GALAXY NEXT GENERATION, INC. - Quarter Report: 2016 September (Form 10-Q)

Form 10-Q Quarterly Report

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 September 30, 2016

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)

61-1363026

(I.R.S. Employer Identification No.)

1125 Summit Drive, Shelbyville, KY 40065-9540

(Address of Principal Executive Offices) (Zip Code)

(502) 410-4500

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X . No .

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes 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: 187,606,258 Class A common shares as of November 17, 2016.

FORM 10-Q

FULLCIRCLE REGISTRY, INC.

Table of Contents


			Page
PART I.	Financial Information

	Item 1.	Unaudited Consolidated Financial Statements	3

		Consolidated Balance Sheets for September 30, 2016 (unaudited) and December 31, 2015	3

		Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 2016 and 2015 (unaudited)	4

		Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2016 and 2015 (unaudited)	5

		Notes to Consolidated Financial Statements (unaudited)	6

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	13

	Item 4.	Controls and Procedures	13

PART II.	Other Information

	Item 1.	Legal Proceedings	14

	Item 1A.	Risk Factors	14

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	14

	Item 3.	Defaults Upon Senior Securities	14

	Item 4.	Mine Safety Disclosures	14

	Item 5.	Other Information	14

	Item 6.	Exhibits	14

	Signatures		14

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.


FullCircle Registry, Inc.
Consolidated Balance Sheets
ASSETS
				September 30,		December 31,
				2016		2015
				Unaudited		Audited
Current Assets
	Cash		$	-	$	17,313
	Inventory			4,227		3,267
	Accounts receivable, net			26,615		28,496
	Prepaid expenses			445		305
Total Current Assets				31,287		49,381
Fixed Assets
	Property and equipment			6,574,608		6,563,277
	Accumulated depreciation			(1,532,927)		(1,307,549)
Total Fixed Assets				5,041,681		5,255,728
Other Assets				10,870		10,870
TOTAL ASSETS			$	5,083,838	$	5,315,979
LIABILITIES & STOCKHOLDERS DEFICIT
Liabilities
	Current Liabilities
		Current portion of long term debt	$	4,501,873	$	4,477,921
		Accounts payable		98,277		90,111
		Deferred rental income		-		13,373
		Accrued property taxes		139,218		148,190
		Other accrued expenses		5,534		8,845
		Preferred dividends payable		37,407		33,124
		Note payable related parties		1,147,480		1,081,653
		Note payable		30,000		30,000
		Accrued interest		428,864		234,588
	Total Current Liabilities			6,388,653		6,117,805
	Long Term Liabilities
		Equipment note payable, less current portion		134,141		256,374
	Total Long Term Liabilities			134,141		256,374
Total Liabilities				6,522,794		6,374,179
Stockholders' Deficit
	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 shares of 187,443,238 and 185,754,300 shares respectively			187,444		185,755
	Additional paid-in-capital			9,398,089		9,390,532
	Accumulated deficit			(11,024,799)		(10,634,797)
		Total Stockholders’ Deficit		(1,438,956)		(1,058,200)
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT			$	5,083,838	$	5,315,979
The accompanying notes are an integral part of these consolidated financial statements.


FullCircle Registry, Inc.
Consolidated Statements of Operations
(Unaudited)

				For the Three Months				For the Nine Months
				Ended September 30,				Ended September 30,
				2016		2015		2016		2015

Revenues			$	261,568	$	287,858	$	820,667	$	918,407
Cost of sales				81,378		80,159		236,658		303,276
Gross profit				180,190		207,699		584,009		615,131
Operating expenses
	Selling, general & administrative			194,250		3,981		488,401		501,144
		Total operating expenses		194,250		3,981		488,401		501,144
Income (loss) before depreciation & amortization				(14,060)		203,718		95,608		113,987
Depreciation
	Depreciation expense			(75,126)		(66,599)		(225,378)		(199,798)
Operating income (loss)				(89,186)		137,119		(129,770)		(85,811)
Other expense
	Interest expense			(78,275)		(90,535)		(255,949)		(267,364)
	Total other expense			(78,275)		(90,535)		(255,949)		(267,364)
Net income (loss) before income taxes				(167,461)		46,584		(385,719)		(353,175)
Income taxes				-		-		-		-
Net income (loss)			$	(167,461)	$	46,584	$	(385,719)	$	(353,175)
Net basic and fully diluted income (loss) per share			$	(0.001)	$	0.000	$	(0.002)	$	(0.002)
Weighted avg shares outstanding/Basic				187,443,238		174,117,482		186,882,313		166,840,797
Weighted avg shares outstanding/Diluted				216,734,771		195,838,857		216,216,791		187,842,954
The accompanying notes are an integral part of these consolidated financial statements.


FullCircle Registry, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
				For the Nine Months
				Ended September 30,
				2016		2015
Cash flows from operating activities
	Net loss		$	(385,719)	$	(353,175)
	Adjustments to reconcile net loss to net cash provided by (used in) operating activities
		Depreciation		225,378		199,798
		Stock issued for services		4,246		162,117
		Stock returned to treasury		-		(25)
	Change in assets and liabilities
		(Increase) decrease in prepaid expenses		(140)		694
		Decrease in accounts receivable		1,881		5,740
		Increase in inventory		(960)		(1,576)
		Increase (decrease) in accounts payable		8,166		(2,286)
		Increase in accrued interest		194,276		67,409
		Decrease in accrued expenses and other current liabilities		(12,283)		(156,035)
		Decrease in prepaid rental income		(13,373)		-
	Net cash provided by (used in) operating activities			21,472		(77,339)

Cash flows from investing activities
	Purchase of property and equipment			(11,331)		-
	Net cash used in operating activities			(11,331)		-

Cash flows from financing activities
	Payments on mortgage payable			-		(98,092)
	Payments on digital equipment financing payable			(98,281)		(78,752)
	Proceeds from notes payable related parties			65,827		192,252
	Proceeds from sale of common stock			5,000		62,500
	Net cash provided by (used in) financing activities			(27,454)		77,908
	Net increase (decrease) in cash			(17,313)		569
Cash at beginning of period				17,313		6,316
Cash at end of period			$	-	$	6,885

Supplemental cash flow information
Cash used for:
	Interest		$	61,673	$	199,955
Non-cash transactions
	Stock issued for services		$	4,246	$	162,117
The accompanying notes are an integral part of these consolidated financial statements.

NOTE 1. BASIS OF FINANCIAL STATEMENT PRESENTATION.

The information furnished herein was taken from the books and records of the Company without audit. However, such information reflects all adjustments, which are, in the opinion of management, necessary to properly reflect the results of the interim period presented. The information presented is not necessarily indicative of the results from operations expected for the full fiscal year.

The accompanying 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, 2015 Annual Report on Form 10-K. Operating results for the three-months and nine-months ended September 30, 2016, are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.

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 $11,024,799 and $10,634,797 as of September 30, 2016 and December 31, 2015, 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:

Raising new investment capital in the form of loans, sufficient to invest in theater operations improvements that will result in continual quarterly revenue growth until revenues are sufficient to meet operating expenses on an ongoing basis.

Leasing or developing our Georgetown 14 Cinema property, which may involve developing a portion of our parking area.

Maintaining the Company mission of minimal overhead costs while sourcing services in consulting roles to keep overhead costs 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 latter part of this 3^rd quarter was focused on installing the new management team of Jon R. Findley, CEO and Matthew T. Long, President and CFO, to replace the Company’s former President and CFO, Norman Frohreich. This new team has successfully established strong working relationships with the Company’s Board and theater staff, focused on the transition of the theater to Mr. Findley’s new “Dine-In Lite” business model. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 3. STOCKHOLDERS’ EQUITY

During the nine-month period ended September 30, 2016 the company issued an aggregate amount of 1,688,938 shares of common stock. The following is a listing of the common stock transactions.

1,000,000 shares of Common Stock were issued for $5,000 in cash, at $.005 per share, for working capital.

528,768 shares of Common Stock were issued for $2,645 or $.005 per share, for consulting services.

160,170 shares of Common Stock were issued for $1,601, or $.01 per share, for consulting services.

NOTE 4. SIGNIFICANT ACCOUNTING POLICIES

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 187,443,238 on September 30, 2016 and 185,754,300 on December 31, 2015. The common stock has one vote per share. The common stock is traded on the OTCBB (now “OTC Pink”) under the symbol FLCR.

The Company has not paid, nor declared, any dividends associated with its common stock since its inception and does not intend to declare any such dividends in the foreseeable future. The Company's ability to pay dividends is subject to limitations imposed by Nevada law. Under Nevada law, dividends may be paid to the extent that the corporation's assets exceed its liabilities and the Company can 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.

NOTE 5. SUBSEQUENT EVENT

The Company evaluated subsequent events through the date the financial statements were issued and filed with the SEC. There were no subsequent events that required recognition or disclosure.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

General Information

Where this Form 10-Q includes “forward-looking” statements within the meaning of Section 27A of the Securities Act, we desire to take advantage of the “safe harbor” provisions thereof. Therefore, FullCircle Registry, Inc., is including this statement for the express purpose of availing itself of the protections of such safe harbor provisions with respect to all of such forward-looking statements. The forward-looking statements in this Form 10-Q reflect our current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ from those anticipated. In this Form 10-Q, the words “anticipates,” “believes,” “expects,” “intends,” “future” and similar expressions identify forward-looking statements. We undertake no obligation to publicly revise these forward-looking statements to reflect events or circumstances that may arise after the date hereof. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this section. We have based these forward-looking statements on our current expectations and projections about future events, including, among other things:

Attracting immediate financing to fund new investments in theater operations targeted at increasing revenue;

Improving the number of new Hollywood releases the theater receives;

Improving the overall attractiveness and appeal of the theater to better deliver on customer expectations;

Better serving our target market and surrounding community with film scheduling and special events; and

Creating a more competitive position by transitioning to our new Dine-In Lite business model.

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. 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.

In addition to the parent company, FullCircle Registry, Inc., we previously have established subsidiaries to operate in the following business sectors: entertainment, distribution of medical supplies, insurance agency and prescription assistance services. Our entertainment subsidiary, FullCircle Entertainment, Inc. is currently our only active subsidiary, whereas FullCircle Medical Supplies, Inc., FullCircle Insurance Agency, Inc. and FullCircle Prescriptions, Inc. are currently inactive.

In 2010, within our FullCircle Entertainment, Inc. subsidiary, we purchased our first property, in Indianapolis, Indiana, that contains the Georgetown 14 Digital Cinemas. Revenues within FullCircle Entertainment, Inc. since the purchase of Georgetown 14 Digital Cinemas, were predominantly from the movie theater operations. The Company’s Board and executive team is entirely focused on movie theater entertainment as the Company’s sole primary business.

New Business Plan and Direction

Our new business plan is to create a “recipe for success” incorporating our new mission statement:

FullCircle Registry, Inc.’s, mission is to develop a more lucrative model for dine-in cinema that uniquely fits our urban market setting, offering comfortable recliner seating, international cuisine as well as popular food menu selections and film scheduling that caters to our diverse community – but without the high overhead cost of full kitchen service and in-theater wait staff.

We have actively begun our transition to this new business model and will be announcing our progress through PR newswire releases.

Funding for Theater Improvements and Operating Capital

The Company is preparing to raise funding that will be allocated specifically for theater improvements. These planned uses will be targeted to increasing revenue from increased attendance and food concessions sales.

Most of our professional consulting services have been paid for with our Common Stock. We are nearing the 200 million authorized share amount and may need to increase that level to enable us to continue to issue shares for services. We continue to monitor authorized shares in the event we need to increase shares in accordance with our Bylaws and Articles of Incorporation.

FullCircle Entertainment, Inc.

In 2010 we established FullCircle Entertainment, Inc. (“FullCircle Entertainment”) for the purpose of acquiring movie theaters and other entertainment venues.

On March 31, 2010, FullCircle Entertainment purchased Georgetown 14 Cinemas, a movie theater complex property at 3898 Lafayette Road, Indianapolis, Indiana 46224.

A summary of the Georgetown 14 acquisition follows:

The 8-acre property purchase price was $5.5 million.

The appraised value was $7.85 million.

Assumed mortgage was $5,047,841 with issuance of Company stock valued at $452,159.

15 to 22 employees depending on season.

In January 2012, we converted all of our screens to a digital format and installed 3D capability at a cost of $790,000, which we financed with a secured loan. The digital format offers a crisper view and allows the exhibition of 3D movies on three of our screens.

In late 2015, the mortgage on our property was transferred to another lender, and we negotiated a mortgage payment moratorium until July 31, 2016. For some time, revenues from theater operations have not been sufficient for us to remain current with our mortgage payments. Subsequent to September 30, 2016, as of the date of this Report we remain delinquent in payment of our real estate note, but we continue negotiations with the lender. Building theater net profits to the point where we can pay all monthly liabilities is the first milestone of the Board and the executive team. After reaching this goal, the theater will be in position to increase net profits and improve shareholder value.

During 2016, contingent on our funding status, we plan to improve our theater operations to allow us to offer:

Brighter LED lighting in our parking lot for the added security and convenience of our customers

Film festival and private party events

Dine-in cinema with new recliner seating and new food cuisine

Scheduling more Spanish language films from Hollywood and Mexico

Expanding film offerings to attract our Asian-Indian community, including Bollywood titles

Although our new “Dine-In Lite” business model, as discussed below, greatly reduces the amount of capital required to drive this transition, we remain at a pre-funding stage and currently have no contracts, agreements, or understandings for additional funding. In such an event, this may have a materially adverse effect on our business, operating results and financial condition. 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.

A portion of the building housing the Georgetown Digital Cinemas also includes a grocery store space, which we lease to an independent operator. In 2014 we renewed our lease to Save-A-Lot Stores, a grocery store operator, for another seven years with three five year options.

We received a new real estate tax assessment for 2016 that did not take into consideration our 2015 assessment adjustment so we have started the appeal process again. The Company believes it will soon confirm all possible tax adjustments so that we can better budget our annual costs in this area.

Our New Business Model for Georgetown 14 Cinemas

For several years, large theater chains such as AMC and industry start-ups like Studio Movie Grill have been reinventing the theater business – with more restaurant-style food choices and greater comfort. Audiences at an ever-growing number of “dine-in theaters” can order such dishes as chicken salad rolls or limoncello-tossed shrimp. More middle-of-the-road fare is also available, like cheeseburgers and chicken Caesar salads. Seats in these in-theater dining cinemas are big and plush. Lobbies are luxurious. A full bar is standard.

The dine-in theater business concept has been validated, with increased theater revenues following conversion to in-theater dining and quickly trending up. Different theater groups have developed different styles of food services. Some allow customers to order food and drinks throughout the movie presentation, while some limit food and beverage ordering to before the start of the film. But they all share certain similarities: 1) a complete kitchen operation, like a restaurant inside of a theater, 2) a full “meal menu”, often with higher-priced cuisine, and 3) in-theater wait staff.

FullCircle Entertainment’s business concept follows the successful growth of dine-in cinema, but we’re implementing a different strategy called “Dine-in Lite,” which is carefully designed to provide superior seating and food service, but eliminates the expense of our competitors’ restaurant-in-theater concepts.

Conversion to “Dine-In Lite”

After extensive brand name research, the Company filed for the service mark “Cinema Lounge” with the United States Patent & Trademark Office covering International Classifications 041 (movie theaters) and 043 (bar & restaurant services). The Company also owns the cinemalounge.net domain name. In early 2017, the Company will be complete the re-branding process and Georgetown 14 Cinemas begin operations as Cinema LoungeTM.

The Cinema Lounge logo will be prominently displayed on a new theater entrance façade, taking advantage of a matching grant we expect to receive from the International Marketplace Coalition. The new entrance would extend twelve feet above the current building roofline, giving the theater a recognizable identity it has lacked since its original design in 1983. Skylightsare to be affixed the top of the façade tower, broadcasting our location in a traditional “show biz” fashion.

Conversion to Recliner Seating

The Company’s plan is to convert 10 of the 14 theaters to luxury recliner seating as part of a comprehensive interior upgrade. The remaining auditoriums will stay in a stadium seating configuration to better fit the theater’s special event and film festival strategies. The seating conversion should be completed during 2017, using a roll-out schedule that reduces impact to revenue.

We are anticipating making our first order of new recliner seating near the end of 2016. Our selected seating vendor, Irwin Seating Company, builds all their extremely durable seating products in Grand Rapids, MI. Irwin clients include Regal Theaters, Cinemark and Alamo Drafthouse. They will be assisting us in theater conversion design as well as installation.

Catering Services Instead of Kitchen Facilities

A key part of our Dine-In Lite strategy is to eliminate the need of a restaurant-style kitchen while still providing a unique new dining experience. Our new menu will present unique international food items, working with popular ethnic restaurants within the International Marketplace to present theater patrons with a wider variety of innovative food choices. Select menu items from these restaurants are brought into the theater’s new International Cuisine serving area every Friday, Saturday and Sunday evening.

Bringing Theater Back to Full Operations

Georgetown Cinemas has been operating with just 11 of our 14 theaters available for film presentation. In order to cope with decreasing revenues, critical projector and related technology repairs have been postponed. The Board and executive team are committed to getting all theaters fully-functional. With all 14 theaters scheduling films, rentals or special promotional events, the Company is confident in its ability to generate revenue margins that will result from targeting newly proposed investor funding for the designated expenditures that will permit the theater to perform at its peak potential.

Our Corporate Information

Our principal executive offices are located at 1125 Summit 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.

Competition

Movie Theater Entertainment:

The motion picture exhibition industry is fragmented and highly competitive. Our theaters compete against regional and independent operators as well as the larger theatre circuit operators.

Our operations are subject to varying degrees of competition with respect to film licensing, attracting customers, and obtaining new theater sites. In those areas where real estate is readily available, there are few barriers preventing competing companies from opening theaters near our existing theater, which may have a material adverse effect on our revenues. Demographic changes and competitive pressures can also lead to a theater location becoming impaired.

In addition to competition with other motion picture exhibitors, our theaters face competition from a number of alternative motion picture exhibition delivery systems, such as cable television, satellite and pay-per-view services and home video systems. The expansion of such delivery systems could have a material adverse effect upon our business and results of operations. We also compete for the public’s leisure time and disposable income with all forms of entertainment, including sporting events, concerts, live theatre and restaurants.

The movie theater industry is dependent upon the timely release of first run movies. Ticket sales and concession sales are influenced by the availability of top producing movies. At times, our revenues are impacted by the shortage of first run movies. During the year we experience “slow” releases from the movie companies in January through March and then again during the late summer from August through October.

The theater business has changed. With the new access to movies for home viewing shortly after new releases occur more people are viewing these releases four to five weeks after the theater has shown those released. We believe that this is causing some of the decline in attendance as well as the poor movies being released. The Company’s new “Dine-In Lite” business model will fine-tune the proven dine-in cinema success model that is the future of movie theater entertainment – greater comfort with greater food selection.

Debt

We have a substantial amount of indebtedness, which may adversely affect our cash flow and our ability to operate our business. As of September 30, 2016, we have approximately $1,177,480 in unsecured notes payable. The majority of our unsecured notes are with insiders of the company and does not require any debt maintenance at this time, as interest is accrued.

We have a mortgage of approximately $4,373,001 for our property in Indianapolis and approximately $263,013 of an outstanding balance on our digital equipment lease, which is also secured.

Our amount of indebtedness could have important consequences. For example, it could:

increase our vulnerability to adverse economic, industry or competitive developments;

require a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our mortgage indebtedness, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures and future business opportunities;

increase our cost of borrowing;

restrict us from making strategic acquisitions;

limit our ability to service our indebtedness;

limit our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions or general corporate purposes;

limit our flexibility in planning for, or reacting to, changes in our business or the industry in which we operate, placing us at a competitive disadvantage to less highly leveraged competitors who may be able to take advantage of opportunities that our leverage prevents us from exploiting; and

Employees

FullCircle Registry, Inc., and its subsidiaries have employee levels generally ranging between 18 to 28 employees/officers depending on seasonal needs. We have never experienced employment-related work stoppages and focus on good relations with our personnel and are continuing to attract stronger talent.

Results of Operations

Revenues during the three months ended September 30, 2016 were $261,568 with a cost of sales of $81,378, yielding a gross profit of $180,190 or 69%. This compares to $287,858 in revenues for the same period in 2015, with a cost of sales of $80,159, yielding a gross profit of $207,699 or 72%.

Revenues during the nine months ended September 30, 2016 were $820,667, with a cost of sales of $236,658, yielding a gross profit of $584,009 or 71%. This compares with $918,407 in revenues for the same period in 2015, with cost of sales of $303,276, yielding a gross profit of $615,131 or 67%.

Selling, general, and administrative expenses during the current three-month period ended September 30, 2016 were $194,250, resulting in a loss before depreciation of ($14,060), compared to selling, general and administrative expenses during the three month period ended September 30, 2015 of $3,981, resulting in operating income before depreciation and amortization of $203,718. Operating expenses have increased in 2016 as compared to 2015, as in 2015 we received a significant credit on property tax we owed as a result of our successful property tax assessment appeal, no such credit was received in 2016.

Depreciation expense totaled ($75,126) resulting in operating loss of ($89,186) for the three-month period ended September 30, 2016. Depreciation expense in the same period in 2015 was ($66,599) resulting in an operating income of $137,119. Depreciation expense during the nine-month period ended September 30, 2016 was ($225,378), resulting in an operating loss of ($129,770). Depreciation expense in the same period in 2015 was ($199,798), resulting in an operating loss of ($85,811).

Interest expense for the three months ended September 30, 2016 was ($78,275), producing a net loss for the period of ($167,461), compared to interest expense of ($90,535), resulting in a net income of $46,584 during the same period in 2015. Interest expense during the nine months ended September 30, 2016 was ($255,949), producing a net loss for the period of ($385,719) compared to interest expense of ($267,364), resulting in a net loss of ($353,175) during the same period in 2015.

Outside the direct theater operation expenses of FullCircle Entertainment, Inc., depreciation, interest expense, SEC compliance cost for auditors, accountants, consultants and attorneys continue to be the major part of our expenses.

Liquidity and Capital Resources

At September 30, 2016 the Company had total assets of $5,083,838 compared to $5,315,979 on December 31, 2015. The Company had total assets consisting of $0 in cash, $4,227 in inventory, $26,615 in accounts receivable, $10,870 in utility deposits, $445 in prepaid expenses and $5,041,681 of net fixed assets in Georgetown 14, which includes accumulated depreciation of ($1,532,927). Total assets at December 31, 2015 consisted of $17,313 in cash, $3,267 in inventory, $28,496 accounts receivable, $10,870 in utility deposits, $305 in prepaid expenses, and $5,255,728 of net fixed assets in Georgetown 14, which includes accumulated depreciation of ($1,307,549).

At September 30, 2016 the Company had $6,522,794 in total liabilities. Total liabilities include $98,277 in accounts payable, $5,534 in accrued expenses, $428,864 in accrued interest, $37,407 in preferred dividends payable, $30,000 in notes payable, $1,147,480 of notes payable-related party, $4,501,873 of current portion of long-term debt, $139,218 in accrued property taxes and $134,141 of the long term portion of our digital equipment note.

Total liabilities at December 31, 2015 were $6,374,179, which was comprised of $90,111 in accounts payable, $13,373 in deferred income, $8,845 in accrued expenses, $234,588 in accrued interest, $33,124 in preferred dividends payable, $30,000 in notes payable, $1,081,653 of notes payable-related party, $4,477,921 of current portion of long-term debt, $148,190 in accrued property taxes and $256,374 of the long term portion of our digital equipment note.

Net cash provided by operating activities for the nine months ended September 30, 2016 was $21,472 compared to net cash used by operating activities for the nine months ended September 30, 2015 of ($77,339). During the nine months ended September 30, 2016, ($11,331) was used on investing activities, and ($27,454) was used by financing activities. For the same period in 2015, $0 was used in investing activities and $77,908 was provided by financing activities.

As of September 30, 2016 we had capital commitments of a mortgage and the digital equipment loan for $4,636,014 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.

The Company also currently owes $30,000 in notes payable and $1,147,480 in notes payable to related parties. Our auditors have expressed concern that the Company has experienced losses from operations and negative cash flows from operations since inception. We have negative working capital and a capital deficiency at September 30, 2016. As of September 30, 2016 the stockholders deficit is $1,438,956 compared to a deficit of $1,058,200 on December 31, 2015. 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 forecasted operating requirements for FullCircle Registry, Inc.

The current expansion of the Company’s business demands that significant financial resources be raised to fund capital expenditures, working capital needs, conversion of the theater into a restaurant with entertainment 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 funds to provide the necessary capital to meet the Company’s expansion needs. Management continues to negotiate with existing shareholders, financial institutions, new investors, and other accredited investors in order to obtain working capital necessary to meet current and future obligations and commitments.

Management is confident that these efforts will produce financing to further the growth of the Company. Nevertheless, there can be no assurance that the Company will be able to raise additional capital on satisfactory terms or at all.

Critical Accounting Policies and Estimates

The 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.

The Company does not anticipate that any of the recently issued Statement of Financial Accounting Standards will have a material impact on its Statement of Operations or its Balance Sheet.

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 not 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 period covered by this report 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 nine-month period ended September 30, 2016 the company issued an aggregate amount of 1,000,000 unregistered shares of common stock. The following is a listing of the unregistered common stock transactions.

1,000,000 shares of Common Stock were issued for $5,000 in cash, at $.005 per share, for working capital.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

We have been delinquent in payments on the first mortgage on our property; however, we negotiated a mortgage payment moratorium until July 31, 2016. The revenues from the theater are not sufficient for us to remain current with our mortgage payments. As of the date of this Report we are delinquent in payment of our real estate note, but we continue negotiations with the lender.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS


Exhibit
Number	Title	Location

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

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

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: November 21, 2016

/s/ Jon R. Findley

Jon R. Findley

Chief Executive Officer