GALAXY NEXT GENERATION, INC. - Annual Report: 2012 (Form 10-K)
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
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Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2012
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number: 333-51918
FULLCIRCLE REGISTRY, INC.
(Exact name of registrant as specified in its charter)
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NEVADA (State or other jurisdiction of incorporation or organization) |
| 87-0653761 (I.R.S. Employer Identification No.) |
161 Alpine Drive, Shelbyville, Kentucky 40065
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: (502) 410-4500
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
(None)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
(None)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes . or No X .
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes .or No X .
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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes X .or No .
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 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 . or No .
Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. .
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 . |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes . No X .
The aggregate market value of the voting stock of the registrant held by non-affiliates (affiliates being, for these purposes only, directors, executive officers and holders of more than 5% of the registrant’s common stock) of the registrant as of June 30, 2012 was approximately $4,199,973 for 69,999,558 shares at $.06 per share.
The number of shares outstanding of the issuer's Common Stock, as of December 31, 2012 was 112,743,016.
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Table of Contents
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PART I
ITEM 1. Business.
History:
Our initial business began in 2000 with the formation of FullCircle Registry, Inc (“FullCircle” or the “Company”). We were a technology-based business that provided emergency document and information retrieval services. Our services included: providing customers with secure storage and immediate access to their critical medical records, legal documents (living wills, powers of attorney, “do not resuscitate” orders, etc.) and emergency contact information. The system was designed to allow medical personnel to quickly obtain critical information. We provided these services directly to subscribers and through strategic alliances with health care providers.
Our Current Business:
Our current business plan targets the acquisition of small profitable businesses. FullCircle Registry, Inc. has become a holding company with three subsidiaries. They are FullCircle Entertainment, Inc., FullCircle Insurance Agency, Inc. and FullCircle Prescription Services, Inc. Target companies for future acquisition are those in search of exit plans for the owners and are intended to continue autonomous operations as current ownership is phased out over a period of 3-5 years.
FullCircle Entertainment, Inc.
In 2010 we established a new company, FullCircle Entertainment, Inc. (“FullCircle Entertainment”) for the purpose of acquiring movie theaters and other entertainment venues.
On December 31, 2010, FullCircle Entertainment purchased Georgetown 14 Cinemas, a movie theater complex property at 3898 Lafayette Road, Indianapolis, Indiana 46224.
A summary of the Georgetown 14 acquisition follows:
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The 8-acre property purchase price was $5.5 million.
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The appraised value was $7.85 million.
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Assumed mortgage was $5,047,841 with issuance of Company stock valued at $452,159.
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24 employees.
In 2012 the FullCircle Entertainment, Inc., company revenues improved by 45% over 2011 with our gross profit improving by 48.4% for the same period. For the 2012-year our Earnings Before Interest and Taxes (EBIT) profits improved by 65% to $173,970 and our Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) profits improved 50% to $402,064.
Street construction near the theater was completed in early January 2012, which allowed for the local businesses to return to normal business activities in 2012. In addition, the neighboring Lafayette Square Mall is continuing to improve which should have a positive impact on the property values in the area in the future.
Additional acquisitions were suspended in 2011 and 2012 until the economic climate recovered and until the Georgetown 14 complex returns to profitability. During the fourth quarter FullCircle Entertainment, Inc. experienced positive cash flow.
In January 2012 we converted all of our screens to a digital format and installed 3D capability at a cost of $790,000. A neighboring theater has announced that it will be closing because it has not upgraded their theater from conventional 35MM projection to digital projection. It is generally expected that by the end of 2013 major movie companies will no longer offer 35MM projection. The digital format offers a crisper view and allows the exhibition of 3D movies on two of our silver screens. Two of our theaters had been previously converted to digital prior to 2012.
In July 2012 we renegotiated the mortgage on our Georgetown 14 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 a half percentage point. Also, in March 2013 our digital equipment note interest rate was renegotiated down by 2 percentage points.
In November 2012 we increased pricing of our tickets and concessions to be in line with other competing full service digital theaters in our area.
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We also developed a new web page for the Georgetown 14 Theater 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 early 2013, we have decided to begin a major upgrade to Georgetown 14 with more signage and a complete remodel of our concession area as well as our lobby area. New furniture will be installed allowing 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. All employees will be provided upgraded uniforms with brighter colors.
In addition to operating the Georgetown 14 Theater, we lease a portion of the premises to a grocery store pursuant to a 25 year lease with incremental inflationary clauses. We receive $11,395 in revenues from this lease on a monthly basis.
FullCircle Insurance Agency, Inc.
The FullCircle Insurance Agency, Inc. was founded in August 2008, but is currently inactive. Until adequate funding is available, any operations of this company have been placed on hold.
FullCircle Prescription Services, Inc.
In 2006, we acquired the assets of AMPO II, Inc. (“AMPO II”), a Kentucky corporation, including its 68,000-customer database. We currently own all of the database, software, equipment, and the records from AMPO II.
FullCircle Prescription Services, Inc. was established for the purpose of handling our new prescription assistance services program. The company’s mission is to assist our customers to find medications at discounted rates worldwide in our “Shop the World” program. FullCircle Prescription Services, Inc. will not dispense any medications nor handle any prescriptions. We will be functioning only as a customer assistance program. FullCircle Prescription Services, Inc. has begun minimal operations however, given the current political climate the company has elected to suspend the marketing efforts to expand this business model.
Our web pages: www.fullcircleRx.com and www.medshelp4U.com have been launched and are operational. Our customers can Shop the World and subscribe to our services online.
Our customers are serviced by a large reputable mail order pharmacy in Canada. Our Shop the World shopping cart takes our customers directly into our partner pharmacy where prescriptions are priced from several FDA approved manufacturers around the world. All prescriptions are priced on a daily basis to allow our customers to shop for the best pricing. By law in Canada, a licensed pharmacist reviews and approves each and every prescription.
Until a more favorable political climate exists we have discontinued the marketing events for the advancement of FullCircle Prescription Services, Inc. Up until 2009 the political trend was to support the re-importation of generic drugs to assist in combating the increasing expense of medications. However since that time the political trend has reversed and this direction is not currently supported. We are still operational but have elected to not expend any marketing funds at this time.
Competition:
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 public’s leisure time and disposable income with all forms of entertainment, including sporting events, concerts, live theatre and restaurants.
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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 have opened up more international movies with a strong following for Hindi-language “Bollywood” films from India. In addition, other international movies will be shown during our seasonal slow periods.
In 2013 we are expanding into 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 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.
On February 4, FullCircle Registry, Inc., entered into an agreement with HFP Capital Markets. This relationship was developed for the purpose of expanding our Mergers and Acquisitions activities and the access to capital to fund new acquisitions.
Employees:
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 consider that we maintain good relations with our personnel.
ITEM 1A. Risk Factors
As a “smaller reporting company” we are not required to respond to this item.
ITEM 1B. Unresolved Staff Comments
As a “smaller reporting company” we are not required to respond to this item.
ITEM 2. Properties
Our principal executive offices are located at 161 Alpine Drive, Shelbyville, KY 40065. Our telephone number is 502-410-4500. Our office consists of approximately 1,200 square feet of office space, leased for $750 per month on a month-to-month basis. We have elected to maintain a month-to-month agreement should acquisitions dictate the moving of our corporate offices.
We also own the Georgetown 14 movie complex located at 3898 Lafayette Road, Indianapolis, Indiana 46224. The property currently houses a 14 movie theatre complex, which is owned and operated by us and a grocery store, which is owned and operated by an independent third party under a 25 year lease with us.
ITEM 3. Legal Proceedings.
We are not currently subject to any material pending legal proceedings.
ITEM 4. Mine Safety Disclosures.
Not applicable.
PART II
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common stock trades on the OTC Bulletin Board, or OTCBB, under the trading symbol FLCR.
The following table sets forth, for the periods indicated, the high and low closing prices as reported by OTCBB for our common stock for fiscal years 2011 and 2012 and the latest information in the first quarter 2013. The OTCBB quotations reflect inter-dealer prices, without retail mark-up, markdown or commission and may not represent actual transactions.
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| High | Low | Close |
2013 |
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January | 0.03 | 0.02 | 0.03 |
February | 0.10 | 0.01 | 0.09 |
March Through March 15 | 0.10 | 0.03 | 0.086 |
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2012 |
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First Quarter | 0.10 | 0.03 | 0.06 |
Second Quarter | 0.06 | 0.06 | 0.06 |
Third Quarter | 0.05 | 0.04 | 0.05 |
Fourth Quarter | 0.05 | 0.01 | 0.03 |
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2011 |
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First Quarter | 0.10 | 0.032 | 0.04 |
Second Quarter | 0.068 | 0.025 | 0.068 |
Third Quarter | 0.07 | 0.07 | 0.07 |
Fourth Quarter | 0.06 | 0.06 | 0.06 |
We have never declared or paid any cash dividends on our common stock and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. The payment of dividends, if any, in the future is within the discretion of our Board of Directors and will depend on our earnings, capital requirements and financial condition and other relevant facts. We currently intend to retain all future earnings, if any, to finance the development and growth of our business.
The number of record holders of our common stock at March 15, 2013 was approximately 640.
ITEM 6. Selected Financial Data
As a “smaller reporting company” we are not required to respond to this item.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
New Business plan and new direction
In recent years we reorganized into three companies, for our entertainment, insurance agency and prescription operations. In 2010 we purchased our first property in Indianapolis, Indiana that contains the Georgetown 14 Theater. Revenues for 2011 and 2012 were predominantly from the movie theater operations. FullCircle Insurance Agency, Inc. and FullCircle Prescriptions, Inc. are currently inactive, pending funding to begin operations.
Results of Operations
Revenue:
Revenues during the year ended December 31, 2012 were $1,865,468 with cost of sales of $867,600 yielding a gross profit of $997,868. This compares to revenues of $1,288,330 with cost of sales of $616,484 yielding a gross profit of $671,846 for the same period in 2011.
Operating expenses and other costs during the year ended December 31, 2012 were $1,070,434 resulting in an operating loss of $72,566 compared to the operating expenses of $929,244 resulting in an operating loss of $257,398 for the same period in 2011.
Interest expense for the year ended December 31, 2012 was $363,677 and miscellaneous income was $66,459 resulting in a net loss from continuing operations of $369,784. By comparison, interest expense for the year ended December 31, 2011 was $312,904 resulting in a net loss from continuing operations of $570,302.
In 2012 we began to experience improved revenues from our acquisition in Indianapolis because of the transition to digital projection from 35mm projection and the resulting improved attendance. Our 2013 revenues are expected to continue to improve because of the planned improvements to the Georgetown Theater. However, we remain dependent on first run releases from the movie companies to generate our revenue with the theater. Additional revenues may occur in 2013 from anticipated acquisitions.
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Legal, Accounting, Amortization and Depreciation Expenses:
A large portion of our 2012 parent company operating expenses were the result of SEC compliance requirements for our 2012 10K and three 10Q SEC filings. In addition, in 2012, we expensed $86,040 for the amortization of our database, and $228,094 was expensed for the depreciation of our Georgetown 14 property, which was included in our total operating expenses.
Liquidity and Capital Resources:
As of December 31, 2012, the Company had assets in the amount of $6,099,484 compared to assets in the amount of $5,579,290 at December 31, 2011. The Company had total assets principally consisting of $34,469 in cash, $39,177 in accounts receivable, $535 prepaid expenses, $5,982,281 in property and equipment related to the acquired movie theater and $43,022 investment in the 68,000 name database. Total assets at December 31, 2011 consisted of $19,731 in cash, a $10,000 note receivable, $5,881 accounts receivable, $129,062 investment in the customer database and $5,414,616 in property and equipment.
In the quarter ended September of 2008, we began depreciating our database on a 15-year amortization plan of expensing $6,146 per quarter. In the quarter ended September of 2009 we revised our database amortization schedule from 15 years to 5 years. The expense associated with this amortization schedule is now $21,510 per quarter. The amortization expense expires in the second quarter 2013.
On December 31, 2012, the Company had $6,167,787 in total liabilities. Current liabilities included $53,071 in accounts payable, $11,141 in accrued expenses, $62,834 in accrued interest, $15,071 preferred dividends payable, current note payable of $40,000, $359,414 notes payable – related party, current mortgage payable and equipment loan of $264,189, $125,965 property tax accrual, digital equipment note of $584,211, and long term mortgage payable of $4,651,891.
On December 31, 2011, the Company had $5,355,495 in total liabilities. Current liabilities included $98,490 in accounts payable, $1,656 in accrued expenses, $32,924 in accrued interest, $9,043 preferred dividends payable, current note payable of $40,000, $172,626 notes payable – related party, current mortgage payable of $128,186, $62,893 property tax accrual, and long term mortgage payable of $4,809,677.
Net cash provided by operating activities for the year ended December 31, 2012 was $16,282 compared to net cash used of $162,007 in the year ended December 31, 2011. During the year ended December 31, 2012 $794,214 was provided by financing activities compared to $175,000 provided by financing activities in 2011 and $795,758 was used in investing activities in 2012.
On December 15, 2012, in an effort to secure additional operating capital and to pay down accounts payable and notes payable, the Company authorized the sale up to 5,000,000 shares at the rate of $.02 per share, for gross proceeds of $100,000. No shares were sold for this offering in 2012 however we received $70,000 in funds in January of 2013. In 2011 we offered 2,500,000 shares at a price of $.04 per share and received $35,000 during 2012 from this offering. In addition, in 2012, in an effort to secure additional capital to cover operations at our Georgetown 14 Theater, we borrowed $186,788, represented by promissory note agreements from some of our major stockholders represented by promissory notes. Also in 2011 we borrowed $172,626 from some of our major stockholders for working capital. In November 2011 we discharged a $25,000 note by issuance of 833,334 restricted shares at $.03 per share.
On December 31, 2012 our net worth was ($68,303) as compared to a net worth of $223,795 on December 31, 2011.
We are currently focused on developing revenues from our entertainment division, our future acquisitions and reducing debt through converting notes payable to common stock when our common stock price provides a reasonable conversion ratio. At this time, we have no contracts, agreements, or understandings for additional funding, nor can any assurance be given that we will be able to obtain this capital on acceptable terms, if at all. In such an event, this may have a materially adverse effect on our business, operating results and financial condition. If the need arises, we may offer a private placement or attempt to obtain funding through the use of various types of short term funding, loans or working capital financing arrangements from financial institutions and or shareholders. 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.
Factors That May Impact Future Results:
At the time of this filing, we had insufficient cash reserves and receivables necessary to meet forecast operating requirements. 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 immediate capital to expand our operations and implement our plans. Our failure to obtain immediate 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 our stockholders holdings or discontinue all or a portion of our remaining operations.
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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, attain profitable operations and acquire profitable companies. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The current expansion of the Company’s business demands that significant financial resources be raised to fund capital expenditures, working capital needs, debt service and the cash flow deficits expected to occur once we continue our acquisition program. Current cash balances and the realization of accounts receivable will cover our operations at Georgetown 14 but will not be sufficient to fund planned mergers. Consequently, the Company is pursuing funding using our common stock.
Critical Accounting Policies and Estimates:
The Company’s discussion and analysis of its financial condition and results of operations are based upon its financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these 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, contingencies and litigation. Provided the company is profitable in 2013 our loss carry forward would eliminate cash needs for income taxes. 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.
Forward-Looking Statements:
Where this Form 10-K 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 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-K 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-K, 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.
Some of the matters discussed in this “Management's Discussion and Analysis or Plan of Operations,” and elsewhere in this annual report on Form 10-K include forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events including, among other things:
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Attracting immediate financing;
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Delivering a quality product that meets customer expectations;
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Obtaining and expanding market acceptance of the products we offer; and
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Competition in our market.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
As a “smaller reporting company” we are not required to respond to this item.
ITEM 8. Financial Statements and Supplementary Data
The financial statements of the Company and notes thereto appear on page F-1 and are incorporated herein by reference
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
None
ITEM 9A. Controls and Procedures.
Under the supervision and with the participation of our management, including the Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer), we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e), as of the end of the period covered by this report.
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Evaluation of Disclosure Controls and Procedures
We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls”) as of the end of the period covered by this Form 10-K. The Disclosure Controls evaluation was conducted under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. Disclosure Controls are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed under the Exchange Act, such as this Form 10-K, is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms. Disclosure Controls are also designed to provide reasonable assurance that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
The evaluation of our Disclosure Controls included a review of the controls’ objectives and design, our implementation of the controls and the effect of the controls on the information generated for use in this Form 10-K. During the course of our evaluation of our internal control over financial reporting, we advised our Board of Directors that we had identified a material weakness as defined under standards established by the Public Company Accounting Oversight Board (United States). A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness we identified is discussed in “Management’s Report on Internal Control Over Financial Reporting” below. Our Chief Executive Officer and Chief Financial Officer have concluded that as a result of the material weakness, as of the end of the period covered by this Annual Report on Form 10-K, our Disclosure Controls were not effective.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting; as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was designed 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. Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management, including our principal executive officer and principal accounting officer, conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework.
Based on our evaluation, our management concluded that there is a material weakness in our internal control over financial reporting. The material weakness identified did not result in the restatement of any previously reported financial statements or any related financial disclosure, nor does management believe that it had any effect on the accuracy of the Company’s financial statements for the current reporting period. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
The material weakness relates to the fact that our management is relying on external consultants for purposes of preparing its financial reporting package; however, the officers may not be able to identify errors and irregularities in the financial reporting package before its release as a continuous disclosure document.
Our external consultants responsible for the preparation of our financial reporting package identified this material weakness. The aforementioned material weaknesses did not impact our financial reporting or result in a material misstatement of our financial statements. As of December 31, 2012 we have not taken action to correct the material weaknesses identified in our disclosure controls and procedures.
We have engaged an outside CPA with SEC related experience to assist in correction of these material weaknesses. In addition we appointed an accountant to provide financial statements on a monthly basis and to assist with the preparation of our SEC financial statements, which will allow for proper segregation of duties as well as additional manpower for proper documentation.
Because of the material weakness described above, management concluded that, as of December 31, 2012 our internal control over financial reporting was not effective based on the criteria established in Internal Control-Integrated Framework issued by COSO.
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This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the SEC that permit smaller reporting companies like us to provide only management’s report in this annual report.
This report shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that section, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Changes in internal control over financial reporting.
There has been no change in our internal controls that occurred during our most recent fiscal period that has materially affected, or is reasonably likely to affect, our internal controls.
ITEM 9B. Other Information.
None.
PART III
ITEM 10. Directors, Executive Officers, and Corporate Governance
The following table sets forth the name, age, position and office term of each executive officer and director of the Company.
Name | Age | Position | Since |
Alec G. Stone | 71 | Chairman of the Board | 2012 |
Carl R. Austin | 72 | Director | 2012 |
Norman Frohreich | 70 | Director, President, CEO/CFO | 2007 |
Alec G. Stone, Chairman
Mr. Stone has been an attorney in private practice since 1968. Mr. Stone is not currently serving on the Board of any other public company. Mr. Stone is a major stockholder of the Company.
Carl R. Austin.
Mr. Austin holds a B.S. degree from Indiana University. Mr. Austin is a retired developer and operator of supermarkets, shopping centers and various other businesses. He is not on the board of directors of any other public company. Mr. Austin is a major stockholder of the Company.
Norman L. Frohreich, President and CEO/CFO and Director.
Mr. Frohreich joined the Company as a consultant and the CFO in March 2007 to develop the new business plans and design the new infrastructure for the complete transition of the company into that new business model. In August 2007 Mr. Frohreich was elected to the Board of Directors. On December 5, 2007 Mr. Frohreich was appointed as President and CEO. Mr. Frohreich owns his own consulting firm and prior to the FullCircle appointment he providing services to the business community. He holds a degree in Economics from Purdue University with emphasis in financial management.
The Company has adopted a code of ethics that applies to the Company’s principal executive officer, principal financial officer, principal accounting officer or controller. Our Code of Ethics was included as an exhibit to our annual report on Form 10-K for the year ended December 31, 2004
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ITEM 11. Executive Compensation.
Compensation of Directors:
Directors will be paid 250,000 shares per year for their services. The directors received no compensation in 2012.
Compensation of Officers:
The following table lists the compensation received by our former and current officers over the last two years.
SUMMARY COMPENSATION TABLE
Name | Position | Year | Salary | Stock | Other | Total |
Alec Stone (1) | Chairman | 2012 | - | - | - | - |
Carl Austin (2) | Director | 2012 | - | - | - | - |
Norman Frohreich | Dir/CEO/CFO | 2012 | - | - | - | - |
Brion Tinsley (4) | VP Operations FCPS | 2012 | - | $ 2,500 | - | $ 2,500 |
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Isaac Boutwell (3) | Chairman | 2011 | - | - | - | - |
Dave Allen (3) | Director | 2011 | - | - | - | - |
Norman Frohreich | Dir/CEO/CFO | 2011 | - | $ 20,000 | - | $ 20,000 |
Brion Tinsley | VP Operations FCPS | 2011 | - | $ 5,000 | - | $ 5,000 |
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1. New Chairman July 2012 |
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2. New Director July 2012 |
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3. Resigned June 2012 |
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4. Resigned December 2012 |
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ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth as of December 31, 2012 the name and shareholdings of each director, officer and stockholders holding more than five percent of the Company’s outstanding shares. Except as otherwise indicated, the persons named in the table have sole voting and dispositive power with respect to all shares beneficially owned, subject to community property laws where applicable.
|
| Number of Shares |
|
Name and Address | Title of Class | Beneficially Owned | % of Shares |
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Alec G. Stone (1) |
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830 Lawrence St. |
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Brandenburg, KY 40108 | Common | 18,651,855 | 16.54% |
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Carl Austin (2) |
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624 River Edge Rd. |
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Brandenburg, Ky 40108 | Common | 13,624,499 | 12.08% |
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Norman Frohreich (2)(3)(4)(5) |
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1014 Hidden Meadow Ln. |
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Middlebury, IN 46540 | Common | 10,393,190 | 9.22% |
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All as a group | Common | 42,669,544 | 37.85% |
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(1) Chairman |
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(2) Director |
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(3) Officer |
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(4) Includes 3,213,400 shares attributable to family members of Norman Frohreich |
| ||
(5) Includes 2,215,514 shares attributable to Norlander Information Services, Inc. |
| ||
ITEM 13. Certain Relationships and Related Transactions and Director Independence
None
12
Audit and Audit-Related Fees:
ITEM 14. Principal Accounting Fees and Services.
The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of FullCircle’s annual financial statement and review of financial statements included in FullCircle’s Form 10-K and 10-Q reports and services normally provided by the accountant in connection with statutory and regulatory filings or engagements were:
Rodefer Moss & Company PLLC $37,500 in 2012
Rodefer Moss & Company PLLC $37,000 and Morrill & Associates, LLC $3,000 in 2011.
Tax Fees:
There were no fees for tax compliance, tax advice and tax planning to our auditors for the fiscal years 2012 and 2011.
All Other Fees:
There were no other aggregate fees billed in either of the last two fiscal years for products and services provided by the principal accountant other than the services reported above.
We do not have an audit committee currently serving and as a result our board of directors performs the duties of an audit committee. Our board of directors will evaluate and approve in advance the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services. We do not rely on pre-approval policies and procedures.
PART IV
Item 15. Exhibits, Financial Statement Schedules.
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Exhibit Number | Title | Location |
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3(i) | Articles of Incorporation* | Form 10-SB filed 2/15/00 |
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|
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3(ii) | Bylaws* | Form 10-SB filed 2/15/00 |
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|
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14 | Code of Ethics* | Form 10-K for the Period |
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| Ended December 31, 2004 |
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|
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31 | Certification of the Chief Executive Officer and Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Attached |
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|
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32 | Certification of the Chief Executive Officer and Principal Accounting Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** | Attached |
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* Incorporated by reference.
** The Exhibit attached to this Form 10-K 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 otherwise set forth by specific reference in such filing.
13
Audit and SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 29, 2013
FullCircle Registry, Inc.
By: /s/ Norman L. Frohreich
Norman L. Frohreich
President, Chief Executive Officer, and
Principal Accounting Officer
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: March 29, 2013
By: /s/ Alec G. Stone
Alec G. Stone
Director
Date: March 29, 2013
By: /s/ Carl R. Austin
Carl R. Austin
Director
Date: March 29, 2013
By: /s/ Norman L. Frohreich
Norman L. Frohreich
President
Chief Executive Officer
Principal Accounting Officer
Director
14
FullCircle Registry, Inc.
Consolidated Financial Statements for the Period Ended
December 31, 2012 and 2011
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|
Table of Contents | Page |
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|
Report of Independent Registered Public Accounting Firms | F-2 |
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Consolidated Balance Sheets | F-3 |
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Consolidated Statements of Operations | F-4 |
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|
Consolidated Statements of Cash Flows | F-5 |
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Consolidated Statements of Stockholders’ Equity (Deficit) | F-6 |
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Notes to Consolidated Financial Statements | F-7 |
F - 1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
FullCircle Registry, Inc.
We have audited the accompanying consolidated balance sheets of FullCircle Registry, Inc. (a Nevada Corporation) as of December 31, 2012 and 2011, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of FullCircle Registry, Inc. and subsidiaries as of December 31, 2012 and 2011, and the consolidated results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that FullCircle Registry, Inc. will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, FullCircle Registry, Inc. has suffered recurring losses from operations and has a net working capital deficiency that raises substantial doubt about the company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.
/s/ Rodefer Moss & Co., PLLC
Rodefer Moss & Co., PLLC
New Albany, Indiana
March 29, 2013
F - 2
FullCircle Registry, Inc.
Consolidated Balance Sheets
| ASSETS |
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| December 31, |
| December 31, |
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|
| 2012 |
| 2011 |
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|
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|
|
Current assets: |
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|
|
| |
| Cash | $ | 34,469 | $ | 19,731 |
| Notes receivable |
| 0 |
| 10,000 |
| Accounts receivable |
| 39,177 |
| 5,881 |
| Prepaid expenses |
| 535 |
| - |
| Total current assets |
| 74,181 |
| 35,612 |
|
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|
|
|
|
Fixed assets |
|
|
|
| |
| Georgetown 14 property |
| 6,372,161 |
| 5,576,402 |
| Computers and Equipment |
| 82,928 |
| 82,928 |
| Accumulated depreciation |
| (472,808) |
| (244,714) |
Total fixed assets |
| 5,982,281 |
| 5,414,616 | |
|
|
|
|
|
|
Other assets: |
|
|
|
| |
| Total customer data Base after amortization |
| 43,022 |
| 129,062 |
Total assets | $ | 6,099,484 | $ | 5,579,290 | |
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|
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|
|
| LIABILITIES AND EQUITY |
|
|
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|
Current liabilities: |
|
|
|
| |
| Accounts payable | $ | 53,071 | $ | 98,490 |
| Accrued expenses |
| 11,141 |
| 1,656 |
| Accrued interest |
| 62,834 |
| 32,924 |
| Preferred dividends payable |
| 15,071 |
| 9,043 |
| Short term notes payable |
| 40,000 |
| 40,000 |
| Notes payable - related party |
| 359,414 |
| 172,626 |
| Current portion of long term debt |
| 264,189 |
| 128,186 |
| Accrued Property tax |
| 125,965 |
| 62,893 |
Total current liabilities |
| 931,685 |
| 545,818 | |
|
|
|
|
|
|
Long term liabilities |
|
|
|
| |
| Digital equipment note, less current portion |
| 584,211 |
| - |
| Mortgage payable, less current portion |
| 4,651,891 |
| 4,809,677 |
| Total long term liabilities |
| 5,236,102 |
| 4,809,677 |
Total liabilities |
| 6,167,787 |
| 5,355,495 | |
|
|
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|
|
|
Stockholders: |
|
|
|
| |
| 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 112,743,016 and 110,130,620 shares, respectively |
| 112,743 |
| 110,130 |
| Additional paid-in capital |
| 8,638,180 |
| 8,557,078 |
| Accumulated deficit |
| (8,819,536) |
| (8,443,723) |
| Total Stockholders' equity |
| (68,303) |
| 223,795 |
Total liabilities and stockholders' deficit | $ | 6,099,484 | $ | 5,579,290 | |
The accompanying notes are an integral part of these consolidated financial statements
F - 3
FullCircle Registry, Inc.
Consolidated Statements of Operations
|
|
| For the years | ||
|
|
| Ended December 31, | ||
|
|
| 2012 |
| 2011 |
|
|
|
|
|
|
Revenues | $ | 1,865,468 | $ | 1,288,330 | |
|
|
|
|
|
|
Cost of sales |
| 867,600 |
| 616,484 | |
|
|
|
|
|
|
Gross profit |
| 997,868 |
| 671,846 | |
|
|
|
|
|
|
Operating expenses |
|
|
|
| |
|
|
|
|
|
|
| Selling, general & administrative |
| 1,070,434 |
| 929,244 |
|
|
|
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|
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| Total operating expenses |
| 1,070,434 |
| 929,244 |
|
|
|
|
|
|
Operating loss |
| (72,566) |
| (257,398) | |
|
|
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|
|
Other income (expense) |
|
|
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| |
|
|
|
|
|
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| Interest expense |
| (363,677) |
| (312,904) |
|
|
|
|
|
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| Miscellaneous Income |
| 66,459 |
| - |
|
|
|
|
|
|
| Total other income (expense) |
| (297,218) |
| (312,904) |
|
|
|
|
|
|
Net loss before income taxes |
| (369,784) |
| (570,302) | |
|
|
|
|
|
|
Income taxes |
| - |
| - | |
|
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|
|
|
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Net loss | $ | (369,784) | $ | (570,302) | |
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Net basic and fully diluted loss per share | $ | (0.003) | $ | (0.005) | |
|
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Weighted average shares outstanding |
| 111,560,574 |
| 104,294,924 | |
The accompanying notes are an integral part of these consolidated financial statements
F - 4
FullCircle Registry, Inc.
Consolidated Statements of Cash Flows
|
|
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| For the Twelve Months | ||
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|
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| Ended December 31, | ||
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| 2012 |
| 2011 |
Cash flows from operating activities |
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| ||
| Net loss | $ | (369,784) | $ | (570,302) | |
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities |
|
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| |
|
|
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| ||
|
| Depreciation & amortization |
| 314,134 |
| 247,826 |
|
| Stock issued for services |
| 48,715 |
| 54,555 |
| Change in assets and liabilities |
|
|
|
| |
|
| (Increase) decrease in prepaid expenses |
| (535) |
| - |
|
| (Increase) decrease in accounts receivable |
| (33,296) |
| (5,881) |
|
| Increase (decrease) in accounts payable |
| (45,419) |
| 36,610 |
|
| Increase (decrease) in accrued interest |
| 29,910 |
| 12,638 |
|
| Increase (decrease) in accrued expenses |
| 72,557 |
| 62,547 |
|
| Net cash provided by (used in) operating activities |
| 16,282 |
| (162,007) |
|
|
|
|
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|
|
Cash flows from investing activities |
|
|
|
| ||
| Purchase of fixed assets |
| (795,758) |
|
| |
| Net cash provided by (used in) investing activities |
| (795,758) |
| - | |
|
|
|
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Cash flows from financing activities |
|
|
|
| ||
| Purchase of fixed assets |
| - |
| (76,402) | |
| Payments on mortgage payable |
| (121,679) |
| (109,978) | |
| Payments on digital equipment financing payable |
| (111,653) |
| - | |
| (Increase) decrease in notes receivable |
| 10,000 |
| - | |
| Proceeds from notes payable related parties |
| 186,788 |
| 172,626 | |
| Payment of notes payable |
| - |
| (25,000) | |
| Proceeds from digital equipment loan |
| 795,758 |
| - | |
| Proceeds from sale of common stock |
| 35,000 |
| 213,754 | |
| Stock issued for services |
| - |
| - | |
| Net cash provided by financing activities |
| 794,214 |
| 175,000 | |
|
|
|
|
|
|
|
| Net increase (decrease) in cash |
| 14,738 |
| 12,993 | |
|
|
|
|
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|
|
Cash and cash equivalents at beginning of period |
| 19,731 |
| 6,738 | ||
Cash and cash equivalents at end of period | $ | 34,469 | $ | 19,731 | ||
Supplemental cash flow information |
|
|
|
| ||
Cash paid for: |
|
|
|
| ||
| Interest | $ | 333,767 | $ | 300,266 | |
| Income Taxes | $ | - | $ | - | |
Non-cash transactions |
|
|
|
| ||
| Unpaid dividends | $ | 6,029 | $ | 6,037 | |
| Stock issued for accounts payable and accrued interest | $ | - | $ | 35,306 | |
| Stock issued for notes payable and accrued interest | $ | - | $ | - | |
| Stock issued for services | $ | 48,715 | $ | 54,555 | |
The accompanying notes are an integral part of these consolidated financial statements
F - 5
FullCircle Registry, Inc.
Consolidated Statements of Stockholders’ Equity (Deficit)
For the period ended December 31, 2012 and December 31, 2011
| Preferred Stock | Common Stock | Paid-in | Accumulated | ||
| Shares | Amount | Shares | Amount | Capital | Deficit |
|
|
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|
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Balance, January 1, 2011 | 310,600 | $ 310 | 101,316,138 | $ 101,316 | $ 8,297,583 | $(7,867,384) |
|
|
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|
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Stock issued for cash at .04 per share | - | - | 1,336,205 | 1,336 | 52,112 | - |
|
|
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Stock issued for cash at .04 per share | - | - | 125,000 | 125 | 4,875 | - |
|
|
|
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Stock issued for cash at .04 per share | - | - | 2,500,000 | 2,500 | 97,500 | - |
|
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|
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Stock issued for services at .01 per share | - | - | 2,000,000 | 2,000 | 18,000 | - |
|
|
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Stock issued for services at .05 per share | - | - | 250,000 | 250 | 12,250 | - |
|
|
|
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Stock issued for services at .04 per share | - | - | 426,382 | 426 | 16,629 | - |
|
|
|
|
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Stock issued for services at .01 per share | - | - | 500,000 | 500 | 4,500 | - |
|
|
|
|
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|
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Stock issued for cash at .04 per share | - | - | 500,000 | 500 | 19,500 | - |
|
|
|
|
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|
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Stock issued for note and accrued interest at .03 | - | - | 1,176,895 | 1,177 | 34,129 | - |
|
|
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|
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|
|
Preferred stock dividend | - | - | - | - | - | (6,037) |
|
|
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|
|
Net Loss for the year ended December 31, 2011 | - | - | - | - | - | (570,302) |
|
|
|
|
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|
|
Balance, January 1, 2012 | 310,600 | $ 310 | 110,130,620 | $ 110,130 | $ 8,557,078 | $(8,443,723) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued for services at .04 per share | - | - | 577,000 | 577 | 22,503 | - |
|
|
|
|
|
|
|
Stock issued for services at .04 per share | - | - | 50,000 | 50 | 1,950 | - |
|
|
|
|
|
|
|
Stock issued for cash at .04 per share | - | - | 250,000 | 250 | 9,750 | - |
|
|
|
|
|
|
|
Stock issued for cash at .04 per share | - | - | 625,000 | 625 | 24,375 | - |
|
|
|
|
|
|
|
Stock issued for services at .025 per share | - | - | 385,396 | 386 | 9,249 | - |
|
|
|
|
|
|
|
Stock issued for services at .04 per share | - | - | 225,000 | 225 | 8,775 | - |
|
|
|
|
|
|
|
Stock issued for services at .01 per share | - | - | 250,000 | 250 | 2,250 | - |
|
|
|
|
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|
|
Stock issued for services at .01 per share | - | - | 250,000 | 250 | 2,250 | - |
|
|
|
|
|
|
|
Preferred stock dividend | - | - | - | - | - | (6,029) |
|
|
|
|
|
|
|
Net Loss for the year ended December 31, 2012 | - | - | - | - | - | (369,784) |
|
|
|
|
|
|
|
Balance, January 1, 2013 | 310,600 | $ 310 | 112,743,016 | $ 112,743 | $ 8,638,180 | $(8,819,536) |
The accompanying notes are an integral part of these consolidated financial statements
F - 6
FullCircle Registry, Inc.
For Year Ending December 31, 2012 and December 31, 2011
Notes to Consolidated Financial Statements
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
a. Organization
FullCircle Registry, Inc. (the Company), formerly Excel Publishing, Inc. (Excel) was incorporated on June 7, 2000 in the State of Nevada. On April 10, 2002, the Company merged with FullCircle Registry, Inc., a private Delaware corporation (FullCircle). Per the terms of the agreement, Excel agreed to deliver 12,000,000 shares of the Company’s common stock to the shareholders of FullCircle in exchange for 100% of FullCircle’s shares. The merger was treated as a reverse merger with FullCircle being the accounting acquirer; therefore, all historical financial information prior to the acquisition date is that of FullCircle. Pursuant to the merger, the Company changed its name from Excel Publishing, Inc. to FullCircle Registry, Inc.
FullCircle Registry, Inc., was incorporated as WillRequest.com, Inc. under the laws of the State of Delaware on January 20, 2000. In July 2000, the Company changed its name from WillRequest.com, Inc. to FullCircle Registry, Inc. The Company was formed to provide a digital safe deposit box for vital medical and legal information of its customers.
In 2008 the Company elected to revise the mission statement that it would become a holding company for the purpose of acquiring small profitable businesses to provide exit plans for those companies owners.
In 2008 the Company formed two new subsidiaries to begin to formulate the expansion of the new business model and the growth of FullCircle Registry, Inc. FullCircle Prescription Services, Inc. and FullCircle Insurance Agency, Inc. were formed in 2008. The details of these companies and plans are identified in the section Item 1. Description of Business of our Form 10-K for 2012.
In 2010 the Company formed FullCircle Entertainment, Inc., for the purpose of acquiring entertainment venues, including Georgetown 14, a movie theater complex.
b. Accounting Method & Revenue Recognition
The Company's policy is to use the accrual method of accounting to prepare and present financial statements that conform to generally accepted accounting principles (“GAAP”). The Company recognizes income and expenses on the accrual basis of accounting. Revenue is recognized for the performance of providing goods, services or other rights to customers. When evidenced by an arrangement of a purchase order or contract, delivery has occurred of a service and collection of funds has occurred, revenue is recognized at that time on the records of the company. The Company has chosen a fiscal year end of December 31.
c. Principles of Consolidation
For the years ended December 31, 2012 and 2011, the consolidated financial statements include the books and records of FullCircle Registry, Inc., FullCircle Entertainment, Inc., FullCircle Prescription Services, Inc. and FullCircle Insurance Agency, Inc. All inter-company transactions and accounts have been eliminated in the consolidation.
d. 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.
e. 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:
F - 7
FullCircle Registry, Inc.
For Year Ending December 31, 2012 and December 31, 2011
Notes to Consolidated Financial Statements
·
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 December 31, 2012 and 2011. At December 31, 2012 and 2011, the Company had no assets or liabilities that are measured at fair value on a recurring or non-recurring basis.
f. 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 B issued and outstanding is 300,600. Class A preferred shares have no voting rights. Class B preferred shares have voting rights at 10 for 1 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 112,743,016 on December 31, 2012 and 110,130,620 on December 31, 2011. 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 on common shares 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.
g. Property and Equipment
Property and equipment are recorded at cost. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation of property and equipment is provided using the straight-line method over the respective useful lives ranging from 3-39 years. Depreciation expense for the years ended December 31, 2012 and 2011 totaled $228,094 and $161,786, respectively.
h. Impairment of Long Lived Assets
The Company assesses whether certain relevant factors limit the period over which acquired assets are expected to contribute directly or indirectly to future cash flows for amortization purposes. Under certain conditions the Company may assess the recoverability of the unamortized balance of its long-lived assets based on undiscounted expected future cash flows. Should the review indicate that the carrying value is not fully recoverable; the excess of the carrying value over the fair value of any intangible asset is recognized as an impairment loss. Amortization expense for the years ended December 31, 2012 and 2011 totaled $86,040 and $86,040, respectively.
F - 8
FullCircle Registry, Inc.
For Year Ending December 31, 2012 and December 31, 2011
Notes to Consolidated Financial Statements
i. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based on the weighted average number of shares outstanding at the date of the consolidated financial statements.
Earnings (Loss) Per Share
|
| For the Twelve Months | ||
|
| Ended December 31, | ||
|
| 2012 |
| 2011 |
|
|
|
|
|
Net loss | $ | (381,784) | $ | (570,302) |
|
|
|
|
|
Net basic and fully diluted loss per share | $ | (0.003) | $ | (0.005) |
|
|
|
|
|
Weighted average shares outstanding |
| 111,560,574 |
| 104,294,924 |
There are no outstanding common stock options and/or warrants.
j. Provision for Income Taxes
Deferred tax assets and the valuation account are as follows:
|
| December 31, 2012 |
| December 31, 2011 |
|
|
|
|
|
Loss Carry Forward | $ | 8,819,536 | $ | 8,443,732 |
|
|
|
|
|
Deferred tax asset: |
|
|
|
|
NOL carryforward |
| 3,175,033 |
| 2,828,730 |
|
|
|
|
|
Valuation allowance |
| (3,175,033) |
| (2,828,730) |
|
|
|
|
|
Total deferred tax asset: | $ | - | $ | - |
|
|
|
|
|
The components of current income tax expense are as follows: |
|
| ||
|
|
|
|
|
|
| December 31, 2012 |
| December 31, 2011 |
|
|
|
|
|
Current federal tax expense | $ | - | $ | - |
|
|
|
|
|
Current state tax expense |
| - |
| - |
|
|
|
|
|
Change in NOL benefits |
| 346,303 |
| 193,079 |
|
|
|
|
|
Change in valuation allowance |
| (346,303) |
| (193,079) |
|
|
|
|
|
Income tax expense | $ | - | $ | - |
F - 9
FullCircle Registry, Inc.
For Year Ending December 31, 2012 and December 31, 2011
Notes to Consolidated Financial Statements
The Company has adopted FASB ASC 740-10 to account for income taxes. The Company currently has no issues creating timing differences that would mandate deferred tax expense. Net operating losses would create possible tax assets in future years. Due to the uncertainty of the utilization of net operating loss carry forwards; an evaluation allowance has been made to the extent of any tax benefit that net-operating losses may generate. A provision for income taxes has not been made due to net operating loss carry-forwards of $3,175,033 and $2,828,730 as of December 31, 2012 and December 31, 2011, respectively, which may be offset against future taxable income. These NOL carry-forwards begin to expire in the year 2020. No tax benefit has been reported in the financial statements. Tax rates differ from statutory rates due to the uncertainty of the above.
The Company did not have any tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months.
The Company includes interest and penalties arising from the underpayment of income taxes in the consolidated statements of operations in the provision for income taxes. As of December 2012 and 2011, the Company had no accrued interest or penalties related to uncertain tax positions.
The tax years that remain subject to examination by major taxing jurisdictions are for the years ended December 31, 2012, 2011, and 2010.
k. Concentration of Risk
Financial instruments which potentially subject the Company to concentrations of credit risk are cash and cash equivalents. The Company places its cash with financial institutions deemed by management to be of high credit quality.
l. Recent Accounting Pronouncements
In July 2012, the FASB issued the Accounting Standards Update 2012-02, Intangibles - Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment (ASU 2012-02). This update is effective for fiscal years beginning after September 15, 2012. The update permits qualitative analysis of impairment of indefinite-lived intangible assets to determine if quantitative assessment of the value of such assets is necessary. It applies to intangible assets with an indefinite life other than goodwill. The update provides a series of events and circumstances that could impact significant inputs used to determine fair value of indefinite-lived assets. It also provides guidance as to frequency such qualitative and/or quantitative analysis must be performed. Finally, once an asset is determined to have a finite life, impairment assessment must be performed in accordance with paragraphs 350-35-35-18 through 35-19.
The intent of the update is to assess whether or not, on a more likely than not basis, using qualitative analysis as described in the update, an indefinite-lived asset is impaired. If it is determined to be impaired, a valuation on a quantitative basis must be performed. Similarly, if the indefinite-lived asset is determined to have a finite life it must be evaluated for amortization and/or impairment analysis. The Company has not yet adopted this update and is evaluating the impact of this update on its financial statements and whether or not any of its assets would fall into this category. It believes the impact on our financial statements will not be material.
In October of 2012, the FASB issued Accounting Standards Update 2012-04, Technical Corrections and Improvements (ASU 2012-04). The guidance provided by the standard will be effective for fiscal periods beginning after December 15, 2012 and will be effective for our 2013 financial statements. The Company has not yet adopted this update and is evaluating the impact of this update on its financial statements. It believes the impact on our financial statements will not be material.
In December 2011, the FASB issued the Accounting Standards Update 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities (ASU 2011-11) and the clarification release of the Accounting Standards Update 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities (ASU 2013-01) on January 31, 2013. These updates require disclosure on both a gross and net basis of offsetting assets and liabilities in connection financial assets and liabilities. It is effective for annual reporting periods beginning on or after January 1, 2013 and interim reporting periods within those annual periods. The Company does not have any offsetting financial assets and liabilities at the present time. If, in the future, after the effective date, the Company acquires such assets and liabilities it will comply with the disclosure requirements of the update.
F - 10
FullCircle Registry, Inc.
For Year Ending December 31, 2012 and December 31, 2011
Notes to Consolidated Financial Statements
In August 2012 the FASB issued Accounting Standards Update 2012-03, Technical Amendments and Corrections to SEC Sections - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22. The standard has been adopted and the technical corrections therein, if applicable, have been applied to its financial statements.
m. Advertising
Advertising costs are expensed as incurred.
n. Cash and Cash Equivalents
For the purposes of the Statements of Cash Flows, the Company considers cash and cash equivalents to be cash in all bank accounts, including money market and temporary investments that have an original maturity of three months or less.
o. Subsequent Events
The Company has evaluated subsequent events from the balance sheet date through the date the consolidated financial statements were issued and has determined that there are no such events that would have a material impact on the consolidated financial statements.
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 $8,819,536 as of December 31, 2012 and $8,443,723 as of December 31, 2011, 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:
·
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 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.
·
Optimizing our relationship with our new HFP Capital Markets to facilitate sourcing companies for acquisitions and sourcing financing to complete these mergers.
·
Maintaining the Company mission of minimal overheads while 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.
F - 11
FullCircle Registry, Inc.
For Year Ending December 31, 2012 and December 31, 2011
Notes to Consolidated Financial Statements
NOTE 3. NOTES PAYABLE
The Company's notes payable obligations, both related party and unrelated, are as follows:
|
|
| December 31, |
| December 31, |
|
|
| 2012 |
| 2011 |
Notes payable current liabilities |
|
|
|
| |
|
|
|
|
|
|
| Notes payable to related parties Ike Boutwell, Carl Austin, and Alec Stone for funds installed into Fullcircle Entertainment Inc. at 10% interest | $ | 282,788 | $ | 96,000 |
|
|
|
|
|
|
| Notes payable related parties current liabilities Ike Boutwell @ 8.0% |
| 76,626 |
| 76,626 |
|
|
|
|
|
|
| Notes payable to various individuals bears Interest at 8.0% per annum principal and interest due on demand |
| 40,000 |
| 40,000 |
|
|
|
|
|
|
| Current portion of long term debt |
| 264,189 |
| 128,186 |
|
|
|
|
|
|
Total current liabilities - notes | $ | 663,603 | $ | 340,812 | |
|
|
|
|
|
|
Mortgage payable, less current portion |
|
|
|
| |
|
|
|
|
|
|
| Mortgage payable assumed in acquisition; interest payable at 4.75% monthly payments of $34,435 through July 2017 with balloon payment of the Balance upon maturity. | $ | 4,651,891 | $ | 4,809,677 |
|
|
|
|
|
|
Digital Equipment note payable, less current portion |
|
|
|
| |
|
|
|
|
|
|
| Note payable exercised in January 2012; interest payable at 5.25% with a term of five years; secured by the digital equipment |
| 584,211 |
| - |
|
|
|
|
|
|
| Total long-term liabilities - notes | $ | 5,236,102 | $ | 4,809,677 |
|
|
|
|
|
|
| Total liabilities notes | $ | 5,899,705 | $ | 5,150,489 |
On December 31, 2012 two notes of $20,000 each are in default.
Accrued interest on these notes; as of December 31, 2012 were $6,022.47 and $12,547 respectively.
In December 2011 $25,000 in notes bearing interest at 8% and accrued interest were exchanged for restricted shares at $.03 per share.
Future minimum principal payments on notes payable are as follows:
2013 | $ | 663,603 |
2014 | $ | 272,329 |
2015 | $ | 289,562 |
2016 | $ | 307,103 |
2017 | $ | 4,367,108 |
Total | $ | 5,899,705 |
F - 12
FullCircle Registry, Inc.
For Year Ending December 31, 2012 and December 31, 2011
Notes to Consolidated Financial Statements
NOTE 4. RELATED PARTY
The Company received advances from related parties for $186,789 for operating needs in 2012. The balance of the notes payable to related parties was $359,414 as of December 31, 2012.
NOTE 5. COMMITMENTS AND CONTINGENCIES
Our principal executive offices are located at 161 Alpine Drive, Shelbyville, KY 40065. The facility consists of approximately 1,200 square feet of office space, leased for $750 per month. Our original lease expired on September 15, 2007 and, due to high vacancies in the area, we have elected to maintain a verbal month-to-month agreement.
NOTE 6. INTANGIBLE ASSETS
The Company’s intangible assets consist primarily of the database containing the names, addresses, and phone numbers of approximately 68,000 customers for its use as part of its prescription oriented array of services. Amortization expense amounted to $86,040 and $86,040 for the years ended December 31, 2012 and 2011 respectively. Estimated future amortization of these intangibles is expected to consist of the following amounts for the twelve month periods ended on December 31:
12 Months Ending December 31, | Amount |
|
|
2013 | $43,022 |
NOTE 7. STOCKHOLDERS EQUITY
In March 2012 the Company issued 627,000 restricted shares for $25,080 for services at $.04 per share.
In March 2012 the Company issued 875,000 restricted shares for $35,000 cash for operations at $.04 per share.
In September 2012 the Company issued 385,396 free trading shares for $9,634 for services at $.025 per share.
In September 2012 the Company issued 225,000 free trading shares for $9,000 for services at $.04 per share.
In September 2012 the Company issued 500,000 free trading shares for $5,000 for services at $.01 per share.
In March 2011 the Company issued 1,336,205 restricted shares for $53,448.20 cash for operations at $.04 per share.
In May 2011 the Company issued 125,000 restricted shares for $5,000 cash for operations at $.04 per share.
In August 2011 the Company issued 250,000 restricted shares for $12,500 for services at $.05 per share.
In August 2011 the Company issued 426,382 restricted shares for $17,055.26 for services at $.04 per share.
In August 2011 the Company issued 2,500,000 restricted shares for $100,000 cash for operations at $.04 per share.
In August 2011 the Company issued 2,000,000 restricted shares for $20,000 services at $.01 per share.
In December 2011 the Company issued 500,000 restricted shares for $20,000 cash for operations at $.04 per share.
In December 2011 the Company issued 1,176,895 restricted shares for $35,305.85 in exchange for a note and accrued interest at $.03 per share.
In December 2011 the Company issued 500,000 restricted shares for $5,000 cash for services at $.01 per share.
F - 13