GALAXY NEXT GENERATION, INC. - Quarter Report: 2016 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, 2016

OR

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

For the transition period from to

Commission file number 333-51918

FULLCIRCLE REGISTRY, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

NEVADA (State or Other Jurisdiction of Incorporation or Organization)		87-0653761 (I.R.S. Employer Identification No.)

161 Alpine Drive, Shelbyville, KY 40065

(Address of Principal Executive Offices) (Zip Code)

(502) 410-4500

(Registrant’s Telephone Number, Including Area Code)

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

Yes  X . No      .

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

Yes   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: 187,443,238 Class A common shares as of May 16, 2015.

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FORM 10-Q

FULLCIRCLE REGISTRY, INC.

Table of Contents

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PART I – FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

FullCircle Registry, Inc.
Consolidated Balance Sheets
		ASSETS
				March 31,		December 31,
				2016		2015
Current Assets
	Cash		$	7,466	$	17,313
	Inventory			3,934		3,267
	Accounts receivable, net			26,376		28,496
	Prepaid expenses			0		305
Total Current Assets				37,776		49,381
Fixed Assets
	Property and equipment			6,563,277		6,563,277
	Accumulated depreciation			(1,382,675)		(1,307,549)
Total Fixed Assets				5,180,602		5,255,728
Other Assets				10,870		10,870
TOTAL ASSETS			$	5,229,248	$	5,315,979
		LIABILITIES & STOCKHOLDERS' DEFICIT
Liabilities
	Current Liabilities
		Current portion of long term debt	$	4,477,921	$	4,477,921
		Accounts payable		98,364		90,111
		Deferred rental income		-		13,373
		Accrued property taxes		156,601		148,190
		Other accrued expenses		7,495		8,845
		Preferred dividends payable		34,606		33,124
		Note payable related parties		1,116,273		1,081,653
		Note payable		30,000		30,000
		Accrued interest		281,493		234,588
	Total Current Liabilities			6,202,753		6,117,805
	Long Term Liabilities
		Equipment note payable, less current portion		236,732		256,374
	Total Long Term Liabilities			236,732		256,374
Total Liabilities				6,439,485		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			187,443		185,755
	Additional paid-in-capital			9,398,089		9,390,532
	Accumulated deficit			(10,796,079)		(10,634,797)
		Total Stockholders' Deficit		(1,210,237)		(1,058,200)
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT			$	5,229,248	$	5,315,979
The accompanying notes are an integral part of these consolidated financial statements.

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FullCircle Registry, Inc.
Consolidated Statements of Operations
				For the Three Months
				Ended March 31,
				2016		2015
Revenues			$	248,584	$	316,079
Cost of sales				64,034		108,798
Gross profit				184,550		207,281
Operating expenses
	Selling, general & administrative			182,122		268,835
		Total operating expenses		182,122		268,835
Income (Loss) before depreciation				2,428		(61,554)
Depreciation
	Depreciation expense			(75,126)		(66,599)
Operating loss				(72,698)		(128,153)
Other expense
	Interest expense			(87,101)		(86,476)
	Total other expense			(87,101)		(86,476)
Net loss before income taxes				(159,799)		(214,629)
Income taxes				-		-
Net loss			$	(159,799)	$	(214,629)
Net basic and fully diluted loss per share			$	(0.001)	$	(0.001)
Weighted average shares outstanding - Basic				185,754,300		155,770,554
Weighted average shares outstanding - Diluted				214,882,663		175,816,184
The accompanying notes are an integral part of these financial statements

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FullCircle Registry, Inc.
Consolidated Statements of Cash Flows
				For the Three Months
				Ended March 31,
				2016		2015
Cash flows from operating activities
	Net loss		$	(159,799)	$	(214,629)
	Adjustments to reconcile net loss to net cash used in operating activities
		Depreciation		75,126		66,599
		Stock issued for services		4,245		90,324
	Change in assets and liabilities
		Decrease in prepaid expenses		305		433
		Decrease (increase) in accounts receivable		2,120		(18,295)
		(Increase) in inventory		(667)		(925)
		Increase in accounts payable		8,252		19,942
		Increase in accrued interest		46,905		18,177
		Increase (decrease) in accrued expenses		(6,312)		20,898
		Net cash provided by (used in) operating activities		(29,825)		(17,476)
Cash flows from financing activities
	Payments on mortgage payable			-		(48,027)
	Payments on digital equipment financing payable			(19,642)		(17,440)
	Proceeds from notes payable related parties			34,620		69,119
	Proceeds from sale of common stock			5,000		52,474
	Net cash provided by financing activities			19,978		56,126
	Net increase (decrease) in cash			(9,847)		38,650
Cash at beginning of period				17,313		6,316
Cash at end of period			$	7,466	$	44,966
Supplemental cash flow information
Cash paid for:
	Interest		$	40,196	$	68,299
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, 2015, Annual Report on Form 10-K. Operating results for the three months ended March 31, 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 $10,796,079 and $10,634,797 as of March 31, 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:

·

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.

·

Leasing our Georgetown 14 Cinema, or selling or developing a portion of its parking area.

·

Locating and merging with other profitable private companies where the owners are seeking liquidity and exit plans.

·

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 accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 3. STOCKHOLDERS’ EQUITY

During the three-month period ended March 31, 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 at $.01 per share, or $1,601.70 for consulting services.

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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 March 31, 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 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:

·

Attracting immediate financing;

·

Merging with or acquiring profitable private businesses.

·

Delivering a quality product that meets customer expectations;

·

Obtaining and expanding market acceptance of the products we offer; and

·

Competition in our market.

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.

Our Current Business:

Our current business plan targets the acquisition of small profitable businesses with the following mission statement:

FullCircle Registry, Inc.’s, mission is to provide exit capabilities for small to medium sized private profitable, companies through acquisition, to improve our stockholder value while leaving those companies autonomous where possible to continue to be managed by the team that founded them, and subsequently providing liquidity and increased returns for the founder(s).

We have entered the “analysis” and “selection” phase of our M&A activities and will be announcing any progress through PR newswire releases.

New Business plan and new direction

In recent years we have established four operating subsidiaries.   In addition to the parent company, FullCircle Registry, Inc., we have established companies to operate in the following business sectors: distribution of medical supplies, entertainment, insurance agency and prescription assistance services. In 2010 we purchased our first property, in Indianapolis, Indiana, that contains the Georgetown 14 Digital Cinemas.  Revenues for 2011, 2012, 2013, 2014 and 2015 were predominantly from the movie theater operations. Our medical supplies distribution company, FullCircle Medical Supplies, Inc., plans to commence operations in 2016 when funding is available.  FullCircle Insurance Agency, Inc. and FullCircle Prescriptions, Inc. are currently inactive, pending national economic improvements and changes in the healthcare sector.

Funding for acquisitions, theater improvements and operating capital

In July 2015 we entered into discussions with Local Initiatives Support Corporation (“LISC”) for the purpose of receiving funding assistance for the business model change of our theater in Indianapolis.  Additional information regarding those activities is reported under “New direction business model for Georgetown 14 Cinemas,” below.

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We continue to receive additional requirements to qualify for consideration of funding from LISC.  We have accomplished all of those demands and are in the final stages of revising the application and pro formas to include those revisions.  We have been informed that our application should proceed to the LISC committee in June for its recommendation to LISC corporate offices.  This has been a very difficult process as there has been no assistance on how to proceed with the application process.  There are specialists that perform these functions for companies; however, FullCircle does not have sufficient capital to hire these services so our CEO has had to perform these application revisions himself along with the tax appeal process, SEC filings and the general management of the Company.

Our CEO met with our property mortgage holder and was able to obtain a mortgage payment moratorium until July 31, 2016 when it is expected that our LISC funding application will be resolved.

It is our intent to lease the theater once the funding and theater conversion is completed.  

FullCircle Entertainment, Inc.

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

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

A summary of the Georgetown 14 acquisition follows:

·

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

·

The appraised value was $7.85 million.

·

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

·

20 employees.

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

In 2012 we renegotiated the mortgage on the property, resulting in a reduction of ¾ percentage point in the interest rate. In March 2013 we again renegotiated the mortgage, resulting in a further reduction of 1/4 percentage point.

Our mortgage currently is currently at a 4 ¾ % interest rate.  Due to the decline in movie revenues and related decline in operating cash flows, in 2015 it was difficult for us to maintain the current level of principal and interest payments.  On July 31, 2015, we entered into a change in terms agreement with our lender whereby our lender agreed to modify our payment schedule from a monthly fixed principal and interest payment in the amount of $34,435 to interest only payments beginning with payment due date of June 15, 2015 thru November 15, 2015.  The normal payment of principal and interest of $34,435 was to resume on December 15, 2015.

In late 2015, the mortgage on our property was transferred to another lender, and recently we have negotiated a mortgage payment moratorium until July 31, 2016 expecting that our funding application with LISC will be resolved by then.

During 2013 we increased pricing of our tickets and concessions to be in line with other competing full service digital theaters in our area.

We also developed a new web page for the Georgetown 14 Digital Cinemas allowing for a more complete patron information center. The new site is: www.georgetowncinemas.com. Our patrons can now find us on Facebook and Twitter, and sign up for our weekly newsletter keeping them informed about the upcoming movies and news about our Georgetown improvements and community events.

In 2013, we began an upgrade to the Georgetown 14 Digital Cinemas; with more signage and a complete remodel of our concession and lobby areas, as well as new employee uniforms. Funding for these improvements has been difficult, but we have managed to begin the process with the assistance from major stockholders.  We plan to install new furniture, which will allow a place for our patrons to meet and enjoy our enhanced concession menu, as well as enjoy our new WiFi hot spots throughout the theater.

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We launched a gift card program as well as a Customer Rewards program.  Since its inception in January 2014 more than 500 patrons have enrolled in the Customer Rewards program.  This will allow us to identify the zip codes of our patrons, so that we can target specialized marketing materials and monitor our growth outside our immediate area.

We also added uniformed security from dusk to close, and increased our management compensation to be more commensurate with other local theaters.  We also improved our maintenance operations to improve the patron experience.

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

·

Free viewing of U.S. popular sporting events, such as the Major League Baseball World Series, NFL playoffs, NCAA Basketball and Football playoffs and NBA playoffs.  These would be primarily marketing events to increase concession revenue.

·

Viewing of popular international sporting events, to serve our local international community.

·

Business meetings requiring high-speed internet upload and download capabilities

·

Private party functions

·

Adult beverages and in-theater dining

·

New recliner seating

During 2015, nationwide theater revenues were down compared to the preceding year, due principally to a series of poorly reviewed and disappointing movies that were released.  Because of the first run movies that are predominately class B movies, we experienced a further decline in attendance.  Our first quarter ticket sales and concession revenues dropped by 26.5% compared to the first quarter 2015.

The quality of the movies during the quarter has been disappointing; however the industry as a whole is expecting some improved releases in June and July.

In early 2014 we received a letter of intent for the purpose of leasing our Georgetown 14 Theater.  We negotiated and accepted reasonable terms of a lease and after six months the company vacated the LOI.  Their broker informed us that they were unable to obtain the funds necessary for their planned $2.5 million conversion of the theater.  

In October 2014 we once again returned to seeking a theater company to lease or purchase our property. Those conversations continued throughout 2015 and remain active at the time of this filing.  We continue to discuss leasing opportunities with major theater companies.  Several have visited but have declined due to the high crime image in our area next to the Lafayette Square Mall, which is predominately vacant and in disrepair.

Provided that we are successful in acquiring funding and completing the conversion into a dine-in theater we believe that we will become attractive to a major movie theater company for the purpose of leasing our remodeled facility.

No assurances can be made as to the success of our plan to lease or sell the property; however we have paid down our mortgage by approximately $800,000 since the acquisition of the property in 2010, so should this occur we would be in a better financial position to be able to refinance our mortgage and be able to use some of our equity for working capital.

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.  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.

Our theater General Manager elected to retire and relocate to Idaho during the March Quarter. Currently the theater and property is being managed by the FullCircle CEO and we are reviewing candidates to hire a new general manager.

Recently we received notification that our appeal for the property tax assessment was approved. This appeal reduced our annual property tax payments by $46,087 to $38,000 for the 2015 assessment year.

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We received a new assessment for 2016 that did not take into consideration our 2015 assessment adjustment so we have started the appeal process again. Working on these appeals for each year since 2011 is extremely time consuming and frustrating.  Due to the degree of difficulty working with a bureaucracy requires engaging an experienced tax attorney. Given that there is insufficient funding to hire those services the CEO has been required to perform all of those appeals since 2011. The savings has been substantial with approximately $240,000 in tax savings with the 2016 appeal remaining.

New direction business model for Georgetown 14 Cinemas

The cost of renting movies from studios and filmmakers continues to increase. In addition, the quantity of major new releases each week has declined. In general, we do not receive the best first run movies anymore.

On the other hand, the casual restaurant business has been on the upswing in recent years, and consumer demand for restaurant meals has increased.

Because of these trends, we have been attempting to refinance the theater or acquire other funding to finance the conversion of the theater into an “In-Theater Dining” experience and replace the stadium seating with recliner lounge seating.  As a result of changes in Hollywood’s direction and the popularity of Netflix and other movie aftermarket activity, the theater business model is changing, and many theater companies are starting to convert to enhanced food and beverage services. In addition, many theaters are transforming their auditoriums to luxury reclining seating.    Fortunately, as of this date only two theaters in our marketplace have converted. Studio Movie Grill converted a facility 10 miles from us to full in-dining services and Circle Center has converted to just luxury recliners. We believe that we need to move quickly to protect our investment.

We believe we have an ideal theater footprint for us to do a complete conversion, including a nice area for a lounge and a lobby large enough to install a food or beverage destination area as well.  The plan would be to convert the smallest auditorium into a kitchen. In our phase one plans we would convert four auditoriums into luxury recliner seating and begin serving an expanded menu and beverages.  In phase two more theaters would be converted as well.

Because of the improved performance in the casual restaurant sector in past years, we believe that this trend will continue. Economically, if a person and their spouse want to do a dinner and a movie it takes about four hours to do and if they have children the babysitting cost is very high.  Combining the theater and the restaurant reduces the time to about two hours and becomes more economically attractive.

Since October 2014 we have been working with agencies that are involved in economic development in the depressed areas of Indianapolis.  We have had two meetings with representatives of the Mayor of Indianapolis, and a meeting with former Mayor Ballard on July 28th 2015. The Mayor’s office introduced us to Local Initiatives Support Corporation (“LISC”), which provides grants and financing for redevelopment of urban commercial properties and we are requesting a grant to provide the funding to convert the theater.  Indianapolis has expressed interest in improving the Georgetown 14 area, and members of the city’s economic development staff are assisting us in our campaign.  Our applications for the conversion grant and the refinancing of the property have been submitted.  

The area has been economically damaged by the problems with the Lafayette Square Mall, adjacent to us, along with the recession. Currently, Lafayette Square Mall is less than 50% occupied. LISC is interested in helping the area to improve the business climate and begin a recovery. Another mall area, Lafayette Shoppes, which is adjacent to our property, has also experienced a decline in tenants. Currently that center’s shops are only 50% occupied.

Among other activities, we have been engaged in a property tax appeal since May 2012 to correct our valuations, back to 2011.  In late August we made a presentation to the Tax Review Board of Marion County for the purpose of evaluation of our historical assessments and taxes on the theater property.  We won this appeal and we have received credits of $190,000 dating back to the assessments in 2011.  We have engaged in a payment plan to clear the remaining property tax balance in monthly payments of $4,010 per month through June of 2016.  We are still in the process of appealing the 2014 and 2015 assessments.

Since we have resolved the valuation and tax issues, we became cleared to submit our LISC application.  All of the required information, financial history and pro formas, along with details of the five phases of our plan, have been submitted to LISC.

If we receive a favorable response from LISC, it is our goal that LISC would provide the funding for the theater conversion and upgrade.  We are requesting funds sufficient to complete the conversion of half the theater.  Our pro forma with the conversion is estimated to take our FullCircle Entertainment revenues to the $2.7 to $3.0 million level in the first year after conversion, which would be more than double our current revenue.  Performances of other existing theaters that have made this conversion have had even greater percentages increases. Of course, these pro forma estimates depend on a number of assumptions.

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No assurances can be made at this time as to the success of our plan to acquire the funding and lease or sell the property.

Subsequent to December 31, 2015 on February 20, 2016 we received a Letter of Intent (LOI) for the purpose of purchasing a portion of our parking lot.  The LOI purpose is to use the south end of the parking lot for a mixed-use building housing retail shops and millennium apartments.  At this time the developer is engaged in a feasibility study.  If this purchase for the development moves forward it will provide some working capital as well as improve the value of our remaining property.  The area being discussed is about one acre in size.

Recently, on May 2nd we received a support letter from the Director of the International Marketplace Coalition, which was one of the requirements from LISC for us to complete our application requirements.  This allows us to now proceed to committee action for our funding application.

FullCircle Medical Supplies, Inc.

In 2013 we established a new company, FullCircle Medical Supplies, Inc. (“FullCircle Medical”), for the purpose of entering into the durable medical equipment (“DME”) supply business sector, for the purpose of acquiring medical supply businesses and other related medical supply services in the Sun Belt states.

At the time we started to move into the DME acquisition direction we believed that the theater would be leased out which would free up our time and financial resources to begin that project.  Unfortunately this company development had to be placed on hold until we can get out from under the financial burden of the theater.

Our current plan is to acquire or establish DME businesses throughout the state of Louisiana with up to twelve DME locations, utilizing centralized warehousing, billing, and purchasing, and to provide all related DME services in each location.

Acquiring these businesses and covering the whole state should provide:

·

Economies of scale, reducing costs of inventory and operational expenses

·

Central warehousing, providing prompt supply to all stores and internet sales, and reducing obsolete inventory write-downs

·

Smaller vehicle fleets

·

Improved buying power by purchasing in volume

·

Reduced insurance expense

·

Improved individual store web sites

·

Internet marketing allowing the stores to reach out to the entire country with product catalogues and shopping carts

·

Social media marketing

·

Centralized billing and insurance claim processing

·

Improved receivables controls

·

Increased selection of products

·

Operational synergies between all stores

·

Improved margins and profitability

Once we can begin we are considering several existing DME businesses, with an average of approximately $1.1 million in revenues. At such time as we complete some acquisitions, we plan to employ a state manager with experience in the medical supply industry to supervise the managers of the purchased stores and to manage the operations in the state.  

We have signed consulting agreements with two Acquisition Managers for the purpose of assisting in our acquisition process in Louisiana and South Carolina and to assist the CEO in the due diligence requirements necessary to determine each DME’s suitability to become part of our mission.

Many of these businesses are still owned by their founders, who are looking for an exit strategy to realize a gain for their life’s work. Most have employees with ten to fifteen years’ experience, who are solid contributors to these businesses.  Most are contributors to civic activities in their communities, which provides them a business connection within their marketing area.  Our intent is to allow them to continue to operate autonomously, to continue to be profitable, and to improve net income with increased product selection, improved synergies, and Internet and social media exposure. We have entered the “analysis” and “selection” phase of our acquisition activities, and our executives have made multiple trips to Louisiana for the purpose of collecting and analyzing information, reviewing each business, observing employees, and understanding the focus and strengths of each business. In some cases we are negotiating letters of intent for these proposed acquisitions, and in the process of financial evaluations of those businesses.

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Typically, most DME businesses do not market on the Internet and many do not have websites. Once we complete the first acquisition, we plan to create a web site introducing a products catalogue and shopping cart.  As acquisitions continue, we plan to “clone” the website for each location, connecting to our products catalogue and shopping carts.  This would allow each DME to market nationally as well as internationally and ship out of a central warehouse.  We believe that revenues from these businesses can be expanded by approximately 50% over the first two-year period through Internet and social media marketing.

In general, applicable SEC rules require that the financial statements of these businesses be audited by an independent certified public accountant, so the purchase of these businesses cannot be completed until the auditors complete the audit and provide their opinion.

Candidates to operate the proposed Louisiana company have been interviewed and, following acquisition of DME companies in the state, will be phased in with consulting arrangements and eventually assume management positions in the company. We believe our consultants will assist in providing a full range of products and services for each market.

Once we establish consolidated operations in Louisiana, and the infrastructure and operations are tested and functioning, we plan to utilize this same rollup approach in additional southern states.

FullCircle Insurance Agency, Inc.

The FullCircle Insurance Agency, Inc. was founded in August 2008, but is currently inactive.  In the past few years the insurance industry has experienced difficulties flowing from the financial problems of AIG and other major industry players, and the enactment of the Affordable Care Act has produced significant uncertainty in the healthcare insurance field.  Until these matters are stabilized, we have placed operations of this company on hold.   We believe that this industry will thrive once the Affordable Care Act is fully implemented, improved, and finalized. Increased agency knowledge and professionalism will be necessary to help businesses and individuals understand the new laws.   We believe there are opportunities to “roll up” several local agencies into regional agencies, for economies of scale in providing these professional services.

FullCircle Prescription Services, Inc.

FullCircle Prescription Services, Inc. was established for the purpose of handling our prescription assistance services program. Its mission is to assist consumers in finding medications at discounted rates worldwide in our “Shop the World” program. When it becomes operational, FullCircle Prescription Services, Inc. will not dispense any medications nor handle any prescriptions, but will function only as a customer assistance program.

Until a more favorable political climate exists we have placed the marketing efforts for the advancement of FullCircle Prescription Services, Inc. on hold.  Up until 2009 the political trend was to support the re-importation of generic drugs to assist in combating the increasing expense of prescription medications most importantly for senior citizens.  However, since that time the political trend has reversed largely influenced by large pharmaceutical companies.  The U.S. Government currently disfavors the re-importation of generic drugs manufactured by U.S. companies, which is essential to the business strategy of FullCircle Prescription Services, Inc. Pending a change in this policy, we are still operational but have elected to not expend any operational or marketing funds at this time.

Our Corporate Information:

 

Our principal executive offices are located at 161 Alpine Drive, Shelbyville, Kentucky, 40065, and our telephone number is (502) 410-4500. Our current website address is www.fullcircleregistry.com.  Our website and the information contained therein or connected thereto shall not be deemed to be incorporated into this report.

SEC Compliance and Regulations:

The requirements for regulatory compliance continue to be difficult.  The HTML and the XBRL filing format are now both required by the SEC, which is expensive.  FullCircle has been filing in both formats for the last two years.   Both formats can be viewed on our web page under the Announcements Tab per SEC rules.

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.

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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.  

We plan to expand into the exhibition of live sporting events such as world soccer, cricket, and possibly NFL playoff games and the World Series to provide large screen viewing of these sporting events.  We are also taking an aggressive posture to expand into business conference sessions during “dead” screen time to facilitate the anticipated increase in demand for “upload and download” communication with enhanced WiFi and dish communication systems.

The theater business is changing.  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.

A new business model is emerging.  We have witnessed a theater in the Indianapolis market do a theater conversion to provide VIP seating (luxury recliners), and serve food and adult beverages in the auditoriums during the movie.  This theater was converted and we can see that it experienced a 700% increase in revenues since 2013.  Another theater converted to recliner seating without a kitchen and has experienced a 300% increase in ticket sales since December 2014.  We are working in the direction to provide this capability. Given the limited capital we cannot convert the whole theater but may be able to accomplish one or two auditoriums at a time.

Durable Medical Equipment  (DME):

The durable medical equipment supply business is highly fragmented, consisting mainly of local pharmacies, small pharmacy chains, and local distributors and retail outlets. As a result, the business is not overly price competitive, and prices are generally comparable market to market and state to state.  Pricing is predominantly controlled by insurance companies and by Medicare / Medicaid reimbursement policies.  Revenue improvement depends on additional services and improved marketing.  According to Forbes Magazine, in 2012 the medical supply business was the second most profitable of the top 20 small businesses in the United States.

Successful medical supply businesses are profitable because the founders or managers devote their attention to customer service and inventory management, to ensure quick delivery to their patrons.  We plan to maintain this performance in businesses we acquire

Recently, Medicare has developed a competitive bidding process in larger cities that is squeezing margins of many DME businesses. We believe this trend will continue, and consequently will require better management and control of expenses to maintain profitability. We believe this situation will provide us an opportunity to acquire some of these businesses, and to provide the synergies to remain competitive and improve profits.

Debt:

We have a substantial amount of indebtedness, which may adversely affect our cash flow and our ability to operate our business. As of December 31, 2015, we have approximately $1,112,000 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 $4,373,000 for our property in Indianapolis and $351,653 in the outstanding balance on our digital equipment lease, which is also secured.

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

·

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

·

result in an event of default if we fail to satisfy our obligations with our mortgage, which requires debt maintenance of $34,434 per month after our July 31, 2016 moratorium expires.

·

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

·

prevent us from raising the funds necessary to proceed with planned acquisitions in our Medical Supplies business model. 

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 for the Three-Month Periods Ended March 31, 2016 and 2015.

Revenues during the three months ended March 31, 2016 were $248,584 with a cost of sales of $64,034, yielding a gross profit of $184,550. This compares to $316,079 in revenues for the same period in 2015, with a cost of sales of $108,798, yielding a gross profit of $207,281.

Selling, general, and administrative expenses during the current three-month period ended March 31, 2016 were $182,122, resulting in an income before depreciation of $2,428, compared to selling, general and administrative expenses during the three month period ended March 31, 2015 of $268,835, resulting in operating loss before depreciation and amortization of $61,554.

Depreciation expense totaled $75,126 resulting an operating loss of $75,126 in the three-month period ended March 31, 2016. Depreciation and amortization expense in the same period in 2015 was $66,599 resulting in an operating loss of $128,153.

Interest expense for the three months ended March 31, 2016 was $87,101, producing a net loss for the period of $159,799, compared to interest expense of $86,476, resulting in a net loss of $214,629 during the same period in 2015.

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

The theater industry typically loses money during the first quarter because there are fewer new films released and many people are recovering from the expense of the holiday season at the end of the previous year.

Liquidity and Capital Resources

At March 31, 2016 the Company had total assets of $5,229,248 compared to $5,315,979 on December 31, 2015. The Company had total assets consisting of $7,466 in cash, $3,934 in inventory, $26,376 in accounts receivable, $10,870 in utility deposits, $5,180,602 of net fixed assets in Georgetown 14, which includes accumulated depreciation of $1,382,675. 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 prepaid expenses, $5,255,728 of net fixed assets in Georgetown 14, which includes accumulated depreciation of $1,307,549.

At March 31, 2016 the Company had $6,439,485 in total liabilities. Total liabilities include $98,364 in accounts payable, $7,495 in accrued expenses, $281,493 in accrued interest, $34,606 in preferred dividends payable, $30,000 in notes payable, $1,116,273 notes payable-related party, $4,477,921 current portion of long-term debt, $156,601 accrued property taxes, $236,732 digital equipment note.

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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 accrued expenses, $234,588 accrued interest, $33,124 in preferred dividends payable, $30,000 in notes payable, $1,081,653 note payable related party, current portion of long term debt $4,477,921, accrued property tax of $148,190, digital equipment note $256,374.  

Net cash used by operating activities for the three months ended March 31, 2016 was $29,825 compared to net cash used by operating activities for the three months ended March 31, 2015 of $17,476. During the three months ended March 31, 2016, $0 was used on investing activities, and $19,978 was provided by financing activities. For the same period in 2015, $0 was used in investing activities and $56,126 was provided by financing activities.

As of March 31, 2016 we had capital commitments of a mortgage and the digital equipment loan for $4,714,653 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 $30,000 in notes payable and $1,116,273 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, 2016. As of March 31, 2016 the stockholders deficit is $1,210,237 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 forecast 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, 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.

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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 three months ended March 31, 2016 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, 2016 the company issued the following unregistered shares:

1,528,768 shares of Common Stock were issued for $7,646, or $.005 per share.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None

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

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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 20, 2015

/s/ Norman L. Frohreich

Norman L. Frohreich

President

Chief Executive Officer

Chief Financial Officer

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