ave
New York. NY 10022
All officers and directors 44,423,502 61.3%
as a group (four persons)
Note (1) As of November 15, 2009, there were 40,635,715 shares of Common
Stock issued and outstanding. Percentage of class for all officers and
directors as a group is computed on 72,476,963 shares which includes
31,841,028 warrants held by these individuals. Percentage of class for
Lavin Holdings LLC, Carole Salkind, John Cavanna and Iroquois Capital
Management LLC and Stephanie Cook is computed on outstanding common stock
in the amount of 40,635,715
COMPLIANCE WITH SECTION 16(a) OF THE 1934 ACT
Section 16(a) of the 1934 Act requires the Company's directors and executive
officers and persons who own more than 5% of a registered class of the
Company's equity securities to file with the Commission initial reports of
ownership and reports of changes in ownership of the Company's Common Stock.
Officers, directors and greater than 5% stockholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file. Based on a review of copies of Forms 3, 4 and 5 and amendments thereto
furnished to the Company during or with respect to its fiscal year ended
August 31, 2009 the Company believes that no director or officer of the
Company or beneficial owner of more than 5% of the Company's Common Stock
failed to file on a timely basis reports required by Section 16(a) of the
1934 Act during such fiscal year.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Litwin is a principal of the law firm of Litwin & Tierman, P.A. which
provides certain legal services to the Company. At August 31, 2009, the
Company was obligated to that firm in the amount of $398,318. Expenses in
fiscal 2009 were $13,162 for legal services, and in fiscal 2008,$37,064
for legal services.
In April 2006 the Company borrowed $25,000 from a director of the Company. The
note carries an interest rate of $500 per month . In conjunction with the
transaction the Company issued five-year warrants to purchase 50,000 shares of
the Companys common stock at an exercise price of$.20 per share.
During the three fiscal years ended 2009, the officers deferred a total of
$ 1,315,735 of their salaries. Effective June 2, 2002, interest at the annual
rate of 6% was accrued on the salaries deferred. The total interest accrued
was $534,388 at August 31, 2009.
Item 13. EXHIBITS
A. THE FOLLOWING FINANCIAL STATEMENTS OF THE COMPANY ARE BEING FILED PURSUANT
TO ITEM 7 AS PART OF THIS ANNUAL REPORT ON FORM 10-K
1. FINANCIAL STATEMENTS
Index to Financial Statements F-1
Report of Independent Registered Public Accounting Firm
Sherb & Co., LLP. F-2
Financial Statements:
Balance Sheets as of August 31, 2009 and 2008 F-3
Statements of Operations for the years
ended August 31, 2009 and 2008 F-4
Statements of Changes in Stockholders' Deficiency
for the years ended August 31,2009 and 2008 F-5
Statements of Cash Flows for the Years
Ended August 31, 2009 and 2008 F-6
Notes to Financial Statements F-7 to F-15
2. EXHIBITS none
2. Certification of Financial Information Exhibits 31.1 31.2
3. Sarbanes-Oxley Act Section 906 Certification Exhibits 32.1 32.2
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
AUDIT FEES
The aggregate fees billed and unbilled for the fiscal years ended August 31,
2009 and 2008 for professional services rendered by the Company s principal
accountants for the audits of its annual financial statements and the review
of its financial statements included in our quarterly reports on Form 10Q
were approximately $30,277 and $36,500, respectively.
AUDIT-RELATED FEES
The aggregate fees billed for the fiscal years ended August 31, 2009 and 2008
for assurance and related services rendered by our principal accountants
related to the performance of the audit or review of the Company s financial
statements, specifically accounting research was $0 for each year.
TAX AND OTHER FEES
The aggregate fees billed for the fiscal years ended August 2009 and
2008 for tax related or other services rendered by the Company s principal
accountants in connection with the preparation of its federal and state income
tax returns was $3,000 and $ 3,000, respectively.
APPROVAL OF NON-AUDIT SERVICES AND FEES
We did not have any non-audit services provided by our principal accountants
during fiscal 2009 or 2008.
SIGNATURES
In accordance with Section 13 or 15(d) of the 1934 Act, the registrant
has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NOFIRE TECHNOLOGIES, INC.
Date: January 13, 2010 By: /s/ Sam Gottfried
------------------------
Sam Gottfried,
Chief Executive Officer
Date: January 13, 2010 By: /s/ Sam Oolie
------------------------
Sam Oolie
Chief Financial Officer
In accordance with the 1934 Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated.
SIGNATURE DATE
/s/ Samuel Gottfried
---------------------------- January 13, 2010
Samuel Gottfried, Director
/s/ Bernard J. Koster
----------------------------- January 13, 2010
Bernard J. Koster, Director
/s/ Gerald H. Litwin
----------------------------- January 13, 2010
Gerald H. Litwin, Director
/s/ Sam Oolie
----------------------------- January 13, 2010
Sam Oolie, Director
INDEX TO FINANCIAL STATEMENTS
Page
---
Report of Independent Registered Public Accounting Firm
Sherb & Co, LLP F-2
Financial Statements
Balance sheets at August 31, 2009 and 2008 F-3
Statements of operations for the years ended
August 31, 2009 and 2008 F-4
Statements of changes in stockholders' deficiency F-5
for years ended August 31, 2009 and 2008
Statements of cash flows for the years ended
August 31, 2009 and 2008 F-6
Notes to financial statements F-7 to F-15
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Stockholders and Directors
NoFire Technologies, Inc.
Upper Saddle River, New Jersey
We have audited the accompanying balance sheets of NoFire
Technologies, Inc. as of August 31, 2009 and 2008, and the related
statements of operations, stockholders deficiency and cash flows for each of
the years ended August 31, 2009 and 2008.These financial statements are the
responsibility of the Company s management.Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of NoFire
Technologies, Inc. as of August 31,2009 and 2008, and
the results of its operations and its cash flows for each of the
years ended August 31, 2009 and 2008, in conformity with
accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. The Company
has suffered recurring losses from operations, including a net
loss of approximately $1.6 million and $1.7 million for each of the years
ended August 31, 2009 and 2008, and has a substantial working capital
deficiency as of August 31, 2009. These factors raise substantial doubt
concerning the Company s ability to continue as a going concern. The
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/ Sherb & Co., LLP
Certified Public Accountants
New York, New York
December 28, 2009
F-2
NOFIRE TECHNOLOGIES, INC
BALANCE SHEETS
ASSETS
CURRENT ASSETS:
August 31,2009 August 31,2008
-------------- --------------
Cash $ 6,089 $ 2,334
Accounts receivable trade, net 89,498 83,451
Inventories 90,563 203,068
Prepaid expenses and other current assets 4,848 22,419
----------- -----------
Total Current Assets 190,998 311,272
OTHER ASSETS:
Security deposits 37,240 37,065
--------- ----------
$228,238 $ 348,337
========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Settled liabilities $ 378,031 $ 378,031
Accounts payable and accrued expenses 2,170,975 1,610,733
Loans and advances payable to stockholders 189,148 247,874
Deferred salaries 2,915,870 2,449,900
Loans payable 452,890 408,583
Convertible debenture 8%, (net) 519,096 595,928
---------- -------------
Total Current Liabilities 6,626,010 5,691,049
LONG TERM LIABILITIES:Deferred Revenue-licenses 11,242 12,550
STOCKHOLDERS' DEFICIENCY:
Common stock $.01 par value:
Authorized -150,000,000 shares
issued, and outstanding-40,635,715
And 40,273,465 respectively 406,360 402,735
Capital in excess of par value 19,293,602 18,778,157
Stock subscriptions receivable (13,250) (13,250)
Accumulated Deficit (26,095,778) (24,522,904)
---------- ------------
Total Stockholders' Deficiency (6,409,014) (5,355,262)
---------- ------------
$ 228,238 $ 348,337
========= ==========
See accompanying notes to financial statements
F-3
NOFIRE TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
Year Ended August 31,
2009 2008
---------- ----------
Sales:
Sales of product $ 877,019 610,932
Royalty revenue 111,537
------------------------
NET SALES 877,019 722,469
---------- ----------
COSTS AND EXPENSES:
Cost of sales 483,093 297,245
Research and development costs 48,326 66,757
General and administrative
(includes equity based
compensation of $44,250
and $194,353, respectively) 1,290,014 1,371,789
---------- ----------
1,821,433 1,735,791
--------- ----------
LOSS FROM OPERATIONS ( 944,414) (1,013,322)
---------- ----------
OTHER EXPENSES (INCOME):
Interest expense (includes equity
based portion $271,033 and
$ 419,016, respectively) 647,401 755,930
Other income (18) (6,920)
-------- --------
647,383 749,010
LOSS BEFORE INCOME TAXES (1,591,797) (1,762,332)
INCOME TAX BENEFIT 18,923 20,788
---------- --------
NET LOSS $ (1,572,874) $(1,741,544)
========== =========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING-BASIC AND DILUTED 40,425,388 39,885,615
========== ==========
BASIC AND DILUTED LOSS
PER COMMON SHARE: $ (.04) $ (.04)
========== ==========
See accompanying notes to financial statements
F-4
NOFIRE TECHNOLOGIES, INC.
STATMENTS OF CHANGES IN STOCKHOLDERS DEFICIENCY
Common Stock Capital
Number of in Excess Accumulated Stock Subscriptions Total
Shares Amount of Par Value (Deficit) Receivable Stockholders
Deficit
Balance as of August 31,2007 39,382,932 $ 393,830 $17,877,058 $(22,781,360) $(4,510,472)
Equities issued with debt/beneficial
Conversion rights 30,000 300 418,716 419,016
Sale of stock 519,348 5,193 223,066 228,259
Stock subscription 50,000 500 12,750 (13,250) -
Exercise of warrants 291,185 2,912 52,213 55,125
Equities issued for services - - 194,353 194,353
Net loss (1,741,544) (1,741,544)
----------- --------- ----------- ------------- ----------- -----------
Balance as of August 31, 2008 40,273,465 402,735 18,778,156 (24,522,904) (13,250) (5,355,263)
Conversion of debt 250,000 2,500 22,500 25,000
Equity issued for services 112,250 1,125 47,458 48,634
Equity issued with debt/beneficial
conversion rights 445,488 445,488
Net loss (1,572,874) (1,572,874)
---------- -------- ---------- ------------- --------- -----------
Balance as of August 31,2009 40,635,715 $ 406,360 $ 19,293,602 $ (26,095,778) $(13,250) $(6,409,014)
========== =========== =========== ============ ========= ============
F-5
See accompanying notes to financial statements
NOFIRE TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
Year Ended August 31,
2009 2008
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,572,874 )$(1,741,544)
Adjustments to reconcile net loss
to net cash flows from
operating activities:
Equities issued and amortization thereof
as interest and beneficial conversion
features on current and past due loans
payable 271,033 419,016
Equities issued for consulting services 45,208 194,353
Accounts receivable - trade (6,047) 217,835
Inventories 112,505 (105,284)
Prepaid expenses and other current 20,946 72,423
Accounts payable and accrued
expenses 560,242 247,504
Deferred revenue (1,308) 12,550
Deferred salaries 490,970 369,397
---------- ----------
Net cash flows used in
operating activities (79,325) (313,750)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Security deposits (175) -
----------- -----------
NET CASH FLOWS USED BY INVESTING ACTIVITIES (175) -
------------ ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common
stock and exercise of warrants,
net of related expenses - 283,384
Payments on short term loans - (165,000)
Net proceeds from short-term loans 44,307 117,848
Loans and advances received (paid) from
stockholders (58,726) 48,436
Proceeds from issuance of convertible
Debentures 97,674
---------- ----------
Net cash flows from
financing activities 83,255 284,668
---------- ----------
NET INCREASE (DECREASE) IN CASH 3,755 (29,082)
CASH AT BEGINNING OF YEAR 2,334 31,416
---------- ----------
CASH AT END OF YEAR $ 6,089 $ 2,334
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 72,303 $ 127,824
========== ==========
Income taxes paid (benefit) $ (18,923) $( 20,788)
========== ==========
Equity issued in exchange
for services $ 48,635 $ 194,353
========== ==========
Equities issued for debt fees an interest $445,488 $419,016
========== ===========
Conversion of debt to equity $ 25,000 -
========= ===========
See accompanying notes to financial statements
F-6
NOFIRE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - NATURE OF THE BUSINESS
Nature of the Business - The Company manufactures and markets intumescent fire
retardant products throughout the world. The Company was organized under the
laws of the State od Delaware on July 13, 1987
Going Concern- 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 has
reported substantial losses since inception. The Company's viability as a
going concern is dependent upon its ability to achieve profitable operations
through increased sales, obtaining additional financing or receiving
additional capital. This raises substantial doubt about the Company s ability
to continue as a going concern. On August 11, 1995, the Company emerged from
Chapter 11 of the United States Bankruptcy Code pursuant to a plan of
reorganization (the Plan). As of August 11, 1995, in accordance with accounting
guidance for Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code (SOP 90-7), the Company adopted fresh start reporting and
implemented the effects of such adoption in its balance sheet as of
August 31, 1995.
As discussed in Note 3, the Company has a liability for settled claims
payable to creditors and has incurred accrued expenses in connection with its
reorganization. Certain settled claims due on September 27, 1996 through 1999
remain unpaid. Without additional financing/capital or the achievement of
profitable operations, funds for repayment of these obligations would not be
available.
Note 2 SUMMARY OF SIGNIFICENT U.S.ACCOUNTING POLICIES
Estimates and Uncertainties - The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results, as determined at a
later date, could differ from those estimates.
Financial Instruments - Financial instruments include accounts
receivable, other assets, accounts payable, accrued expenses, settled
liabilities and due to stockholders. The amounts reported for financial
instruments are considered to be reasonable approximations of their fair
values. The fair value estimates presented herein were based on market or
other information available to management. The use of different market
assumptions and/or estimation methodologies could have a material effect on
the estimated fair value amounts.
Inventories - Inventories are stated at the lower of cost (first-in,
first-out method) or market.
Equipment - Equipment is recorded at cost and is depreciated primarily using
the straight-line method over the estimated useful lives of 5 to 7 years for
furniture and fixtures, manufacturing equipment and data processing equipment.
Depreciation expense was $ 0 for the years ended August 31, 2009 and 2008,
respectively.
Income Taxes - Deferred income taxes arise from temporary differences between
financial and tax reporting, principally for deferred compensation, equity
based transactions and net operating loss carry forwards.
Risk Concentrations - The following summarizes the risk concentration of the
Company as of August 31, 2009:
F-7
NOFIRE TECHNOLOGIES, INC
NOTES TO FINANCIAL STATEMENTS
Accounts Receivable - The Company grants unsecured credit to many of its
customers with no customers comprising a concentrated risk. Management
continually evaluates the credit risk associated with accounts receivable and
believes that the risk is limited.
Cash Concentrations - The Company maintains a cash balance with a financial
institution, which at some times may exceed federally, insured limits.
Revenue Recognition- Revenue for product sales are recognized when there is
evidence of an arrangement, the amount is fixed and determinable, and
collectibility is probable. Company s products are shipped. Revenues from
royalty sales are recognized once such royalties are deemed earned and
collectible.
Cost of Sales - Cost of sales includes the following costs: material costs,
freight in, direct labor and packaging costs. Indirect costs of sales
include selling, general and administrative costs for the years ended
August 31, 2009 and 2008 they are as follows: shipping and receiving labor of
$13,292 and $22,135, and shipping costs of $8,301 and $24,938, respectively.
Advertising Costs - The Company expenses costs for trade shows, marketing
and promotional activities as incurred. Expenses were approximately $1,767
and $8,659 for the years ended August 31, 2009 and August 31, 2008,respectively
Research and Development Costs- Expenditures relating to the development of
new products and processes, including significant improvements to existing
products, are expensed as incurred.
Loss per Share - Loss per share is based on the weighted average number of
shares outstanding during the periods. The effect of 64,055,001 and 62,591,244
warrants outstanding is not included for fiscal 2009 and 2008, respectively
since it would be anti-dilutive.
Equity based compensation -
Effective September 1, 2006, the Company adopted provisions of FASB guidance
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 years ended
August 31, 2008, and August 31, 2009 which have been recorded as an expense in
the amount of $194,353 and $ 44,250, respectively, as such warrants vested
immediately upon issuance.
In accordance with FASB guidance on equity based compensation, 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 year ended August 31,
2009 2008
Risk free interest rate 2,39 % 3.10 %
Expected life 4.75 yrs 4.75 yrs
Dividend rate 0.00 % 0.0%
Expected volatility 129% 211%
F-8
NOFIRE TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS
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 entity?s
fiscal year, the entity will apply the amendments under this Subtopic
retrospectively from the beginning of the entity?s 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.
All other issued but not yet effective Accounting Pronouncements have been
deemed to be not material or relevant to the Company?s Financials
NOTE 3 - INVENTORIES:
Inventories, net of reserves, at August 31, 2009 and 2008 consisted of the
following:
August
2009 2008
Testing material $ 2,500 $ 5,000
Raw material 12,448 12,431
Finished goods 75,615 185,637
-------- ------
$ 90,563 $203,068
========== ========
NOTE 4 - SETTLED CLAIMS:
Settled claims consist of claims payable to creditors for which payment has
been deferred beyond the Plan's effective date pursuant to the terms and
conditions of the Plan, as agreed upon between the Company and its creditors.
At August 31, 2009, settled liabilities payable totaled $378,031.
The Company is currently delinquent on its scheduled payments to certain
Creditors that were due September 27, 1996 through 1999 in the gross amount of
approximately $378,031. The Company does not have funds available for
repayment and without additional sales, capital or financing, payments
cannot be made.
NOTE 5 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consist of the following:
F-09
NOFIRE TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS
August
2009 2008
Legal fees $ 417,408 $ 396,089
Commissions 64,183 67,357
Interest 805,895 562,976
Payroll and payroll taxes 143,944 114,222
Accounts payable 479,751 330,164
Other 259,794 139,925
---------- ---------
$ 2,170,975 $1,610,733
========= ==========
NOTE 6 RELATED PARTY TRANSACTIONS
Mr. Litwin is a principal of the law firm of Litwin & Tierman, P.A., which
provides certain legal services to the Company. At August 31, 2009, the
Company was obligated to that firm in the amount of $398,318. Expenses in
fiscal 2009 were $13,162 for legal services, and in fiscal 2008, $ 37,064.
In addition, Litwin & Holsinger (a predecessor to Litwin and Tierman P.A)
filed a claim as an unsecured creditor in the bankruptcy proceedings in the
gross amount of $140,403 in respect of pre-petition legal services rendered and
has received one distribution in the amount of $15,584 in respect thereof.
on the salaries deferred. The total interest accrued was $637,186 at
August 31, 2009.
The officers (current and former) deferred a total of $2,915,870 of their
salaries. Effective June 2, 2002, interest at the annual rate of 6% was accrued
on the salaries deferred.
During 2009 Mr Oolie, CEO, was repaid $58,726 by the Company.
These remaining advances by the CEO are due on demand and bear interest at 15%
per annum.
NOTE 7 CONVERTIBLE DEBENTURES AND OTHER DEBT:
In April 2006 the Company borrowed $25,000 from a director of the Company. The
note carries an interest rate of $500 per month. In conjunction with the
transaction the Company issued five-year warrants to purchase 50,000 shares of
the Company s common stock at an exercise price of $.20 per share.
As of December 15, 2009 the above amounts are still unpaid.
During the quarter ended February 29, 2008 the Company borrowed $105,000
from three individuals all due by July 2008. The terms were 2% interest per
month.
In conjunction with the above five year warrants were issued to purchase 45,000
shares of the Company?s common stock at $.25 to $.30. These warrants are valued
at $12,294 and expensed in fiscal 2008. The warrants vested immediately.
During June 2008 the Company borrowed $10,000 from an individual.
The chairman of the board pledged his stock holdings in an unrelated
company to secure the debt. The note carries a 2% per month interest charge and
was due in December 2009. This note remains unpaid as of the date of filing.
In conjunction with the above, the Company issued 8,000 warrants to purchase the
Company?s common stock at $.36 per share. These warrants are valued at $2,819
F-10
NOTES TO NOFIRE TECHNOLOGIES, INC.
FINANCIAL STATEMENTS
and expensed in fiscal 2008. The warrants vested immediately.
During July of 2008 the Company borrowed $15,000 from an individual.
The chairman of the board has pledged his stock holdings in an unrelated
company to secure the debt. The note carries a 2% per month interest charge and
is due in September 2008.
During August 2008 the Company borrowed $50,000 from an individual. The terms
were 2% interest per month, and was due on May 31, 2009. This note remains
unpaid as of the date of filing.
In conjunction with the above five year warrants were issued to
purchase 30,000 shares of the Company?s common stock at $0.30 per share.
These warrants are valued at $8,927 and expensed in fiscal 2008 The warrants
vested immediately.
Also during August 2008 an individual converted $14,000 of his loan into
50,000 shares of the Company?s common stock at $.28 per share.
In December 2008 the Company paid an additional $21,355 of the debt
using the proceeds of the sale of the New Jersey net operating loss
carry forward for the year 2008 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.
During the quarter ended May 31,2009 the Company borrowed an additional
$43,227 from two individuals. The debts are evidenced by short term
demand notes
Note 8? Manufacturing Agreement:
In March 2008, the Company entered into a Manufacturing Agreement, with a
Singapore based company. This Manufacturing Agreement has several financial
components which require payments over a period of time within a year. These
payments are for a 10 year license fee of $18,200, consultancy work totaling
$57,995 and prepaid material for product development. The license fee will
be amortized over the term of the agreement ratably. Once the Singapore
company begins manufacturing the Nofire products, the Singapore company will
be obligated to pay a 2% royalty on Nofire product sales.
In addition to the above the Company will generate additional sales from the
sale of propriety chemicals?to the licensee. These chemicals are necessary in
the manufacture of the product.
NOTE 9 - COMMITMENTS AND CONTINGENCIES:
The Company occupies 12,700 square feet of space at 21 Industrial Avenue,
Upper Saddle River, New Jersey. The facility includes office space, storage
space and an area for the mixing and testing of products and is adequate for
the Company's current requirements. The Company rents such space pursuant to a
three year lease which expires December 31, 2012.The annual commitment is
$153,540.
In conjunction with a $100,000 loan made in September 2005, a lien was placed
on two temporary patents as collateral for the loan.
As of December 2009, the balance due was approximately $7,000.
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
F-11
NOTES TO NOFIRE TECHNOLOGIES, INC.
FINANCIAL STATEMENTS
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.
NOTE 10- SOURCES OF SUPPLY:
Several components of the Company s products are available from a small
number of suppliers. In the event that these suppliers were to terminate
the manufacture or sale of such components for any reason, then the
manufacture of the Company s products could be interrupted.
Note 11 ? INCOME TAXES
No provision for current and deferred income taxes is required for the years
ended August 31, 2009 and 2008.
The following is a reconciliation of income tax benefits computed at the 34%
statutory rate to the provision for income taxes:
2009 2008
--------- ---------
Tax at statutory rate $ 535,000 $ 592,000
Permanent and other items (108,000) (209,000)
State income tax, net of federal
income tax benefit 6,000 7,000
Valuation allowance (433,000) (390,000)
--------- ---------
$ - $ -
========= =========
As a result of the issuance of common stock pursuant to the Plan, the Company
experienced a greater than 50% change of ownership as defined in Internal
Revenue Code Section 382 ("Section 382"). Consequently, the Company's ability
to utilize net operating losses generated prior to the effective date of the
Plan is limited during the carry forward periods.
The Company has determined that the annual limitation under Section 382 on its
ability to utilize net operating loss carry forwards, totaling approximately
$857,000, to be approximately $150,000 per year expiring through 2010.
Subsequent to the date of the Plan, the Company has generated approximately
$11,379,000 in net operating losses, which expire through 2029.
The significant components of the Company s net deferred tax asset are
summarized as follows:
August 31,
------------------------
2009 2008
---------- ----------
Net operating loss carry forwards $ 3,868,000 $ 4,192,000
Temporary timing difference 1,208,000 976,000
---------- ------------
Valuation allowance (5,076,000) (5,168,000)
---------- -------------
$ - $ -
=========== ============
A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax asset will not be realized. The Company has
determined, based on the Companys prior history of recurring losses, that a
full valuation allowance is appropriate at August 31, 2009 and 2008.
F-12
NOFIRE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
At August 31, 2009, the Company has federal and state net operating loss
carry forwards for financial reporting and income tax purposes of
approximately $11,379,000, which can be used to offset current and future
taxable income through the year 2029.
During each of the fiscal years 2009 and 2008, the Company sold a portion of
its state net operating loss carry forwards realizing approximately
$18,923 and $20,788, respectively. The Company has not yet sold its net
operating loss carry forward for the fiscal year ended August 31, 2009.
NOTE 12 - MAJOR CUSTOMERS:
Sales to six customers represented 13.5%,12.0%, 11.2% 9.4% 9.4 and 8.8% of net
Sales for the year ended August 31, 2009. Sales to five customers represented
26% 17.4%9.7% and 6.6% and 4.3% of net sales for the year ended August 31, 2008
NOTE 13 WARRANTS AND COMMON STOCK:
For the years ended August 31, 2009 and 2008, a summary of the status of
warrants were as follows:
2009 2008
------------------- --------------------
Weighted Weighted
Number Average Number Average
of Exercise of Exercise
Shares Price Shares Price
---------- -------- ---------- --------
Outstanding, beginning of year 62,591,244 $ 0.16 60,556,794 $ 0.16
Granted 5,773,394 0.09 2,622,674 0.28
Exercised - - (347,500) 0.21
Cancelled/ forgiven - - - -
Expired 4,309,636 0.24 (240,724) 0.25
---------- ----- ---------- -----
Outstanding and exercisable,
end of year 64,055,002 0.15 62,591,244 0.16
========== ===== ========== =====
Exercisable, end of year 64,055,002 $ 0.15 62,591,244 $ 0.16
============ ===== ========== =====
The following table summarizes warrant data as of August 31, 2009:
Outstanding and exercisable
Number of Weighted- Weighted Number
Outstanding average remaining average exercisable
life in exercise
years price
------------ ------------------ ----------- -
Range of exercise prices:
$.01-$.15 50,106,283 3.07 0.13 50,106,283
$.16-$.50 13,698,809 2.82 0.23 13,698,809
$.51-$.99 203,113 2.64 0.43 203,113
$1.00 or more 46,797 2.62 1.10 46,797
------------ -----------
64,055,002 64,055,002
F-13
NOFIRE TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENT
Information, at date of issuance, regarding warrant grants during the year
ended August 31, 2009:
exercise fair
shares price value
------------ ------------ ---------
Exercise price exceeds
market price - - -
Exercise price equals
market price 5,740,436 $0.15 $0.09
Exercise price is less than
market price 32,958 $0.03 $0.03
The intrinsic value of the outstanding options at August 31,2009 and 2008 was
$79,051 based on the August 31,2009 market price of $0.10 and $8,878,070 based
On the August 31,2008 market price of $0.30
The weighted average grant date fair value of warrants granted during the
year ended August 31, 2009 and 2008 was $0.15 $ 0.23. Warrants had been
exercised by holders during the year ended August 31, 2008 in the amount
of 347,500 with proceeds of $55,125.
During fiscal year ended August 31, 2008 the following equity
transactions occurred:
The Company sold 519,348 shares of common stock and issued 259,674
five year warrants with exercise prices ranging from $0.25 to $0.60 per
share for $228,259, which was the then trading prices of the common stock on
each respective sale date.
The Company issued 1,658,000 warrants and 30,000 shares of common stock to
unrelated parties for the inducement of debt extensions and the lending of
additional monies during the year. These warrants have exercise prices ranging
from $0.24 to $0.39 per share and expire in five years. The Company recorded
$419,016 for the beneficial conversion rights and warrants issued in
connection with such debt extended. There is no remaining debt discount
unamortized at August 31,2008.
The Company issued another 705,000 warrants for services rendered during the
year by consultants and its employees which such warrants and shares have been
fairly valued at $194,353, which has been expensed. These warrants have a
five-year term with exercise prices ranging from $0.28 to $0.34 per share. The
exercise prices were the then trading prices of the common stock at each
respective issue date.
All warrants vested immediately.
F-14
NOFIRE TECHNOLOGIES, INC
NOTES TO FINANCIAL STATEMENT
During the year ended August 31,2009 the following equity transactions
occurred
A former officer converted $25,000 of accrued salary for 250,000 shares of
Common stock. The market value of the common stock on the date of this
conversion was $0.10 per share.
There was 112,500 shares of common stock and 32,958 of five year warrants
Exercisable at $0.03 and $0.04 a share issued for legal services. The fair
value of the equities issued was $4,333 and has been expensed.
The Company issued 561,000 of five year warrants to its employees for services,
exercisable at $0.10 a share. The fair value of these warrants issued was
$44,300 and has been expensed.
The Company issued another 5,179,436 warrants to unrelated parties for the
inducement of debt extensions and the lending of additional monies during the
year. These warrants have exercise prices ranging from $0.30 to $0.04 per share
and expire in five years. The Company recorded as debt discounts or loan fees
valued at $445,488 and some of which has been and other amounts are being
expensed over the term of the debt which range from one to two years. The
unamortized portion of the debt discount is $174,506 as of August 31, 2009.
NOTE 14 - SUBSEQUENT EVENTS:
The Company has evaluated the subsequent disclosure through January 8 2010
For its adequacy.
F-15
10
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