ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This annual report on Form 10-K 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 Relating to Our Business" in Item 1A of this annual report. 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-K.
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.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- continued
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 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. Five shares of Class A stock can be converted into one share of common stock at any time, upon demand from of the holder.
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. Five shares of Class B stock can be converted into one share 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 number of authorized Common Stock from 4,000,000 to 8,000,000 shares. Copy of the Amendment to the Article of Incorporation is attached as exhibit to this filing.
Effective November 19, 2012, the Company filed an amendment with the Nevada Secretary of State to increase the number of authorized Common Stock from 8,000,000 to 19,000,000 shares.
On August 19, 2013, the Company filed a Certificate of Change regarding a 1 for 50 shares reverse stock split. The split was effective September 3, 2013. Corresponding change resulted in 19,000,000 shares of Common Stock being authorized.
Effective August 22, 2013, the Company filed an amendment with the Nevada Secretary of State to increase authorized shares of all Classes of Stock: Common Stock – from 19,000,000 to 600,000,000 shares; Class A – from 250,000 to 350,000 shares; and Class B – from 5,000,000 to 40,000,000 shares.
Plan of Operation
Over the next twelve months, we will concentrate on the following four areas to grow our operations:
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●
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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.
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●
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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.
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●
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Sales – Grow its core business in North Texas, and expand in other areas.
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●
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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 2013.
|
ITEM 7.
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
For the fiscal years ended June 30, 2013 and 2012, we have generated revenues of $1,100,819 and $702,295, respectively. Revenue for the 2013 fiscal year includes $91,246 revenues from franchising. Net losses for the same periods were $758,449 and $903,674, respectively.
For the fiscal years ended June 30, 2013 and 2012, costs of revenues were $791,382 and $597,137, respectively.
For the fiscal years ended June 30, 2013 and 2012, operating losses were $320,432 and $726,403, respectively.
As of June 30, 2013 and 2012, the Company had assets of $215,549 and $158,410, respectively; and total liabilities of $1,375,733 and $1,168,225, respectively.
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 June 30, 2013 and 2012, the Company had $18,112 and $7,008 of cash, respectively. Loans and sales of our common stock have been the primary source of these funds.
We are presently able to meet our obligations as they come due. At June 30, 2013, we had a working capital deficit of $1,199,931, which included $460,480 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, unless the agreement is extended, with the consent of both parties. During the fiscal years ended June 30, 2013 and 2012, the Company received $46,000 and $140,000, respectively, as advances under this agreement. 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.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- continued
Other Items and Conditions
The Company has no off balance sheet arrangements, or significant obligations under any contracts.
Critical Accounting Policies
The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures about contingent assets and liabilities. We base these estimates and assumptions on historical experience and on various other information and assumptions that are believed to be reasonable under the circumstances. Estimates and assumptions about future events and their effects cannot be perceived with certainty and, accordingly, these estimates may change as additional information is obtained, as more experience is acquired, as our operating environment changes and as new events occur. Our critical accounting policies are listed in the notes to our audited financial statements included in this Annual Report.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FINANCIAL STATEMENTS
Index to Financial Statements
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Page
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Report of Independent Registered Public Accounting Firm
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Balance Sheets - June 30, 2013 and 2012
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Statements of Operations - For the Fiscal Years Ended June 30, 2013 and 2012
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Statement of Stockholders' Deficit - For the Fiscal Years Ended June 30, 2013 and 2012
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Statements of Cash Flows
- For the Fiscal Years Ended June 30, 2013 and 2012
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Notes to Financial Statements - June 30, 2013 and 2012
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Fireman’s Contractors, Inc.
We have audited the accompanying balance sheets of Fireman’s Contractors, Inc. (the “Company”), as of June 30, 2013 and 2012, and the related statements of operations, changes in stockholders’ deficit, and cash flows for the years then ended. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company, as of June 30, 2013 and 2012, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, as of June 30, 2013, the Company has an accumulated deficit of $2,393,281 and negative working capital of $1,199,931, both of which raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Whitley Penn, LLP
Dallas, Texas
October 16, 2013
Firemans Contractors, Inc.
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Balance Sheets
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Jun. 30, 2013
|
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Jun. 30, 2012
|
|
ASSETS
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|
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Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
18,112
|
|
|
$
|
7,008
|
|
Accounts receivable
|
|
|
117,315
|
|
|
|
66,966
|
|
Inventory
|
|
|
-
|
|
|
|
4,499
|
|
Prepaid expenses
|
|
|
-
|
|
|
|
13,533
|
|
Current portion of notes receivable
|
|
|
40,375
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
175,802
|
|
|
|
92,006
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, less accumulated depreciation of
|
|
|
24,669
|
|
|
|
62,466
|
|
$19,136 and $34,276, respectively
|
|
|
|
|
|
|
|
|
Note receivable
|
|
|
13,453
|
|
|
|
-
|
|
Other assets
|
|
|
1,625
|
|
|
|
3,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
215,549
|
|
|
$
|
158,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
274,806
|
|
|
$
|
224,931
|
|
Accrued expenses
|
|
|
66,583
|
|
|
|
76,412
|
|
Accrued interest (related parties)
|
|
|
12,191
|
|
|
|
14,962
|
|
Warranty liability
|
|
|
10,096
|
|
|
|
7,034
|
|
Other payables
|
|
|
5,275
|
|
|
|
20,888
|
|
Current portion of long-term debt
|
|
|
-
|
|
|
|
4,314
|
|
Convertible notes payable, net of unamortized beneficial conversion
|
|
|
|
|
|
|
|
|
features of $11,040 and $65,001, respectively
|
|
|
493,960
|
|
|
|
229,650
|
|
Derivative liability
|
|
|
64,533
|
|
|
|
32,727
|
|
Loans payable to shareholders
|
|
|
448,289
|
|
|
|
552,466
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,375,733
|
|
|
|
1,163,384
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, net of current maturities
|
|
|
-
|
|
|
|
4,871
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,375,733
|
|
|
|
1,168,255
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
350,000 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
|
|
40,000,000 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
|
|
|
|
-
|
|
600,000,000 shares common stock
|
|
|
|
|
|
|
|
|
authorized at $0.001/par value
|
|
|
|
|
|
|
|
|
18,966,619 and 1,785,129 issued and outstanding, respectively
|
|
|
18,967
|
|
|
|
1,786
|
|
Additional paid-in capital
|
|
|
959,130
|
|
|
|
423,201
|
|
Accumulated deficit
|
|
|
(2,393,281
|
)
|
|
|
(1,634,832
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders' deficit
|
|
|
(1,160,184
|
)
|
|
|
(1,009,845
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
$
|
215,549
|
|
|
$
|
158,410
|
|
|
|
|
|
|
|
|
|
|
The accompanying footnotes are an integral part of these financial statements.
|
|
|
|
|
|
|
|
|
Firemans Contractors, Inc.
|
|
Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
Fiscal Year Ended
|
|
|
|
Jun. 30, 2013
|
|
|
Jun. 30, 2012
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,009,573
|
|
|
$
|
702,295
|
|
Franchise fees and royalties
|
|
|
91,246
|
|
|
|
-
|
|
Total revenues
|
|
|
1,100,819
|
|
|
|
702,295
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues (exclusive of
|
|
|
|
|
|
|
|
|
depreciation shown separately below)
|
|
|
791,382
|
|
|
|
597,137
|
|
Sales and marketing expenses
|
|
|
82,522
|
|
|
|
171,305
|
|
General and administrative expenses
|
|
|
526,235
|
|
|
|
643,055
|
|
Loss on sale of equipment
|
|
|
9,666
|
|
|
|
-
|
|
Depreciation and amortization
|
|
|
11,446
|
|
|
|
17,201
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
1,421,251
|
|
|
|
1,428,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(320,432
|
)
|
|
|
(726,403
|
)
|
|
|
|
|
|
|
|
|
|
Other income/(loss)
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
1,861
|
|
|
|
5
|
|
Loss on derivative liabilities
|
|
|
(17,567
|
)
|
|
|
-
|
|
Interest expense (related parties)
|
|
|
(25,513
|
)
|
|
|
(22,522
|
)
|
Interest expense
|
|
|
(396,798
|
)
|
|
|
(154,754
|
)
|
|
|
|
|
|
|
|
|
|
Total other loss
|
|
|
(438,017
|
)
|
|
|
(177,271
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before taxes
|
|
|
(758,449
|
)
|
|
|
(903,674
|
)
|
|
|
|
|
|
|
|
|
|
Income tax (expense) benefit
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(758,449
|
)
|
|
$
|
(903,674
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
|
$
|
(0.08
|
)
|
|
$
|
(0.56
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average
|
|
|
|
|
|
|
|
|
number of common shares outstanding
|
|
|
9,897,014
|
|
|
|
1,627,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
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|
|
|
|
|
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|
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
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|
The accompanying footnotes are an integral part of these financial statements.
|
|
Firemans Contractors, Inc.
|
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Statements of Stockholders' Deficit
|
|
For the Fiscal Years Ended June 30, 2013 and 2012
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Convertible
|
|
|
Class B Convertible
|
|
|
|
|
|
|
|
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Additional
|
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|
|
|
|
|
|
|
|
preferred stock
|
|
|
preferred stock
|
|
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Common stock
|
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|
paid-in
|
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|
Accumulated
|
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|
|
|
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Shares
|
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Amount
|
|
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Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
capital
|
|
|
deficit
|
|
|
Total
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
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Balance June 30, 2011
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
1,603,600
|
|
|
$
|
1,604
|
|
|
$
|
466,024
|
|
|
$
|
(731,158
|
)
|
|
$
|
(263,530
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued for shareholder loans @ $0.125/sh. Aug. 2011
|
|
|
200,000
|
|
|
|
200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(175,000
|
)
|
|
|
|
|
|
|
25,000
|
|
Stock issued for note conv. @ $1.375/sh. Apr. 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,545
|
|
|
|
15
|
|
|
|
19,985
|
|
|
|
|
|
|
|
20,000
|
|
Stock issued for note conv. @ $0.50/sh. May. 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
40
|
|
|
|
19,960
|
|
|
|
|
|
|
|
20,000
|
|
Stock issued for note conv. @ $0.1575/sh. May. 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
126,984
|
|
|
|
127
|
|
|
|
19,873
|
|
|
|
|
|
|
|
20,000
|
|
Beneficial conversion features
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72,359
|
|
|
|
|
|
|
|
72,359
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(903,674
|
)
|
|
|
(903,674
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2012
|
|
|
200,000
|
|
|
$
|
200,000
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
1,785,129
|
|
|
$
|
1,786
|
|
|
$
|
423,201
|
|
|
$
|
(1,634,832
|
)
|
|
$
|
(1,009,845
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Exchange Jul. 2012
|
|
|
|
|
|
|
|
|
|
|
2,000,000
|
|
|
|
2,000
|
|
|
|
(400,000
|
)
|
|
|
(400
|
)
|
|
|
(1,600
|
)
|
|
|
|
|
|
|
-
|
|
Stock issued for services @ $0.17/sh. Jul. 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
60
|
|
|
|
10,140
|
|
|
|
|
|
|
|
10,200
|
|
Stock issued for note conv. @ $0.054/sh. Aug. 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,140,851
|
|
|
|
1,141
|
|
|
|
60,186
|
|
|
|
|
|
|
|
61,327
|
|
Stock issued for note conv. @ $0.092/sh. Aug. 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
162,955
|
|
|
|
163
|
|
|
|
14,837
|
|
|
|
|
|
|
|
15,000
|
|
Stock issued for services @ $0.40/sh. Aug. 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
60
|
|
|
|
23,940
|
|
|
|
|
|
|
|
24,000
|
|
Stock issued for note conv. @ $0.06/sh. Sep. 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,426,382
|
|
|
|
1,426
|
|
|
|
84,169
|
|
|
|
|
|
|
|
85,595
|
|
Stock issued for note conv. @ $0.045/sh. Oct. 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
555,556
|
|
|
|
556
|
|
|
|
24,444
|
|
|
|
|
|
|
|
25,000
|
|
Stock issued for note conv. @ $0.0475/sh. Oct. 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
287,508
|
|
|
|
287
|
|
|
|
13,370
|
|
|
|
|
|
|
|
13,657
|
|
Share Exchange Oct. 2012
|
|
|
|
|
|
|
|
|
|
|
1,834,500
|
|
|
|
1,835
|
|
|
|
(366,900
|
)
|
|
|
(367
|
)
|
|
|
(1,468
|
)
|
|
|
|
|
|
|
-
|
|
Stock issued for note conv. @ $0.015/sh. Oct. 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
333,333
|
|
|
|
333
|
|
|
|
4,667
|
|
|
|
|
|
|
|
5,000
|
|
Stock issued due to reset provision Oct. 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
358,942
|
|
|
|
359
|
|
|
|
(359
|
)
|
|
|
|
|
|
|
-
|
|
Stock issued for note conv. @ $0.0175/sh. Nov. 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
266,667
|
|
|
|
266
|
|
|
|
4,401
|
|
|
|
|
|
|
|
4,667
|
|
Stock issued for note conv. @ $0.025/sh. Nov. 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
413,333
|
|
|
|
413
|
|
|
|
9,920
|
|
|
|
|
|
|
|
10,333
|
|
Stock issued for note conv. @ $0.0275/sh. Nov. 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
272,727
|
|
|
|
273
|
|
|
|
7,227
|
|
|
|
|
|
|
|
7,500
|
|
Statements of Stockholders' Deficit
- continued
Stock issued for note conv. @ $0.024/sh. Dec. 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
279,168
|
|
|
|
279
|
|
|
|
6,421
|
|
|
|
|
|
|
|
6,700
|
|
Stock issued for note conv. @ $0.0175/sh. Dec. 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
280,000
|
|
|
|
280
|
|
|
|
4,620
|
|
|
|
|
|
|
|
4,900
|
|
Stock issued for note conv. @ $0.014/sh. Dec. 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
278,572
|
|
|
|
279
|
|
|
|
3,621
|
|
|
|
|
|
|
|
3,900
|
|
Stock issued for note conv. @ $0.012/sh. Jan. 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
275,000
|
|
|
|
275
|
|
|
|
3,025
|
|
|
|
|
|
|
|
3,300
|
|
Stock issued for note conv. @ $0.0125/sh. Jan. 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
312,000
|
|
|
|
312
|
|
|
|
3,588
|
|
|
|
|
|
|
|
3,900
|
|
Stock issued for note conv. @ $0.011/sh. Jan. 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
563,637
|
|
|
|
564
|
|
|
|
5,636
|
|
|
|
|
|
|
|
6,200
|
|
Stock issued for note conv. @ $0.01/sh. Jan. 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,317,860
|
|
|
|
1,318
|
|
|
|
11,860
|
|
|
|
|
|
|
|
13,178
|
|
Stock issued for note conv. @ $0.005/sh. Jan. 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
383,000
|
|
|
|
383
|
|
|
|
1,532
|
|
|
|
|
|
|
|
1,915
|
|
Stock issued for note conv. @ $0.0085/sh. Feb. 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
552,942
|
|
|
|
553
|
|
|
|
4,147
|
|
|
|
|
|
|
|
4,700
|
|
Stock issued for note conv. @ $0.004/sh. Feb. 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,273,000
|
|
|
|
1,273
|
|
|
|
5,092
|
|
|
|
|
|
|
|
6,365
|
|
Stock issued for note conv. @ $0.004/sh. Feb. 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,712,952
|
|
|
|
1,713
|
|
|
|
5,139
|
|
|
|
|
|
|
|
6,852
|
|
Stock issued for note conv. @ $0.0075/sh. Feb. 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
956,000
|
|
|
|
956
|
|
|
|
6,214
|
|
|
|
|
|
|
|
7,170
|
|
Stock issued for note conv. @ $0.002/sh. Mar. 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,515,338
|
|
|
|
1,515
|
|
|
|
1,516
|
|
|
|
|
|
|
|
3,031
|
|
Stock issued for note conv. @ $0.0025/sh. Mar. 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
644,000
|
|
|
|
644
|
|
|
|
966
|
|
|
|
|
|
|
|
1,610
|
|
Stock issued for note conv. @ $0.003/sh. Mar. 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000,000
|
|
|
|
1,000
|
|
|
|
2,000
|
|
|
|
|
|
|
|
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
|
|
Stock issued for note conv. @ $0.003/sh. Apr. 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,266,667
|
|
|
|
1,267
|
|
|
|
2,533
|
|
|
|
|
|
|
|
3,800
|
|
Beneficial conversion features
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
264,094
|
|
|
|
|
|
|
|
264,094
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(758,449
|
)
|
|
|
(758,449
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2013
|
|
|
250,000
|
|
|
$
|
250,000
|
|
|
|
5,000,000
|
|
|
$
|
5,000
|
|
|
|
18,966,619
|
|
|
$
|
18,967
|
|
|
$
|
959,130
|
|
|
$
|
(2,393,281
|
)
|
|
$
|
(1,160,184
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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The accompanying footnotes are an integral part of these financial statements.
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|
Firemans Contractors, Inc.
|
|
Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
Fiscal Year Ended
|
|
|
|
Jun. 30, 2013
|
|
|
Jun. 30, 2012
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(758,449
|
)
|
|
$
|
(903,674
|
)
|
Adjustments to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
11,446
|
|
|
|
17,201
|
|
Loss on sale of equipment
|
|
|
9,666
|
|
|
|
-
|
|
Loss on derivative liabilities
|
|
|
17,567
|
|
|
|
-
|
|
Consulting expenses (share based payments)
|
|
|
34,200
|
|
|
|
-
|
|
Interest expense (share based payments)
|
|
|
47,850
|
|
|
|
29,652
|
|
Beneficial conversion feature amortization
|
|
|
238,516
|
|
|
|
68,014
|
|
Debt discount amortization
|
|
|
93,779
|
|
|
|
3,636
|
|
|
|
|
|
|
|
|
|
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(50,349
|
)
|
|
|
91,938
|
|
Advances
|
|
|
-
|
|
|
|
10,178
|
|
Inventory
|
|
|
2,499
|
|
|
|
(198
|
)
|
Prepaid expenses
|
|
|
13,533
|
|
|
|
(9,585
|
)
|
Notes receivable
|
|
|
(48,828
|
)
|
|
|
-
|
|
Other assets
|
|
|
2,313
|
|
|
|
(3,250
|
)
|
Accounts payable
|
|
|
49,875
|
|
|
|
175,762
|
|
Accrued expenses
|
|
|
(9,829
|
)
|
|
|
9,230
|
|
Warranty liability
|
|
|
3,062
|
|
|
|
(779
|
)
|
Other payables
|
|
|
(9,613
|
)
|
|
|
18,268
|
|
Loans payable to shareholders
|
|
|
229,787
|
|
|
|
232,344
|
|
Payments on loans payable to shareholders
|
|
|
(16,650
|
)
|
|
|
(38,554
|
)
|
Accrued interest (related parties)
|
|
|
(2,771
|
)
|
|
|
10,110
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(142,396
|
)
|
|
|
(289,707
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(1,500
|
)
|
|
|
(15,582
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(1,500
|
)
|
|
|
(15,582
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Payments on long-term debt
|
|
|
-
|
|
|
|
(4,444
|
)
|
Proceeds from convertible notes payable
|
|
|
155,000
|
|
|
|
205,000
|
|
|
|
|
|
|
|
|
|
|
Net cash flows provided by financing activities
|
|
|
155,000
|
|
|
|
200,556
|
|
|
|
|
|
|
|
|
|
|
Increase/(decrease) in cash and cash equivalents
|
|
|
11,104
|
|
|
|
(104,733
|
)
|
|
|
|
|
|
|
|
|
|
Cash at beginning of period
|
|
|
7,008
|
|
|
|
111,741
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
18,112
|
|
|
$
|
7,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
11,720
|
|
|
$
|
39,402
|
|
Interest (related parties)
|
|
$
|
10,843
|
|
|
$
|
12,412
|
|
|
|
|
|
|
|
|
|
|
Non-cash activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued for loans and interest
|
|
$
|
308,600
|
|
|
$
|
60,000
|
|
Stock issued for shareholder loans and interest
|
|
$
|
1,216
|
|
|
$
|
25,000
|
|
Derivative liability and beneficial conversion features
|
|
$
|
279,933
|
|
|
$
|
105,086
|
|
Reclassification of loans payable to shareholders to
|
|
|
|
|
|
|
|
|
convertible notes payable
|
|
$
|
316,117
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
The accompanying footnotes are an integral part of these financial statements.
|
|
|
|
|
|
Firemans Contractors, Inc.
Notes to Financial Statements
June 30, 2013 and 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.
On August 19, 2013, the Company filed a Certificate of Change regarding a 1 for 50 shares reverse stock split
of its Common Stock
. The split was effective September 3, 2013. The accompanying financial statements reflect retroactive application of the split.
NOTE 2. 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 $1,199,931 and an accumulated deficit of $2,393,281 at June 30, 2013, and a net loss of $758,449 and negative operating cash flows of $142,396 for the fiscal year ended June 30, 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, and from issuance of convertible debt. 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 will need 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 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a.
Basis of Presentation
The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP). The Company operates on a June year end fiscal basis.
b.
Basic and Diluted Earnings per Share
Basic net loss per share amount is computed by dividing the net loss by the weighted average number of common shares outstanding for the period. Diluted net loss per share is the same as basic net loss per share, since the effects of potentially dilutive securities are excluded from the calculation for all periods presented, as their inclusion would be anti-dilutive. Dilutive securities consist of convertible notes payable and convertible preferred stock.
c.
Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. There are no restrictions on Company’s cash. At June 30, 2013 and 2012, balances in Company’s cash accounts did not exceed federally insured limits.
Firemans Contractors, Inc.
Notes to Financial Statements
June 30, 2013 and 2012
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- continued
d.
Accounts Receivable
Accounts receivable are stated at amounts management expects to collect. Management provides for probable uncollectible amounts through a charge to earnings and a credit to an allowance for doubtful accounts based on its assessment of the current status of individual accounts. Balances still outstanding after management has used reasonable collection efforts are written off through a charge to the allowance for doubtful accounts and a credit to accounts receivable. As of June 30, 2013 and 2012, no allowances had been recorded.
e.
Inventories
Inventories of paint and materials are located at the Company’s Fort Worth office and are valued at the lower of cost or market.
f.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is charged on the straight-line basis for furniture and equipment over the estimated useful lives of the assets. Leasehold improvements are amortized on a straight-line basis over the term of the lease, or the life of the improvements, whichever is shorter. Maintenance and repairs are charged to expense as incurred. Major improvements are capitalized.
Estimated useful lives:
Furniture, fixtures and equipment - 5 years
Software – 3 years
g.
Revenue Recognition
The Company’s revenue for painting and maintenance services is recognized only when all of the following criteria have been met:
|
(i)
|
Persuasive evidence for an agreement exists;
|
|
(ii)
|
Services have been performed;
|
|
(iii)
|
The fee is fixed or determinable; and
|
|
(iv)
|
Collectability is reasonably assured.
|
The Company’s revenue for royalties from franchisees is recognized monthly, based on billing done by the franchisees in the previous month.
h.
Franchise Fee Recognition
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.
|
i.
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 June 30, 2013 and 2012, the balances of warranty liability were $10,096 and $7,034, respectively. Warranty expenses for the fiscal years ended June 30, 2013 and 2012, were $4,379 and $3,951, respectively, and are included in the Cost of revenues on the Statements of Operations.
Firemans Contractors, Inc.
Notes to Financial Statements
June 30, 2013 and 2012
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- continued
j.
Equity-Based Payments to Non-Employees
The Company has issued common stock to non-employees for payment of services. Measurement of the share-based payment transactions with non-employees are based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued.
k.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
l.
Income Taxes
A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carryforwards.
Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of all of the deferred tax assets will be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
m.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash deposits and accounts receivable. The cash is on deposit with a large federally insured bank. The Company has not experienced any losses in cash balances and does not believe it is exposed to any significant credit risk on cash and cash equivalents. As of June 30, 2013, approximately 46% of accounts receivable were concentrated with three customers. As of June 30, 2012, approximately 52% of accounts receivable were concentrated with two customers. The Company believes its credit policies are prudent and reflect normal industry terms and business risks.
NOTE 4. INVENTORY
At each year end, respectively, the Company had the following inventory:
|
|
Jun. 30, 2013
|
|
|
Jun. 30, 2012
|
|
|
|
|
|
|
|
|
Paint and materials
|
|
$
|
-
|
|
|
$
|
4,499
|
|
|
|
|
|
|
|
|
|
|
Total inventory
|
|
$
|
-
|
|
|
$
|
4,499
|
|
The inventory consisted primarily of paint and pre-fabricated items used in parking lot maintenance, and is valued at a lower of cost or market value. By the end of fiscal year the Company switched exclusively to use of subcontractors and stopped carrying any inventory.
NOTE 5. PREPAID EXPENSES
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. The Company did not have any prepaid expenses as of June 30, 2013.
Firemans Contractors, Inc.
Notes to Financial Statements
June 30, 2013 and 2012
NOTE 6. FAIR VALUE MEASUREMENTS
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.
|
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 8, are classified as Level 2.
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 June 30, 2013, balance under the Note was $19,711. Principal received for the fiscal year ended June 30, 2013 was $8,289. Interest income for the same period was $1,697.
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 June 30, 2013, balance under the Note was $29,880.
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 June 30, 2013, balance under the Note was $4,237. Principal received for the fiscal year ended June 30, 2013 was $763. Interest income for the same period was $164.
NOTE 8. 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 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, 2014 (extended term), unless the agreement is further extended, with consent of both parties.
Firemans Contractors, Inc.
Notes to Financial Statements
June 30, 2013 and 2012
NOTE 8. CONVERTIBLE NOTES PAYABLE
- continued
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 fiscal year ended June 30, 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 fiscal year ended June 30, 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 and $25,714 have been amortized to interest expense in the accompanying statements of operations for the fiscal years ended June 30, 2013 and 2012, respectively.
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 and $1,049 have been amortized to interest expense in the accompanying statements of operations for the fiscal years ended June 30, 2013 and 2012, respectively.
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 and $396 have been amortized to interest expense in the accompanying statements of operations for the fiscal years ended June 30, 2013 and 2012, respectively.
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 fiscal year ended June 30, 2013.
During April and May of 2012, $60,000 outstanding under the Note was converted into 181,529 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 2,730,188 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 2,215,339 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 4,828,290 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 June 30, 2013 and 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 June 30, 2013 and 2012, were $8,280 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, of which $17,624 and $9,289 have been amortized to interest expense in the accompanying statements of operations for the fiscal years ended June 30, 2013 and 2012, respectively. During January
and February of 2013, $22,559 of principal outstanding under the note was converted into 3,005,860 shares of common stock of the company. As of June 30, 2013 and 2012, the principal balances were $2,441 and $25,000, respectively, and accrued interest balances were $3,747 and $1,109, respectively.
Firemans Contractors, Inc.
Notes to Financial Statements
June 30, 2013 and 2012
NOTE 8. CONVERTIBLE NOTES PAYABLE
- continued
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 1,110,467 shares of common stock of the company. During January and February of 2013, remaining $17,000 of principal balance was converted into 1,671,579 shares of common stock of the company. During April of 2013, $1,600 of accrued interest was converted into 533,333 shares of common stock of the company. As of June 30, 2013 and 2012, principal balances of the note were $0 and $40,000, respectively. As of June 30, 2013 and 2012, balances of the debt discount were $0 and $29,091, respectively. For the fiscal years ended June 30, 2013 and 2013, amortization of the debt discount was $29,091 and 3,636, respectively, reflected on the accompanying statements of operations as interest expense.
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 1,000,000 shares of common stock of the company. During April of 2013, $2,200 of principal balance was converted into 733,334 shares of common stock of the company. As of June 30, 2013, principal balance of the note was $27,300. For the fiscal year ended June 30, 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. For the fiscal year ended June 30, 2013, amortization of the debt discount was $34,772, 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 June 30, 2013, balance of the debt discount was $4,100. For the fiscal year ended June 30, 2013, amortization of the debt discount was $3,325, reflected on the accompanying statements of operations as interest expense.
As of June 30, 2013 and 2012, derivative liabilities for the convertible promissory notes totalled $64,533 and $32,727, respectively, including a reduction of $36,982 due to conversions noted earlier. For the fiscal year ended June 30, 2013, loss on derivative liabilities was $17,567, 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 fiscal year ended June 30, 2013. As of June 30, 2013, the principal balance remained unchanged, and accrued interest balance was $3,062.
Firemans Contractors, Inc.
Notes to Financial Statements
June 30, 2013 and 2012
NOTE 8. 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 fiscal year ended June 30, 2013. As of June 30, 2013, the principal balance remained unchanged, and accrued interest balance was $6,078.
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, all of which has been amortized to interest expense in the accompanying statements of operations for the fiscal year ended June 30, 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 $5,560 has been amortized to interest expense in the accompanying statements of operations for the fiscal year ended June 30, 2013.
NOTE 9. 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 10. RELATED PARTY TRANSACTIONS
For the fiscal years ended June 30, 2013 and 2012, the Company accrued $166,000 and $132,000, 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 $120,000, respectively, to the officers and directors who resigned in December of 2012. As of June 30, 2013, these individuals are no longer considered insiders, and balances of their shareholder notes were transferred to convertible notes payable.
As of June 30, 2013 and 2012, the balances of shareholder notes were 448,289 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 June 30, 2013 and 2012, accrued interest payable on the notes was $12,191 and $14,962, respectively. Interest paid during the fiscal years ended June 30, 2013 and 2012, was $10,843 and $12,412, respectively. These notes payable do not approximate fair value, as they are with related parties, and do not bear market rates of interest.
Firemans Contractors, Inc.
Notes to Financial Statements
June 30, 2013 and 2012
NOTE 10. RELATED PARTY TRANSACTIONS
- continued
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 8.
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 8.
NOTE 11. 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 June 30, 2013, future rents under this agreement are as follows:
2014
|
|
$
|
19,500
|
|
2015
|
|
|
4,875
|
|
|
|
|
|
|
Total
|
|
$
|
24,375
|
|
Rent expenses for the fiscal years ended June 30, 2013 and 2012, were $29,107 and $47,723, respectively, reflected in general and administrative expenses in the accompanying statements of operations.
NOTE 12. 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 fiscal year ended June 30, 2013:
|
|
Operations
|
|
|
Franchise
|
|
|
Total
|
|
Fiscal Year Ended June 30, 2013
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,009,573
|
|
|
$
|
-
|
|
|
$
|
1,009,573
|
|
Franchise fees
|
|
|
-
|
|
|
|
76,730
|
|
|
|
76,730
|
|
Royalties
|
|
|
-
|
|
|
|
14,516
|
|
|
|
14,516
|
|
Total Revenues
|
|
$
|
1,009,573
|
|
|
$
|
91,246
|
|
|
$
|
1,100,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
$
|
791,382
|
|
|
$
|
-
|
|
|
$
|
791,382
|
|
Sales and marketing expenses
|
|
|
81,522
|
|
|
|
1,000
|
|
|
|
82,522
|
|
General and administrative expenses
|
|
|
451,506
|
|
|
|
74,729
|
|
|
|
526,235
|
|
Depreciation and amortization
|
|
|
11,446
|
|
|
|
-
|
|
|
|
11,446
|
|
Interest income
|
|
|
-
|
|
|
|
1,861
|
|
|
|
1,861
|
|
Net income/(loss)
|
|
$
|
(775,828
|
)
|
|
$
|
17,379
|
|
|
$
|
(758,449
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
24,669
|
|
|
$
|
-
|
|
|
$
|
24,669
|
|
Total assets
|
|
$
|
161,721
|
|
|
|
53,828
|
|
|
$
|
215,549
|
|
Firemans Contractors, Inc.
Notes to Financial Statements
June 30, 2013 and 2012
NOTE 13. INCOME TAXES
For the period from inception (August 21, 2009) through June 30, 2013, the Company incurred a net operating loss and, accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets.
Reconciliation of income tax expense to the provision for income taxes is as follows:
|
|
June 30, 2013
|
|
|
June 30, 2012
|
|
|
|
|
|
|
|
|
Federal income tax benefit at statutory rate
|
|
$
|
257,873
|
|
|
$
|
306,693
|
|
State income taxes, net of federal benefit
|
|
|
7,584
|
|
|
|
9,020
|
|
Permanent differences
|
|
|
(155,466
|
)
|
|
|
(32,354
|
)
|
Change in valuation allowance
|
|
|
(109,991
|
)
|
|
|
(283,359
|
)
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
$
|
-
|
|
|
$
|
-
|
|
Significant components of the Company’s deferred tax assets and liabilities were as follows:
|
|
June 30, 2013
|
|
|
June 30, 2012
|
|
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Accrued liabilities
|
|
$
|
287,859
|
|
|
$
|
231,845
|
|
Net operating loss carryforwards
|
|
|
394,731
|
|
|
|
310,620
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
682,590
|
|
|
|
542,465
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
(2,530
|
)
|
|
|
(4,425
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(2,530
|
)
|
|
|
(4,425
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets before valuation allowance
|
|
|
680,060
|
|
|
|
538,040
|
|
Less: Valuation allowance
|
|
|
(680,060
|
)
|
|
|
(538,040
|
)
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and carryforwards are expected to be available to reduce taxable income. As the achievement of required future taxable income is uncertain, the Company has recorded a valuation allowance for the full amount of the net deferred tax assets.
As of June 30, 2013, we had net operating loss carryforwards of $1,127,803 available to offset future regular, alternative minimum and foreign taxable income, if any. This loss can be carried forward for up to 20 years. Changes in our ownership may lead to restrictions in respect of the availability and use of this tax loss.
US GAAP creates a single model to address accounting for uncertainty in tax positions by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. US GAAP also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. There are no unrecognized tax benefits to record or disclose in the notes to the financial statements.
Tax returns for the years ended June 30, 2010, 2011, 2012 and 2013, are open to examination by the major taxing jurisdictions to which the Company is subject. No penalties or interest have been assessed on any returns filed by the Company.
Firemans Contractors, Inc.
Notes to Financial Statements
June 30, 2013 and 2012
NOTE 14. COMMON STOCK
During April and May of 2012, the Company issued 181,529 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 $60,000. The number of shares was computed based on agreed upon discount to market price of the shares at the time of the conversion.
Effective August 3, 2012, the Company filed an amendment with the Nevada Secretary of State to increase the number of authorized Common Stock from 4,000,000 to 8,000,000 shares.
During July and August of 2012, the Company issued 120,000 shares of common stock for consulting services, valued at $34,200.
During August and September of 2012, the Company issued 2,730,188 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 8,000,000 to 19,000,000 shares.
During October and November of 2012, the Company issued 2,215,339 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 1,110,467 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 1,671,579 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 3,005,860 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 4,828,290 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 1,000,000 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.
During April of 2013, the Company issued 533,333 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 733,334 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.
Firemans Contractors, Inc.
Notes to Financial Statements
June 30, 2013 and 2012
NOTE 15. 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. Five shares of Class A stock can be converted into one share of common stock at any time, upon demand from the holder.
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.
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. Five shares of Class B stock can be converted into one share 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 200,000 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 189,100 shares of common stock for 945,500 shares of Class B convertible preferred stock, based on the conversion ratio designated for Class B shares.
On October 9, 2012, Danielle O’Neal, our Secretary and Director, exchanged 177,800 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 16. SUBSEQUENT EVENTS
On August 19, 2013, the Company filed a Certificate of Change regarding a 1 for 50 shares reverse stock split. The split was effective September 3, 2013. Corresponding change resulted in 19,000,000 shares of Common Stock being authorized.
Effective August 22, 2013, the Company filed an amendment with the Nevada Secretary of State to increase authorized shares of all Classes of Stock: Common Stock – from 19,000,000 to 600,000,000 shares; Class A – from 250,000 to 350,000 shares; and Class B – from 5,000,000 to 40,000,000 shares.
During September and October of 2013, the Company issued 3,240,220 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 $4,247, and fees of $500.
During September of 2013, the Company issued 1,850,000 shares of common stock in partial satisfaction of principal balance outstanding under the convertible note payable, originated on December 5, 2012, in the amount of $1,480.
During October of 2013, the Company issued 3,800,000 shares of common stock in partial satisfaction of principal balance outstanding under the convertible note payable, originated on December 5, 2012, in the amount of $3,040.
On September 30, 2013, the Company issued 46 shares of common stock to make correction relating to processing of the reverse stock split.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A.
CONTROLS AND PROCEDURES
(a) 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 June 30, 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.
(b) Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of June 30, 2013, based on the criteria set forth in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the criteria set forth in Internal Control - Integrated Framework, our management concluded that our internal control over financial reporting is not effective for the reasons stated in paragraph (a).
(c) Changes in our Internal Control over Financial Reporting
Management of the Company has also evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer of the Company, any change in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal year covered by this Annual Report on Form 10-K. There was no change in the Company's internal control over financial reporting identified in that evaluation that occurred during the fiscal year covered by this Annual Report on Form 10-K that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
ITEM 9B.
OTHER INFORMATION
None.
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers of Registrant
The name, age and position of each of our directors and executive officers as of June 30, 2013 are as follows:
Name
|
|
Age
|
|
Position
|
|
|
|
|
President, Chief Executive Officer and Director
|
|
|
|
|
Chief Financial Officer, Treasurer and Director
|
|
|
|
|
Chief Operations Officer and Director
|
Ms. Renee Gilmore
is our President, Chief Executive Officer and Director. Ms. Gilmore has served as our Director, President and CEO since our inception in August 2009. From March 2003 until January 2007 Ms. Gilmore served as an independent top Sales Director and Trainer for Mary Kay Inc., with its headquarters located in Dallas, Texas. From January 2007 until August of 2009, she was a partner in a contractor company. Renee attended the University of Nebraska at Omaha and earned an associate’s degree in Computer Science at Metropolitan Community College.
Mr. Aaron Gilmore
is our Chief Operations Officer and Director. He has served as our Director and COO since our inception in August of 2009. Mr. Gilmore also currently serves as a firefighter for Hurst Fire Department, located in Hurst, Texas, a position he has held since April 2002. Aaron attended University of Nebraska at Omaha. Aaron has a FireFighter Certification where he graduated first in his class. Aaron has also earned his EMT B, EMT I, and Paramedic Certifications. Aaron is HAZMAT certified and with his multitude of safety certifications, he is able to pass his experience on to those affiliated with Firemans Contractors.
Mr. Nikolay Frolov
, CPA, is our Chief Financial Officer, Treasurer and Director. He has served in these capacities since we were incorporated on August 21, 2009. Mr. Frolov has over 15 years of experience in accounting. Between 2008 and 2012, Mr. Frolov served as CFO and director of EVCARCO, Inc., a publicly traded company. Prior to 2008, Mr. Frolov was the assistant controller for Romacorp, Inc. Prior to this role, Mr. Frolov was a manager for Travis, Wolff & Co., LLP. Mr. Frolov was a senior consultant with Taylor and Taylor, LLP from 1994-2006. Mr. Frolov graduated with honors from the University of Texas at Arlington with Bachelor’s and Master’s degrees in Accounting.
Board Composition
Our Bylaws provide that the Board of Directors shall consist of one or more members, but not more than nine, and that our shareholders shall determine the number of directors at each regular meeting. Each director serves for a term that expires at the next regular meeting of the shareholders or until his successor is elected and qualified.
Committees of the Board of Directors
Due to our size, limited operating history and financial conditions we do not presently have a separately constituted audit committee, compensation committee, nominating committee, executive committee or any other committees of our Board of Directors. Our entire Board of Directors acts as our audit committee and handles matters related to compensation and nominations of directors. We do not have an audit committee “financial expert.”
Potential Conflicts of Interest
Since we do not have an audit or compensation committee comprised of independent directors, the functions that would have been performed by such committees are performed by our directors. Thus, there is a potential conflict of interest in that our directors and officers have the authority to determine issues concerning management compensation and audit issues that may affect management decisions. We are not aware of any other conflicts of interest with any of our executives or directors.
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
- continued
Director Independence
We are not subject to listing requirements of any national securities exchange or national securities association and, as a result, we are not at this time required to have our board comprised of a majority of “independent directors.” Our determination of independence of directors is made using the definition of “independent director” contained in Rule 4200(a)(15) of the Marketplace Rules of the NASDAQ Stock Market (“NASDAQ”), even though such definitions do not currently apply to us because, we are not listed on NASDAQ. We have determined that none of our directors currently meet the definition of “independent” as within the meaning of such rules as a result of their current positions as our executive officers.
Significant Employees
We have no significant employees other than the executive officers described above.
Family Relationships
Our Chief Operations Officer and Director, Aaron Gilmore, is the husband of Renee Gilmore, our President, CEO and Director.
Involvement in Certain Legal Proceedings
No director, person nominated to become a director, executive officer, promoter or control person of our company has, during the last five years: (i) been convicted in or is currently subject to a pending a criminal proceeding (excluding traffic violations and other minor offenses); (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to any federal or state securities or banking or commodities laws including, without limitation, in any way limiting involvement in any business activity, or finding any violation with respect to such law, nor (iii) any bankruptcy petition been filed by or against the business of which such person was an executive officer or a general partner, whether at the time of the bankruptcy or for the two years prior thereto.
Stockholder Communications with the Board
We have not implemented a formal policy or procedure by which our stockholders can communicate directly with our Board of Directors or make nominations to the Board of Directors. Nevertheless, every effort has been made to ensure that the views of stockholders are heard by the Board of Directors or individual directors, as applicable, and that appropriate responses are provided to stockholders in a timely manner. We believe that we are responsive to stockholder communications, and therefore have not considered it necessary to adopt a formal process for stockholder communications with our Board. During the upcoming year, our Board will continue to monitor whether it would be appropriate to adopt such a process.
Code of Ethics
As of June 30, 2013, we had not adopted a Code of Ethics, which would include our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.
ITEM 11.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information with respect to compensation paid by us to our officers for the fiscal years ended June 30, 2012 and 2013.
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Non-Equity
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Non-qualified
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Incentive
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Deferred
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All
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Name and
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Stock
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Option
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Plan
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Comp.
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Other
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Principal
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Salary
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Bonus
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Awards
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Awards
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Comp.
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Earnings
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Comp.
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Total
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Position
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Year
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($)
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($)
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($)
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($)
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($)
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($)
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($)
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($)
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These amounts represent primarily accrued compensation. The manner and timing of payments of the accrued compensation will depend on the future financial conditions of the Company.
Refer to the Notes to Financial Statements for more information.
Outstanding Equity Awards
No individual grants of stock options or other equity incentive awards have been made to any executive officer or any director since our inception; accordingly, none were outstanding at June 30, 2013 and 2012.
Employment Contracts, Termination of Employment, Change-in-Control Arrangements
There are currently no employment or other contracts or arrangements with our executive officers.
Compensation of Directors
We have no formal plan for compensating our directors for their services in their capacity as directors. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our Board of Directors. The Board of Directors may award special remuneration to any director undertaking any special services on behalf of Firemans Contractors other than services ordinarily required of a director.
The following table summarizes all compensation awarded to, earned by or paid to our directors for all services rendered in all capacities to us for the fiscal years ended June 30, 2012 and 2013.
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Non-Equity
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Non-qualified
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Incentive
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Deferred
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All
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Name and
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Stock
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Option
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Plan
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Comp.
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Other
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Principal
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Salary
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Bonus
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Awards
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Awards
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Comp.
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Earnings
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Comp.
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Total
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Position
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Year
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($)
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($)
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($)
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($)
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($)
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($)
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($)
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($)
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ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
The following table sets forth information regarding the beneficial ownership of our common stock as of October 10, 2013, for (1) each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common stock; (2) each of our executive officers; (3) each of our directors; and (4) all of our executive officers and directors as a group.
We have determined beneficial ownership in accordance with the rules of the Securities and Exchange Commission. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws, and the address for each person listed in the table is c/o FIREMANS CONTRACTORS, Inc., 2313 E Loop 820 N, Fort Worth, Texas 76118.
The percentage ownership information shown in the table below is calculated based on 28,906,885 shares of common stock, which includes 27,856,885 shares of our common stock issued and outstanding as of October 10, 2013; increased by 50,000 shares of common stock, representing the right to acquire beneficial ownership of the holders of 250,000 shares of Class A convertible preferred stock; further increased by 1,000,000 shares of common stock, representing the right to acquire beneficial ownership of the holders of 5,000,000 shares of Class B convertible preferred stock.
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Amount and Nature
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Title of
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of Beneficial
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Class
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Name of Beneficial Owner
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Ownership
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Percentage
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President, Chief Executive Officer and Director
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Chief Financial Officer, Treasurer and Director
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Chief Operations Officer and Director
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All Officers and Directors as a Group
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(1) Includes the effect given to 50,000 shares of common stock, which can be acquired by converting 250,000 shares of Class A convertible preferred stock, and the effect given to 1,000,000 shares of common stock, which can be acquired by converting 5,000,000 shares of Class B convertible preferred stock, held by Ms. Gilmore.
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(2) Reflects Ms. Gilmore’s indirect ownership in shares directly owned by her child.
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(3) Reflects Mr. Frolov’s indirect ownership in shares directly owned by his children.
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(4) Reflects Mr. Gilmore’s indirect ownership in shares directly owned by his spouse, our President, Chief Executive Officer and Director, Renee Gilmore, and his child
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* Percentage of beneficial ownership for Mr. Gilmore is identical to those of his spouse, and is excluded from the table in order to avoid duplication.
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We are unaware of any contract or other arrangement the operation of which may at a subsequent date result in a change in control of our Company.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
No promoters have been involved with our business or its principals since the foundation of our business.
The balance of the shareholder loans as of June 30, 2013 was $460,480, including $12,191 balance of interest accruing at 5% per year, on the outstanding balances.
Other than transactions above, and the stock transactions discussed below, we have not entered into any transaction nor are there any proposed transactions in which any director, executive officer, shareholder of the company or any member of the immediate family of any of the foregoing had or is to have a direct or indirect material interest.
On August 21, 2009, we issued a total of 200,000 shares of restricted common stock to Renee Gilmore, our officer and director in consideration for $1,000 cash.
On August 21, 2009, we issued a total of 60,000 shares of restricted common stock to Nikolay Frolov, our officer and director in consideration for $300 cash.
On August 21, 2009, we issued a total of 200,000 shares of restricted common stock to Aaron Gilmore, our officer and director in consideration for $1,000 cash.
On August 16, 2011, Aaron Gilmore, our officer and director, transferred 189,300 shares of common stock directly owned by him to his spouse, Renee Gilmore, our officer and director.
On August 16, 2011, Renee Gilmore, our officer and director, acquired 100,000 shares of Class A convertible preferred stock, in exchange for $12,500, as part of payment of accrued salary.
On July 6, 2012, Renee Gilmore, our officer and director, acquired 1,000,000 shares of Class B convertible preferred stock, in exchange for 200,000 shares of common stock.
On October 6, 2012, Renee Gilmore, our officer and director, acquired 945,500 shares of Class B convertible preferred stock, in exchange for 189,100 shares of common stock.
On December 4, 2012, Renee Gilmore, our officer and director, acquired 100,000 shares of Class A convertible preferred stock, and 1,889,000 shares of Class B convertible preferred stock, from our former officer and director in a private transaction.
On March 12, 2012, Renee Gilmore, our officer 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.
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table includes the aggregate fees paid to our independent registered public accounting firm for the fiscal years ended June 30, 2013 and 2012:
PART IV
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this annual report:
(1) Financial Statements
All financial statements of the Registrant as set forth under Item 8 of this Annual Report on Form 10-K.
(2) Financial Statement Schedules
All financial statement schedules have been omitted because they are not applicable or not required, or the information required thereby is included in the consolidated financial statements or the notes thereto included in this annual report.
(3) Exhibits
Each exhibit identified below is filed with this annual report. Exhibits designated with an “*” are filed herewith.
Exhibit No.
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Description
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Articles of Incorporation of Registrant (1)
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101.INS**
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XBRL INSTANCE DOCUMENT
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101.SCH**
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XBRL TAXONOMY EXTENSION SCHEMA
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101.CAL**
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XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
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101.DEF**
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XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
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101.LAB**
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XBRL TAXONOMY EXTENSION LABEL LINKBASE
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101.PRE**
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XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE
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____________
*
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Filed herewith.
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**
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To be furnished by amendment per Temporary Hardship Exemption under Regulation S-T.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Fort Worth, State of Texas, on October 16, 2013.
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FIREMANS CONTRACTORS, INC.
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By:
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/s/ Renee Gilmore
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Name: Renee Gilmore
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Title: CEO, President and Director
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Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on October 16, 2013.
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Signature
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Title
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/s/ Renee Gilmore
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CEO, President and Director
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Renee Gilmore
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(Principal Executive Officer)
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/s/ Nikolay Frolov
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Chief Financial Officer and Director
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Nikolay Frolov
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(Principal Financial and Accounting Officer)
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/s/ Aaron Gilmore
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Chief Operations Officer and Director
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Aaron Gilmore
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SUPPLEMENTAL INFORMATION:
NO ANNUAL REPORT OR PROXY MATERIAL WAS SENT TO SECURITY HOLDERS DURING THE LAST FISCAL YEAR, AND NO SUCH REPORT OR MATERIAL IS EXPECTED TO BE SENT IN THE CURRENT FISCAL YEAR.
INDEX TO EXHIBITS
Exhibit No.
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Description
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3.1
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Articles of Incorporation of Registrant (1)
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3.2
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Bylaws of Registrant (1)
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3.3
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Amendment to Articles of Incorporation (2)
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3.4
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Amendment to Articles of Incorporation (3)
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3.5
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Amendment to Articles of Incorporation (4)
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4.1
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Certificate of Designation (2)
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4.2
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Certificate of Designation (3)
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99.1
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2011 Employees/Consultants Stock Compensation Plan (2)
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101.INS**
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XBRL INSTANCE DOCUMENT
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101.SCH**
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XBRL TAXONOMY EXTENSION SCHEMA
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101.CAL**
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XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
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101.DEF**
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XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
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101.LAB**
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XBRL TAXONOMY EXTENSION LABEL LINKBASE
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101.PRE**
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XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE
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____________
1. Incorporated by reference to the Company's Registration Statement on Form S-1 as filed with the SEC on September 15, 2010.
2. Incorporated by reference to the Company's Annual Report on Form 10-K as filed with the SEC on September 28, 2011.
3. Incorporated by reference to the Company's Current Report on Form 8-K as filed with the SEC on July 12, 2012.
4. Incorporated by reference to the Company's Current Report on Form 8-K as filed with the SEC on August 8, 2012.
* Filed herewith.
** To be furnished by amendment per Temporary Hardship Exemption under Regulation S-T.