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EX-31.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULES 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934 - Firemans Contractors, Inc.exhibit_31-2.htm
EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULES 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934 - Firemans Contractors, Inc.exhibit_31-1.htm
EX-32 - CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER AND THE CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C., SECTION 1350 - Firemans Contractors, Inc.exhibit_32.htm

 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

(Mark One)
x           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2011

o           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ________________ to ________________

Commission file number 333-169384
 FIREMANS CONTRACTORS, INC.

(Exact name of registrant as specified in its charter)

Nevada
 1700
27-0811315
(State or other jurisdiction of
incorporation or organization)
 (Primary Standard Industrial
Classification Code Number)
(IRS Employer
Identification No.)
 
2406 Gravel Drive
Fort Worth, Texas
(Address of principal executive offices) (Zip Code)

(800) 475-1479
(Registrant’s telephone number, including area code)
 
Not applicable
(Former name, former address and former fiscal year, if changed since last report)

 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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.    x Yes    o  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   
x Yes  o No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  o Yes     x No
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of November 7, 2011, there were 80,180,000 shares of Common Stock, $0.001 par value.

 
1

 
 



FIREMANS CONTRACTORS, INC.
 
TABLE OF CONTENTS
 
 
Index
Page Number
     
PART I
FINANCIAL INFORMATION
 
     
ITEM 1.
Financial Statements
F-1
     
ITEM 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
3
     
ITEM 3.
Quantitative and Qualitative Disclosures About Market Risk 
5
     
ITEM 4.
Controls and Procedures
5
     
PART II
OTHER INFORMATION
 
     
ITEM 1.
Legal Proceedings
6
     
ITEM 1A.
Risk Factors 
6
     
ITEM 2.
Unregistered Sales of Equity Securities and Use of Proceeds
6
     
ITEM 3.
Defaults Upon Senior Securities
6
     
ITEM 4.
(Removed and Reserved)
6
     
ITEM 5.
Other Information
6
     
ITEM 6.
Exhibits
6
     
SIGNATURES
 
7
 
 
 
 
 
 

 
 


 
2

 
 


PART I - FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
FIREMANS CONTRACTORS, INC.
 
INDEX TO FINANCIAL STATEMENTS
 
Financial Statements
 
   
Balance Sheets as of September 30, 2011 (Unaudited) and June 30, 2011
F-2
   
Statements of Operations for the Three Months Ended September 30, 2011 and 2010 (Unaudited)
F-3
   
Statement of Stockholders' Deficit for the Three Months Ended September 30, 2011 (Unaudited)
F-4
   
Statements of Cash Flows for the Three Months Ended September 30, 2011 and 2010 (Unaudited)
F-5
   
Condensed Notes to Financial Statements
F-6 to F-9
 
 
 
 
 
 
 
 
 
 
 
 

 
F-1

 

Firemans Contractors, Inc.
 
Balance Sheets
 
             
   
Sep. 30, 2011
   
Jun. 30, 2011
 
   
(Unaudited)
       
ASSETS
   
 
 
             
Current assets
           
             
Cash
  $ 3,048     $ 111,741  
Accounts receivable
    123,575       158,904  
Advances
    8,190       10,178  
Inventory
    9,522       4,301  
Prepaid expenses
    32,703       3,948  
                 
Total current assets
    177,038       289,072  
                 
Property and equipment, less accumulated depreciation of
    60,028       64,086  
   $21,133 and $17,075, respectively
               
Other assets
    3,938       688  
                 
                 
TOTAL ASSETS
  $ 241,004     $ 353,846  
                 
                 
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
       
                 
Current liabilities
               
                 
Accounts payable
  $ 97,017     $ 49,169  
Accrued expenses
    51,861       67,182  
Accrued interest (related parties)
    7,605       4,852  
Warranty liability
    9,054       7,813  
Other payables
    1,937       2,620  
Current portion of long-term debt
    4,159       4,108  
Convertible notes payable, net of unamortized beneficial conversion
    104,217       88,434  
   features of $15,783 and $31,566, respectively
               
Loans payable to shareholders
    395,476       383,677  
                 
Total current liabilities
    671,326       607,855  
                 
Long-term debt, net of current maturities
    8,465       9,521  
                 
Total liabilities
    679,791       617,376  
                 
Commitments and contingencies
               
                 
Stockholders' deficit
               
                 
250,000 shares Class A Convertible preferred stock
               
   authorized at $1.00/par value ($10 liquidation preference)
               
   200,000 and 0 issued and outstanding, respectively
    200,000       -  
200,000,000 shares common stock
               
   authorized at $0.001/par value
               
   80,180,000 issued and outstanding
    80,180       80,180  
Additional paid-in capital
    212,448       387,448  
Accumulated deficit
    (931,415 )     (731,158 )
                 
Total stockholders' deficit
    (438,787 )     (263,530 )
                 
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
  $ 241,004     $ 353,846  
                 
                 
                 
                 
The accompanying footnotes are an integral part of these financial statements.
               

 
F-2

 

Firemans Contractors, Inc.
 
Statements of Operations
 
             
             
   
Three Months Ended September 30,
 
   
2011
   
2010
 
   
(Unaudited)
   
(Unaudited)
 
             
Revenues
  $ 236,948     $ 113,349  
Cost of revenues (exclusive of
               
   depreciation shown separately below)
    198,897       70,235  
Sales and marketing expenses
    44,116       18,875  
General and administrative expenses
    157,549       135,125  
Depreciation and amortization
    4,058       2,124  
                 
Total operating expenses
    404,620       226,359  
                 
                 
Operating loss
    (167,672 )     (113,010 )
                 
Other income/(loss)
               
   Interest income
    5       -  
   Interest expense (related parties)
    (4,812 )     (3,055 )
   Interest expense
    (27,778 )     (388 )
                 
Total other loss
    (32,585 )     (3,443 )
                 
                 
Loss before taxes
    (200,257 )     (116,453 )
                 
Income tax (expense) benefit
    -       -  
                 
Net loss
  $ (200,257 )   $ (116,453 )
                 
                 
Basic and diluted loss per share
  $ (0.00 )   $ (0.00 )
                 
Basic and diluted weighted average
               
   number of common shares outstanding
    80,180,000       60,180,000  
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
The accompanying footnotes are an integral part of these financial statements.
 

 
F-3

 

Firemans Contractors, Inc.
 
Statements of Stockholders' Deficit
 
For the Three Months Ended September 30, 2011
 
                                           
                                           
                                           
               
Class A Convertible
   
Additional
             
   
Common stock
   
preferred stock
   
paid-in
   
Accumulated
       
   
Shares
   
Amount
   
Shares
   
Amount
   
capital
   
deficit
   
Total
 
                                           
Balance June 30, 2011
    80,180,000     $ 80,180       -     $ -     $ 387,448     $ (731,158 )   $ (263,530 )
                                                         
                                                         
                                                         
Stock issued for shareholder loans @ $0.125/sh. Aug. 2011
                  200,000       200,000       (175,000 )             25,000  
Net loss
                                            (200,257 )     (200,257 )
                                                         
                                                         
Balance September 30, 2011 (Unaudited)
    80,180,000     $ 80,180       200,000     $ 200,000     $ 212,448     $ (931,415 )   $ (438,787 )
                                                         
                                                         
                                                         
                                                         
                                                         
                                                         
                                                         
                                                         
                                                         
                                                         
                                                         
                                                         
                                                         
                                                         
                                                         
                                                         
                                                         
                                                         
                                                         
                                                         
                                                         
                                                         
The accompanying footnotes are an integral part of these financial statements.
 
 
 
 
 
 
F-4

 
 
 
Firemans Contractors, Inc.
 
Statements of Cash Flows
 
             
             
   
Three Months Ended September 30,
 
   
2011
   
2010
 
   
(Unaudited)
   
(Unaudited)
 
Cash flows from operating activities:
           
             
Net loss
  $ (200,257 )   $ (116,453 )
Adjustments to reconcile net loss to net cash
               
provided by/(used in) operating activities:
               
Depreciation and amortization
    4,058       2,124  
Consulting expenses (stock)
    -       12,500  
Beneficial conversion feature amortization
    15,783       -  
                 
Change in operating assets and liabilities:
               
Accounts receivable
    35,329       9,541  
Advances
    1,988       -  
Inventory
    (5,221 )     (685 )
Prepaid expenses
    (28,755 )     -  
Other assets
    (3,250 )     -  
Accounts payable
    47,848       9,950  
Accrued expenses
    (15,321 )     16,305  
Warranty liability
    1,241       1,070  
Other payables
    (683 )     (420 )
Loans payable to shareholders
    48,199       83,623  
Payments on loans payable to shareholders
    (11,400 )     (5,000 )
Accrued interest (related parties)
    2,753       1,512  
                 
Net cash provided by/(used in) operating activities
    (107,688 )     14,067  
                 
                 
Cash flows from financing activities:
               
Payments on long-term debt
    (1,005 )     (958 )
                 
Net cash flows used in financing activities
    (1,005 )     (958 )
                 
Increase/(decrease) in cash
    (108,693 )     13,109  
                 
Cash at beginning of period
    111,741       27,550  
                 
Cash at end of period
  $ 3,048     $ 40,659  
                 
                 
Cash paid for:
               
                 
Interest
  $ 11,755     $ 388  
Interest (related parties)
  $ 2,059     $ 1,543  
                 
Non-cash activities:
               
                 
Preferred stock issued for shareholder loans
  $ 25,000     $ -  
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
The accompanying footnotes are an integral part of these financial statements.
         
 
 
 

 
F-5

 
Firemans Contractors, Inc.
Condensed Notes to Financial Statements
September 30, 2011 and June 30, 2011


NOTE 1.   ORGANIZATION AND DESCRIPTION OF BUSINESS

Firemans Contractors, Inc. (“The Company”) was incorporated under the laws of the State of Nevada on August 21, 2009.  Firemans Contractors is a full service contracting company specializing in commercial painting and parking lot maintenance services.


NOTE 2.   BASIS OF PRESENTATION

The Financial Statements are unaudited. As permitted under the Securities and Exchange Commission (“SEC”) requirements for interim reporting, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. We believe that these financial statements include all necessary and recurring adjustments for the fair presentation of the interim period results. These financial statements should be read in conjunction with the Financial Statements and related notes included in our audit report for the fiscal year ended June 30, 2011. The results of operations for the three months ended September 30, 2011 are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2012.

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 the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Subsequent actual results may differ from those estimates.


NOTE 3.   FAIR VALUE OF FINANCIAL INSTRUMENTS

Carrying amounts of certain of our financial instruments, including accounts receivable, other receivables, accounts payable and other payables approximate fair value due to their short maturities. Carrying values of convertible note payable and long-term debt approximate fair values as they approximate market rates of interest. None of our financial instruments are held for trading purposes.


NOTE 4.  INVENTORY

At each period end, respectively, the Company had the following inventory:

   
Sep. 30, 2011
   
Jun. 30, 2011
 
             
Paint and materials
  $ 9,522     $ 4,301  
                 
Total inventory
  $ 9,522     $ 4,301  

The inventory consists primarily of paint and pre-fabricated items used in parking lot maintenance, and is valued at a lower of cost or market value.


NOTE 5.  PREPAID EXPENSES

As of September 30, 2011, the balance of prepaid expenses was $32,703, representing $1,152 of advertising, $27,218 of consulting and contract labor, and $4,333 of rents. As of June 30, 2011, the balance of prepaid expenses was $3,948, representing $1,152 of advertising and $2,796 of contract labor.



 
F-6

 
Firemans Contractors, Inc.
Condensed Notes to Financial Statements
September 30, 2011 and June 30, 2011

NOTE 6.  WARRANTIES

The Company warrants the work for one year after completion of a project.  Reserve for warranty work is established in the amount of 1% of sales for the previous twelve months.  As of September 30, 2011 and June 30, 2011, the balances of warranty liability were $9,054 and $7,813, respectively.  Warranty expenses for the three months ended September 30, 2011 and 2010, were $4,224 and $1,070, respectively, which are included in the Cost of revenues on the Statements of Operations.


NOTE 7.  CONVERTIBLE NOTE PAYABLE

In January of 2011, the Company signed a Convertible Note agreement. Under the agreement, the Company can borrow up to $500,000, on as needed basis.  Interest on outstanding balance is due monthly, at a rate of 36% per year, with no schedule set for principal repayments.  The Holder of the Note has a right to convert part, or the entire outstanding balance into shares of Company’s common stock at 30% discount to market price.  Unpaid principal and interest outstanding under the Note, is due on January 1, 2012 (one year term), unless the agreement is extended, with consent of both parties.

On January 18, 2011, the Company received $60,000 as the first advance under the Note.  The Company recorded $25,714 related to the deemed beneficial conversion feature of this advance, of which $6,708 has been amortized to interest expense in the accompanying statements of operations for the three months ended September 30, 2011.  As of September 30, 2011, the balance of interest accrued under the note was $900.

On April 12, 2011, the Company received $60,000 as the second advance under the Note.  The Company recorded $25,714 related to the deemed beneficial conversion feature of this advance, of which $9,075 has been amortized to interest expense in the accompanying statements of operations for the three months ended September 30, 2011.  As of September 30, 2011, the balance of interest accrued under the note was $900.


NOTE 8.  LONG-TERM DEBT

In September of 2009 the Company borrowed $20,326 in order to purchase a truck.  The note is secured by the truck, and bears 4.9% interest, with a 60 months repayment term.  The note balances at September 30, 2011 and June 30, 2011, were $12,624 and $13,629, respectively. Principal payments for the three months ended September 30, 2011 and 2010 were $1,005 and $958, respectively.  Interest expense for the corresponding periods was $162 and $209.
 
As of September 30, 2011, maturities of the long-term debt for the next four fiscal years were as follows:

2012
  $ 3,103  
2013
    4,314  
2014
    4,530  
2015
    677  
Total
  $ 12,624  


NOTE 9.  RELATED PARTY TRANSACTIONS

For the three months ended September 20, 2011 and 2010, the Company accrued $33,000 and $63,000, respectively, in salaries payable to its officers and major shareholders, which are reflected in notes payable to those shareholders. $36,400 of accrued salaries was paid during the first quarter of fiscal 2012.
 
 

 
F-7

 
Firemans Contractors, Inc.
Condensed Notes to Financial Statements
September 30, 2011 and June 30, 2011
 
NOTE 9.  RELATED PARTY TRANSACTIONS - continued
 
As of September 30, 2011 and June 30, 2011, the balances of shareholder notes were $395,476 and $383,677, respectively. The balance included accrued salaries, along with various advances to and from the Company.  The notes are unsecured, due upon demand and accrue interest at the end of each month on the then outstanding balance at the rate of 5.00% per annum.  As of September 30, 2011 and June 30, 2011, accrued interest payable on the notes was $7,605 and $4,852, respectively. Interest paid during the three months ended September 30, 2011 and 2010, was $2,059 and $1,543, respectively. These notes payable do not approximate fair value, as they are with related parties, and do not bear market rates of interest.


NOTE 10.  COMMITMENTS AND CONTINGENCIES

The Company leases its location under a 12 month agreement, which started in September of 2011.  For the fiscal years following June 30, 2011, future minimum annual rents under this agreement are as follows:
 
2012
  $ 29,250  
2013
    6,500  
         
Total
  $ 35,750  

The Company decided to vacate its previous location, leased under a three year agreement, which started in November of 2010. While attempting to sub-lease these premises, it is continuing to make monthly rent payments.  As of September 30, 2011, future minimum annual rents under this agreement are as follows:

2012
  $ 6,195  
2013
    8,260  
2014
    2,065  
         
Total
  $ 16,520  
 
Rent expense for the three months ended September 30, 2011, was $9,916, which included $6,067 of early termination penalty, and is reflected in general and administrative expenses in the accompanying statements of operations.  The Company did not lease an office in the first quarter of fiscal year 2010.


NOTE 11.  OPERATING SEGMENTS

During the period from inception through September 30, 2011, the Company operated as a single business segment.


NOTE 12.  PREFERRED STOCK

Effective August 16, 2011, the Company filed an amendment with the Nevada Secretary of State to authorize Class A Convertible preferred stock in the amount of 250,000 shares at $1.00 par value.  Class A shares have no dividend rights, except as may be declared by the Board of Directors in its sole discretion. Class A stock is ranked senior and prior to the Corporation’s common stock as to dividends and upon liquidation. Class A shares have liquidation rights of $10 per share, and are entitled to 1,000 votes each, on any matters requiring shareholders’ vote. One share of Class A stock can be converted into 10 shares of common stock at any time, upon demand from the holder.

 
F-8

 
Firemans Contractors, Inc.
Condensed Notes to Financial Statements
September 30, 2011 and June 30, 2011
 
NOTE 12.  PREFERRED STOCK - continued
 
On August 16, 2011, Renee Gilmore, our President, CEO and Director, and Danielle O’Neal, our Secretary and Director, acquired 100,000 shares each of Class A convertible preferred stock, in exchange for $12,500, each, as part of payment of accrued salaries.


NOTE 13.  GOING CONCERN

The financial statements of the Company have been prepared on the basis of accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company had negative working capital of $494,288 and an accumulated deficit of $931,415 at September 30, 2011, and a net loss of $200,257 and negative operating cash flows of $107,688 for the three months ended September 30, 2011.  These matters raise substantial doubt about the Company’s ability to continue as a going concern.  The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts, or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.
 
The Company has primarily funded its operations through the net proceeds received from the Company's issuance of stock to investors.  The Company plans to issue additional equity and/or debt to fund its future operations.
 
Based on the Company’s current liquidity position, the Company plans to raise additional capital through debt or equity funding within the next twelve months.  There is no assurance that any such financing will be available on acceptable terms or at all.  Should continuing funding requirements not be met, the Company’s operations may cease to exist.


NOTE 14.  SUBSEQUENT EVENTS

On November 1, 2011, the Company received a third advance, in the amount of $100,000, under the Convertible Note agreement, described in Note 7.  The Company recorded $42,857 related to the deemed beneficial conversion feature of this advance.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
F-9

 

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q contains statements which, to the extent they do not recite historical fact, constitute "forward looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You can identify these statements by the use of words like "may," "will," "could," "should," "project," "believe," "anticipate," "expect," "plan," "estimate," "forecast," "potential," "intend," "continue," and variations of these words or comparable words. Forward looking statements do not guarantee future performance and involve risks and uncertainties. Actual results may differ substantially from the results that the forward looking statements suggest for various reasons, including those discussed under the caption "Risks Related to Our Business" in our Annual Report on Form 10-K. These forward looking statements are made only as of the date of this report. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based. This discussion should be read together with the financial statements and other financial information included in this Form 10-Q.

The following discussion contains forward-looking statements that are subject to significant risks and uncertainties. There are several important factors that could cause actual results to differ materially from historical results and percentages and results anticipated by the forward-looking statements. The Company has sought to identify the most significant risks to its business, but cannot predict whether or to what extent any of such risks may be realized nor can there be any assurance that the Company has identified all possible risks that might arise. Investors should carefully consider all of such risks before making an investment decision with respect to the Company's stock.

 
Overview
 
Firemans Contractors, Inc. was incorporated on August 21, 2009 in the State of Nevada.  The Company is a full-service contractor, specializing in commercial painting and parking lot maintenance services.
 
Firemans Contractors, Inc. has never declared bankruptcy, has never been in receivership, and has never been involved in any illegal action or proceedings.
 
Since becoming incorporated, Firemans Contractors, Inc. has not made any significant purchases or sale of assets, nor has it been involved in any mergers, acquisitions or consolidations. Firemans Contractors, Inc. is not a blank check registrant as that term is defined in Rule 419(a) (2) of Regulation C of the Securities Act of 1933, since it has a specific business plan or purpose in which we have engaged in since our inception. In addition, neither Firemans Contractors, Inc. nor its officers, directors, promoters, or affiliates has had preliminary contact or discussions with, nor do we have any present plans, proposals, arrangements, or understandings with any representatives of the owners of any business or company regarding the possibility of an acquisition or merger. Further, our financial statements reflect that we have generated more than nominal revenues from our primary business during our first year of operation and we have more than nominal assets other than cash.


Plan of Operation
 
Over the next twelve months, we will concentrate on the following four areas to grow our operations:
 
 
Capital and Funding – Seek to obtain capital from all available sources, including bank financing, private sales of stock and/or convertible debt.  We expect income from operations and franchise sales to contribute to ongoing capital needs in the near future.
 
 
Advertising and Marketing – Work with several marketing companies to develop brand identity, marketing materials, and update our web site. Utilize all available marketing venues and public relations opportunities to promote the Company and its products, services, and franchise system.  Specifically, hire sales people, use direct mail, as well as images on our trucks, trailers and equipment, online advertisings and marking with major search engines like Google, Yahoo, Bing and such. We will also cultivate a referral program and network in various business organizations and associations.
 
 
Sales – Grow its core business in North Texas, and expand in other areas.
 
 
Franchise Development – Begin marketing the Firemans Contractors® franchise concept and licensing of Company’s Service Marks, with the short-term objective of establishing five new franchisee candidates during 2012.
 
 
 
3

 

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
Operating Environment
 
The painting industry is a $20 Billion annual industry, up from $16.1 Billion in 2003. Since 2006, reports indicate an annual rate increase of 3%, per The Rauch Guide to the US Paint Industry. As previously noted the industry is highly fragmented with about 40,000 companies nationwide. Most companies are small, over 70% have fewer than five employees. Larger firms may have more than 200 employees and generate an average $40 million in annual revenue.
 
The parking lot striping and maintenance service industry is very fragmented, consisting of a few national companies and numerous small, privately held and regional operators. Parking lot striping and maintenance is an ongoing service, requiring restriping and updated signage every 1-3 years. Parking lots require ADA compliance and city code mandates that require businesses to maintain proper visual signage, fire lanes, and other relevant markings & accessibility for customers to do business.  Firemans Contractors continues to operate and increase its customer base and increase sales through various advertising, business networking, cold calls, referrals and repeat customers.
  
The Company recognizes that building its brand is important to securing a strong standing. Therefore, Firemans Contractors, Inc. will continue focusing to build a brand that encompasses its core values of integrity and quality service with “Contractors You Can Trust®”. The Company’s goal is dedicated to stream-lining the contractor industry and making a difference by providing customers with quality service, using the best products available on the market for long lasting wear and as environmentally friendly as possible. To raise brand awareness among its intended audience, the Company has developed an appealing and memorable logo that it will use throughout its promotional strategy and in its various marketing materials. This will aid in brand reinforcement and the enhanced growth of its name and positive reputation among consumers nationwide.

 
Operating Results

We are constantly expanding our service offerings and have experienced steady growth in revenues.

For the three month periods ended September 30, 2011 and 2010, we have generated revenues of $236,948 and $113,349, respectively, and incurred net losses for the same periods of $200,257 and $116,453.

As of September 30, 2011, the Company had assets of $241,004, and total liabilities of $679,791.  As of June 30, 2011, the Company had assets of $353,846, and total liabilities of $617,376.
 
 
Liquidity and Capital Resources
 
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern which contemplates, among other things, the realization of assets and satisfaction of liabilities in the ordinary course of business.
  
As of September 30, 2011 and June 30, 2011, the Company had $3,048 and $111,741 of cash, respectively. Sales of our common stock and borrowings under the convertible note agreement have been the primary source of these funds.
  
We are presently able to meet our obligations as they come due.  At September 30, 2011, we had a working capital deficit of $494,288, which included $403,081 owed to related parties, mainly for accrued compensation.
 
In January of 2011 we secured a line of credit, by executing a Convertible Note Agreement.  Under the agreement, the Company can borrow up to $500,000, on as needed basis.  Interest on the outstanding balance is due monthly, at a rate of 36% per year, with no schedule set for principal repayments.  The Holder of the Note has a right to convert part, or the entire outstanding balance into shares of Company’s common stock at a 30% discount to market price.  Unpaid principal and interest outstanding under the Note, is due on January 1, 2012 (one year term), unless the agreement is extended, with the consent of both parties.  On January 18, and April 12, of 2011, the Company received two advances under this arrangement, of $60,000 each. On November 1, 2011, we received the third advance under the agreement, in the amount of $100,000. We believe this line of credit should be sufficient to ensure that the Company is able to meet its obligations for the next 12 months.

At the end of May 2011, under the Registration Statement on Form S-1, which was declared effective by the SEC on May 3, 2011, we sold 20,000,000 shares of our common stock for $250,000.
 
We anticipate that our future liquidity requirements will arise from the need to fund our growth, pay current obligations and future capital expenditures. In addition, following the completion of this offering, we expect that our general and administrative expenses will increase due to the additional operational and reporting costs associated with being a public company. The primary sources of funding for such requirements are expected to be cash generated from operations and raising additional funds from the private sources and/or debt financing. However, we can provide no assurances that we will be able to generate sufficient cash flow from operations and/or obtain additional capital or financing on terms satisfactory to us, if at all, to remain a going concern.
 
 
 
 
 
4

 

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
Other Items and Conditions
 
None.

 
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required.

 
ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, or the Exchange Act. This term refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission. An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2011. Based on that evaluation, the Company’s management concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2011. During the quarter ended on September 30, 2011, there was no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
 


 
 
 
 
 
 
 
 
 
 
 
 
 

 

 
5

 


PART II - OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

Management is not aware of any legal proceedings contemplated by any governmental authority against us. None of our directors, officers or affiliates are (i) a party adverse to us in any legal proceedings, or (ii) have an adverse interest to us in any legal proceedings.


ITEM 1A.  RISK FACTORS

Not required.


ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
Information regarding unregistered sales not included in previous reports:
 
               
Exemption
   
               
from
 
Terms of
Date
             
regulation
 
conversion
Sold
 
Amount
 
Securities Sold
 
Consideration *
 
claimed **
 
or exercise
                     
08/16/11
 
200,000
 
Class A Convertible Preferred Stock
 
Payment of accrued compensation - $25,000
 
 Reg. D
 
10 shares of Common Stock for each 1 share of Class A Convertible Preferred Stock

* For per share price, see Statement of Stockholders’ Equity.  No commissions or discounts were paid.

** The Company relied on information from purchasers that they were accredited investors and/or such investors were provided adequate information and were otherwise determined to be suitable.  In all cases, there was no public solicitation.

 
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.


ITEM 4.  (REMOVED AND RESERVED)

None.

 
ITEM 5.  OTHER INFORMATION

None.


ITEM 6.  EXHIBITS

101.INS
XBRL Instance Document
 
101.SCH
XBRL Taxonomy Extension Schema
 
101.CAL
XBRL Taxonomy Extension Calculation Linkbase
 
101.DEF
XBRL Taxonomy Extension Definition Linkbase
 
101.LAB
XBRL Taxonomy Extension Label Linkbase
 
101.PRE
XBRL Extension Presentation Linkbase
 

 
 
 
6

 
 
 

SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
FIREMANS CONTRACTORS, INC.
     
Date: November 14, 2011
By:
/s/  Renee Gilmore
   
Renee Gilmore
   
Principal Executive Officer

Date: November 14, 2011
By:
/s/  Nikolay Frolov
   
Nikolay Frolov
   
Chief Financial Officer
(Principal Financial and Accounting Officer)
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
7