SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
X . QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2013
. TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 333-51918
FULLCIRCLE REGISTRY, INC.
(Exact Name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification No.)
161 Alpine Drive, Shelbyville, KY 40065
(Address of Principal Executive Offices) (Zip Code)
(Registrants Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, (the Exchange Act) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X . No .
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes X . No .
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
. (Do not check if a smaller reporting company)
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes . No X .
State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date: 129,981,301 Class A common shares as of October 31, 2013.
FULLCIRCLE REGISTRY, INC.
Table of Contents
Unaudited Consolidated Financial Statements
Consolidated Balance Sheets for September 30, 2013 (unaudited) and December 31, 2012
Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 2013 and 2012 (unaudited)
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2013 and 2012 (unaudited)
Notes to Consolidated Financial Statements (unaudited)
Managements Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Controls and Procedures
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults Upon Senior Securities
Mine Safety Disclosures
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
FullCircle Registry, Inc.
Consolidated Balance Sheets
Total current assets
Georgetown 14 property
Computers and equipment
Total fixed assets
Total customer data Base after amortization
LIABILITIES AND EQUITY
Preferred dividends payable
Short term notes payable
Notes payable - related party
Current portion of long term debt
Accrued Property tax
Total current liabilities
Long term liabilities
Digital equipment note, less current portion
Mortgage payable, less current portion
Total long term liabilities
Preferred stock, authorized 10,000,000 shares of $.001 par value
Preferred A, issued and outstanding is 10,000
Preferred B, issued and outstanding is 300,600
Common stock, authorized 200,000,000 shares of $.001 par value,
issued and outstanding shares of 129,049,631
and 112,743,016 shares, respectively
Additional paid-in capital
Total Stockholders' equity
Total liabilities and stockholders' deficit
The accompanying notes are an integral part of these consolidated financial statements.
FullCircle Registry, Inc.
Consolidated Statements of Operations
For the Three Months
For the Nine Months
Ended September 30,
Ended September 30
Cost of sales
Selling, general & administrative
Total operating expenses
Other income (expense)
Total other income (expense)
Net loss before income taxes
Net basic and fully diluted loss per share
Weighted average shares outstanding
The accompanying notes are an integral part of these financial statements
FullCircle Registry, Inc.
Consolidated Statements of Cash Flows
For the Nine Months
Ended September 30,
Cash flows from operating activities
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities
Depreciation & amortization
Stock issued for services
Change in assets and liabilities
(Increase) decrease in prepaid expenses
(Increase) decrease in accounts receivable
Increase (decrease) in accounts payable
Increase (decrease) in accrued interest
Increase (decrease) in accrued expenses
Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchase of fixed assets
Net cash provided by (used in) investing activities
Cash flows from financing activities
Payments on mortgage payable
Payments on digital equipment payable
Proceeds from notes payable related parties
Proceeds from digital equipment loan
Proceeds from sale of common stock
Net cash provided by financing activities
Net increase (decrease) in cash
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental cash flow information
Cash paid for:
Stock issued for accounts payable and accrued interest
Stock issued for notes payable and accrued interest
Stock issued for services
The accompanying notes are an integral part of these consolidated financial statements.
NOTE 1. BASIS OF FINANCIAL STATEMENT PRESENTATION.
The information furnished herein was taken from the books and records of the Company without audit. However, such information reflects all adjustments, which are, in the opinion of management, necessary to properly reflect the results of the interim period presented. The information presented is not necessarily indicative of the results from operations expected for the full fiscal year.
The accompanying unaudited financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in accordance with such rules and regulations. The information furnished in the interim financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements. Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim financial statements be read in conjunction with the Companys most recent audited financial statements and notes thereto included in its December 31, 2012 Annual Report on Form 10-K. Operating results for the three and nine months ended September 30, 2013, are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.
NOTE 2. GOING CONCERN.
The accompanying Consolidated Financial Statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has suffered recurring losses, negative working capital and is dependent upon raising capital to continue operations. The Company has incurred losses resulting in an accumulated deficit of $9,108,495 and $8,819,536 as of September 30, 2013 and December 31, 2012, respectively.
The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. It is managements plan to generate additional working capital by increasing revenue as a result of new sales and marketing initiatives and by raising additional capital from investors.
Management's plans with regards to these issues are as follows:
Locating and merging with other profitable private companies where the owners of these businesses are seeking liquidity and exit plans.
Expanding revenues by purchasing, or otherwise acquiring, profitable private businesses.
Continued development of Georgetown 14, our first acquisition, to increase revenues and profitability.
Upgrade and improve Georgetown 14 Cinemas and utilization of the property equity for financing.
Expansion of the services from HFP Capital Markets to assist in our search for business candidates for acquisition.
Raising new investment capital, either in the form of equity or loans, sufficient to meet the Company's operating expenses until the revenues are sufficient to meet the Companys operating expenses on an ongoing basis.
Increasing public relations exposure with the buy-side financial institutions.
The Company cannot ascertain the eventual success of management's plans with any degree of certainty. No assurances can be given that the Company will be successful in raising immediate capital or that the Company will achieve profitability or positive cash flows.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described above. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 3. STOCKHOLDERS EQUITY
During the nine-month period ending September 30, 2013 the Company issued 10,500,000 shares of Common Stock at $.02 per share providing for $210,000 operating funds, 5,250,000 shares of Common Stock for services at $.01 per share, 232,785 shares of Common Stock for services at $.02, and 323,830 shares of Common Stock for services at $.04 per share.
NOTE 4. SIGNIFICANT ACCOUNTING POLICIES
Effective July 1, 2009, in accordance with the provisions of GAAP the Company has revised its estimate of the useful life of the database asset from 15 years to 5 years from the date the assets were originally placed into service. According to GAAP this revised life is to be amortized prospectively over its remaining useful life and, therefore, has no impact on prior periods. The database amortization expense of $21,500 per quarter expired at the end of the June 30, 2013 quarter; accordingly, there is no amortization expense in the September 2013 quarter or for ensuing quarters.
Fair Value of Financial Instruments
On January 1, 2008, the Company adopted FASB ASC 820-10-50, Fair Value Measurements. This guidance defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follows:
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 inputs to valuation methodology are unobservable and significant to the fair measurement.
The carrying amounts reported in the balance sheets for the cash and cash equivalents, receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The carrying value of convertible notes payable approximates fair value because negotiated terms and conditions are consistent with current market rates as of September 30, 2013 and December 31, 2012.
In accordance with ASC 505, Equity, the Companys capital structure is as follows:
Preferred Stock, authorized 10,000,000 shares of $.001 par value. Class A Preferred Stock issued and outstanding is 10,000 shares. The Class A preferred shares have no voting rights. Class B Preferred Stock issued and outstanding is 300,600 shares. The Class B shares have voting rights of 10 votes for one share. There is no publicly traded market for our Preferred Stock.
Common Stock, authorized 200,000,000 shares of $.001 par value, issued and outstanding 129,981,301 on October 31, 2013 and 112,743,016 on December 31, 2012. The Common Stock has one vote per share, and is traded on the OTCBB under the symbol FLCR.
The Company has not paid, nor declared, any dividends on its Common Stock since its inception and does not intend to declare any such dividends in the foreseeable future. The Company's ability to pay dividends is subject to limitations imposed by Nevada law. Under Nevada law, dividends may be paid to the extent that the corporation's assets exceed its liabilities and it is able to pay its debts as they become due in the usual course of business.
The Class B Preferred Stock accrues a 2% preferred dividend, payable annually.
Use of Estimates in the Preparation of Consolidated Financial Statements
The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and expenses during the reporting period. In these Consolidated Financial Statements, assets, liabilities and expenses involve extensive reliance on managements estimates. Actual results could differ
from those estimates.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Where this Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act, we desire to take advantage of the safe harbor provisions thereof. Therefore, FullCircle Registry, Inc., is including this statement for the express purpose of availing itself of the protections of such safe harbor provisions with respect to all of such forward-looking statements. The forward-looking statements in this Form 10-Q reflect our current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ from those anticipated. In this Form 10-Q, the words anticipates, believes, expects, intends, future and similar expressions identify forward-looking statements. We undertake no obligation to publicly revise these forward-looking statements to reflect events or circumstances that may arise after the date hereof. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this section. We have based these forward-looking statements on our current expectations and projections about future events, including, among other things:
Attracting immediate financing;
Merging with or acquiring profitable private businesses.
Delivering a quality product that meets customer expectations;
Obtaining and expanding market acceptance of the products we offer; and
Competition in our market.
Our initial business began in 2000 with the formation of FullCircle Registry, Inc (FullCircle or the Company). We were a technology-based business that provided emergency document and information retrieval services. Our services included: providing customers with secure storage and immediate access to their critical medical records, legal documents (living wills, powers of attorney, do not resuscitate orders, etc.) and emergency contact information. The system was designed to allow medical personnel to quickly obtain critical information. We provided these services directly to subscribers and through strategic alliances with health care providers.
Our Current Business:
Our current business plan targets the acquisition of small profitable businesses with the following mission statement:
FullCircle Registry, Inc.s, mission statement is to provide exit capabilities for small to medium sized private profitable companies through M&A activity with those private companies, at a discount, to improve our stockholder value while leaving those companies autonomous to FullCircle where possible to continue to be managed by the team that founded them and subsequently providing liquidity and increased returns for the founder(s).
On February 4, 2013 FullCircle Registry, Inc., entered into an agreement with HFP Capital Markets. This relationship was developed for the purpose of expanding our mergers and acquisitions activities and the access to capital to fund new acquisitions. The diligence reports have been completed and HFP Capital has completed the updating process of the financial services web pages for FullCircle information. Our FullCircle Registry web page was updated during the third quarter.
We have entered the analysis and selection phase of our M&A activities, as reported in our shareholder letter of June 5th.
A wholly owned subsidiary, FullCircle Medical Supplies, Inc. has been established.
A PR Newswire announcing the signing of a non-binding letter of intent (LOI) to purchase a medical supply company was released on August 7, 2013. Its tax returns report that it is profitable, with revenues of $1.9 million in 2012. The target company is the leading medical supply provider in its city.
An offer proposal has been prepared and presented for the purchase of this business. Applicable SEC rules require that qualified auditors provide an opinion after a three-year audit of the books of the company. The purchase of this business cannot be completed until the auditors complete the audit and provide their opinion.
In September we signed a second Letter of Intent with a medical supply business in the same state and those financial evaluations and due diligence are in process.
Prior to this filing one additional Letter of Intent has been presented for approval and signature to a medical supply business in this state.
In addition we have signed Non Disclosure Agreements and are in negotiations with several other medical supply companies in the same state, in different markets. If our negotiations are satisfactory we will issue additional Letters of Intent on each of those businesses.
The due diligence process is lengthy and time consuming because of new regulations requiring more information regarding the purchase. Many of these businesses do not employ full time accountants and or bookkeepers and consequently most do not have audited financial statements readily available for review.
All businesses under review have been visited by FullCircle management.
Full confidentiality of the location of these businesses is important because of competitive and employee concerns.
To provide full coverage of the state it is planned to acquire approximately ten to twelve medical supply businesses, along with several existing satellite stores.
Rolling up these businesses and covering the whole state provides:
Economies of scale reducing COGS and operational expenses
Central warehousing providing prompt supply to all stores and internet sales, and reducing obsolete inventory write-downs
Smaller vehicle fleets
Improved buying power by purchasing in volume
Reduced insurance expense
Improved individual store web sites
Internet marketing allowing the stores to reach out to the entire country with product catalogues and shopping carts
Social media marketing
Centralized billing and insurance claim processing
Improved receivables controls
Increased selection of products
Operational synergies between all stores
Improved margins and profitability
The average of the several businesses that we are reviewing is $1.2 million in revenues for each store.
We are planning on employing a state manager with experience in the medical supply industry to become president of that states company and supervise all of the purchased store managers.
Many of these businesses are still owned by their founders who are looking for an exit strategy to realize a gain for their lifes work. Most have employees that have ten to fifteen years of seniority and are solid contributors to those businesses. Most are contributors to civic activities in their communities. Our intent is to allow them to continue to operate autonomously and to continue to be profitable and to improve that net income with increased products, improved synergies, and Internet and social media exposure.
FullCircle Entertainment, Inc.
In 2010 we established a new company, FullCircle Entertainment, Inc. (FullCircle Entertainment) for the purpose of acquiring movie theaters and other entertainment venues.
On December 31, 2010, FullCircle Entertainment purchased Georgetown 14 Cinemas, a movie theater complex property at 3898 Lafayette Road, Indianapolis, Indiana 46224.
A summary of the Georgetown 14 acquisition follows:
The 8-acre property purchase price was $5.5 million.
The appraised value was $7.85 million.
Assumed mortgage was $5,047,841 with issuance of Company stock valued at $452,159.
18-25 employees depending on the season.
In October we received funding to begin the upgrade. It is expected that our remodel will improve our attendance, attracting patrons from a greater distance. The Interstate 65 access to our theater is an advantage, with two exits that feed into our Lafayette Road address.
Theater upgrades of approximately $200,000 are planned to begin shortly that will include lounging areas for family gatherings and birthday parties, internal Wi-Fi, additional signage, a new lobby look with an international theme, new carpet, increased lighting and an improved concession area with digital menus that is expected to improve our concession sales. Our new website, www.georgetowncinemas.com is now operational.
New employee uniforms were provided in August.
Spanish dubbed or Spanish sub-titled movies were started in July and now run daily on at least one screen. This allows us to attract more of our Latino population in our area.
Movie releases and schedules occur on our theater web site as well as email blasts out to our patrons. We are engaged in social media marketing on Facebook, which can be viewed by visiting our web site.
In the next year we plan to improve our theater operations to allow us to offer:
Viewing of U.S. popular sporting events such as the Major League Baseball World Series, NFL playoffs, NCAA Basketball and Football playoffs and NBA playoffs.
Viewing of International popular sporting events to serve our local international community.
Business meetings requiring upload and download high-speed internet capabilities
During the third quarter, nationwide theater revenues were flat compared to the preceding year, due principally to a series of poorly reviewed and disappointing movies from Hollywood. We experienced a slight decline in attendance, so our revenues were below 2012 levels by 1.9%.
In addition, compared to 2012 we added uniformed security and increased our management compensation to be more commensurate with other local theaters.
FullCircle Insurance Agency, Inc.
The FullCircle Insurance Agency, Inc. was founded in August 2008, but is currently inactive. Until adequate funding is available, any operations of this company have been placed on hold. In addition, we believe that this industry will thrive once the Patient Protection and Affordable Care Act is implemented and finalized. Increased agency knowledge and professionalism will be necessary to help businesses and individuals understand the new laws.
FullCircle Prescription Services, Inc.
Until a more favorable political climate exists we have discontinued the marketing events for the advancement of FullCircle Prescription Services, Inc. Up until 2009 the political trend was to support the re-importation of generic drugs to assist in combating the increasing expense of medications most importantly for our senior citizens. However, since that time the political trend has reversed and this direction is not currently supported by the current administration. We are still operational but have elected to not expend any marketing funds at this time.
Our Corporate Information
Our principal executive offices are located at 161 Alpine Drive, Shelbyville, Kentucky, 40065, and our telephone number is (502) 410-4500. Our current website address is www.fullcircleregistry.com. Our website and the information contained therein or connected thereto shall not be deemed to be incorporated into this report.
SEC Compliance and Regulations
The requirements for regulatory compliance continue to be expensive and difficult. The HTML filing format will be combined with the XBRL format for the September quarter. The XBRL filing format, required by the SEC, is expensive. FullCircle has been filing in both formats for the last two years per SEC regulations. Both formats can be viewed on our web page under the Announcements Tab.
The motion picture exhibition industry is fragmented and highly competitive. Our theater competes against regional and independent operators as well as the larger theater circuit operators.
Our operations are subject to varying degrees of competition with respect to film licensing, attracting customers, and obtaining new theater sites. In those areas where real estate is readily available, there are few barriers preventing competing companies from opening theaters near one of our existing theaters, which may have a material adverse effect on our theatres. Demographic changes and competitive pressures can also lead to a theater location becoming impaired.
In addition to competition with other motion picture exhibitors, our theaters face competition from a number of alternative motion picture exhibition delivery systems, such as cable television, satellite and pay-per-view services and home video systems. The expansion of such delivery systems could have a material adverse effect upon our business and results of operations. We also compete for the publics leisure time and disposable income with all forms of entertainment, including sporting events, concerts, live theatre and restaurants.
FullCircle Registry, Inc., and subsidiaries currently have 18 employees, contract employees and officers. Our total company employees will range from 18 to 28 employees, depending on the season. We have never experienced employment-related work stoppages and consider that we maintain good relations with our personnel.
Results of Operations for the Three-month and Nine-Month Periods Ended September 30, 2013 and 2012.
Revenues during the three months ended September 30, 2013 were $487,729 with a cost of sales of $207,090, yielding a gross profit of $280,639 or 57.5%. This compares to $497,083 in revenues for the same period in 2012, with a cost of sales of $227,525, yielding a gross profit of $269,558 or 54.2%. Revenues during the nine months ended September 30, 2013 were $1,411,573, with a cost of sales of $556,243, yielding a gross profit of $855,330 or 60.6%. This compares with $1,410,722 in revenues for the same period in 2012, with cost of sales of $624,930, yielding a gross profit of $785,792 or 55.7%.
Operating expenses during the three-month period ended September 30, 2013 were $220,779, resulting in an operating income of $59,860, compared to operating expenses of $230,317 in the same period in 2012, resulting in operating income of $39,241. Operating expenses and selling, general and administrative costs during the current nine-month period were $663,744, resulting in an operating profit of $191,586, compared to operating expenses of $570,611 for the nine months ended September 30, 2012, resulting in an operating profit of $215,181 in the same period in 2012. Operating expenses for the nine-month period have increased because of the improvements of the theater and increased employee hours to upgrade our services.
Operating expenses were also greater due to a non-cash management compensation expense issued in our Common Stock. In addition, our theater management compensation was increased to be more commensurate with our competition. In 2013 we added uniformed security to our theater.
Interest expense for the three months ended September 30, 2013 was $77,000, amortization expense was $0 and depreciation expense was $60,339 producing a net loss for the period of $77,479, compared to interest expense of $61,216, amortization expense of $21,510 and depreciation expense of $60,339 resulting in a net loss of $103,824 during the same period in 2012. Interest expense for the nine months ended September 30, 2013 was $252,010, amortization expense was $43,022 and depreciation expense was $181,017 resulting in a net loss from continuing operations of $284,463. For the nine months ended September 30, 2012 the Company had interest expense of $246,925, amortization expense of $64,530 and depreciation expense of $167,755 and recognized a net loss of $264,029.
Outside the direct theater operation expenses of FullCircle Entertainment, Inc., depreciation, interest, amortization, SEC compliance cost for auditors, accountants and attorneys continue to be the major part of our expenses.
During the first nine months of 2013, compared to the corresponding period of 2012, national theater revenues were down slightly and our Georgetown 14 Theater ticket revenues were down. The theater revenues were a direct reflection of less popular first run movies being released compared to the same period last year. We were able to offset some of that ticket sale decline in improved concession revenues and advertising revenues. At the present time we are maintaining our competitive adult ticket pricing at $9.00. Our closest competitors have increased their pricing from $10.00 to $10.50 per adult ticket. Once our new WOW upgrade to the theater is completed we will re-evaluate our pricing.
Liquidity and Capital Resources
At September 30, 2013 the Company had total assets of $5,926,575, compared to $6,099,484 on December 31, 2012. The Company had total assets consisting of $9,031 in cash, $34,574 in accounts receivable, $23,423 in prepaid expenses, $58,283 in theater upgrades, $6,372,161 of fixed assets in the Georgetown 14 property, and $82,928 in computers and equipment, less accumulated depreciation of $653,825. Total assets at December 31, 2012 consisted of $34,469 in cash, $39,177 in accounts receivable, $535 in prepaid expenses, $6,372,161 of fixed assets in Georgetown 14, and $43,022 in our customer database, less accumulated depreciation of $472,808.
At September 30, 2013 the Company had $6,004,515 in total liabilities. Total liabilities include $47,277 in accounts payable, $13,256 in accrued expenses, $75,281 in accrued interest, $19,568 in preferred dividends payable, $40,000 in notes payable, $391,563 in notes payable-related party, $299,242 in current portion of long-term debt, $134,310 in accrued property taxes, $487,342 in the digital equipment note, and $4,496,676 in mortgage payable.
Total liabilities at December 31, 2012 were $6,167,787, which was comprised of $53,071 in accounts payable, $11,141 in accrued expenses, $62,834 in accrued interest, $15,071 in preferred dividends payable, $40,000 in notes payable, $359,414 in note payable related party, $264,189 in current portion of long term debt, $125,965 in accrued property tax, $584,211 in the digital equipment note, and $4,651,891 mortgage payable.
Net cash used by operating activities for the nine months ended September 30, 2013 was $7,727 compared to net cash used by operating activities for the nine months ended September 30, 2012 of $28,800. During the nine months ended September 30, 2013, $58,283 was used for investments, and $25,118 was provided by financing activities. For the same period in 2012, $795,758 was used for investments and $783,098 was provided by financing activities.
As of September 30, 2013 we had capital commitments of a mortgage and the digital equipment loan for $5,245,822 for Georgetown 14 Theater. We may also seek funding from sales of securities or from lenders offering favorable terms. No assurance can be given that we will be able to obtain the total capital necessary to fund our new business plans. In such an event, this may have a materially adverse effect on our business, operating results and financial condition.
We require additional capital to supplement our anticipated revenues and to fund our mergers and continuing operations. We have relied upon advances from directors, officers and shareholders and we have issued stock to finance our operations to this point.
FullCircle currently owes $40,000 in notes payable and $391,563 notes payable to related parties. Our auditors have expressed concern that the Company has experienced losses from operations and negative cash flows from operations since inception. We have negative working capital and a capital deficiency at September 30, 2013. As of September 30, 2013 stockholders equity is ($77,940) compared to ($68,303) on December 31, 2012.
Factors That May Impact Future Results
At the time of this report, we had insufficient cash reserves and receivables necessary to meet forecast operating requirements for FullCircle Registry, Inc.
The current expansion of the Companys business demands that significant financial resources be raised to fund capital expenditures, working capital needs, and debt service. Current cash balances and the realization of accounts receivable will not be sufficient to fund the Companys current business plan for the next twelve months. Consequently, the Company is currently seeking convertible debt and/or additional equity financing in the aggregate amount of at least $500,000, to fund the Companys expansion needs. Management is currently negotiating with existing shareholders, financial institutions, prospective new investors, and other accredited investors in order to obtain working capital necessary to meet current and future obligations and commitments.
Management is confident that these efforts will produce financing to further the growth of the Company. Nevertheless, there can be no assurance that the Company will be able to raise additional capital on satisfactory terms or at all.
Critical Accounting Policies and Estimates
The Companys discussion and analysis of its financial condition and results of operations are based upon its consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements may have required the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures. On an ongoing basis, the Company evaluates estimates, including those related to bad debts, inventories, fixed assets, income taxes, contingencies and litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances; the results of which form the basis of the Companys judgments on the carrying value of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Companys President and Chief Financial Officer have concluded, based on an evaluation of the Companys disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15(d)-15(e)) that such disclosure controls and procedures were effective as of the end of the period covered by this report.
Changes in Internal Control Over Financial Reporting
There has been no change in the Companys internal control over financial reporting during the three months ended September 30, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART IIOTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no pending legal proceedings.
ITEM 1A. RISK FACTORS.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
During the three-month period ending September 30, 2013 the Company issued an aggregate amount of 3,000,000 shares for operating capital at $.02 per share. During the three-month period ending September 30, 2013 the Company issued an aggregate amount of 500,000 shares for management services at $.01.per share and issued 232,785 for services at $.02 per share, and issued 28,400 shares for consulting services at $.04 per share.
We believe the foregoing transactions were exempt from the registration requirements of the Securities Act of 1933, as amended, under Section 4(2) thereof or Rule 506 of Regulation D promulgated thereunder.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
ITEM 4. MINE SAFETY DISCLOSURES
ITEM 5. OTHER INFORMATION.
ITEM 6. EXHIBITS
Certification of Chief Executive Officer/Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Executive Officer/Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002*
In accordance with the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
FULLCIRCLE REGISTRY, INC.
Date: November 12, 2013
/s/ Norman L. Frohreich
Norman L. Frohreich
Chief Executive Officer
Chief Financial Officer