GALAXY NEXT GENERATION, INC. - Quarter Report: 2013 March (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 March 31, 2013
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.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes X . No .
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | . | 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 .
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 125,288,446 Class A common shares as of April 28, 2013.
FORM 10-Q
FULLCIRCLE REGISTRY, INC.
Table of Contents
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PART I. | Financial Information |
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| Item 1. | Unaudited Consolidated Financial Statements | 3 |
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| Consolidated Balance Sheets for March 31, 2013 (unaudited) and December 31, 2012 | 3 |
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| Consolidated Statements of Operations for the Three Months Ended March 31, 2013 and 2012 (unaudited) | 4 |
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| Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2013 and 2012 (unaudited) | 5 |
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| Notes to Consolidated Financial Statements (unaudited) | 6 |
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| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 8 |
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| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 12 |
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| Item 4. | Controls and Procedures | 12 |
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PART II. | Other Information |
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| Item 1. | Legal Proceedings | 12 |
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| Item 1A. | Risk Factors | 12 |
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| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 12 |
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| Item 3. | Defaults Upon Senior Securities | 12 |
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| Item 4. | Mine Safety Disclosures | 12 |
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| Item 5. | Other Information | 12 |
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| Item 6. | Exhibits | 13 |
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| Signatures | 13 | |
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PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
FullCircle Registry, Inc. | ||||||
Consolidated Balance Sheets | ||||||
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| ASSETS | ||
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| March 31, |
| December 31, |
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| 2013 |
| 2012 |
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Current assets: |
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| Cash | $ | 101,294 | $ | 34,469 | |
| Accounts receivable |
| 40,977 |
| 39,177 | |
| Prepaid expenses |
| 2,328 |
| 535 | |
| Total current assets |
| 144,599 |
| 74,181 | |
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Fixed assets |
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| Georgetown14 Upgrade |
| 7,975 |
| - |
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| Georgetown 14 property |
| 6,372,161 |
| 6,372,161 |
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| Computers and Equipment |
| 82,928 |
| 82,928 |
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| Accumulated depreciation |
| (533,147) |
| (472,808) |
Total fixed assets |
| 5,929,917 |
| 5,982,281 | ||
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Other assets: |
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| Total customer data Base after amortization | 21,512 |
| 43,022 | |
Total assets | $ | 6,096,028 | $ | 6,099,484 | ||
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| LIABILITIES AND EQUITY | ||
Current liabilities: |
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| Accounts payable | $ | 7,667 | $ | 53,071 | |
| Accrued expenses |
| 9,425 |
| 11,141 | |
| Accrued interest |
| 61,020 |
| 62,834 | |
| Preferred dividends payable |
| 16,554 |
| 15,071 | |
| Short term notes payable |
| 40,000 |
| 40,000 | |
| Notes payable - related party |
| 359,414 |
| 359,414 | |
| Current portion of long term debt |
| 264,323 |
| 264,189 | |
| Accrued Property tax |
| 139,065 |
| 125,965 | |
Total current liabilities |
| 897,468 |
| 931,685 | ||
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| Long term liabilities |
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| Digital equipment note, less current portion | 560,065 |
| 584,211 | |
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| Mortgage payable, less current portion | 4,604,264 |
| 4,651,891 | |
| Total long term liabilities |
| 5,164,329 |
| 5,236,102 | |
Total liabilities |
| 6,061,797 |
| 6,167,787 | ||
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Stockholders: |
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| Preferred stock, authorized 10,000,000 shares of $.001 par value |
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| Preferred A, issued and outstanding is 10,000 | 10 |
| 10 | |
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| Preferred B, issued and outstanding is 300,600 | 300 |
| 300 | |
| Common stock, authorized 200,000,000 shares of $.001 par value, issued and outstanding shares of 117,105,516 and 112,743,016 shares, respectively | 117,106 |
| 112,743 | ||
| Stock subscribed |
| 50,000 |
| - | |
| Additional paid-in capital |
| 8,715,817 |
| 8,638,180 | |
| Accumulated deficit | $ | (8,849,002) | $ | (8,819,536) | |
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| Total Stockholders' equity |
| 34,231 |
| (68,303) |
Total liabilities and stockholders' deficit | $ | 6,096,028 | $ | 6,099,484 | ||
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The accompanying notes are an integral part of these consolidated financial statements. | ||||||
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FullCircle Registry, Inc. | ||||||
Consolidated Statements of Cash Flows | ||||||
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| For the Three Months | ||
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| Ended March 31, | ||
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| 2013 |
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Cash flows from operating activities |
| Unaudited |
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| Net loss | $ | (27,983) | $ | (68,242) | |
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities |
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| Depreciation & amortization |
| 81,849 |
| 68,587 |
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| Stock issued for services |
| 12,000 |
| 25,080 |
| Change in assets and liabilities |
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| (Increase) decrease in prepaid expenses |
| (1,793) |
| - |
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| (Increase) decrease in accounts receivable |
| (1,800) |
| (5,423) |
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| Increase (decrease) in accounts payable |
| (45,404) |
| (16,292) |
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| Increase (decrease) in accrued interest |
| (1,814) |
| 4,805 |
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| Increase (decrease) in accrued expenses |
| 11,384 |
| 16,719 |
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| Increase (decrease) in current portion of long term debt | 134 |
| (3,313) | |
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| Net cash provided by (used in) operating activities |
| 26,573 |
| 21,921 |
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Cash flows from investing activities |
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| Purchase of fixed assets |
| (7,975) |
| (795,759) | |
| Net cash provided by (used in) investing activities |
| (7,975) |
| (795,759) | |
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Cash flows from financing activities |
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| Payments on mortgage payable |
| (47,627) |
| (23,405) | |
| Payments on digital equipment financing payable |
| (24,146) |
| (22,819) | |
| Proceeds from stock subscribed |
| 50,000 |
| - | |
| Proceeds from notes payable related parties |
| - |
| 39,788 | |
| Proceeds from digital equipment loan |
| - |
| 755,971 | |
| Proceeds from sale of common stock |
| 70,000 |
| 35,000 | |
| Net cash provided by financing activities |
| 48,227 |
| 784,535 | |
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| Net increase (decrease) in cash |
| 66,825 |
| 10,697 | |
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Cash and cash equivalents at beginning of period |
| 34,469 |
| 19,731 | ||
Cash and cash equivalents at end of period | $ | 101,294 | $ | 30,428 | ||
Supplemental cash flow information |
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Cash paid for: |
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| Interest | $ | 89,175 | $ | 81,390 | |
| Income Taxes | $ | - | $ | - | |
Non-cash transactions |
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| Unpaid dividends | $ | 16,554 | $ | 10,546 | |
| Stock issued for accounts payable and accrued interest | $ | - | $ | - | |
| Stock issued for notes payable and accrued interest | $ | - | $ | - | |
| Stock issued for services | $ | 12,000 | $ | 25,080 | |
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The accompanying notes are an integral part of these consolidated financial statements. | ||||||
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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, 2012, Annual Report on Form 10-K. Operating results for the three months ended March 31, 2013, are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.
NOTE 2. GOING CONCERN.
The accompanying Consolidated Financial Statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has suffered recurring losses, negative working capital and is dependent upon raising capital to continue operations. The Company has incurred losses resulting in an accumulated deficit of $8,849,002 and $8,819,536 as of March 31, 2013 and December 31, 2012, respectively.
The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. It is 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:
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Locating and merging with other profitable private companies where the owners of these businesses are seeking liquidity and exit plans.
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Expanding revenues by purchasing, or otherwise acquiring, profitable private businesses.
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Continued development of Georgetown 14, our first acquisition, to increase revenues and profitability.
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Upgrade and improve Georgetown 14 Cinemas and utilization of the property equity for financing.
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Expansion of the services from HFP Capital Markets to assist in our search for business candidates for acquisition.
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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.
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Increasing PR exposure with the buy-side financial institutions.
The Company cannot ascertain the eventual success of management's plans with any degree of certainty. No assurances can be given that the Company will be successful in raising immediate capital or that the Company will achieve profitability or positive cash flows.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described above. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
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NOTE 3. STOCKHOLDERS’ EQUITY
During the three-month period ending March 31, 2013 the Company issued an aggregate amount of 3,500,000 restricted shares for operating capital at $.02 per share and 750,000 control - free trading shares of the Company’s common stock for services at $.01 per share and 112,500 free trading shares for services at $.04 per share.
NOTE 4. SIGNIFICANT ACCOUNTING POLICIES
Effective July 1, 2009, in accordance with the provisions of GAAP the Company has revised its estimate of the useful life of the database asset from 15 years to 5 years from the date the assets were originally placed into service. According to GAAP this revised life is to be amortized prospectively over its remaining useful life and, therefore, has no impact on prior periods. The database amortization will expire at the end of the June 30, 2013 quarter and will decrease our quarterly expenses by $21,510 in the September and December quarters.
Fair Value of Financial Instruments
On January 1, 2008, the Company adopted FASB ASC 820-10-50, “Fair Value Measurements”. This guidance defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follows:
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Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
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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.
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Level 3 inputs to valuation methodology are unobservable and significant to the fair measurement.
The carrying amounts reported in the balance sheets for the cash and cash equivalents, receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The carrying value of convertible notes payable approximates fair value because negotiated terms and conditions are consistent with current market rates as of March 31, 2013 and December 31, 2012.
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 125,288,446 on April 28, 2013 and 112,743,016 on December 31, 2012. The common stock has one vote per share. The common stock is traded on the OTCBB under the symbol FLCR.
The Company has not paid, nor declared, any dividends since its inception and does not intend to declare any such dividends in the foreseeable future. The Company's ability to pay dividends is subject to limitations imposed by Nevada law. Under Nevada law, dividends may be paid to the extent that the corporation's assets exceed its liabilities and it is able to pay its debts as they become due in the usual course of business.
Class B Preferred shares have a 2% preferred dividend, payable annually.
Use of Estimates in the Preparation of Consolidated Financial Statements
The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and expenses during the reporting period. In these Consolidated Financial Statements, assets, liabilities and expenses involve extensive reliance on management’s estimates. Actual results could differ
from those estimates.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
General
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:
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Attracting immediate financing;
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Merging with or acquiring profitable private businesses.
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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.
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 with the following mission statement:
FullCircle Registry, Inc., mission statement is to provide exit capabilities for small to medium sized private profitable companies through M&A activity with those private companies, at a discount, to improve our stockholder value while leaving those companies autonomous to FullCircle where possible to continue to be managed by the team that founded them and subsequently providing liquidity and increased returns for the founder(s).
On February 4, FullCircle Registry, Inc., entered into an agreement with HFP Capital Markets. This relationship was developed for the purpose of expanding our Mergers and Acquisitions activities and the access to capital to fund new acquisitions. The diligence reports have been completed and HFP Capital has completed the updating process of the financial services web pages for FullCircle information. Our FullCircle Registry web page is currently being revised and we should have our new web page operational during the June Quarter.
We have entered the “analysis” and “selection” phase of our M&A activities and will be announcing our progress through PR newswire releases.
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.
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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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18 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.
During the quarter ending March 31, 2013 EBIT improved to $137,203 from $104,717 in the March quarter in 2012, a 32% improvement. The EBITDA improved to $197,542 from $151,794 in the March quarter in 2012, a 30% improvement.
In the first quarter ending March 31, 2013 our subsidiary FullCircle Entertainment, Inc. obtained quarterly profitability with a net income of $24,724.
Profitability was obtained with increased revenues, reduced operating expenses and pricing adjustments. Georgetown 14 Cinemas ticket pricing and concession pricing continues to be the best value theater compared to surrounding competition.
One of our competitors Movie Buffs closed down operations on April 1, 2013. The theater was purchased by a national chain offering “Dinner and a Movie” which departs from our strategic price point.
Theater upgrades of approximately $400,000 are planned to be completed in 2013 that will include new employee uniforms, additional lounging areas for families, a new face on the theater, new signage, new lobby and new concession area. Our new website, www.georgetowncinemas.com is now operational. Releases will occur on our theater web site as well as email blasts out to our patrons.
Over the next several months we will be improving our theater operations to offer:
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U.S. popular sporting events such as the Baseball World Series, NFL playoffs, NCAA Basketball and Football playoffs and NBA playoffs.
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International popular sporting events to serve our local international community.
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Business meetings requiring upload and download high-speed internet capabilities
After the completion of our upgrades to Georgetown 14 we will be in a position to attract other businesses to our property to utilize unused facilities and acreage for additional leasing opportunities.
Our internal theater management has been recently changed to facilitate our upgrades and new policies and procedures.
FullCircle Insurance Agency, Inc.
The FullCircle Insurance Agency, Inc. was founded in August 2008, but is currently inactive. Until adequate funding is available, any operations of this company have been placed on hold. In addition, we believe that this industry will thrive once the Patient Protection and Affordable Care Act is implemented and finalized. Increased agency knowledge and professionalism will be necessary to help businesses and individuals understand the new laws.
FullCircle Prescription Services, Inc.
Until a more favorable political climate exists we have discontinued the marketing events for the advancement of FullCircle Prescription Services, Inc. Up until 2009 the political trend was to support the re-importation of generic drugs to assist in combating the increasing expense of medications most importantly for our senior citizens. However, since that time the political trend has reversed and this direction is not currently supported by the current administration. We are still operational but have elected to not expend any marketing funds at this time.
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Our Corporate Information
Our principal executive offices are located at 161 Alpine Drive, Shelbyville, Kentucky, 40065, and our telephone number is (502) 410-4500. Our current website address is www.fullcircleregistry.com. Our website and the information contained therein or connected thereto shall not be deemed to be incorporated into this report.
SEC compliance and Regulations
The requirements for regulatory compliance continue to be difficult. The HTML filing format will be discontinued in the June quarter. At that time the XBRL filing format, required by the SEC will be the new format, which is very expensive. FullCircle has been filing in both formats for the last two years. Both formats can be viewed on our web page under the Announcements Tab.
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 theatre sites. In those areas where real estate is readily available, there are few barriers preventing competing companies from opening theatres near one of our existing theatres, which may have a material adverse effect on our theatres. Demographic changes and competitive pressures can also lead to a theatre location becoming impaired.
In addition to competition with other motion picture exhibitors, our theatres 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.
Employees
FullCircle Registry, Inc., and subsidiaries currently have 21 employees/officers. We have never experienced employment-related work stoppages and consider that we maintain good relations with our personnel.
Results of Operations for the Three-Month Periods Ended March 31, 2013 and 2012.
Revenues during the three months ended March 31, 2013 were $454,301 with a cost of sales of $145,473, yielding a gross profit of $308,828. This compares to $444,643 in revenues for the same period in 2012, with a cost of sales of $188,404, yielding a gross profit of $256,239. .
Operating expenses during the current three-month period ended March 31, 2013 were $167,601, resulting in operating income of $141,227, compared to operating expenses of $174,504 in the same period in 2012, resulting in an operating income of $81,735.
Interest expense for the three months ended March 31, 2013 was $87,361, amortization expense was $21,510 and depreciation expense was $60,339 producing a net loss for the period of $27,983, compared to interest expense of $81,390, amortization expense of $21,510 and depreciation expense of $47,077 resulting in a net loss of $68,242 during the same period in 2012.
Outside the direct theater operation expenses of FullCircle Entertainment, Inc., Our depreciation, interest, amortization, SEC compliance cost for auditors, accountants and attorneys continue to be the major part of our expenses.
The results of the Georgetown 14 Theater are good. The theater industry typically loses money during the first quarter because there are fewer new films released and many people are recovering from the expense of the holiday season at the end of the previous year. During the first quarter of 2013 the national year over year period, the national theater revenues were down by 13% and our Georgetown 14 Theater revenues were up 2.3%. The national theater revenues were a direct reflection of less strong first run movies being released compared to the same period last year.
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Liquidity and Capital Resources
At March 31, 2013 the Company had total assets of $6,096,028 compared to $6,099,484 on December 31, 2012. The Company had total assets consisting of $101,294 in cash, $40,977 in accounts receivable, $2,328 prepaid expenses, $7,975 in theater upgrades, $6,372,161 of fixed assets in Georgetown 14, and $21,512 in our customer database less accumulated depreciation of $533,147. Total assets at December 31, 2012 consisted of $34,469 in cash, $39,177 accounts receivable, $535 prepaid expenses, $6,372,161 of fixed assets in Georgetown 14, and $43,020 in our customer database less accumulated depreciation of $472,808.
At March 31, 2013 the Company had $6,061,797 in total liabilities. Total liabilities include $7,667 in accounts payable, $9,425 in accrued expenses, $61,020 in accrued interest, $16,554 in preferred dividends payable, $40,000 in notes payable, $359,414 notes payable-related party, $264,323 current portion of long-term debt, $139,065 accrued property taxes, $560,065 digital equipment note and $4,604,264 mortgage payable.
Total liabilities at December 31, 2012 were $6,167,787, which was comprised of $53,071 in accounts payable, $11,141 accrued expenses, $62,834 accrued interest, $15,071 in preferred dividends payable, $40,000 in notes payable, $359,414 note payable related party, current portion of long term debt $264,189, accrued property tax of $125,965, digital equipment note $584,211 and $4,651,891 mortgage payable.
Net cash provided by operating activities for the three months ended March 31, 2013 was $26,573 compared to net cash provided by operating activities for the three months ended March 31, 2012 of $21,921. During the three months ended March 31, 2013, $7,975 was used for investments, and $48,227 was provided by financing activities. For the same period in 2012 $795,759 was used for investments and $784,535 was provided by financing activities.
As of March 31, 2013 we had capital commitments of a mortgage and the digital equipment loan for $5,428,652 for Georgetown 14 Theater. We are currently focused on increasing revenues from our operations and reducing debt through converting notes payable to common stock. We may also seek funding from securities purchases or from lenders offering favorable terms. No assurance can be given that we will be able to obtain the total capital necessary to fund our new business plans. In such an event, this may have a materially adverse effect on our business, operating results and financial condition.
We require additional capital to supplement our anticipated revenues and fund our continuing operations. We have relied upon advances from directors, officers and shareholders and we have issued stock to finance our operations to this point.
FullCircle currently owes $40,000 in notes payable and $359,414 notes payable to related parties. Our auditors have expressed concern that the Company has experienced losses from operations and negative cash flows from operations since inception. We have negative working capital and a capital deficiency at March 31, 2013. As of March 31, 2013 the stockholders equity is $34,231 compared to ($68,303) on March 31, 2012. These conditions raise substantial doubt about our ability to continue as a going concern.
Factors That May Impact Future Results
At the time of this report, we had insufficient cash reserves and receivables necessary to meet forecast operating requirements for FullCircle Registry, Inc. Our subsidiary FullCircle Entertainment, Inc. is now producing a positive cash flow and was profitable in the March quarter 2013.
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 $500,000, to fund the Company’s expansion needs. Management is currently negotiating with existing shareholders, financial institutions, new investors, and other accredited investors in order to obtain working capital necessary to meet current and future obligations and commitments.
Management 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.
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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
Disclosure Controls and Procedures
The Company’s President and Chief Financial Officer have concluded, based on an evaluation of the Company’s disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15(d)-15(e)), which such disclosure controls and procedures were effective as of the end of the period covered by this report.
Changes in Internal Control Over Financial Reporting
There has been no change in the Company’s internal control over financial reporting during the three months ended March 31, 2013 that has materially affected, or is reasonably likely to materially affect, our 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.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
During the three-month period ending March 31, 2013 the Company issued an aggregate amount of 3,500,000 restricted shares of the Company’s common stock for operating capital at $.02 per share to accredited investors, issued 112,500 free trading shares for services at $.04 per share, and issued 750,000 control shares for services at $.01 per share.
We believe the foregoing transactions were exempt from the registration requirements of the Securities Act of 1933, as amended, under Section 4(2) thereof or Rule 506 of Regulation D promulgated thereunder.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
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ITEM 6. EXHIBITS
Exhibit |
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Number |
| Title |
| Location |
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31.1 |
| Certification of Chief Executive Officer/Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 |
| Attached |
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32.1 |
| Certification of Chief Executive Officer/Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002* |
| Attached |
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: May 14, 2013
/s/ Norman L. Frohreich
Norman L. Frohreich
President
Chief Executive Officer
Chief Financial Officer
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