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 March 31, 2014
. 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: 131,784,426 Class A common shares as of April 30, 2014.
FULLCIRCLE REGISTRY, INC.
Table of Contents
Unaudited Consolidated Financial Statements
Consolidated Balance Sheets for March 31, 2014 (unaudited) and December 31, 2013
Consolidated Statements of Operations for the Three Months Ended March 31, 2014 and 2013 (unaudited)
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2014 and 2013 (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
Total Fixed Assets
Total Other Assets
LIABILITIES & EQUITY
Current Portion of Long Term Debt
Property Tax Accrual
Preferred Dividends Payable
Note Payable Related Parties
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
131,784,426 and 131,784,426 shares, respectively
Total Stockholders' equity (deficit)
TOTAL LIABILITIES & EQUITY
The accompanying notes are an integral part of these consolidated financial statements.
FullCircle Registry, Inc.
Consolidated Statements of Operations
For the Three Months
Ended March 31,
Cost of sales
Selling, general & administrative
Total operating expenses
Income before depreciation and amortization
Depreciation and Amortization
Operating Profit (Loss)
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 consolidated financial statements.
FullCircle Registry, Inc.
Consolidated Statements of Cash Flows
For the Three Months
Ended March 31,
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 financing payable
Proceeds from stock subscribed
Proceeds from notes payable related parties
Proceeds from sale of common stock
Net cash provided by financing activities
Net increase 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 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, 2013, Annual Report on Form 10-K. Operating results for the three months ended March 31, 2014, are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.
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 $9,370,674 and $9,273,650 as of March 31, 2014 and December 31, 2013, 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:
Improving our Georgetown 14 Cinemas investment.
Expanding revenues by purchasing, or otherwise acquiring, independent businesses.
Raising new investment capital, either in the form of equity or loans, sufficient to fund acquisition goals and to meet the Company's operating expenses until the revenues are sufficient to meet operating expenses on an ongoing basis.
Locating and merging with other profitable private companies where the owners are seeking liquidity and exit plans.
Maintaining the Company mission of minimal overheads by sourcing services in consulting roles to keep overheads at a minimum.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually attain profitable operations. The accompanying 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 three-month period ending March 31, 2014 the Company did not issue any shares of common stock.
NOTE 4. SIGNIFICANT ACCOUNTING POLICIES
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 March 31, 2014 and December 31, 2013.
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 issued and outstanding is 10,000. Class A preferred shares have no voting rights. Class B issued and outstanding is 300,600 shares. The Class B shares have voting rights of 10 votes for 1 Preferred B share. There is no publicly traded market for our preferred shares.
Common stock, authorized 200,000,000 shares of $.001 par value, issued and outstanding 131,784,426 on April 23, 2014 and 131,784,426 on December 31, 2013. The common stock has one vote per share. The common stock is traded on the OTCBB under the symbol FLCR.
The Company has not paid, nor declared, any dividends 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.
Class B Preferred shares have 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.
Certain 2013 financial information has been reclassified to conform to the 2014 presentation. The reclassifications have no impact on the previously reported financial position of the Company or its operations.
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. 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 is to provide exit capabilities for small to medium sized private profitable, companies
through acquisition, to improve our stockholder value while leaving those companies autonomous where possible to continue to be managed by the team that founded them, and subsequently providing liquidity and increased returns for the founder(s).
We have entered the analysis and selection phase of our M&A activities and will be announcing our progress through PR newswire releases.
New Business plan and new direction
In recent years we have established four operating subsidiaries. In addition to the parent company, FullCircle Registry, Inc., we have added companies in the following business sectors: distribution of medical supplies, entertainment, insurance agency and prescription assistance services. In 2010 we purchased our first property, in Indianapolis, Indiana, that contains the Georgetown 14 Digital Cinemas. Revenues for 2011, 2012, and 2013 were predominantly from the movie theater operations. Our medical supplies distribution company, FullCircle Medical Supplies, Inc., plans to commence operations in 2014. FullCircle Insurance Agency, Inc. and FullCircle Prescriptions, Inc. are currently inactive, pending national economic improvements and changes in the healthcare sector.
Funding for acquisitions, theater improvements and operating capital
Subsequent to March 31, 2014, the company signed a non-binding term sheet for $1,500,000 in funding to assist in our capital requirements for Durable Medical Equipment (DME) acquisitions and operations. The companys counsel is in the process of reviewing the funding documents. If FullCircle approves the documents we will file a Registration Statement with the SEC to register the shares in accordance with one of the requirements in the term sheet.
FullCircle Entertainment, Inc.
In 2010 we established 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.
In January 2012 we converted all of our screens to a digital format and installed 3D capability at a cost of $790,000, which we financed with a secured loan. The digital format offers a crisper view and allows the exhibition of 3D movies on three of our screens. Two of our theaters had been previously converted to digital prior to 2012.
In 2012 we renegotiated the mortgage on the property, resulting in a reduction of ¾ percentage point in the interest rate. In March 2013 we again renegotiated the mortgage, resulting in a further reduction of 1/4 percentage point.
During 2013 we increased pricing of our tickets and concessions to be in line with other competing full service digital theaters in our area.
We also developed a new web page for the Georgetown 14 Digital Cinemas allowing for a more complete patron information center. The new site is: www.georgetowncinemas.com. Our patrons can now find us on Facebook and Twitter, and sign up for our weekly newsletter keeping them informed about the upcoming movies and news about our Georgetown improvements and community events.
In 2013, we began a major upgrade to the Georgetown 14 Digital Cinemas, with more signage and a complete remodel of our concession and lobby areas, as well as new employee uniforms. Funding for these improvements has been difficult, but we have managed to begin the process with the assistance from major stockholders. We plan to install new furniture, which will allow a place for our patrons to meet and enjoy our enhanced concession menu, as well as enjoy our new WiFi hot spots throughout the theater.
We launched a gift card program as well as a Customer Rewards program. Since its inception in January 2014 more than 500 patrons have enrolled in the Customer Rewards program. This will allow us to identify the zip codes of our patrons, so that we can target specialized marketing materials and monitor our growth outside our immediate area.
We also added uniformed security from dusk to close, and increased our management compensation to be more commensurate with other local theaters. We also improved our maintenance operations to improve the patron experience.
During 2014 we plan to improve our theater operations to allow us to offer:
Free 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. These would be primarily marketing events to increase concession revenue.
Viewing of popular international sporting events, to serve our local international community.
Business meetings requiring high-speed internet upload and download capabilities
Private party functions
During the last half of 2013, nationwide theater revenues were down compared to the preceding year, due principally to a series of poorly reviewed and disappointing movies that were released during this period. We experienced a slight decline in attendance, so our ticket sale revenues were below 2012 levels by 1.9%.
A portion of the building housing the Georgetown Digital Cinemas also includes a grocery store space, which we lease to an independent operator. The lease was set to expire in 2014, and we recently leased the space to Save-A-Lot Stores, a grocery store operator, for another 20 years.
FullCircle Medical Supplies, Inc.
In 2013 we established a new company, FullCircle Medical Supplies, Inc. (FullCircle Medical), for the purpose of entering into the durable medical equipment (DME) supply business sector, for the purpose of acquiring medical supply businesses and other related medical supply services in the Sun Belt states.
Our current plan is to acquire or establish DME businesses throughout the state of Louisiana with up to twelve DME locations, utilizing centralized warehousing, billing, and purchasing, and to provide all related DME services in each location.
Acquiring these businesses and covering the whole state should provide:
Economies of scale, reducing costs of inventory 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
We are currently considering several existing DME businesses, with an average of approximately $1.1 million in revenues. At such time as we complete some acquisitions, we plan to employ a state manager with experience in the medical supply industry to supervise the managers of the purchased stores and to manage the operations in the state.
We have signed consulting agreements with two Acquisition Managers for the purpose of assisting in our acquisition process in Louisiana and South Carolina and to assist the CEO in the due diligence requirements necessary to determine each DMEs suitability to become part of our mission.
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 with ten to fifteen years experience, who are solid contributors to these businesses. Most are contributors to civic activities in their communities, which provides them a business connection within their marketing area. Our intent is to allow them to continue to operate autonomously, to continue to be profitable, and to improve net income with increased product selection, improved synergies, and Internet and social media exposure. We have entered the analysis and selection phase of our acquisition activities, and our executives have made multiple trips to Louisiana for the purpose of collecting and analyzing information, reviewing each business, observing employees, and understanding the focus and strengths of each business. In some cases we are negotiating letters of intent for these proposed acquisitions, and in the process of financial evaluations of those businesses.
We are engaged in several acquisition negotiations and expect to execute purchase agreements in the quarter ending June 30, 2014.
Typically, most DME businesses do not market on the Internet and many do not have websites. Once we complete the first acquisition, we plan to create a web site introducing a products catalogue and shopping cart. As acquisitions continue, we plan to clone the website for each location, connecting to our products catalogue and shopping carts. This would allow each DME to market nationally as well as internationally and ship out of a central warehouse. We believe that revenues from these businesses can be significantly increased over the first two-year period through Internet and social media marketing.
Candidates to operate the proposed Louisiana company have been interviewed and, following acquisition of DME companies in the state, will be phased in with consulting arrangements and eventually assume management positions in the company. We believe our consultants will assist in providing a full range of products and services for each market.
Once we establish consolidated operations in Louisiana, and the infrastructure and operations are tested and functioning, we plan to utilize this same rollup approach in additional southern states.
FullCircle Insurance Agency, Inc.
The FullCircle Insurance Agency, Inc. was founded in August 2008, but is currently inactive. In the past few years the insurance industry has experienced difficulties flowing from the financial problems of AIG and other major industry players, and the enactment of the Affordable Care Act has produced significant uncertainty in the healthcare insurance field. Until these matters are stabilized, we have placed operations of this company on hold. We believe that this industry will thrive once the Affordable Care Act is fully implemented, improved, and finalized. Increased agency knowledge and professionalism will be necessary to help businesses and individuals understand the new laws. We believe there are opportunities to roll up several local agencies into regional agencies, for economies of scale in providing these professional services.
FullCircle Prescription Services, Inc.
FullCircle Prescription Services, Inc. was established for the purpose of handling our prescription assistance services program. Its mission is to assist consumers in finding medications at discounted rates worldwide in our Shop the World program. When it becomes operational, FullCircle Prescription Services, Inc. will not dispense any medications nor handle any prescriptions, but will function only as a customer assistance program.
Until a more favorable political climate exists we have placed the marketing efforts for the advancement of FullCircle Prescription Services, Inc. on hold. Up until 2009 the political trend was to support the re-importation of generic drugs to assist in combating the increasing expense of prescription medications most importantly for senior citizens. However, since that time the political trend has reversed largely influenced by large pharmaceutical companies. The U.S. Government currently disfavors the re-importation of generic drugs manufactured by U.S. companies, which is essential to the business strategy of FullCircle Prescription Services, Inc.. Pending a change in this policy, we are still operational but have elected to not expend any operational or 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 difficult. The HTML and the XBRL filing format are now both required by the SEC, which is expensive. FullCircle has been filing in both formats for the last two years. Both formats can be viewed on our web page under the Announcements Tab per SEC rules.
Movie Theater Entertainment:
The motion picture exhibition industry is fragmented and highly competitive. Our theaters compete against regional and independent operators as well as the larger theatre 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 our existing theater, which may have a material adverse effect on our revenues. 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.
The movie theater industry is dependent upon the timely release of first run movies. Ticket sales and concession sales are influenced by the availability of top producing movies. At times, our revenues are impacted by the shortage of first run movies. During the year we experience slow releases from the movie companies in January through March and then again during the late summer from August through October.
We plan to expand into the exhibition of live sporting events such as world soccer, cricket, and possibly NFL playoff games and the World Series to provide large screen viewing of these sporting events. We are also taking an aggressive posture to expand into business conference sessions during dead screen time to facilitate the anticipated increase in demand for upload and download communication with enhanced WiFi and dish communication systems.
Durable Medical Equipment (DME):
The durable medical equipment supply business is highly fragmented, consisting mainly of local pharmacies, small pharmacy chains, and local distributors and retail outlets. As a result, the business is not overly price competitive, and prices are generally comparable market to market and state to state. Pricing is predominantly controlled by insurance companies and by Medicare / Medicaid reimbursement policies. Revenue improvement depends on additional services and improved marketing. According to Forbes Magazine, in 2012 the medical supply business was the second most profitable of the top 20 small businesses in the United States.
Successful medical supply businesses are profitable because the founders or managers devote their attention to customer service and inventory management, to ensure quick delivery to their patrons. We plan to maintain this performance in any businesses we acquire.
Recently, Medicare has developed a competitive bidding process in larger cities that is squeezing margins of many DME businesses. We believe this trend will continue, and consequently will require better management and control of expenses to maintain profitability. We believe this situation will provide us an opportunity to acquire some of these businesses, and to provide the synergies to remain competitive and improve profits.
FullCircle Registry, Inc., and its subsidiaries have employee levels generally ranging between 20 to 28 employees/officers depending on seasonal needs. We have never experienced employment-related work stoppages and focus on good relations with our personnel and are continuing to attract stronger talent.
Results of Operations for the Three-Month Periods Ended March 31, 2014 and 2013.
Revenues during the three months ended March 31, 2014 were $386,143 with a cost of sales of $149,963, yielding a gross profit of $236,180. This compares to $454,301 in revenues for the same period in 2013, with a cost of sales of $145,473, yielding a gross profit of $308,828
Selling, general, and administrative expenses during the current three-month period ended March 31, 2014 were $192,775, resulting in income before depreciation of $43,405, compared to selling, general and administrative expenses during the three month period ended March 31, 2013 of $167,601, resulting in operating income before depreciation and amortization of $141,227.
Depreciation expense totaled $63,252 resulting an operating loss of $19,847 in the three-month period ended March 31, 2014. Depreciation and amortization expense in the same period in 2013 was $81,849 resulting in an operating profit of $59,378.
Interest expense for the three months ended March 31, 2014 was $75,662, producing a net loss for the period of $95,509, compared to interest expense of $87,361, resulting in a net loss of $27,983 during the same period in 2013.
Outside the direct theater operation expenses of FullCircle Entertainment, Inc., our depreciation, interest, amortization, SEC compliance cost for auditors, accountants and attorneys continue to be the major part of our expenses.
The theater industry typically loses money during the first quarter because there are fewer new films released and many people are recovering from the expense of the holiday season at the end of the previous year. During the first quarter of 2014 the national year over year period, the theater revenues were down by 11% and our Georgetown 14 Theater revenues were down 9%. The national theater revenues were a direct reflection of less strong first run movies being released compared to the same period last year.
Liquidity and Capital Resources
At March 31, 2014 the Company had total assets of $5,797,720 compared to $5,854,062 on December 31, 2013. The Company had total assets consisting of $23,828 in cash, $28,260 in accounts receivable, $3,698 in prepaid expenses, $10,870 in utility deposits, $6,431,386 of fixed assets in Georgetown 14, less accumulated depreciation of $700,322. Total assets at December 31, 2013 consisted of $14,267 in cash, $30,428 accounts receivable, $10,870 in utility deposits, $5,126 prepaid expenses, $6,430,441 of fixed assets in Georgetown 14,less accumulated depreciation of $637,070.
At March 31, 2014 the Company had $6,036,333 in total liabilities. Total liabilities include $73,455 in accounts payable, $8,751 in accrued expenses, $103,570 in accrued interest, $22,599 in preferred dividends payable, $35,000 in notes payable, $460,932 notes payable-related party, $309,586 current portion of long-term debt, $179,184 accrued property taxes, $440,487 digital equipment note and $4,402,769 mortgage payable.
Total liabilities at December 31, 2013 were $5,995,651, which was comprised of $70,974 in accounts payable, $7,628 accrued expenses, $74,610 accrued interest, $21,083 in preferred dividends payable, $35,000 in notes payable, $426,248 note payable related party, current portion of long term debt $309,586, accrued property tax of $150,120, digital equipment note $464,875 and $4,435,527 mortgage payable.
Net cash provided by operating activities for the three months ended March 31, 2014 was $32,968 compared to net cash provided by operating activities for the three months ended March 31, 2013 of $26,573. During the three months ended March 31, 2014, $945 was used for investments, and $22,462 was used by financing activities. For the same period in 2013, $7,975 was used for investments and $48,227 was provided by financing activities.
As of March 31, 2014 we had capital commitments of a mortgage and the digital equipment loan for $4,843,256 for Georgetown 14 Theater. We are currently focused on increasing revenues from our operations and reducing debt through converting notes payable to common stock. We may also seek funding from securities purchases 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 fund our 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 $35,000 in notes payable and $460,932 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 March 31, 2014. As of March 31, 2014 the stockholders equity is ($238,613) compared to ($141,589) on December 31, 2013. These conditions raise substantial doubt about our ability to continue as a going concern.
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 funds to provide the necessary capital to meet the Companys expansion needs. Management continues to negotiate with existing shareholders, financial institutions, new investors, and other accredited investors in order to obtain working capital necessary to meet current and future obligations and commitments.
Management believes 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 March 31, 2014 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 March 31, 2014 the Company issued no additional shares of our common stock.
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: May 15, 2014
/s/ Norman L. Frohreich
Norman L. Frohreich
Chief Executive Officer
Chief Financial Officer