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GALAXY NEXT GENERATION, INC. - Quarter Report: 2011 June (Form 10-Q)

FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q


(Mark One)


 X .    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended June 30, 2011

OR


     .    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)

 

NEVADA
(State or Other Jurisdiction of Incorporation or Organization)

 

87-0653761
(I.R.S. Employer Identification No.)


161 Alpine Drive, Shelbyville, KY 40065

(Address of Principal Executive Offices) (Zip Code)


(502) 410-4500

(Registrant’s 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      . 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

      .

Accelerated filer

      .

Non-accelerated filer

      . (Do not check if a smaller reporting company)

Smaller reporting company

  X .


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      . No  X .





FORM 10-Q


State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 104,652,343 Class A common shares certified by Interwest Transfer, and 10,000 Class A preferred shares, and 300,600 Class B shares as of August 9, 2011


FORM 10-Q

FULLCIRCLE REGISTRY, INC.


Table of Contents


 

 

 

Page

PART I.

Financial Information

 

 

 

 

 

 

Item 1.

Unaudited Consolidated Financial Statements

3

 

 

 

 

 

 

Consolidated Balance Sheets for June 30, 2011 (unaudited) and December 31, 2010

4

 

 

 

 

 

 

Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2011 and 2010 (unaudited)

5

 

 

 

 

 

 

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2011, and 2010 (unaudited)

6

 

 

 

 

 

 

Notes to Consolidated Financial Statements (unaudited)

8

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis or Plan of Operation

11

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

15

 

 

 

 

 

Item 4.

Controls and Procedures

15

 

 

 

 

PART II.

Other Information

 

 

 

 

 

 

Item 1.

Legal Proceedings

16

 

 

 

 

 

Item 1A.

Risk Factors

16

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

17

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities

17

 

 

 

 

 

Item 4.

Exhibits

17

 

 

 

 

 

Signatures

17



2



PART I – FINANCIAL INFORMATION


ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.


In the opinion of management, the accompanying unaudited consolidated financial statements of FullCircle Registry, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Regulation S-X for the three month period ended June 30, 2011 and the six month period ended June 30, 2011. The consolidated financial statements reflect, in the opinion of management, all adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the results for such periods.


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.



3



FullCircle Registry, Inc.

Consolidated Balance Sheets


ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

 

 

 

 

2011

 

2010

 

 

 

 

(Unaudited)

 

 

Current assets:

 

 

 

 

 

Cash

$

31,808

$

6,738

 

Notes receivable

 

10,000

 

10,000

 

Prepaid Expenses

 

10,000

 

-

 

Total Current Assets

 

51,808

 

16,738

 

 

 

 

 

 

 

Fixed Assets

 

 

 

 

 

 

Georgetown 14 Theater (FCET property)

 

5,500,000

 

5,500,000

 

 

Computers and Equipment

 

82,928

 

82,928

 

 

Accumulated Depreciation

 

(162,712)

 

(82,928)

Total Fixed Assets

 

5,420,216

 

5,500,000

 

 

 

 

 

 

 

Other assets:

 

 

 

 

 

 

Total Customer Data Base after Amortization

 

172,082

 

215,102

Total assets

$

5,644,106

$

5,731,840

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

105,491

$

61,881

 

Accrued expenses

 

-

 

2,002

 

Accrued interest

 

23,426

 

20,286

 

Preferred Dividends payable

 

6,012

 

3,006

 

Short term Notes payable

 

65,000

 

65,000

 

Note Payable - Related Party

 

41,055

 

-

 

Current portion of mortgage payable

 

116,084

 

113,430

Total current liabilities

 

357,068

 

265,605

 

 

 

 

 

 

 

 

Long term liabilities

 

 

 

 

 

 

Mortgage payable

 

4,874,627

 

4,934,411

 

Total long term liabilities

 

4,874,627

 

4,934,411

Total Liabilities

 

5,231,695

 

5,200,016

 

 

 

 

 

 

 

Stockholders equity:

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock, authorized 10,000,000 shares

 

 

 

 

 

of $.001 par value

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred A, issued and outstanding is 10,000

 

10

 

10

 

 

Preferred B, issued and outstanding is 300,600

 

300

 

300

 

Common stock, authorized 200,000,000 shares

 

 

 

 

 

of $.001 par value, issued and outstanding

 

 

 

 

 

102,777,343 and 101,316,138 shares, respectively

 

102,777

 

101,316

 

 

 

 

 

 

 

 

Additional paid-in capital

 

8,354,570

 

8,297,582

 

Accumulated deficit

 

(8,045,246)

 

(7,867,384)

 

 

Total Stockholders' equity

 

412,411

 

531,824

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

$

5,644,106

$

5,731,840


The accompanying notes are an integral part of these consolidated financial statements.



4



FullCircle Registry, Inc.

Consolidated Statements of Operations

(unaudited)


 

 

 

 

For the Three Months

 

For the Six Months

 

 

 

 

Ended June 30,

 

Ended June 30

 

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Revenues

$

318,686

$

382

$

653,401

$

504

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

154,365

 

45

 

278,287

 

95

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

164,321

 

337

 

375,114

 

409

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general & administrative

 

207,162

 

59,438

 

391,471

 

126,511

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

207,162

 

59,438

 

391,471

 

126,511

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

(42,841)

 

(59,101)

 

(16,357)

 

(126,102)

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(78,079)

 

(8,318)

 

(158,499)

 

(16,657)

 

 

 

 

 

 

 

 

 

 

 

 

Miscellaneous Income

 

-

 

-

 

-

 

718

 

 

 

 

 

 

 

 

 

 

 

 

Total other income (expense)

 

(78,079)

 

(8,318)

 

(158,499)

 

(15,939)

 

 

 

 

 

 

 

 

 

 

 

Net loss before income taxes

 

(120,920)

 

(67,419)

 

(174,856)

 

(142,041)

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

-

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(120,920)

$

(67,419)

$

(174,856)

$

(142,041)

 

 

 

 

 

 

 

 

 

 

 

Net basic and fully diluted loss per share

$

(0.00)

$

(0.00)

$

(0.00)

$

(0.00)

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

102,710,035

 

87,354,659

 

102,179,349

 

86,342,770


The accompanying notes are an integral part of these consolidated financial statements.



5



FullCircle Registry, Inc.

Consolidated Statements of Cash Flows

(Unaudited)


 

 

 

 

For the Six Months

 

 

 

 

Ended June 30,

 

 

 

 

2011

 

2010

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(174,856)

$

(142,041)

 

 

 

 

 

 

 

 

Adjustments to reconcile net loss to net cash used in operating activities

 

 

 

 

 

 

Depreciation & amortization

 

122,804

 

43,020

 

 

Stock issued for services

 

-

 

3,279

 

Change in assets and liabilities

 

 

 

 

 

 

(Increase) decrease in prepaid expenses

 

(10,000)

 

 

 

 

Increase (decrease) in accounts payable

 

43,610

 

(8,987)

 

 

Increase (decrease) in accrued interest

 

3,140

 

16,636

 

 

Increase (decrease) in accrued expenses

 

(2,002)

 

(411)

 

 Net cash used in operating activities

 

(17,304)

 

(88,504)

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Net cash provided by investing activities

 

-

 

-

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Loan to unrelated party

 

-

 

(10,000)

 

Payments on mortage payable

 

(57,130)

 

-

 

Proceeds from notes payable - related party

 

41,055

 

-

 

Proceeds from sale of common shares stock

 

58,449

 

120,000

 

Net cash provided by financing activities

 

42,374

 

110,000

 

 

 

 

 

 

 

 

Net increase  in cash

 

25,070

 

21,496

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

6,738

 

2,091

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

$

31,808

$

23,587

 

 

 

 

 

 

 

Supplemental cash flow information

 

 

 

 

 

 

 

 

 

 

 

Cash paid for:

 

 

 

 

 

 

 

 

 

 

 

 

Interest

$

155,359

$

-

 

Taxes

$

-

$

-

 

 

 

 

 

 

 

Non-cash transactions

 

 

 

 

 

Unpaid dividends

$

6,012

$

-

 

Stock issued for accounts payable and accrued interest

$

-

$

-

 

Stock issued for notes payable and accrued interest

$

-

$

300,600

 

Stock issued for services

$

-

$

3,279


The accompanying notes are an integral part of these consolidated financial statements.



6



FullCircle Registry, Inc.

Consolidated Statements of Stockholders’ Deficit

For the period ended June 30, 2011, March 31, 2011 and December 31, 2010


 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Preferred Stock

Common Stock

paid-in

Accumulated

 

Shares

Amount

Shares

Amount

Capital

Deficit

 

 

 

 

 

 

 

Balance, January 1, 2010

10,000

10

84,995,346

84,996

7,165,569

(7,565,940)

 

 

 

 

 

 

 

Stock issued for cash at .04 per share

-

-

2,250,000

2,250

87,750

-

 

 

 

 

 

 

 

Stock issued for services at .03 per share

-

-

109,313

109

3,170

-

 

 

 

 

 

 

 

Stock issued for cash at .04 per share

-

-

750,000

750

29,250

-

 

 

 

 

 

 

 

Preferred stock issued for notes payable

300,600

300

-

-

300,300

-

 

 

 

 

 

 

 

Stock issued for cash at .04 per share

-

-

500,000

500

19,500

-

 

 

 

 

 

 

 

Stock issued for services at .01 per share

-

-

2,500,000

2,500

22,500

-

 

 

 

 

 

 

 

Stock issued for cash at .04 per share

-

-

875,000

875

34,125

-

 

 

 

 

 

 

 

Stock issued for notes payable and accrued interest at .04 per share

-

-

4,814,891

4,814

187,782

-

 

 

 

 

 

 

 

Stock issued for assets at .10 per share

-

-

4,521,588

4,522

447,637

-

 

 

 

 

 

 

 

Preferred stock dividend

-

-

-

-

-

(3,006)

 

 

 

 

 

 

 

Net Loss for the year ended December 31, 2010

-

-

-

-

-

(298,438)

 

 

 

 

 

 

 

Balance, December 31, 2010

310,600

$     310

101,316,138

$ 101,316

$8,297,583

$ (7,867,384)

 

 

 

 

 

 

 

Stock issued for cash at .04 per share

-

-

1,336,205

1,336

52,112

-

 

 

 

 

 

 

 

Preferred stock dividend

 

 

 

 

 

(1,503)

 

 

 

 

 

 

 

Net Loss for the quarter ended March 31, 2011

-

-

-

-

-

(53,936)

 

 

 

 

 

 

 

Balance, March 31, 2010

310,600

$     310

102,652,343

$ 102,652

$8,349,695

$ (7,922,823)

 

 

 

 

 

 

 

Stock issued for cash at .04 per share

-

-

125,000

125

4,875

-

 

 

 

 

 

 

 

Preferred stock dividend

 

 

 

 

 

(1,503)

 

 

 

 

 

 

 

Net Loss for the quarter ended June 30, 2011

-

-

-

-

-

(120,920)

 

 

 

 

 

 

 

Balance, June 30, 2010

310,600

$     310

102,777,343

$ 102,777

$8,354,570

$ (8,045,246)


The accompanying notes are an integral part of these consolidated financial statements.



7



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 un-audited 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 Company’s most recent audited financial statements and notes thereto included in its December 31, 2010, Annual Report on Form 10-K/A. Operating results for the three and six months ended June 30, 2011, are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.


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 $8,045,246, and $7,867,384 as of June 30, 2011 and December 31, 2010, respectively.


The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. It is management’s 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.


·

Locating and purchasing additional theaters.


·

Expanding revenues by finding new customers who can benefit by utilizing the Company’s information retrieval service.


·

Using the 68,000 name prescription customer database to provide the foundation of the FullCircle Prescription Service, Inc. business.


·

Attracting contractors and agents to independently market our services and assist in our search for business candidates for acquisition.


·

Locating and working with new Company partners who will provide additional similar products.


·

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 Company’s operating expenses on an ongoing basis.


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.



8




NOTE 3. STOCKHOLDERS’ EQUITY


During the three-month period ending June 30, 2011 the Company issued an aggregate amount of 125,000 restricted shares of the Company’s common stock for operating capital at .04 per share to accredited investors resulting in total shares issued during the six month period ended June 30, 2011 being 1,461,205 at $.04 per share for $58,449.


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.  


Capital Structure


In accordance with ASC 505, “Equity,” the Company’s 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 104,652,343 on August 9, 2011 and 101,316,138 on December 31, 2010. 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% yield 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 management’s estimates. Actual results could differ from those estimates.



9




Note 5. SUBSEQUENT EVENTS


Subsequent to June 30, 2011, the Company issued 1,375,000 restricted shares for $55,000 at .04 per share in an effort to secure additional operating capital, and to pay down accounts payable.  


On August 9 the Company issued 250,000 restricted shares for services at .04 per share to a Company employee.


On August 9 the Company issued 250,000 restricted shares for services at .05 per share to Richard Inza of RMJ Consulting with the following agreement.


On August 1, 2011, we engaged the services of Richard Inza of RMJ Consulting LLC of Maramar, Florida to share the story about FullCircle with their opt-in group of investors predominately in the eastern part of the country in an effort to increase the liquidity of our stock and to bring in additional investors, Our agreement is for six months and this is the beginning of the “Marketing FullCircle” (phase three) of our plans.  The intent of this arrangement is to expose our mission to potential investors to assist us in bringing in more capital as needed to ramp up our operations.  Once our daily liquidity improves and our share price begins to represent the real value of FullCircle then we should have more successes in acquiring the necessary funding for our plans.



10



ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.


General


When used in this report, the words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “intend,” and similar expressions are intended to identify forward-looking statements within the meaning of Section 27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act of 1934 regarding events, conditions, and financial trends that may affect the Company’s future plans of operations, business strategy, operating results, and financial position. Persons reviewing this report are cautioned that any forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties and that actual results may differ materially from those included within the forward-looking statements as a result of various factors. Such factors are discussed under the “Item 2. Management’s Discussion and Analysis of Financial Condition or Plan of Operations,” and also include general economic factors and conditions that may directly or indirectly impact the Company’s financial condition or 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 Business


Our initial business began in 2000, with the formation of FullCircle Registry, Inc. We were initially a technology-based business that provided emergency document and information retrieval services. Our service 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.


In 2008 the new CEO Norman Frohreich developed plans to place FullCircle Registry, Inc. into a holding company and began developing new totally held Companies.  Since that time the Company has established FullCircle Prescription Services, Inc., FullCircle Insurance Agency, Inc., and FullCircle Entertainment, Inc.  Additional negotiations are on going to add Companies that will give FullCircle a wide range of business activities.


The new mission is to merge with or acquire profitable businesses into our subsidiary companies that will continue on as separate businesses owned by FullCircle Registry, Inc.


Because of the unavailability of funds the Company has been forced to limit the expansion of the business model.  We have had to be extremely conservative about spending Company funds on marketing, salaries and other expenses until more funds are available.  The speed of expanding the business model depends principally upon the available capital to fund filing costs associated with the requirements of the SEC for us to acquire additional businesses.


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 addresses are www.fullcircleregistry.com, www.fullcirclerx.com, and www.medshelp4U.com. Our website and the information contained therein or connected thereto shall not be deemed to be incorporated into this report. Our websites will be revised and updated upon receipt of funds to reflect our new business model (see discussion under the heading “S-1 Application,” below).



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SEC Compliance and Regulations


The requirements for regulatory compliance continue to be difficult, and we are receiving new rules and changes on a monthly basis. It is becoming most difficult for an emerging company to be able to afford all of the compliance costs.


Our 10-Q filing for this June Quarter will require a completely new Edgar process that increases our filing expenses by $4,000 per year.  The old HTML format has been eliminated, and we are now required to file in a new XBRL format with all SEC documents. The change is effective for all periods and all filings commencing in June 2011.


Our Business and Strategy


We have formed three new wholly-owned subsidiaries to begin the new business plan as specifically summarized below.


FullCircle Entertainment, Inc.


Our first acquisition was property containing Georgetown 14, a theater complex in northern Indianapolis.  In addition the property contains A Save-A-Lot Grocery store, which is providing lease revenue of $34,185 per quarter.


Initially, we experienced positive cash flow from the acquisition. However, our revenues dropped because of construction taking place on Georgetown Road and Lafayette Boulevard, which are arteries necessary to enter the Georgetown theater property in the most recent period (April through June, ten lanes of traffic are often cut down to two lanes with flag persons.  Both streets are torn up and traffic has been directed around our business.  We expect that this construction will be completed in the fourth quarter and then business should be normal again.  In the meantime it has severely impacted our revenues.


Also, during the initial periods of the merger we continue to have higher than normal expenses, including increased auditing expenses and increased infrastructure-restructuring expenses.  It is our expectation that Georgetown 14 will soon be able to provide positive cash flow so that we can pursue our next acquisition.


Once we believe that we have completely absorbed Georgetown 14 and are running smoothly, we will then entertain the merger of another business.


Our purchase of Georgetown 14 that we announced in an 8K early this year is summarized as follows:


a.

Purchase price was $5,500,000.

b.

Appraised value is $7,850,000.

c.

June 30, 2011 Mortgage payable was $4,990,711.

d.

Shares issued to owners for purchase were 4,521,588 at the rate of $.10 per share or $452,159.

e.

Expected Gross revenue for 2011 is now expected to be more than $1,200,000 adjusted for the impact of the events noted above.


The size of our property in Indianapolis is 6.869 acres or 295,367 square feet.  Our Georgetown 14 building is 61,233 square feet.  We believe that we have sufficient room to add a strip mall or other businesses on our property. Management will be researching the viability of that decision factoring in the occupancy rates in the immediate area. We are energized to add more facilities such that the additional revenue coming from leased facilities lessens the burden of our mortgage.


During the first quarter of 2011 our revenues exceeded 2010 first quarter by 12% while Movieline International reported a first quarter U.S. and Canada Box office trends drop of 19% compared to last year.  During the second quarter our revenues dropped slightly below the June quarter 2010 because of the traffic congestion on both accesses to our theater because of street construction.


FullCircle Insurance Agency, Inc.


We have formed the FullCircle Insurance Agency, Inc. to be our vehicle for our activity in the insurance business. At this time we have not begun operations since we are awaiting funding.


Independent Insurance Agency Acquisitions


It is our plan to acquire, or otherwise merge with, small insurance agencies with a five to ten-year exit plan, as well as offer shares of FullCircle Registry, Inc. to these agency owners to give them the ability to exit their business with the potential to meet or exceed the value of their business and participate financially in the growth of the Company.



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The target model for an insurance agency acquisition is:


1.

Agency in a town with a population less than 40,000.

2.

Agency that has gross revenues of $50,000 to $150,000.

3.

Agency owner that is over the age of 55.


We believe that these smaller agencies are not targets for acquisition by larger companies, and, therefore, their individual owners have limited options for an exit strategy.


FullCircle Prescription Services, Inc.


FullCircle Prescription Services, Inc. has been established for the purpose of handling our prescription assistance program. We have, at very little expense, been contacting potential contractors and agents to help move the project forward but are limited as to how aggressive we can be given limited capital.


The www.fullcirclerx.com web page has been launched to begin the process of helping individuals find medications that are safe and that could potentially save up to 40% to 70% of the cost of medications.  Our launch with our additional web pages focusing on specific ailments has been delayed pending additional funding.

 

Summary of Current Status of Business Activity


The process to acquire funding for the development of our new business plans has been slow and difficult.  We walked into the recession in 2008 just at the time we were ready to launch the new plans.  Sourcing funds has been time consuming and currently takes up over fifty percent of the CEO’s time.  At some point, when our initial acquisitions begin to provide cash flow then and only then can management turn our efforts into running the Company.


During the last several years we have managed to move our stockholders’ equity from a negative $500,000 net worth to a positive $412,411 net worth at the end of the second quarter of 2011.  In addition, we have eliminated or paid down our debt burden that was in excess of $500,000.  Currently, our outside private investor installment debt burden for FullCircle Registry, Inc. is now down to $65,000 along with notes payable to a related party amounting to $41,055.   Over the last four years we have enjoyed the support of several stockholders who have enabled us to continue to develop our business plans.


Again, management is interested in talking with existing stockholders for the purpose of acquiring working capital to maintain our development and to assure that we can soon become a profitable company.


We are continuing to work with our business partners in the development of our materials. Once funding is available we expect to announce these developments and then engage the personnel that are ready to work with these partners.


FullCircle Prescription Services, Inc. was informed that PinPay was ready and able to support the FullCircle Prescription Gift Card. Because of the lack of funding we were unable to begin the gift card program.   We are targeting the end of 2011 to roll out the Christmas Gift Card, provided funds are available.


Risks Affecting Us


Our business is subject to numerous risks. We have a limited history of operations as an insurance agency and an owner of theaters, have a history of operating losses, and may not achieve or maintain profitability. We are dependent upon the sale of our products and services to generate a significant percentage of our revenue. The entertainment and insurance industries are highly competitive markets, and we will be competing against companies that have much longer operating histories, more established brands and greater resources than we do.


Employees, Contractors, Agents, and Agreements


The Company currently has twenty-seven employees and three independent contractors.



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Results of Operations for the Three-Month and Six-Month Periods Ended June 30, 2011 and 2010.


Revenues during the three months ended June 30, 2011 were $318,686 with a cost of sales of $154,365 yielding a gross profit of $164,321 compared to $382 in revenues for the same period in 2010 with cost of sales of $45 yielding a gross profit of $337 for the same period in 2010. Revenues during the six months ended June 30, 2011 were $653,401 with a cost of sales of $278,287 yielding a gross profit of $375,114 compared to $504 in revenues for the same period in 2010 with cost of sales of $95 yielding a gross profit of $409 for the same period in 2010. The increased amounts in 2011 compared to 2010 are the direct result of our theatre acquisition in late 2010.


Operating expenses and selling, general and administrative costs during the current three-month period were $207,162 resulting in an operating loss of $42,841 compared to operating expenses of $59,438 for the three months ended June 30, 2010 resulting in an operating loss of $59,101 in the same period in 2010. Operating expenses and selling, general and administrative costs during the current six-month period were $391,471 resulting in an operating loss of $16,357 compared to operating expenses of $126,511 for the six months ended June 30, 2010 resulting in an operating loss of $126,102 in the same period in 2010. Operating expenses for the six month period have increased because of the depreciation on our property in Indianapolis and additional operating expenses have occurred for SEC compliance.


Interest expense for the three months ended June 30, 2011 was $78,079 resulting in a net loss from continuing operations of $120,920. For the three months ended June 30, 2010 the Company had interest expense of $8,318 and recognized a net loss of $67,419. Interest expense for the six months ended June 30, 2011 was $158,499 resulting in a net loss from continuing operations of $174,856. For the six months ended June 30, 2010 the Company had interest expense of $16,657 and recognized a net loss of $142,041.  Interest expense for 2011 is higher because the Company is servicing debt of $4,990,711 as of June 30, 2011 with the purchase of the property in Indianapolis that contains our Georgetown 14 Theater.


Our office operating expenses have been much lower because we have continued to curtail our non-essential activities.


Our SEC compliance cost for auditors, accountants and attorneys continue to be the major part of our expenses.


We believe that the results of our acquisition of the Georgetown 14 theater are good.  Once we are able to eliminate our attendance problems because of the road construction we believe that Georgetown 14 will generate positive cash flow and become profitable.


Subsequent to the June quarter we added one more “silver screen” which allows us to bring in digital movies, which have the capability of showing 3D films.  We are currently sourcing additional financing to convert several more screens.  The movie companies will provide us with refunds sufficient to cover the cost of financing the screen conversions.


 Liquidity and Capital Resources


At June 30, 2011 the Company had total assets of $5,644,106 compared to $291,709 in the June quarter 2010, and $5,731,840 at December 31, 2010. The Company had total assets consisting of $31,808 in cash, a $10,000 note receivable, prepaid expenses of $10,000, $5,420,216 in fixed assets in Georgetown 14, and $172,082 in our customer database. Total assets at December 31, 2010 consisted of a note receivable of $10,000, $6,738 in cash, $215,102 in our customer database, and fixed assets of $5,500,000.


At June 30, 2011 the Company had $5,231,695 in total liabilities.  Total liabilities include $105,491 in accounts payable, $23,426 in accrued interest, $6,012 in preferred dividends payable, $65,000 in notes payable, $41,055 notes payable related party, $116,084 current portion of mortgage payable and the long term portion of the mortgage payable of $4,874,627. Total liabilities at December 31, 2010 were $5,200,016, which was comprised of $61,881 in accounts payable, $20,286 in accrued interest, $2,002 in accrued expenses, $3,006 in preferred dividends payable, $65,000 in notes payable, $113,430 current portion of mortgage payable and the long term portion of the mortgage payable of $4,934,411.


Net cash used by operating activities for the six months ended June 30, 2011 was $17,309 compared to net cash used by operating activities for the six months ended June 30, 2010 of $88,504. During the six months ended June 30, 2011, $0 was used for investments, and $42,374 was provided by financing activities. For the same period in 2010 $0 was used for investments and $110,000 was provided by financing activities.


As of June 30, 2011 we had capital commitments of a mortgage for $4,990,711 for Georgetown 14 Theater. We are currently focused on increasing revenues from our operations and reducing debt through notes payable to common stock. We may also seek funding from unencumbered 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.



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We require additional capital to supplement our anticipated revenues and fund our continuing operations. We have relied upon advances from officers and shareholders and we have issued stock to finance our operations to this point.


FullCircle currently owes $65,000 in notes payable and $41,055 notes payable to a related party. 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 June 30, 2011. These conditions raise substantial doubt about our ability to continue as a going concern.


However, the Company’s financial position has improved over the last six months such that now, for the first time since inception, we have a positive stockholders’ equity of $412,411.  As we continue to locate profitable companies where the owners need exit plans we expect that our stockholders’ equity will continue to improve.


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.  It is our believe that our subsidiary FullCircle Entertainment, Inc. will be providing a positive cash flow once the street construction is completed..  


In the event we are unsuccessful in our efforts to raise additional funds, we will be required to significantly reduce cash outflows and, possibly, discontinue our operations. We need to raise capital to continue to be SEC compliant.  Our failure to obtain financing, or inability to obtain financing on acceptable terms, could require us to limit our plans, incur indebtedness that has high rates of interest or substantial restrictive covenants, issue equity securities that will dilute your holdings, or discontinue all or a portion of our remaining operations.


The current expansion of the Company’s 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 Company’s 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 $700,000, to fund the Company’s expansion needs. Management is currently negotiating with existing shareholders 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. In the event that the Company is unable to obtain capital on acceptable terms or in sufficient amounts, the impact thereof would have a material adverse impact on the Company’s business, operating results, and financial condition as well as its ability to service debt requirements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.


Critical Accounting Policies and Estimates


The Company’s 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 Company’s 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


Not applicable


ITEM 4. CONTROLS AND PROCEDURES


Evaluation of Disclosure Controls and Procedures.


Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out a formal evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report.



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Under the supervision and with the participation of our management, including the Principal Executive Officer and Principal Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer have concluded that these disclosure controls and procedures are not effective since the following material weaknesses exist:


i.

The Company’s management is relying on external consultants for purposes of preparing its financial reporting package; the officers may not be able to identify errors and irregularities in the financial reporting package before its release as a continuous disclosure document.


ii.

The foregoing material weaknesses identified in our disclosure controls and procedures were identified by our external consultants responsible for the preparation of our financial reporting package. The aforementioned material weaknesses did not impact our financial reporting or result in a material misstatement of our financial statements. As of August 9, 2011we have not taken action to correct the material weaknesses identified in our disclosure controls and procedures.


Once the Company has sufficient personnel available, our Board of Directors will nominate an audit committee and audit committee financial expert and we will appoint additional personnel to assist with the preparation of our financial statements; which will allow for proper segregation of duties as well as additional manpower for proper documentation.


Our internal controls over financial reporting are designed by, or under the supervision of, our Chief Executive Officer and Principal Accounting Officer, or persons performing similar functions, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:


·

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets.

·

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and


·

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.


Conclusions


Based upon the Evaluation, our Chairman and Principal officer has concluded that as a result of material weaknesses described above our disclosure controls and procedures are not effective as of June 30, 2011, based on Internal Control over Financial Reporting - Guidance for Smaller Public Companies issued by COSO.


The Company does not have the resources to employ a dedicated staff with extensive expertise in all facets of SEC disclosure and GAAP compliance. As is the case with many small businesses, the Company will continue to work with its external attorneys and accountants as it relates to new accounting principles and changes to SEC disclosure requirements. The Company has found that this approach worked well in the past and believes it to be the most cost effective solution available for the foreseeable future.


Changes in Internal Controls.


There were no changes in the Company’s internal control over financial reporting identified in connection with the Company’s evaluation of controls that occurred during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.


PART II—OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS.


There are no pending legal proceedings.


ITEM 1A. RISK FACTORS.


Not applicable.



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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.


Unless otherwise noted, the following shares were issued to an accredited investor in a private transaction exempt under Rule 506 of Regulation D promulgated under Section 4(2) of the Securities Act of 1933, as amended.


During the three-month period ending March 31, 2011, in an effort to secure additional operating capital, and to pay down accounts payable, the Company issued 1,336,205 restricted shares for $53,449 at .04 per share.


During the three-month period ending June 30, 2011, in an effort to secure additional operating capital, and to pay down accounts payable, the Company issued 125,000 restricted shares for $5,000 at .04 per share.


Subsequent to June 30, 2011, the Company issued 1,375,000 restricted shares for $55,000 at .04 per share in an effort to secure additional operating capital, and to pay down accounts payable.


On August 9 the Company issued 250,000 restricted shares for services at .04 per share to a Company employee.


On August 9 the Company issued 250,000 restricted shares for services at .05 per share to Richard Inza of RMJ Consulting.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES.


None


ITEM 4. EXHIBITS


Exhibit

 

 

 

 

Number

 

Title

 

Location

 

 

 

 

 

31.1

 

Certification of Chief Executive Officer/Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002

 

Attached

 

 

 

 

 

32.1

 

Certification of Chief Executive Officer/Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002*

 

Attached


*The Exhibit attached to this Form 10-Q shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to liability under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.




SIGNATURES



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: August 15, 2011

/s/ Norman L. Frohreich   

Norman L. Frohreich

President

Chief Executive Officer

Chief Financial Officer



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