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 May 31,2004
[] 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
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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
--- ---
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
--- ---
State the number of shares of each of the issuer's classes of common equity
outstanding at the latest practicable date: 20,939,019 shares of Common
Stock as of July 13,2004.
Transitional Small Business Disclosure Format (check one):
YES NO X
--- ---
Page 1
NOFIRE TECHNOLOGIES, INC.
FORM 10-QSB
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements:
Balance Sheets as of May 31,2004 (unaudited)
and August 31, 2003 3
Statements of Operations for the Nine Months
ended May 31,2004 and 2003 and
the period July 13,1987 (date of inception)
through May 31, 2004 (unaudited) 5
Statements of Cash Flows for the
Nine Months ended May 31, 2004 and 2003
and the period July 13, 1987 (date of inception)
through May 31, 2004 (unaudited). 6
Notes to Unaudited Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Item 3. Controls and Procedures 14
Part II - OTHER INFORMATION
Item 1. Legal 14
Item 6. Exhibits and Reports on Form 8-K
Signatures 14
Certification of Financial Information 15
Sarbanes-Oxley Act Section 906 Certification Exhibit 1
Page 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
May 31, August 31,
2004 2003
----------- ----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $ 765 $ 197,161
Accounts receivable - trade 17,389 59,353
Inventories 55,567 54,067
Prepaid expenses and other current assets 60,083 46,747
--------- ----------
Total Current Assets 133,804 357,328
--------- ----------
EQUIPMENT, less accumulated depreciation 4,752 6,495
--------- ----------
OTHER ASSETS:
Patents, less accumulated amortization of
$1,531,272 at May 31, 2004 and
$1,523,013 at August 31, 2003 5,063 10,018
Security deposits 24,880 19,379
---------- ---------
29,943 29,397
---------- ---------
$ 168,499 $ 393,220
========== ==========
See accompanying notes to financial statements
Page 3
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
May 31, August 31,
2004 2003
----------- ----------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
CURRENT LIABILITIES:
Settled liabilities $1,168,718 $1,168,718
Accounts payable and accrued expenses 845,569 830,287
Loans and advances payable to
stockholders 74,471 16,470
Deferred salaries 1,552,313 1,362,743
Loans payable 250,173 293,463
Convertible Debentures 8% 430,000 200,000
---------- ---------
Total Current Liabilities 4,321,244 3,871,681
---------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock $.20 par value:
Authorized - 50,000,000 shares
Issued and outstanding -20,939,019
shares at May 31, 2004 and
August 31, 2003 4,187,804 4,187,804
Capital in excess of par value 4,138,757 4,000,757
Deficit accumulated in the development
stage (12,479,306) (11,667,022)
---------- ----------
Total Stockholders' Equity (Deficiency) (4,152,745) (3,478,461)
---------- ----------
$ 168,499 $ 393,220
========== ==========
See accompanying notes to financial statements
Page 4
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
July 13, 1987
(Date of
For the nine Months For the three Months Inception)
Ended May 31, Ended May 31, through
2004 2003 2004 2003 May 31,
2004
---------- ---------- ---------- ---------- ----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
NET SALES $385,875 $ 290,379 $ 252,332 $ 102,526 $ 2,115,859
---------- ---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Cost of sales 128,339 149,410 68,473 60,986 1,038,770
Write down of excess inventory - - - - 55,000
General and administrative 881,112 824,721 319,318 263,728 15,910,395
Severance - 82,500 - 82,500 82,500
---------- ---------- --------- ---------- ----------
1,009,451 1,056,631 387,791 324,714 17,086,665
---------- - --------- ---------- ---------- ----------
LOSS FROM OPERATIONS (623,576) (766,252) (135,459) (222,188) (14,970,806)
---------- ---------- ---------- ---------- ----------
OTHER EXPENSES:
Interest expense 232,191 137,590 22,489 54,407 1,986,472
Interest income (225) (225) (75) (75) (24,665)
Reorganization items - - - - 365,426
Litigation settlement - - - - 198,996
---------- ---------- ---------- ---------- ---------
231,966 137,365 22,414 54,332 2,526,229
---------- ---------- ---------- ---------- ----------
LOSS BEFORE DISCONTINUED OPERATIONS
AND EXTRAORDINARY ITEM (855,542) (903,617) (157,873) (276,520) (17,497,035)
DISCONTINUED OPERATIONS (1,435,392)
---------- ---------- ---------- ---------- ----------
LOSS BEFORE EXTRAORDINARY ITEM (855,542) (903,617) (157,873) (276,520) (18,932,427)
EXTRAORDINARY ITEM - Gain on
debt discharge - - - - 507,952
---------- ---------- ---------- ---------- ----------
LOSS BEFORE INCOME TAXE $(855,542) (903,617) (157,873) (276,520) (18,424,475)
DEFERRED INCOME TAX BENEFIT 43,290 180,557 636,574
---------- ---------- ---------- ---------- ----------
NET LOSS $(812,252) (723,060) (157,873) (276,520) (17,787,901)
========== ========== ========== ========== ==========
(LOSS) PER SHARE, BASIC AND
DILUTED $(0.045) $(0.04) $(0.008) $(0.01)
========== ========== ========== ==========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 20,939,019 20,624,366 20,939,019 20,622,352
========== ========== ========== ==========
See accompanying notes to financial statements
Page 5
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
July 13, 1987
(Date of
For the Nine Months Inception)
Ended May 31, through
2004 2003 May 31, 2004
--------- --------- ----------
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (812,252) (723,060) $(17,705,401)
Adjustments to reconcile net loss to
net cash flows from operating activities:
Depreciation and amortization 6,698 6,699 1,850,579
Extraordinary gain on debt discharge - - (507,952)
Amortization of interest expense for
settled liabilities - - 634,522
Amortization of interest expense for
discount on convertible debentures 138,000 - 298,000
Amortization of interest expense for
discount on note payable - 25,296 38.781
Revaluation of assets and liabilities
to fair value - - 482,934
Litigation settlement - - 198,996
Common stock issued in exchange for
services - - 141,780
Repricing of warrants - (44,000)
Common stock issued as interest on
Past due loan payable 14,000
Write-down of excess inventory - - 55,000
Warrants issued for consulting services - 25,000 25,000
Changes in operating assets and liabilities
(net of effects from reverse purchase
acquisition)
Accounts receivable - trade 41,964 17,351 (17,389)
Inventories (1,500) 58,585 (110,567)
Prepaid expenses (13,111) (2,452) (59,858)
Accounts payable and
accrued expenses 15,250 183,698 3,804,367
Security deposits (5,501) - (24,880)
Deferred salaries 189,570 229,614 1,552,613
Obligation from discontinued
operations - - 51,118
---------- --------- ----------
Net cash flows from operating activities (440,882) (223,269) (9,278,357)
---------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment - - (40,712)
Increase in patent costs - - (164,320)
Acquisition accounted for as a
reverse purchase - - (517,893)
----------- --------- ----------
Net cash flows from investing activities - - (722,925)
----------- --------- ----------
See accompanying notes to financial statements
Page 6
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
July 13,1987
(Date of
For the Nine Months Inception)
Ended May 31, through
2004 2003 May 31, 2004
--------- --------- ----------
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt - - 1,506,113
Principal payments on notes payable - - (75,000)
Principal payment on settled liabilities - (9,714) (2,894,130)
Proceeds from issuance of common stock,
net of related expenses - - 8,774,943
Payments on advances from stockholders - - (60,750)
Loans and advances from stockholders 57,776 8,021 142,749
Interest accrued on loans from
stockholders - - (8,053)
Proceeds from issuance of convertible
debentures 230,000 - 2,366,002
Proceeds from short-term loans (43,290) 233,463 250,173
---------- ---------- ---------
Net cash flows from financing activities 244,486 231,770 10,002,047
---------- ---------- ---------
NET CHANGE IN CASH (196,396) 8,501 765
CASH AT BEGINNING OF PERIOD 197,161 483 -
---------- ---------- -- --------
CASH AT END OF PERIOD $ 765 $ 8,984 $ 765
========== ========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 1,154 $ 7,317 $ 88,617
========== ========== ==========
Income taxes paid (received) (43,290) (180,557) (593,284)
========== ========== ==========
Warrants issued in settlement of accrued
Interest - - $ 479,839
=========== ========== ==========
Common stock issued in exchange
for settlement of debt $ - $ - $2,439,816
========== ========== ==========
Common stock issued in exchange
for subscriptions receivable $ - $ - $ 95,000
========== ========== ==========
Common stock issued in exchange for
services $ - $ - $ 131,700
========== ========== ==========
See accompanying notes to financial statements
Page 7
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
May 31, 2004
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, 2003 (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 accounting principles generally accepted in the United States
of America have been omitted in accordance with the published rules and
regulations of the Securities and Exchange Commission. These financial
statements should be read in conjunction with the financial statements and
notes thereto included in the 10-KSB for the most recent fiscal year.
NOTE 2 - Management's Actions to Overcome Operating and Liquidity
Problems:
The Company's financial statements have been presented on the going concern
basis which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company's viability as a
going concern is dependent upon its ability to achieve profitable operations
through increased sales and/or obtaining additional financing. Without
achieving these, there is substantial doubt about the Company's ability to
continue as a going concern.
The Company has a liability for settled claims payable to creditors in
connection with its plan of reorganization confirmed by the United States
Bankruptcy Court. 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 3- SUMMARY OF SIGNIFICANT ACCOUNTING POLOCIES:
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.
Equity Based Compensation- The Company follows the intrinsic value method
of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25) and related interpretations in accounting for its employee
stock options because, in the opinion of management, Financial Accounting
Page-8
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
May 31, 2004
Standards Board Statement No. 123, Accounting for Stock-Based Compensation
"(FAS 123) requires use of option valuation models that were not developed
for use in valuing employee stock options. FAS 123 permits a company to elect
to follow the intrinsic value method of APB 25 rather than the alternative
fair value accounting provided under FAS 123, but requires pro forma net
income (loss) and earnings (loss) per share disclosures as well as various
other disclosures. The Company has adopted the disclosure provisions required
under Financial Accounting Standards Board Statement No. 148, "Accounting for
Stock-Based Compensation Transition and Disclosure " (FAS 148).
If the recognition provisions of SFAS 123 using the Black-Scholes
option pricing model were applied, the resulting pro-forma net income (loss)
available to common shareholders and pro-forma net income (loss) available
to common shareholders per share would be as follows:
For the Nine months ended For the Three months ended
May 31, MAY 31,
2004 2003 2004 2003
Net loss available to common
Shareholders, as reported $ (653,499) $(446,540) 0 0
Deduct: Stock-based compensation
Net of tax 459,513 - 0 0
Net loss available to common
Shareholders, pro-forma $1,113,012 $(446,540) 0 0
Basic earnings per share:
As reported $ (.03) $ (.02) 0 0
Pro-forma $ (.05) $ (.02) 0
The above stock-based employee compensation expense has been determined
utilizing a fair value method, the Black-Scholes option-pricing model.
The Company has recorded no compensation expense for stock options and warrants
granted to employees during the three or nine months ended May 31,
2004 and 2003.
In accordance with SFAS 123, the fair value of each option grant has been
estimated as of the date of the grant using the Black-Scholes option pricing
model with the following weighted average assumptions:
Page 9-
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
May 31, 2004
For the Nine months ended May 31,
2004 2003
Risk free interest rate 4.0% 0
Expected life 6.5 years n/a
Dividend rate 0.00% 0.00%
Expected volatility 18% n/a
New Accounting Pronouncements - In May 2003, the FASB issued Statements
of Financial Accounting Standards No. 150 b ("SFAS No. 150"), SFAS No. 150
established standards for how an issuer classifies and measures in its
statement of financial position certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability
(or an asset in some circumstances) because that financial instrument embodies
an obligation of the issuer. This SFAS is effective for financial
instruments entered into or modified after May 31, 2003 and otherwise is
effective at the beginning of the first interim period beginning after
June 15, 2003. It is to be implemented by reporting the cumulative effect
of a change in accounting principles for financial instruments created before
the issuance date of SFAS No. 150 and still existing at the beginning of
the interim period of adoption. Restatement is not permitted. The adoption
of SFAS No. 150 will not have a material effect on the financial statements.
The Company has adopted SFAS No. 150.
In December 2003, the FASB revised SFAS No. 132, Employers' Disclosures
about Pensions and Other Post-Retirement Benefits. This revision requires
additional disclosures to those in the original SFAS No. 132 about assets,
obligations, cash flows and net periodic benefit cost of deferred benefit
pension plans and other deferred benefit post-retirement plans. The required
information should be provided separately for pension plans and for other
post-retirement benefit plans. This statement revision is effective for
fiscal year ending after December 14, 2003 and interim periods beginning after
December 15, 2003. The adoption of this revision is not expected to have
a material impact on the Company's results of operations, financial position
or disclosures.
NOTE 4 - CONVERTIBLE DEBENTURES:
Between September and October 2003, the Company issued to six
accredited investors $230,000 of convertible debentures which mature
between May and October 2004 bearing interest at 8% per annum. The debentures
entitle the holders to convert the debt into common stock at a rate of
one share for each $0.30 principal amount plus any outstanding accrued
interest. In conjunction with this transaction, the Company issued
warrants to the six investors, to purchase a total of 1,165,000 shares
of the Company's common stock for $0.30-$0.32 per share, expiring
in five years. The warrants vested immediately.
As of May 31,2004 the debenture due in May had not been paid.
The value attributed to the warrants issued along with the debenture
transactions above, totaling $138,000, has been charged to interest expense.
Page 10-
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
May 31, 2004
During the quarter ended May 31,2004 warrants for the purchase of
1,024,030 shares of the Company's common stock expired unexercised.
NOTE 5- WARRANTS
In December of 2003 the Company issued five-year warrants to purchase a
total of 165,000 shares of the Company's common stock to three employees and
two individuals at an exercise price of $0.30 per share. The warrants vested
immediately.
In January of 2004 the Company issued five-year warrants to purchase a
total of 28,500 shares of the Company's common stock to two employees and
three individuals at an exercise price of $0.30 per share. The warrants vested
immediately.
In January of 2004 the Company issued seven-year warrants to purchase a
total of 5,057,460 shares of the Company's common stock to three officers and
two directors at an exercise price of $0.33 per share. The warrants vested
immediately.
In April 2004, the Company issued warrants to eight individuals to
purchase a total of 100,000 and 20,000 shares of the Company's common stock for
$0.50 and $0.35 per share respectively, expiring in five years. The warrants
vested immediately.
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 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: 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
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,
the slow process of specifying new products in highly regulated industrial
applications, and the decisions not to use any fire retardant product.
In general, the Company's products perform their intended uses well and are
in a form that is safe and easy to use. The Company's most pressing need
continues to be cash infusion as discussed below in the section on Liquidity
and Capital Resources. The Company is limiting its research and development
efforts in order to concentrate on sales of existing products. While new
market opportunities frequently arise, the Company has opted to concentrate
on targeting sales of present products rather than developing new products.
Page-11
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
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 independent
commission agents or employees compensated principally by commission.
COMPARISON NINE MONTHS ENDED MAY 31, 2004 AND MAY 31, 2003
Sales of $385,875 for the nine months ended May 31, 2004 represented an
increase of 33% from the $290,379 for the comparable nine-month period of the
prior year. Cost of goods sold during the same periods decreased from
$149,410 to $128,339 resulting in a gross profit of $257,536 compared to
$140,969 in the prior year. Selling, general and administrative expenses for
the nine months ended May 31, 2004 were $881,112, and $824,721 for the
similar period of the prior year. The most significant changes were increases
in repricing of warrants, commissions and testing of $44,000, $50,523
and $15,392 respectively and decreases in professional fees and payroll
taxes of $41,787 and $12,471.
COMPARISON THREE MONTHS ENDED MAY 31, 2004 AND MAY 31, 2003
Sales of $252,332 for the three months ended May 31,2004 represented an
increase of 146% from the $102,526 for the comparable three-month period of
the prior year. Cost of goods sold during the same periods increased 12% from
$60,986 to $68,473 resulting in a gross profit of $183,859 compared to $41,540
in the prior period. Selling, general and administrative expenses for the
three months ended May 31, 2004 were $319,318, which represented an increase
of 21% from the $263,728 for the similar period of the prior year. The most
significant changes were increases of approximately $50,000 in commissions
and deferred officers salaries of approximately %36,000, and decreases in
payroll taxes of $6696 and $9526 in professional fees.
During the nine months ended May 31,2004 and 2003 the Company realized
approximately $43,000 and $180,000, 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 May 31, 2004 the Company had cash balances of $765. In order to
fund continuing operations during the nine months ended on that date
the Company issued to six accredited investors $230,000 worth of
convertible debentures which mature between May and October 2004
bearing interest at 8% per annum. The debentures entitle the holders
to convert the debt into common stock at a rate of one share for each
$0.30 principal amount plus any outstanding accrued interest.
As of May 31,2004 the debenture due in May had not been paid.
The Company has deferred payment of $1,168,718 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
Page-12
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
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.
CRITICAL ACCOUNTING POLICIES
The discussion and analysis of our financial condition and results of
operations are based upon our 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 us 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 our 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.
We believe that our critical accounting policies are limited to those
described below. For a detailed discussion on the application of these
and other accounting policies, see the notes to our financial statements.
STOCK BASED COMPENSATION
The Company follows the intrinsic value method of Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25),
and related interpretations in accounting for its employee stock options
because, in the opinion of management, Financial Accounting
Standards Board Statement No. 123, Accounting for Stock-Based Compensation
"(FAS 123), requires use of option valuation models that were not developed
for use in valuing employee stock options. FAS 123 permits a company to elect
to follow the intrinsic value method of APB 25 rather than the alternative
fair value accounting provided under FAS 123, but requires pro forma net
income (loss) and earnings (loss) per share disclosures as well as various
other disclosures.
We have recorded no compensation expense for stock options and warrants
granted to employees during the three or nine months ended May 31, 2004.
In accordance with FAS 123, the fair value of each option grant has been
estimated as of the date of the grant using the Black-Scholes option pricing
model utilizing certain assumptions as disclosed in the footnotes to this
Form 10QSB. If we applied the recognition provisions of FAS 123 using the
Black-Scholes option pricing model, the net income (loss) would increase by
$459,513.The pro-forma stock-based employee compensation expense has been
determined utilizing a fair value method, the Black-Scholes option-pricing
model.
ACCOUNTING FOR INCOME TAXES
As part of the process of preparing our financial statements we are required
to estimate our income taxes. Management judgment is required in determining
our provision of our deferred tax asset. We recorded a valuation for the full
deferred tax asset from our 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 we adjust these
estimates in future periods, we may need to adjust such valuation recorded.
Page-13
NOFIRE TECHNOLOGIES, INC.
(A Development Stage Company)
GOING CONCERN
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, 2003 and 2002
and has incurred substantial losses since inception. 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.
Item 3. Controls and Procedures
Within the 90-day period prior to the date of this report, the Company's Chief
Executive Officer and Chief Financial Officer performed an evaluation of the
Company's disclosure controls and procedures, which have been designed to
permit the Company to effectively identify and timely disclose important
information. They concluded that the controls and procedures were effective.
Since the date of the evaluation, the Company has made no significant changes
in the Company's internal controls or in other factors that could
significantly affect the Company's internal controls.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
An 8-K was filed on April 19, 2004 stating a change of auditors as of
April 12,2004
Exhibit 1- Sarbanes-Oxley Act Section 906 Certification
No reports on Form 8-K were filed during the quarter ended May 31,2004.
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: July 13, 2004 NoFire Technologies, Inc.
By: /s/ Samuel Gottfreid
Sam Gottfreid
Chief Executive Officer
By: /s/ Sam Oolie
Sam Oolie
Chairman of the Board,
Chief Financial Officer
Page-14
I, Sam Oolie, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
NoFire Technologies, Inc.;
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements
made, in light of the circumstances under which such
statements were made, not misleading with respect to the
period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and
other financial information included in this quarterly
report, fairly present in all material respects the
financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant is
made known particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90
days prior to the filing date of this quarterly report (the
"Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation, to the
registrant's board of directors (or persons performing the
equivalent functions):
Page 15
a) all significant deficiencies in the design or
operation of internal controls which could adversely affect
the registrant's ability to record, process, summarize and
report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role
in the registrant's internal controls; and
6. The registrant's other certifying officer and I
indicated in this quarterly report that there were no
significant changes in internal controls or in other
factors that could significantly affect internal control
subsequent to the date of our most recent evaluation,
including any
corrective actions with regard to significant deficiencies
and material weaknesses.
Date: July 13,2004 /s/Sam Oolie
-------------
- --------------
Sam Oolie,
Chief Financial Officer
Page 16
I, Samuel Gottfried certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
NoFire Technologies, Inc.;
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements
made, in light of the circumstances under which such
statements were made, not misleading with respect to the
period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and
other financial information included in this quarterly
report, fairly present in all material respects the
financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant is made known particularly during the period in
which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90
days prior to the filing date of this quarterly report (the
"Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation, to the
registrant's board of directors (or persons performing the
equivalent functions):
Page 17
a) all significant deficiencies in the design or
operation of internal controls which could adversely affect
the registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role
in the registrant's internal controls; and
6. The registrant's other certifying officer and I have
indicated in this
annual report whether there were significant changes in
internal controls or in other factors that could
significantly affect internal controls subsequent to the
date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies
and material
weaknesses.
Date: July 13,2004 /s/ SamuelGottfreid
---------------------
Samuel Gottfreid
--------------------
Chief Executive Officer
Page 18
CERTIFICATION
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and
(b) of section 1350, chapter 63 of title 18, United States Code), each of the
undersigned officers of NoFire Technologies, Inc., a Delaware corporation (the
Company), does hereby certify, to the best of such officer's knowledge and
belief, that:
The Quarterly Report on Form 10-QSB for the Quarter ended May 31,
2004 of the Company fully complies with the requirements of section 13
(a) or 15 (d) of the Securities Exchange Act of 1934: and
The information contained in the Form 10-QSB fairly presents in all
material respect the financial condition and results of operations of
the Company.
Dated: July 13, 2004 /s/ Samuel Gottfreid
-------------------
Chief Executive Officer
Dated: July 13, 2004 /s/ Sam Oolie
-----------------------
Chief Financial Officer
EXHIBIT 1