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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
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-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


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 March 31, 2013

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 000-54802
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.)
 
2313 E Loop 820 N
Fort Worth, Texas 76118

(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
 

 
 
1

 


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 May 7, 2013, there were 948,330,733 shares of Common Stock, $0.001 par value.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

 
2

 

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
4
     
ITEM 3.
Quantitative and Qualitative Disclosures About Market Risk 
6
     
ITEM 4.
Controls and Procedures
6
     
PART II
OTHER INFORMATION
 
     
ITEM 1.
Legal Proceedings
7
     
ITEM 1A.
Risk Factors 
7
     
ITEM 2.
Unregistered Sales of Equity Securities and Use of Proceeds
7
     
ITEM 3.
Defaults Upon Senior Securities
7
     
ITEM 4.
Mine Safety Disclosures
7
     
ITEM 5.
Other Information
7
     
ITEM 6.
Exhibits
7
     
SIGNATURES
 
8
 
 
 
 
 

 
 



 
 
 
 
 
3

 
 
 

PART I - FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
FIREMANS CONTRACTORS, INC.
 
INDEX TO FINANCIAL STATEMENTS
 
Financial Statements
 
   
Balance Sheets as of March 31, 2013 (Unaudited) and June 30, 2012
F-2
   
Statements of Operations for the Three and the Nine Months Ended March 31, 2013 and 2012 (Unaudited)
F-3
   
Statement of Stockholders' Deficit for the Nine Months Ended March 31, 2013 (Unaudited)
F-4 - F-5
   
Statements of Cash Flows for the Nine Months Ended March 31, 2013 and 2012 (Unaudited)
F-6
   
Condensed Notes to Financial Statements
F-7 to F-16
 
 

 
 
 
F-1

 
 
Firemans Contractors, Inc.
 
Balance Sheets
 
             
   
Mar. 31, 2013
   
Jun. 30, 2012
 
   
(Unaudited)
       
ASSETS
 
             
Current assets
           
             
Cash
  $ 20,295     $ 7,008  
Accounts receivable
    159,806       66,966  
Inventory
    300       4,499  
Prepaid expenses
    -       13,533  
Current portion of notes receivable
    42,818       -  
                 
Total current assets
    223,219       92,006  
                 
Property and equipment, less accumulated depreciation of
    27,210       62,466  
   $16,596 and $34,276, respectively
               
Note receivable
    16,146       -  
Other assets
    1,625       3,938  
                 
                 
TOTAL ASSETS
  $ 268,200     $ 158,410  
                 
                 
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
 
                 
Current liabilities
               
                 
Accounts payable
  $ 291,916     $ 224,931  
Accrued expenses
    49,026       76,412  
Accrued interest (related parties)
    9,366       14,962  
Warranty liability
    9,365       7,034  
Other payables
    15,139       20,888  
Current portion of long-term debt
    -       4,314  
Convertible notes payable, net of unamortized beneficial conversion
               
   features of $30,261 and $65,001, respectively
    476,939       229,650  
Derivative liabilities
    66,333       32,727  
Loans payable to shareholders
    403,932       552,466  
                 
Total current liabilities
    1,322,016       1,163,384  
                 
Long-term debt, net of current maturities
    -       4,871  
                 
Total liabilities
    1,322,016       1,168,255  
                 
Commitments and contingencies
               
                 
Stockholders' deficit
               
                 
250,000 shares Class A Convertible preferred stock
               
   authorized at $1.00/par value ($10 liquidation preference)
               
   250,000 and 200,000 issued and outstanding, respectively
    250,000       200,000  
5,000,000 shares Class B Convertible preferred stock
               
   authorized at $0.001/par value ($0.10 liquidation preference)
               
   5,000,000 and 0 issued and outstanding, respectively
    5,000       -  
950,000,000 shares common stock
               
   authorized at $0.001/par value
               
   884,997,399 and 89,256,480 issued and outstanding, respectively
    884,997       89,256  
Additional paid-in capital
    87,833       335,731  
Accumulated deficit
    (2,281,646 )     (1,634,832 )
                 
Total stockholders' deficit
    (1,053,816 )     (1,009,845 )
                 
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
  $ 268,200     $ 158,410  
                 
The accompanying footnotes are an integral part of these financial statements.
 
  
 
F-2

 
 
Firemans Contractors, Inc.
 
Statements of Operations
 
   
                           
     
For the Three Months Ended
   
For the Nine Months Ended
 
     
Mar. 31, 2013
   
Mar. 31, 2012
   
Mar. 31, 2013
   
Mar. 31, 2012
 
     
(Unaudited)
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
 
                           
Revenues
    $ 320,474     $ 102,195     $ 778,160     $ 546,522  
Franchise fees and royalties
    7,302       -       84,234       -  
 
Total revenues
    327,776       102,195       862,394       546,522  
                                   
Cost of revenues (exclusive of
                               
   depreciation shown separately below)
    229,059       107,617       591,154       485,749  
Sales and marketing expenses
    19,707       39,147       56,882       138,087  
General and administrative expenses
    107,538       155,472       447,704       493,563  
Loss on sale of equipment
    3,536       -       9,667       -  
Depreciation and amortization
    2,540       4,387       8,906       12,814  
                                   
 
Total operating expenses
    362,380       306,623       1,114,313       1,130,213  
                                   
                                   
 
Operating loss
    (34,604 )     (204,428 )     (251,919 )     (583,691 )
                                   
Other income/(loss)
                               
   Interest income
    491       -       1,413       5  
   Loss on derivative liabilities
    (18,151 )     -       (17,901 )     -  
   Interest expense (related parties)
    (4,793 )     (5,893 )     (20,128 )     (15,841 )
   Interest expense
    (38,994 )     (32,533 )     (358,279 )     (106,545 )
                                   
 
Total other loss
    (61,447 )     (38,426 )     (394,895 )     (122,381 )
                                   
                                   
 
Loss before taxes
    (96,051 )     (242,854 )     (646,814 )     (706,072 )
                                   
Income tax (expense) benefit
    -       -       -       -  
                                   
 
Net loss
  $ (96,051 )   $ (242,854 )   $ (646,814 )   $ (706,072 )
                                   
                                   
Basic and diluted loss per share
  $ (0.00 )   $ (0.00 )   $ (0.00 )   $ (0.01 )
                                   
Basic and diluted weighted average
                               
   number of common shares outstanding
    630,591,428       80,180,000       344,376,165       80,180,000  
                                   
                                   
                                   
                                   
The accompanying footnotes are an integral part of these financial statements.
 

 
 
 
F-3

 
 
Firemans Contractors, Inc.
Statements of Stockholders' Deficit
For the Nine Months Ended March 31, 2013
                                                       
                                                       
   
Class A Convertible
   
Class B Convertible
               
Additional
             
   
preferred stock
   
preferred stock
   
Common stock
   
paid-in
   
Accumulated
       
   
Shares
   
Amount
   
Shares
   
Amount
   
Shares
   
Amount
   
capital
   
deficit
   
Total
 
                                                       
Balance June 30, 2012
    200,000     $ 200,000       -     $ -       89,256,480     $ 89,256     $ 335,731     $ (1,634,832 )   $ (1,009,845 )
                                                                         
                                                                         
Share Exchange Jul. 2012
                    2,000,000       2,000       (20,000,000 )     (20,000 )     18,000               -  
Stock issued for services @ $0.0034/sh. Jul. 2012
                                    3,000,000       3,000       7,200               10,200  
Stock issued for note conv. @ $0.0011/sh. Aug. 2012
                                    57,042,569       57,043       4,284               61,327  
Stock issued for note conv. @ $0.0018/sh. Aug. 2012
                                    8,147,746       8,148       6,852               15,000  
Stock issued for services @ $0.008/sh. Aug. 2012
                                    3,000,000       3,000       21,000               24,000  
Stock issued for note conv. @ $0.0012/sh. Sep. 2012
                                    71,319,077       71,319       14,276               85,595  
Stock issued for note conv. @ $0.0009/sh. Oct. 2012
                                    27,777,778       27,778       (2,778 )             25,000  
Stock issued for note conv. @ $0.00095/sh. Oct. 2012
                                    14,375,411       14,375       (718 )             13,657  
Share Exchange Oct. 2012
                    1,834,500       1,835       (18,345,000 )     (18,345 )     16,510               -  
Stock issued for note conv. @ $0.00035/sh. Oct. 2012
                                    16,666,667       16,667       (11,667 )             5,000  
Stock issued due to reset provision Oct. 2012
                                    17,947,121       17,947       (17,947 )             -  
Stock issued for note conv. @ $0.00035/sh. Nov. 2012
                                    13,333,333       13,333       (8,666 )             4,667  
Stock issued for note conv. @ $0.0005/sh. Nov. 2012
                                    20,666,660       20,667       (10,334 )             10,333  
Stock issued for note conv. @ $0.00055/sh. Nov. 2012
                                    13,636,363       13,636       (6,136 )             7,500  
Stock issued for note conv. @ $0.00048/sh. Dec. 2012
                                    13,958,333       13,958       (7,258 )             6,700  
Stock issued for note conv. @ $0.00035/sh. Dec. 2012
                                    14,000,000       14,000       (9,100 )             4,900  
Stock issued for note conv. @ $0.00028/sh. Dec. 2012
                                    13,928,571       13,929       (10,029 )             3,900  
Stock issued for note conv. @ $0.00024/sh. Jan. 2013
                                    13,750,000       13,750       (10,450 )             3,300  
Stock issued for note conv. @ $0.00025/sh. Jan. 2013
                                    15,600,000       15,600       (11,700 )             3,900  
Stock issued for note conv. @ $0.00022/sh. Jan. 2013
                                    28,181,818       28,182       (21,982 )             6,200  
Stock issued for note conv. @ $0.0002/sh. Jan. 2013
                                    65,893,000       65,893       (52,715 )             13,178  
 
 
 
 
F-4

 
 
Statements of Stockholders' Deficit - continued
 
Stock issued for note conv. @ $0.0001/sh. Jan. 2013
                                    19,150,000       19,150       (17,235 )             1,915  
Stock issued for note conv. @ $0.00017/sh. Feb. 2013
                                    27,647,059       27,647       (22,947 )             4,700  
Stock issued for note conv. @ $0.0001/sh. Feb. 2013
                                    63,650,000       63,650       (57,285 )             6,365  
Stock issued for note conv. @ $0.00008/sh. Feb. 2013
                                    85,647,543       85,647       (78,795 )             6,852  
Stock issued for note conv. @ $0.00015/sh. Feb. 2013
                                    47,800,000       47,800       (40,630 )             7,170  
Stock issued for note conv. @ $0.00004/sh. Mar. 2013
                                    75,766,870       75,767       (72,736 )             3,031  
Stock issued for note conv. @ $0.00005/sh. Mar. 2013
                                    32,200,000       32,200       (30,590 )             1,610  
Stock issued for note conv. @ $0.00006/sh. Mar. 2013
                                    50,000,000       50,000       (47,000 )             3,000  
Stock issued for s/h note conv. @ $0.001/sh. Mar. 2013
    50,000       50,000       1,165,500       1,165                       (49,949 )             1,216  
Beneficial conversion features
                                                    262,627               262,627  
Net loss
                                                            (646,814 )     (646,814 )
                                                                         
                                                                         
Balance March 31, 2013 (Unaudited)
    250,000     $ 250,000       5,000,000     $ 5,000       884,997,399     $ 884,997     $ 87,833     $ (2,281,646 )   $ (1,053,816 )
                                                                         
The accompanying footnotes are an integral part of these financial statements.
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
F-5

 
 
Firemans Contractors, Inc.
 
Statements of Cash Flows
 
             
   
For the Nine Months Ended
 
   
Mar. 31, 2013
   
Mar. 31, 2012
 
   
(Unaudited)
   
(Unaudited)
 
Cash flows from operating activities:
           
             
Net loss
  $ (646,814 )   $ (706,072 )
Adjustments to reconcile net loss to net cash
               
used in operating activities:
               
Depreciation and amortization
    8,906       12,814  
Loss on sale of equipment
    9,667       -  
Loss on derivative liabilities
    17,901       -  
Consulting expenses (share based payments)
    34,200       -  
Interest expense (share based payments)
    46,250       -  
Beneficial conversion feature amortization
    233,361       48,709  
Debt discount amortization
    79,713       -  
                 
Change in operating assets and liabilities:
               
Accounts receivable
    (92,840 )     127,280  
Advances
    -       10,178  
Inventory
    2,199       (615 )
Prepaid expenses
    13,533       (5,573 )
Notes receivable
    (53,964 )     -  
Other assets
    2,313       (3,250 )
Accounts payable
    66,985       124,291  
Accrued expenses
    (27,386 )     10,219  
Warranty liability
    2,331       216  
Other payables
    249       3,696  
Loans payable to shareholders
    183,079       169,344  
Payments on loans payable to shareholders
    (14,300 )     (5,360 )
Accrued interest (related parties)
    (5,596 )     8,507  
                 
Net cash used in operating activities
    (140,213 )     (205,616 )
                 
                 
Cash flows from investing activities:
               
                 
Purchase of property and equipment
    (1,500 )     (13,082 )
                 
Net cash used in investing activities
    (1,500 )     (13,082 )
                 
                 
Cash flows from financing activities:
               
Payments on long-term debt
    -       (3,046 )
Proceeds from convertible notes payable
    155,000       120,000  
                 
Net cash flows provided by financing activities
    155,000       116,954  
                 
Increase / (decrease) in cash
    13,287       (101,744 )
                 
Cash at beginning of period
    7,008       111,741  
                 
Cash at end of period
  $ 20,295     $ 9,997  
                 
                 
Cash paid for:
               
                 
Interest
  $ 12,086     $ 36,824  
Interest (related parties)
  $ 8,283     $ 7,334  
                 
Non-cash activities:
               
                 
Stock issued for loans and interest
  $ 304,800     $ -  
Stock issued for shareholder loans and interest
  $ 1,216     $ 25,000  
Derivative liability and beneficial conversion features
  $ 278,333     $ 51,427  
Reclassification of loans payable to shareholders to
               
convertible notes payable
  $
316,117
    $ -  
                 
The accompanying footnotes are an integral part of these financial statements.
 

 
F-6

 
Firemans Contractors, Inc.
Condensed Notes to Financial Statements
March 31, 2013 and June 30, 2012


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 painting company, focusing on residential, commercial and industrial parking lot striping, and parking lot maintenance services. We have begun franchising our concept, and as of the date of these statements, two of our franchises were in operation in Dallas-Fort Worth area.


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 annual report on Form 10-K for the fiscal year ended June 30, 2012. The results of operations for the nine months ended March 31, 2013 are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2013.

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

Fair value measurements are based upon inputs that market participants use in pricing an asset or liability, which are classified into two categories: observable inputs and unobservable inputs. Observable inputs represent market data obtained from independent sources, whereas unobservable inputs reflect a company’s own market assumptions, which are used if observable inputs are not reasonably available without undue cost and effort. These two types of inputs are further prioritized into the following fair value input hierarchy:
 
 
Level 1 — quoted prices for identical assets or liabilities in active markets.

 
Level 2 — quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g. interest rates) and inputs derived principally from or corroborated by observable market data by correlation or other means.
 
 
Level 3 — unobservable inputs for the asset or liability.

 

 
F-7

 
Firemans Contractors, Inc.
Condensed Notes to Financial Statements
March 31, 2013 and June 30, 2012

NOTE 3.   FAIR VALUE OF FINANCIAL INSTRUMENTS - continued
 
The fair value input hierarchy level to which an asset or liability measurement in its entirety falls is determined based on the lowest level input that is significant to the measurement in its entirety.

Derivative liabilities, described in Note 9, are classified as Level 2.


NOTE 4.   FRANCHISE FEE RECOGNITION POLICY

The Company recognizes franchise fee revenue from an individual franchise sale when all of the following conditions have been met:

 
(i)
The Company has no remaining obligation or intent to refund any cash received or forgive any unpaid notes or receivables;
 
(ii)
Substantially all of the initial services required by the franchise agreement have been performed by us;
 
(iii)
No other material conditions or obligations related to the determination of substantial performance exist.


NOTE 5.  INVENTORY

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

   
Mar. 31, 2013
   
Jun. 30, 2012
 
             
Paint and materials
  $ 300     $ 4,499  
                 
Total inventory
  $ 300     $ 4,499  

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 6.  PREPAID EXPENSES

As of March 31, 2013, the balance of prepaid expenses was $0.  As of June 30, 2012, the balance of prepaid expenses was $13,533, representing $8,770 of consulting and $4,763 of contract labor, materials and equipment rentals.


NOTE 7.  NOTES RECEIVABLE

Effective July 1, 2012, the Company sold its first franchise. Of the total $35,000 franchise fee, $28,000 was financed under a note, with a term of 38 months, and annual interest rate of 7%. As of March 31, 2013, balance under the Note was $21,838.  Principal received for the nine months ended March 31, 2013 was $6,162.  Interest income for the same period was $1,328.
 

 
F-8

 
Firemans Contractors, Inc.
Condensed Notes to Financial Statements
March 31, 2013 and June 30, 2012

NOTE 7.  NOTES RECEIVABLE - continued
 
Effective December 15, 2012, the Company sold its second franchise.  Of the total $35,000 franchise fee, $34,000 was financed. Under the agreement, franchisee will pay for the first nine months 10% of gross revenue toward the balance, which will not accrue any interest. If any balance will remain at the end of that term, it will be placed into an interest bearing note. As of March 31, 2013, balance under the Note was $32,504.

On January 1, 2013, the Company sold equipment to the second franchisee and financed the total amount of $5,000 under a note, with a term of 36 months, and annual interest rate of 7%. As of March 31, 2013, balance under the Note was $4,622. Principal received for the three months ended March 31, 2013 was $378.  Interest income for the same period was $85.


NOTE 8.  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 March 31, 2013 and June 30, 2012, the balances of warranty liability were $9,365 and $7,034, respectively.  Warranty expenses for the nine months ended March 31, 2013 and 2012, were $3,036 and $4,408, respectively, which are included in the Cost of revenues on the Statements of Operations.


NOTE 9.  CONVERTIBLE NOTES PAYABLE

In January of 2011, the Company signed a Convertible Note agreement. Under the agreement, the Company can borrow up to $500,000, on an as needed basis.  Interest on outstanding balance is due monthly, at a rate of 36% per year.  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, 2014 (extended term), unless the agreement is further 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 $13,416 has been amortized to interest expense in the accompanying statements of operations for the nine months ended March 31, 2012.

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 $18,150 has been amortized to interest expense in the accompanying statements of operations for the nine months ended March 31, 2012.

On November 1, 2011, the Company received $100,000 as the third advance under the Note.  The Company recorded $42,857 related to the deemed beneficial conversion feature of this advance, of which $17,143 has been amortized to interest expense in the accompanying statements of operations for each of the nine months ended March 31, 2013 and 2012.

On March 27, 2012, the Company received $20,000 as the fourth advance under the Note. The Company recorded $3,148 related to the deemed beneficial conversion feature of this advance, of which $2,099 has been amortized to interest expense in the accompanying statements of operations for the nine months ended March 31, 2013.

 

 
F-9

 
Firemans Contractors, Inc.
Condensed Notes to Financial Statements
March 31, 2013 and June 30, 2012

NOTE 9.  CONVERTIBLE NOTES PAYABLE - continued
 
On May 4, 2012, the Company received $20,000 as the fifth advance under the Note. The Company recorded $1,584 related to the deemed beneficial conversion feature of this advance, of which $1,188 has been amortized to interest expense in the accompanying statements of operations for the nine months ended March 31, 2013.

On August 22, 2012, the Company received $46,000 as the sixth advance under the Note. The Company recorded $36,853 related to the deemed beneficial conversion feature of this advance, all of which has been amortized to interest expense in the accompanying statements of operations for the nine months ended March 31, 2013.

During April and May of 2012, $60,000 outstanding under the Note was converted into 9,076,480 shares of common stock of the company, representing $30,348 of principal and $29,652 of interest.

During August and September of 2012, $161,922 outstanding under the Note was converted into 136,509,392 shares of common stock of the company, representing $131,607 of principal and $30,315 of interest.

During October and November of 2012, $58,657 outstanding under the Note was converted into 110,766,970 shares of common stock of the company, representing $55,016 of principal and $3,641 of interest.

During February and March of 2013, the Company issued 241,414,413 shares of common stock for the total amount of $18,662, representing $6,367 of principal and $6,340 of interest outstanding under the note; and $5,955 of fees related to conversions.

As of March 31, 2013 and June 30, 2012, combined principal balances outstanding under the Note were $82,662 and $209,223, respectively; net of unamortized beneficial conversion features of $0 and $20,429, respectively.  Balances of interest accrued under the Note as of March 31, 2013 and June 30, 2012, were $2,820 and $14,501, respectively.

On April 8, 2012, the Company issued a convertible promissory note in the amount of $25,000, bearing interest at a rate of 20% per annum. The note is unsecured and matured on December 1, 2012. The entire principal and accrued interest on the note are convertible into common stock of the Company at a variable conversion price, with 30% discount to the market price, at the point of conversion. The Company recorded $24,770 related to the deemed beneficial conversion feature of this note, all of which has been amortized to interest expense in the accompanying statements of operations for the nine months ended March 31, 2013.  During January and February of 2013, $22,559 of principal outstanding under the note was converted into 150,293,000 shares of common stock of the company. As of March 31, 2013 and June 30, 2012, the principal balances were $2,441 and $25,000, respectively, and accrued interest balances were $3,747 and $1,109, respectively.

On May 25, 2012, the Company issued a convertible promissory note in the amount of $40,000, bearing interest at a rate of 8% per annum. The note is unsecured and matured on February 21, 2013. The entire principal and accrued interest on the note are convertible into common stock of the Company at a variable conversion price, with 45% discount to the market price, at the point of conversion. The Company determined that the conversion feature of the Note should be accounted for as a convertible note derivative liability, and recorded at its fair value of $32,727. During November and December of 2012, $23,000 of principal balance was converted into 55,523,267 shares of common stock of the company. During January and February of 2013, remaining $17,000 of principal balance was converted into 83,578,877 shares of common stock of the company. As of March 31, 2013 and June 30, 2012, principal balances of the note were $0 and $40,000, respectively. As of March 31, 2013 and June 30, 2012, balances of the debt discount were $0 and $29,091, respectively. For the nine months ended March 31, 2013, amortization of the debt discount was $29,091, reflected on the accompanying statements of operations as interest expense. As of March 31, 2013, accrued interest balance was $1,600.

 

 
F-10

 
Firemans Contractors, Inc.
Condensed Notes to Financial Statements
March 31, 2013 and June 30, 2012

NOTE 9.  CONVERTIBLE NOTES PAYABLE - continued
 
On July 13, 2012, the Company issued a convertible promissory note in the amount of $32,500, bearing interest at a rate of 8% per annum. The note is unsecured and matured on March 29, 2013. The entire principal and accrued interest on the note are convertible into common stock of the Company at a variable conversion price, with 45% discount to the market price, at the point of conversion. The Company determined that the conversion feature of the note should be accounted for as a convertible note derivative liability, and recorded at its fair value of $26,591. During March of 2013, $3,000 of principal balance was converted into 50,000,000 share of common stock of the company. As of March 31, 2013, principal balance of the note was $29,500. As of March 31, 2013, balance of the debt discount was $0. For the nine months ended March 31, 2013, amortization of the debt discount was $26,591, reflected on the accompanying statements of operations as interest expense.

On October 2, 2012, the Company issued a convertible promissory note in the amount of $42,500, bearing interest at a rate of 8% per annum. The note is unsecured and matures on June 13, 2013. The entire principal and accrued interest on the note are convertible into common stock of the Company at a variable conversion price, with 45% discount to the market price, at the point of conversion. The Company determined that the conversion feature of the note should be accounted for as a convertible note derivative liability, and recorded at its fair value of $34,772. As of March 31, 2013, balance of the debt discount was $11,591. For the nine months ended March 31, 2013, amortization of the debt discount was $23,181, reflected on the accompanying statements of operations as interest expense.

On February 25, 2013, the Company issued a convertible promissory note in the amount of $16,500, bearing interest at a rate of 8% per annum. The note is unsecured and matures on November 22, 2013. The entire principal and accrued interest on the note are convertible into common stock of the Company at a variable conversion price, with 45% discount to the market price, at the point of conversion. The Company determined that the conversion feature of the note should be accounted for as a convertible note derivative liability, and recorded at its fair value of $7,425. As of March 31, 2013, balance of the debt discount was $6,575. For the nine months ended March 31, 2013, amortization of the debt discount was $850, reflected on the accompanying statements of operations as interest expense.

As of March 31, 2013 and June 30, 2012, derivative liabilities for the convertible promissory notes totalled $66,333 and $32,727, respectively, including a reduction of $35,182 due to conversions noted earlier. For the nine months ended March 31, 2013, loss on derivative liabilities was $17,901, calculated as the difference between relief of derivative liability and excess of fair market value of shares received for conversion over principal amount of conversion (due to discount).

On December 5, 2012, the Company issued a convertible promissory note to Kristy D. O’Neal, who resigned from her position of Secretary and from the Board of Directors on the previous day. Principal of the Note - $105,897, represents amount owed to her as of that date, primarily for accrued compensation. This debt was previously included in the Loans payable to shareholders. Note is payable on demand and bears interest at a rate of 5% per annum. The entire principal and accrued interest on the note are convertible into common stock of the Company at a variable conversion price, with 50% discount to the market price, at the point of conversion. The Company recorded $52,949 related to the deemed beneficial conversion feature of this note, all of which has been amortized to interest expense in the accompanying statements of operations for the nine months ended March 31, 2013.  As of March 31, 2013, the principal balance remained unchanged, and accrued interest balance was $1,711.


 
F-11

 
Firemans Contractors, Inc.
Condensed Notes to Financial Statements
March 31, 2013 and June 30, 2012

NOTE 9.  CONVERTIBLE NOTES PAYABLE - continued
 
On December 5, 2012, the Company issued a convertible promissory note to Scott O’Neal, who resigned from the Board of Directors on the previous day. Principal of the Note - $210,200, represents amount owed to him as of that date, primarily for accrued compensation. This debt was previously included in the Loans payable to shareholders. Note is payable on demand and bears interest at a rate of 5% per annum. The entire principal and accrued interest on the note are convertible into common stock of the Company at a variable conversion price, with 50% discount to the market price, at the point of conversion. The Company recorded $105,100 related to the deemed beneficial conversion feature of this note, all of which has been amortized to interest expense in the accompanying statements of operations for the nine months ended March 31, 2013.  As of March 31, 2013, the principal balance remained unchanged, and accrued interest balance was $3,397.

On December 27, 2012, the Company issued a convertible promissory note in the amount of $5,000, bearing interest at a rate of 20% per annum. The note is unsecured and matures on June 19, 2013. The entire principal and accrued interest on the note are convertible into common stock of the Company at a variable conversion price, with 30% discount to the market price, at the point of conversion. The Company recorded $2,143 related to the deemed beneficial conversion feature of this note, of which $1,158 has been amortized to interest expense in the accompanying statements of operations for the nine months ended March 31, 2013.

On February 28, 2013, the Company issued a convertible promissory note in the amount of $12,500, bearing interest at a rate of 20% per annum. The note is unsecured and matures on November 27, 2013. The entire principal and accrued interest on the note are convertible into common stock of the Company at a variable conversion price, with 50% discount to the market price, at the point of conversion. The Company recorded $12,500 related to the deemed beneficial conversion feature of this note, of which $1,390 has been amortized to interest expense in the accompanying statements of operations for the nine months ended March 31, 2013.


NOTE 10.  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. On July 1, 2012, the truck and a trailer, with the carrying value of $13,393, were sold to our franchisee, and the $9,185 balance of liability assigned to them.  In the same transaction, three painting machines, with the carrying value of $5,922, were sold for $4,000.  $2,000, the remainder of the $6,000 cash deposit received from the franchisee prior to June 30, 2012, was used for inventory.


NOTE 11.  RELATED PARTY TRANSACTIONS

For the nine months ended March 31, 2013 and 2012, the Company accrued $117,000 and $99,000, respectively, in salaries payable to its officers and major shareholders, which are reflected in Loans payable to shareholders. For the same periods, the Company accrued $50,000 and $90,000, respectively, to the officers and directors who resigned in December of 2012. As of March 31, 2013, these individuals are no longer considered insiders, and balances of their shareholder notes were transferred to convertible notes payable.


 
F-12

 
Firemans Contractors, Inc.
Condensed Notes to Financial Statements
March 31, 2013 and June 30, 2012

NOTE 11.  RELATED PARTY TRANSACTIONS - continued
 
As of March 31, 2013 and June 30, 2012, the balances of shareholder notes were $403,922 and $552,466, 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 March 31, 2013 and June 30, 2012, accrued interest payable on the notes was $9,366 and $14,962, respectively. Interest paid during the nine months ended March 31, 2013 and 2012, was $8,283 and $7,334, respectively. These notes payable do not approximate fair value, as they are with related parties, and do not bear market rates of interest.

On December 4, 2012, Ms. Kristy D. O’Neal resigned from her position of Secretary, and from the Board of Directors of the Company. On the following day, the Company issued to her a convertible note payable in the amount of $105,897, for the balance of shareholder note as of the date of resignation. The note is described above, in Note 9.

On December 4, 2012, Mr. Scott O’Neal resigned from the Board of Directors of the Company.  On the following day, the Company issued to him a convertible note payable in the amount of $210,200, for the balance of shareholder note as of the date of resignation. The note is described above, in Note 9.


NOTE 12.  COMMITMENTS AND CONTINGENCIES

On December 14, 2012, the Company re-negotiated its office lease and moved to a smaller location.  Current lease is for $1,625 a month, and will expire on September 30, 2014.  For the fiscal years following March 31, 2013, future rents under this agreement are as follows:

2013
  $ 4,875  
2014
    19,500  
2015
    4,875  
         
Total
  $ 29,250  
         
Rent expenses for the nine months ended March 31, 2013 and 2012, were $22,711 and $34,034, respectively.





 
F-13

 
Firemans Contractors, Inc.
Condensed Notes to Financial Statements
March 31, 2013 and June 30, 2012

NOTE 13.  OPERATING SEGMENTS

During the period from inception through June 30, 2012, the Company operated as a single business segment. Starting July 1, 2012 the franchise segment was added.  Table below reflects segment information for the three and nine months ended March 31, 2013:

   
Operations
   
Franchise
   
Total
 
Three Months Ended March 31, 2013
                 
Revenues
  $ 320,474     $ -     $ 320,474  
Franchise fees
    -       3,037       3,037  
Royalties
    -       4,265       4,265  
       Total Revenues
  $ 320,474     $ 7,302     $ 327,776  
                         
Cost of revenues
  $ 229,059     $ -     $ 229,059  
Sales and marketing expenses
    19,207       500       19,707  
General and administrative expenses
    87,678       19,860       107,538  
Depreciation and amortization
    2,540       -       2,540  
Interest income
    -       491       491  
Net income/(loss)
    (83,485 )     (12,566 )     (96,051 )
                         
Nine Months Ended March 31, 2013
                       
Revenues
  $ 778,160     $ -     $ 778,160  
Franchise fees
            73,037       73,037  
Royalties
            11,197       11,197  
       Total Revenues
  $ 778,160     $ 84,234     $ 862,394  
                         
Cost of revenues
  $ 591,154     $ -     $ 591,154  
Sales and marketing expenses
    56,382       500       56,882  
General and administrative expenses
    391,812       55,892       447,704  
Depreciation and amortization
    8,906       -       8,906  
Interest income
    -       1,413       1,413  
Net income/(loss)
    (676,069 )     29,255       (646,814 )
                         
As of March 31, 2013
                       
Property and equipment, net
  $ 27,210     $ -     $ 27,210  
Total assets
    209,236       58,964       268,200  
                         

NOTE 14.  PREFERRED STOCK

Effective July 6, 2012, the Company filed an amendment with the Nevada Secretary of State to authorize Class B convertible preferred stock in the amount of 5,000,000 shares at $0.001 par value.  Class B shares have no dividend rights, except as may be declared by the Board of Directors in its sole discretion. Class B stock is ranked junior and subsequent to Class A convertible preferred stock, but senior and prior to the Corporation’s common stock as to dividends and upon liquidation. Class B shares have liquidation rights of $0.10 per share, and are entitled to 100 votes each, on any matters requiring shareholders’ vote. One share of Class B stock can be converted into 10 shares of common stock at any time, upon demand from the holder.

On July 6, 2012, Renee Gilmore, our President, CEO and Director, and Danielle O’Neal, our Secretary and Director, each, exchanged 10,000,000 shares of common stock for 1,000,000 shares of Class B convertible preferred stock, based on the conversion ratio designated for Class B shares.

On October 9, 2012, Renee Gilmore, our President, CEO and Director, exchanged 9,455,000 shares of common stock for 945,500 shares of Class B convertible preferred stock, based on the conversion ratio designated for Class B shares.


 
F-14

 
Firemans Contractors, Inc.
Condensed Notes to Financial Statements
March 31, 2013 and June 30, 2012

NOTE 14.  PREFERRED STOCK - continued
 
On October 9, 2012, Danielle O’Neal, our Secretary and Director, exchanged 8,890,000 shares of common stock for 889,000 shares of Class B convertible preferred stock, based on the conversion ratio designated for Class B shares.

On March 12, 2013, Renee Gilmore, our President, CEO and Director, acquired 50,000 shares of Class A convertible preferred stock, and 1,165,500 shares of Class B convertible preferred stock in exchange for $1,216 owed to her, based on the market price of equivalent number of shares of common stock of the company.


NOTE 15.  COMMON STOCK

Effective August 3, 2012, the Company filed an amendment with the Nevada Secretary of State to increase the number of authorized Common Stock from 200,000,000 to 400,000,000 shares.

During July and August of 2012, the Company issued 6,000,000 shares of common stock for consulting services, valued at $34,200.

During August and September of 2012, the Company issued 136,509,392 shares of common stock in partial satisfaction of principal and accrued interest balance outstanding under the convertible note payable, originated on January 1, 2011, in the amount of $161,922.

Effective November 19, 2012, the Company filed an amendment with the Nevada Secretary of State to increase the number of authorized Common Stock from 400,000,000 to 950,000,000 shares.

During October and November of 2012, the Company issued 110,766,970 shares of common stock in partial satisfaction of principal and accrued interest balance outstanding under the convertible note payable, originated on January 1, 2011, in the amount of $58,657.

During November and December of 2012, the Company issued 55,523,267 shares of common stock in partial satisfaction of principal balance outstanding under the convertible note payable, originated on May 25, 2012, in the amount of $23,000.

During January and February of 2013, the Company issued 83,578,877 shares of common stock in complete satisfaction of principal balance outstanding under the convertible note payable, originated on May 25, 2012, in the amount of $17,000.

During January and February of 2013, the Company issued 150,293,000 shares of common stock in partial satisfaction of principal balance outstanding under the convertible note payable, originated on April 8, 2012, in the amount of $22,559.

During February and March of 2013, the Company issued 241,414,413 shares of common stock in partial satisfaction of principal balance outstanding under the convertible note payable, originated on January 1, 2011, in the amount of $12,707, and fees of $5,955.

During March of 2013, the Company issued 50,000,000 shares of common stock in partial satisfaction of principal balance outstanding under the convertible note payable, originated on July 13, 2012, in the amount of $3,000.

 
F-15

 
Firemans Contractors, Inc.
Condensed Notes to Financial Statements
March 31, 2013 and June 30, 2012

NOTE 16.  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 $1,098,767 and an accumulated deficit of $2,281,646 at March 31, 2013, and a net loss of $646,814 and negative operating cash flows of $140,213 for the nine months ended March 31, 2013.  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. 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 17.  SUBSEQUENT EVENTS

During April of 2013, the Company issued 26,666,667 shares of common stock in satisfaction of accrued interest balance outstanding under the convertible note payable, originated on May 25, 2012, in the amount of $1,600.

During April of 2013, the Company issued 36,666,667 shares of common stock in partial satisfaction of principal balance outstanding under the convertible note payable, originated on July 13, 2012, in the amount of $2,200.
 
 
 
 
 
 
 
 
 
 
 
 

 
F-16

 
 
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 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.

Effective July 6, 2012, the Company filed an amendment with the Nevada Secretary of State to authorize Class B convertible preferred stock in the amount of 5,000,000 shares at $0.001 par value.  Class B shares have no dividend rights, except as may be declared by the Board of Directors in its sole discretion. Class B stock is ranked junior and subsequent to Class A convertible preferred stock, but senior and prior to the Corporation’s common stock as to dividends and upon liquidation. Class B shares have liquidation rights of $0.10 per share, and are entitled to 100 votes each, on any matters requiring shareholders’ vote. One share of Class B stock can be converted into 10 shares of common stock at any time, upon demand from the holder.

Effective August 3, 2012, the Company filed an amendment with the Nevada Secretary of State to increase the number of authorized Common Stock from 200,000,000 to 400,000,000 shares.

Effective November 19, 2012, the Company filed an amendment with the Nevada Secretary of State to increase the number of authorized Common Stock from 400,000,000 to 950,000,000 shares.

On July 1, 2012, first franchisee of the Firemans Contractors® concept began operations in North Texas. On December 15, 2012, second franchisee of the Firemans Contractors® concept began operations in North Texas.


 
 
 
 
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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
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 and Bing. We will also cultivate a referral program and network in various business organizations and associations.
 
 
Sales – Grow our core business in North Texas, and expand in other areas.
 
 
Franchise Development – Marketing the Firemans Contractors® franchise concept and licensing of Company’s Service Marks, with the short-term objective of establishing ten new franchisees during calendar year 2013.
 
 
 Operating Environment
 
The painting industry is a $20 Billion annual industry, up from $16.1 Billion in 2003. Since 2006, reports indicate an annual growth rate of 3%, as per The Rauch Guide to the US Paint Industry. As described in the next paragraph, 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

For the three month periods ended March 31, 2013 and 2012, we have generated revenues of $327,776 and $102,195, respectively. Revenue for the third quarter of fiscal year 2013 includes $7,302 of revenues from franchising. We’ve incurred net losses for the same periods of $96,051 and $242,854.

For the nine month periods ended March 31, 2013 and 2012, we have generated revenues of $862,394 and $546,522, respectively. Revenue for the first nine months of fiscal year 2013 includes $84,234 of revenues from franchising. We’ve incurred net losses for the same periods of $646,814 and $706,072.

As of March 31, 2013, the Company had assets of $268,200, and total liabilities of $1,322,016.  As of June 30, 2012, the Company had assets of $158,410, and total liabilities of $1,168,255.
 
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 March 31, 2013 and June 30, 2012, the Company had $20,295 and $7,008 of cash, respectively. Sales of our common stock and borrowings under the convertible note agreement have been the primary source of these funds.

 
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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
We are presently able to meet our obligations as they come due.  At March 31, 2013, we had a working capital deficit of $1,098,797, which included $413,298 owed to related parties, mainly for accrued compensation. At June 30, 2012, we had a working capital deficit of $1,071,378, which included $567,428 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, 2014 (one year term, with one year extensions), unless the agreement is further extended, with the consent of both parties.  As of March 31, 2013, the Company received $306,000 in six separate installments. 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.

We anticipate that our future liquidity requirements will arise from the need to fund our growth, pay current obligations and future capital expenditures. 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.
 
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 March 31, 2013. 

Based on management’s evaluation, our chief executive officer and chief financial officer concluded that, as a result of the material weaknesses described below, our disclosure controls and procedures are not designed at a reasonable assurance level and are ineffective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.  The material weaknesses, which relate to internal control over financial reporting, that were identified are:

Our procedures are insufficient to ensure completeness and timeliness of delivery of relevant information among management and the Board. Also, we do not have an independent audit committee.  As a result, there is a lack of monitoring of the financial reporting process and there is a reasonable possibility that material misstatements of the consolidated financial statements, including disclosures, will not be prevented or detected on a timely basis. 

We are committed to improving our financial organization, and are in the process of instituting additional control procedures including formalization of communication policy and periodic disclosure meetings.

Changes in internal control over financial reporting

During the quarter ended on March 31, 2013, 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.
 
 





 
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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
03/06/13
 
75,766,870
 
Common Stock
 
Debt Conversion and fees - $3,031
 
 Reg. D
 
None
03/13/13
 
32,200,000
 
Common Stock
 
Debt Conversion and fees - $1,610
 
 Reg. D
 
None
03/22/13
 
50,000,000
 
Common Stock
 
Debt Conversion - $3,000
 
 Reg. D
 
None
04/01/13
 
26,666,667
 
Common Stock
 
Debt Conversion - $1,600
 
 Reg. D
 
None
04/02/13
 
36,666,667
 
Common Stock
 
Debt Conversion - $2,200
 
 Reg. D
 
None

 
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.


ITEM 4.  MINE SAFETY DISCLOSURES

None.

 
ITEM 5.  OTHER INFORMATION

None.


ITEM 6.  EXHIBITS

 

 
 
 
 
 
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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: May 20, 2013
By:
/s/  Renee Gilmore
   
Renee Gilmore
   
Principal Executive Officer

Date: May 20, 2013
By:
/s/  Nikolay Frolov
   
Nikolay Frolov
   
Chief Financial Officer
(Principal Financial and Accounting Officer)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
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