FIREMANS CONTRACTORS, INC. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Edgar Glimpses Via Acquire Media NewsEdge) This Quarterly Report on Form 10-Q contains statements which, to the extent they
do not recite historical fact, constitute "forward looking" statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. You can identify
these statements by the use of words like "may", "will", "could", "should",
"project", "believe", "anticipate", "expect", "plan", "estimate", "forecast",
"potential", "intend", "continue", and variations of these words or comparable
words. Forward looking statements do not guarantee future performance and
involve risks and uncertainties. Actual results may differ substantially from
the results that the forward looking statements suggest for various reasons,
including those discussed under the caption "Risks Related to Our Business" in
our Annual Report on Form 10-K. These forward looking statements are made only
as of the date of this report. The Company expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in the Company's expectations
with regard thereto or any change in events, conditions or circumstances on
which any statement is based. This discussion should be read together with the
financial statements and other financial information included in this Form 10-Q.
The following discussion contains forward-looking statements that are subject to
significant risks and uncertainties. There are several important factors that
could cause actual results to differ materially from historical results and
percentages and results anticipated by the forward-looking statements. The
Company has sought to identify the most significant risks to its business, but
cannot predict whether or to what extent any of such risks may be realized nor
can there be any assurance that the Company has identified all possible risks
that might arise. Investors should carefully consider all of such risks before
making an investment decision with respect to the Company's stock.
Firemans Contractors, Inc. was incorporated on August 21, 2009 in the State of
Nevada. The Company is a full-service contractor, specializing in parking lot
Firemans Contractors, Inc. has never declared bankruptcy, has never been in
receivership, and has never been involved in any illegal action or proceedings.
Since becoming incorporated, Firemans Contractors, Inc. has not made any
significant purchases or sale of assets, nor has it been involved in any
mergers, acquisitions or consolidations. Firemans Contractors, Inc. is not a
blank check registrant as that term is defined in Rule 419(a) (2) of Regulation
C of the Securities Act of 1933, since it has a specific business plan or
purpose in which we have engaged in since our inception. In addition, neither
Firemans Contractors, Inc. nor its officers, directors, promoters, or affiliates
has had preliminary contact or discussions with, nor do we have any present
plans, proposals, arrangements, or understandings with any representatives of
the owners of any business or company regarding the possibility of an
acquisition or merger. Further, our financial statements reflect that we have
generated more than nominal revenues from our primary business during our first
year of operation and we have more than nominal assets other than cash.
Effective July 6, 2012, the Company filed an amendment with the Nevada Secretary
of State to authorize Class B convertible preferred stock in the amount of
5,000,000 shares at $0.001 par value. Class B shares have no dividend rights,
except as may be declared by the Board of Directors in its sole discretion.
Class B stock is ranked junior and subsequent to Class A convertible preferred
stock, but senior and prior to the Corporation's common stock as to dividends
and upon liquidation. Class B shares have liquidation rights of $0.10 per share,
and are entitled to 100 votes each, on any matters requiring shareholders' vote.
One share of Class B stock can be converted into 10 shares of common stock at
any time, upon demand from the holder.
Effective August 3, 2012, the Company filed an amendment with the Nevada
Secretary of State to increase number of authorized Common Stock from
200,000,000 to 400,000,000 shares.
On July 1, 2012, first franchisee of the Firemans Contractors® concept began
operations in North Texas.
Plan of Operation
Over the next twelve months, we will concentrate on the following four areas to
grow our operations:
Capital and Funding - Seek to obtain capital from all available
sources, including bank financing, private sales of stock and/or
convertible debt. We expect income from operations and franchise
sales to contribute to ongoing capital needs in the near future.
4--------------------------------------------------------------------------------ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - continued
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
Sales - Grow its core business in North Texas, and expand in other areas.
Franchise Development - Marketing the Firemans Contractors®
franchise concept and licensing of Company's Service Marks, with
the short-term objective of establishing ten new franchisees during
fiscal year 2013.
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.
For the three month periods ended September 30, 2012 and 2011, we have generated
revenues of $223,938 and $236,948, respectively. Amount for the first quarter of
fiscal year 2013 includes $38,143 of revenues from franchising. We've incurred
net losses for the same periods of $276,598 and $200,257.
As of September 30, 2012, the Company had assets of $151,944, and total
liabilities of $1,205,412. As of June 30, 2012, the Company had assets of
$158,410, and total liabilities of $1,168,255.
Liquidity and Capital Resources
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern which contemplates, among other things,
the realization of assets and satisfaction of liabilities in the ordinary course
As of September 30 and June 30, 2012, the Company had $3,949 and $7,008 of cash,
respectively. Sales of our common stock and borrowings under the convertible
note agreement have been the primary source of these funds.
We are presently able to meet our obligations as they come due. At September
30, 2012, we had a working capital deficit of $1,116,443, which included
$628,828 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, 2013 (one year
term, with one year extension), unless the agreement is further extended, with
the consent of both parties. As of November 1, 2012, the Company received
$306,000 in six separate installments. We believe this line of credit should be
sufficient to ensure that the Company is able to meet its obligations for the
next 12 months.
--------------------------------------------------------------------------------ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - continued
We anticipate that our future liquidity requirements will arise from the need to
fund our growth, pay current obligations and future capital expenditures. In
addition, following the completion of this offering, we expect that our general
and administrative expenses will increase due to the additional operational and
reporting costs associated with being a public company. The primary sources of
funding for such requirements are expected to be cash generated from operations
and raising additional funds from the private sources and/or debt financing.
However, we can provide no assurances that we will be able to generate
sufficient cash flow from operations and/or obtain additional capital or
financing on terms satisfactory to us, if at all, to remain a going concern.
Other Items and Conditions
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