ITEM 1. Business.
History:
Our initial business began in 2000 with the formation of FullCircle Registry, Inc (“FullCircle” or the “Company”). We were a technology-based business that provided emergency document and information retrieval services. 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 business plan is to target 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).
FullCircle Registry, Inc. is a holding company with four subsidiaries. They are FullCircle Entertainment, Inc., FullCircle Medical Supplies, Inc., FullCircle Insurance Agency, Inc. and FullCircle Prescription Services, Inc. FullCircle Medical Supplies, Inc., has one subsidiary, FullCircle Louisiana Medical, Inc.
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:
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The 8-acre property purchase price was $5.5 million.
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The appraised value was $7.85 million.
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Assumed mortgage was $5,047,841 with issuance of Company stock valued at $452,159.
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24 employees.
In 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.
During 2013 we increased pricing of our tickets and concessions to be in line with other competing full service digital theaters in our area; however, we remain the most competitive theater 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 planned 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. The progress has been slower than expected because of the shortage of stronger movies in 2013 and 2014.
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 2015 we plan to improve our theater operations to allow us to offer:
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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.
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Viewing of popular international sporting events, to serve our local international community.
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Business meetings requiring high-speed internet upload and download capabilities
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Private party functions
During 2014, nationwide theater revenues were down compared to the preceding year, due principally to a series of poorly reviewed and disappointing movies that were released during this period. We experienced a decline in attendance, so our ticket sale and concession revenues were below 2013 levels by 18.9%.
A portion of the building housing the Georgetown Digital Cinemas also includes a grocery store space, which we lease to an independent operator. The lease was set to expire in 2014, and in March 2014 we renewed the lease to Save-A-Lot Stores, a grocery store operator, for another 7 years with three 5-year options.
Our theatre operations are under the supervision of our General Manager who is responsible for overseeing the day-to-day operations of our controls, company procedures, company policies, film scheduling, employee training and scheduling.
The majority of our revenues come from the sale of movie tickets and concessions. For the year ended December 31, 2014, box office admissions and concession sales were approximately 81.9% of total revenues. We license our movies from distributors owned by the major studios. In 2014 our film rental expense constituted 58% of our ticket sales, leaving 42% for overhead and operating expenses.
Most of the tickets we sell are sold at our theatre box offices immediately before the start of a film. Patrons can also buy tickets in advance on the Internet.
Our strategy emphasizes quick and efficient service in our concession stand built around a limited menu, primarily focused on higher margin items such as popcorn, soft drinks, flavored popcorn, candy, frozen drinks, hot dogs, pizza and pretzels. Our concession inventory is purchased from a local supplier. We are attempting to upgrade to digital menu boards. We believe that the installation of these menu boards will enhance customer service and may lead to incremental concessions revenue.
We plan to expand our food and beverage menus, including the sale of alcoholic beverages in the future, as well as a rollout of other theatre dining options, if funding is available.
Typically, movie studios release films with the highest expected revenues during the summer and the holiday period between Thanksgiving and Christmas, causing seasonal fluctuations in revenues. Our slow season is January and February, usually because of weather, and August through October.
We believe that it is important to build patron loyalty through enhancing the benefits received by attending our theatre. We are finalizing our loyalty program where members earn points based on admissions and concessions purchases. Upon achieving designated point thresholds, members are eligible for specified awards, such as admission tickets, concession items and theater logo shirts and hats.
We obtain licenses to exhibit films by using our booking agent to negotiate directly with film distributors. Our booking agent is located in Greenfield, Indiana and is familiar with our demographics. Prior to negotiating for a film license, our booking agent evaluates the prospects for upcoming films, applying criteria such as cast, director, plot, and performance of similar films, estimated film rental costs and expected revenues. Because we only license a portion of newly released first-run films, our success in licensing depends greatly upon the availability of commercially popular motion pictures, and the preferences of patrons in our market and insight into trends in those preferences.
The top ten movies for ticket sales for us in 2014 year were:
1.
Ride Along
2.
Teenage Mutant Ninja Turtles
3.
Dawn of the Planet of the Apes
4.
The Lego Movie
5.
No Good Deed
6.
Age of Transformers
7.
X-Men
8.
The Amazing Spider-Man 2
9.
Think Like a Man
10.
Rio 2
Negative economic conditions have adversely affected our business and financial results by reducing amounts consumers spend from expendable dollars on attending movies and purchasing concessions.
Our business depends on consumers voluntarily spending discretionary funds on leisure activities. Movie theatre attendance and concessions sales may be affected by prolonged negative trends in the general economy that adversely affect consumer spending.
Our customers may have less money for discretionary purchases because of negative economic conditions such as job losses, foreclosures, bankruptcies, sharply falling home prices, reduced availability of credit and other matters, resulting in a decrease in consumer spending or causing consumers to shift their spending to alternative forms of entertainment. This may affect the demand for movies or severely impact the motion picture production industry such that our business and operations could be adversely affected.
In 2013 and 2014 we have invested over $200,000 in upgrades to the building in Indianapolis. More work is necessary but we believe that the facility is in better condition than during recent years. Most of the funding for our upgrade project is being supplied by our largest shareholders.
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.
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 of Louisiana should provide:
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Economies of scale, reducing costs of inventory and operational expenses
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Central warehousing, providing prompt supply to all stores and internet sales, and reducing obsolete inventory write-downs
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Smaller vehicle fleets
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Improved buying power by purchasing in volume
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Reduced insurance expense
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Improved individual store web sites
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Internet marketing allowing the stores to reach out to the entire country with product catalogues and shopping carts
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Social media marketing
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Centralized billing and insurance claim processing
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Improved receivables controls
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Increased selection of products
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Operational synergies between all stores
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Improved margins and profitability
We are currently 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 operations in the state.
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.
We are engaged in several acquisition negotiations, however, these negotiations have been delayed because of the severe drop in the market price of our stock.
We have received press coverage from HME (Home Medical Equipment) News that released an online article about us which was also published in the April issue of HME news. We have received inquiries from Louisiana from that article.
In March we released a 130 piece mailing to the DME owners in Louisiana. We have positive results from that mailing and are responding to each. Another mailing is scheduled to go out in May. Another visit to Louisiana is being scheduled to meet with the new candidates.
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 approach in additional southern states.
We plan to finance acquisitions of DME companies either by issuance of our Common Stock or Preferred Stock, cash, notes or a combination of them. We plan to raise cash to finance these acquisitions through borrowings or a private placement of Common Stock to accredited investors of up to $1.5 million. In addition, we are engaged in discussions with several companies that operate for the purpose of providing alternative funding solutions, as well as with major alternative lending companies for larger commitments that are expected to materialize once the acquisition process begins. These sources will fund as acquisitions occur providing discounted conversations formulas with our Common Stock.
We have not completed any acquisitions at this time because of our current stock price and because of funding.
During 2014 we signed an agreement with Kodiak Capital for the purpose of acquiring equity funding to proceed with our acquisition plans. Subsequent to December 31, 2014 we exercised a put for $100,000 in funding to begin the process of accessing $1.5 million in funding.
Because of the immediate drop in our stock price our put for funding only resulted in funds of $47,500, because Kodiak Capital reached their limit of 9.9% of our Common Stock.
Because of our current share price we are not able to continue our funding plans with Kodiak Capital until our share price returns to reasonable levels.
We believe that individuals or institutions that are engaged in a shorting process targeted us because of our very low float as well as our limited liquidity.
On April 2, 2015 we announced that we engaged Innovative Marketing to assist in disseminating information about the mission of our company and to assist in attracting more investors to increase our stockholder base, improve our stock price and provide additional liquidly of our stock in the market.
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 re-importation of generic drugs manufactured by U.S. companies, which is essential to the business strategy of FullCircle Prescription Services, Inc., is currently disfavored by the U.S. Government. Pending a change in this policy, we are still operational but have elected to not expend any operational or marketing funds at this time.
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.
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.
Durable Medical Equipment :
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 country.
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. Initially, we plan to work in the more rural markets, which do not have competitive requirements from Medicare like New Orleans and Baton Rouge.
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, 2014, we have approximately $866,311 in unsecured notes payable. The majority of our unsecured notes is with insiders of the company and does not require any debt maintenance at this time, as interest is accrued.
We have a mortgage of $4,473,885 for our property in Indianapolis and $454,256 in the outstanding balance on our digital equipment lease, which is also secured.
Our amount of indebtedness could have important consequences. For example, it could:
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increase our vulnerability to adverse economic, industry or competitive developments;
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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.
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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;
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increase our cost of borrowing;
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restrict us from making strategic acquisitions
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limit our ability to service our indebtedness;
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limit our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions or general corporate purposes;
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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
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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 ranging between 20 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.
ITEM 1A.
ITEM 1A. Risk Factors
As a “smaller reporting company” we are not required to respond to this item.
ITEM 1B.
ITEM 1B. Unresolved Staff Comments
As a “smaller reporting company” we are not required to respond to this item.
ITEM 2.
ITEM 2. Properties
Our principal executive offices are located at 161 Alpine Drive, Shelbyville, KY 40065. Our telephone number is 502-410-4500. Our office consists of approximately 1,200 square feet of office space, leased for $750 per month on a month-to-month basis. We have elected to maintain a month-to-month agreement should acquisitions dictate the moving of our corporate offices.
We also own the Georgetown 14 Digital Cinemas movie complex located in Indianapolis, Indiana. The property currently houses a 14 movie theatre complex, which is owned and operated by us. A portion of the building housing the Georgetown Digital Cinemas also includes a grocery store space, which we currently renewing with Save A Lot to expire in 20 years.
ITEM 3.
ITEM 3. Legal Proceedings.
We are not currently subject to any material pending legal proceedings.
ITEM 4.
ITEM 4. Mine Safety Disclosures.
Not applicable.
PART II
ITEM 5.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common stock trades on the OTC Bulletin Board, or OTCBB, under the trading symbol FLCR.
The following table sets forth, for the periods indicated, the high and low closing prices as reported by OTCBB for our common stock for fiscal years 2013 and 2014 and the latest information during the first quarter 2015. The OTCBB quotations reflect inter-dealer prices, without retail mark-up, markdown or commission and may not represent actual transactions.
High
Low
Close
First Quarter
0.0465
0.0035
0.007
First Quarter
0.07
0.028
0.036
Second Quarter
0.060
0.02
0.02
Third Quarter
0.03
0.015
0.0225
Fourth Quarter
0.0465
0.015
0.0465
First Quarter
0.10
0.01
0.083
Second Quarter
0.083
0.025
0.035
Third Quarter
0.07
0.028
0.07
Fourth Quarter
0.07
0.03
0.04
From Yahoo Finance
We have never declared or paid any cash dividends on our common stock and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. The payment of dividends, if any, in the future is within the discretion of our Board of Directors and will depend on our earnings, capital requirements and financial condition and other relevant facts. We currently intend to retain all future earnings, if any, to finance the development and growth of our business.
The number of record holders of our common stock at March 31, 2015 was approximately 630.
ITEM 6.
ITEM 6. Selected Financial Data
As a “smaller reporting company” we are not required to respond to this item.
ITEM 7.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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 added companies 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 and 2014 were predominantly from the movie theater operations. Our medical supplies distribution company, FullCircle Medical Supplies, Inc., plans to commence operations in 2014. FullCircle Insurance Agency, Inc. and FullCircle Prescriptions, Inc. are currently inactive, pending national economic improvements and changes in the healthcare sector.
Results of Operations
Revenue:
Revenues during the year ended December 31, 2014 were $1,497,813 with cost of sales of $589,176 yielding a gross profit of $908,637, 60.7% of revenue. This compares to revenues of $1,883,837 with cost of sales of $748,341 yielding a gross profit of $1,135,496, 60.3% of revenue, for the same period in 2013.
During the 2014 year nationwide theater revenues were down compared to the preceding year, due principally to a series of poorly reviewed and disappointing movies that were released. We experienced a decline in attendance, so our theater revenues were below 2013 levels by 18.9%. In addition to the less popular movies we continue to be impacted by the poor economy in the theater’s area. Although the nation has begun to show signs of recovery, the expendable incomes with the people in this area have not improved.
Selling, general, and administrative expenses during the year ended December 31, 2014 were $957,831 resulting in a loss before depreciation and amortization of $49,194 Depreciation and amortization expense totaled $261,962, resulting in an operating loss of $311,156. Other expenses, including interest expense was $342,272, resulting in a net loss of $653,428. In 2013, selling, general, and administrative expenses were $977,036, resulting in income before depreciation and amortization of $158,460. Depreciation and amortization expense totaled $290,212, resulting in an operating loss of $131,752. Other expenses, including interest expense totaled $316,350, resulting in a net loss of $448,102.
Non-cash expenses during the year ending December 31, 2014 were $394,137, including depreciation expense of $261,962, and stock issued for services of $132,175. Non-cash expenses during the year ending December 31, 2013 were $431,040, including depreciation expense of $247,190, amortization expense of $43,022, and stock issued for services of $140,828.
Our 2014 revenues were down from 2013. Our 2015 revenues are expected to improve because the economy around the theater is expected to improve as unemployment is starting to drop in the area. However, we remain dependent on first run releases from the movie companies to generate revenues from the theater. Providing that funding is obtained in 2015, additional revenues could occur from acquisitions in the DME business sector.
Legal, Accounting, Amortization and Depreciation Expenses:
A large portion of our 2014 parent company operating expenses was the result of SEC compliance requirements for our 2013 10K and three 10Q SEC filings in, accounting, and legal services.
Liquidity and Capital Resources:
As of December 31, 2014, the Company had total assets in the amount of $5,713,556 compared to total assets in the amount of $5,854,062 at December 31, 2013. These assets principally consisted of $6,316 in cash, $28,584 in accounts receivable, $10,870 in utility deposits, $958 in prepaid expenses, $5,664,245 in property and equipment (including the Georgetown 14 Digital Cinemas property.). Total assets at December 31, 2013 consisted of $14,267 in cash, $30,428 in accounts receivable, prepaid expenses of $5,126 and $5,793,371 in property and equipment.
On December 31, 2014, the Company had $6,327,444 in total liabilities. Current liabilities included $79,997 in accounts payable, $5,543 in accrued expenses, $140,324 in accrued interest, $27,128 in preferred dividends payable, current notes payable of $30,000, $836,311 in notes payable - related party, current portion of mortgage and equipment loan of $312,593, $266,627 in property tax accrual, a long term portion of digital equipment note of $348,087, and long term portion of mortgage payable of $4,267,461.
On December 31, 2013 the Company had $5,995,651 in total liabilities. Current liabilities included $70,974 in accounts payable, $7,628 in accrued expenses, $74,610 in accrued interest, $21,083 in preferred dividends payable, current notes payable of $35,000, $426,248 in notes payable - related party, current portion of mortgage and equipment loan of 309,586, $150,120 in property tax accrual, long term portion of digital equipment note of $464,875, and long term portion of mortgage payable of $4,435,527.
Net cash used by operating activities for the year ended December 31, 2014 was $53,331 compared to net cash provided of $26,547 in the year ended December 31, 2013.
During the year ended December 31, 2014, $178,216 was provided by financing activities compared to $11,531 provided by financing activities in 2013.
During the year ended December 31, 2014, $132,836 was used in investing activities and $58,280 was used in investing activities in 2013.
In January 2014 we had a remaining balance of $60,000 from our 2013 offering for working capital for shares at $.02 per share. In June 2014 we issued 2,250,000 shares for $45,000 in funds. In December 2014 the board approved a new offering for $100,000 in working capital at $.015 per share. In December 2014 we collected $10,000 in cash for 666,667 shares of stock. At the end of the year we had $90,000 remaining on our $.015 offering.
Also in 2014, in an effort to secure capital to cover operations at our Georgetown 14 Digital Cinemas, we borrowed $410,063 from certain major related stockholders, represented by promissory notes.
In 2014 we paid $5,000 on a promissory note to a non-related investor.
On December 31, 2014, our net worth was ($613,888) as compared to a net worth of ($141,589) on December 31, 2013.
We are currently focused on developing additional revenues from acquisitions in the DME business sector and from our entertainment division and reducing debt through converting notes payable to common stock when our common stock price provides a reasonable conversion ratio.
We continue to be engaged in negotiations with mezzanine financing and equity funding companies. In addition we continue to research a plan to conduct a private offering of Common Stock to obtain an additional $1,500,000 in funding from accredited investors. The proceeds of this funding will be for planned acquisitions, as well as to provide working capital. The terms of the agreement, in summary, are that Kodiak Capital would provide up to $1.5 million over a period of one year in working capital in return for an equity position in the company. In part, the agreement limited Kodiak to owning no more than 9.9% of the total outstanding shares of our Common Stock and that Kodiak would not sell our Common Stock short.
On July 10, 2014 we announced that we had entered into a $1.5 million common stock purchase agreement with Kodiak Capital Group, LLC pending SEC approval. A Registration Statement on S-1 was filed on July 10, 2014. On December 18, 2014 the SEC declared that the Registration effective.
Subsequent to December 31, 2014, on January 3rd, 2015 we issued a put for $100,000 to Kodiak Capital. During the subsequent five-day pricing period our stock dropped from $.0465 to $.0035. Consequently the put price of our shares was lowered to $.00391, which provided only $47,500 in funding.
Based on this difficult situation with the market price of our stock and the damages from the possible shorting activity we have refrained from further action regarding any additional funding requests from Kodiak Capital, and have engaged a marketing company to help bring our market price back to reasonable levels.
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.
The interest resulted from the CEO’s solicitation of over 30 national theater companies beginning in 2013. In 2010, when we entered into this business segment we had plans to purchase several theaters but we vacated those plans after we took possession of the property in Indianapolis. At this time we do not believe we can operate just one theater in a cost-efficient manner.
In October 2014 we once again returned to seeking a theater company to lease or purchase our property. As of March 31, 2014 we are engaged in discussions with eight different theater companies.
Provided that a lease will provide a positive cash flow experience with our investment in Indianapolis, we believe we should then be able to obtain funding to pursue our other missions.
No assurances can be made as to the success of the leasing or sale of our property; however we have paid down our mortgage by approximately $1 million since acquisition in 2010 so should this occur we would be in a better financial position.
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.
Factors That May Impact Future Results:
At the time of this filing, we had insufficient cash reserves and receivables necessary to meet forecast operating requirements. In the event we are unsuccessful in our efforts to raise additional funds, we will be required to significantly reduce cash outflows and, possibly, discontinue our operations. We need to raise immediate capital to expand our operations and implement our plans.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph, attain profitable operations and acquire profitable companies. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The current expansion of the Company’s business demands that significant financial resources be raised to fund capital expenditures, working capital needs, debt service and the cash flow deficits expected to occur once we continue our acquisition program. Current cash balances and the realization of accounts receivable will cover our operations at Georgetown 14 Digital Cinemas, but will not be sufficient to fund planned acquisitions. Consequently, the Company is pursuing funding using our Common Stock.
Critical Accounting Policies and Estimates:
The Company’s discussion and analysis of its financial condition and results of operations are based upon its financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements may have required the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures. On an ongoing basis the Company evaluates estimates, including those related to bad debts, inventories, fixed assets, contingencies and litigation. If the company is profitable in 2014 our loss carry forward should eliminate cash needs for income taxes. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of the Company’s judgments on the carrying value of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.
Forward-Looking Statements:
Where this Form 10-K includes “forward-looking” statements within the meaning of Section 27A of the Securities Act, we desire to take advantage of the “safe harbor” provisions thereof. Therefore, FullCircle is including this statement for the express purpose of availing itself of the protections of such safe harbor provisions with respect to all of such forward-looking statements. The forward-looking statements in this Form 10-K reflect our current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ from those anticipated. In this Form 10-K, the words “anticipates,” “believes,” “expects,” “intends,” “future” and similar expressions identify forward-looking statements. We undertake no obligation to publicly revise these forward-looking statements to reflect events or circumstances that may arise after the date hereof. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this section.
Some of the matters discussed in this “Management's Discussion and Analysis of Financial Condition and Results of Operation,” and elsewhere in this annual report on Form 10-K include forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events including, among other things:
·
Attracting immediate financing;
·
Delivering a quality product that meets customer expectations;
·
Obtaining and expanding market acceptance of the products we offer,
·
Selling our property,
·
Leasing Georgetown 14 Cinemas; and
·
Competition in our market.
ITEM 7A.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
As a “smaller reporting company” we are not required to respond to this item.
ITEM 8.
ITEM 8. Financial Statements and Supplementary Data
The financial statements of the Company and notes thereto appear on page and are incorporated herein by reference.
ITEM 9.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
(a) Dismissal of Independent Registered Public Accounting Firm:
On October 8, 2014, our board of directors dismissed Rodefer Moss & Co, PLLC as the Company’s independent registered public accounting firm. Rodefer Moss & Co., had been previously retained in 2009.
Rodefer Moss’s report on the financial statements for the fiscal years ended December 31, 2013 and 2012, contained no adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principle, other than for a going concern.
During the fiscal the years ended December 31, 2013 and 2012, and in the subsequent interim period through October 8, 2014, the date of dismissal of Rodefer Moss, there were no disagreements with Rodefer Moss on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Rodefer Moss, would have caused them to make reference to the subject matter of the disagreements in its reports on the financial statements for such year. During the fiscal years ended December 31, 2013 and 2012, and in the subsequent interim period through October 8, 2014, the date of dismissal of Rodefer Moss, there were no reportable events as defined in Item 304(a)(l)(v) of Regulation S-K,
We have provided a copy of the above disclosures to Rodefer Moss and requested Rodefer Moss to provide it with a letter addressed to the U.S. Securities and Exchange Commission stating whether or not Rodefer Moss agrees with the above disclosures. A copy of the 8K filed regarding the dismissal of Rodefer Moss is attached hereto as Exhibit 16.2.
(b) New Independent Registered Public Accounting Firm
On November 7, 2014, our board of directors approved the engagement of Somerset CPAs, P.C. (“Somerset”), as the Company’s new independent registered public accounting firm.
During the fiscal years ended December 31, 2013 and 2012, and the subsequent interim period prior to the engagement of Somerset, the Company has not consulted Somerset regarding (i) the application of accounting principles to any specified transaction, either completed or proposed; (ii) the type of audit opinion that might be rendered on the Company’s financial statements, and either a written report was provided to the registrant or oral advice was provided that the new accountant concluded was an important factor considered by the registrant in reaching a decision as to the accounting, auditing or financial reporting issue; or (iii) any matter that was either the subject of a disagreement (as defined in Item 304(o)(l)(iv)) or a reportable event (as defined in Item 304(a)(l)(v)).
ITEM 9A.
ITEM 9A. Controls and Procedures.
Under the supervision and with the participation of our management, including the Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer), we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e), as of the end of the period covered by this report.
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls”) as of the end of the period covered by this Form 10-K. The Disclosure Controls evaluation was conducted under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. Disclosure Controls are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed under the Exchange Act, such as this Form 10-K, is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms. Disclosure Controls are also designed to provide reasonable assurance that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
The evaluation of our Disclosure Controls included a review of the controls’ objectives and design, our implementation of the controls and the effect of the controls on the information generated for use in this Form 10-K. During the course of our evaluation of our internal control over financial reporting, we advised our Board of Directors that we had identified a material weakness as defined under standards established by the Public Company Accounting Oversight Board (United States). A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness we identified is discussed in “Management’s Report on Internal Control Over Financial Reporting” below. Our Chief Executive Officer and Chief Financial Officer have concluded that as a result of the material weakness, as of the end of the period covered by this Annual Report on Form 10-K, our Disclosure Controls were not effective.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting; as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act.
Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting principles. Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management, including our principal executive officer and principal accounting officer, conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.
Based on our evaluation, our management concluded that there is a material weakness in our internal control over financial reporting. The material weakness identified did not result in the restatement of any previously reported financial statements or any related financial disclosure, nor does management believe that it had any effect on the accuracy of the Company’s financial statements for the current reporting period.
The material weakness relates to the fact that our management is relying on external consultants for purposes of preparing its financial reporting package; however, the officers may not be able to identify errors and irregularities in the financial reporting package before its release as a continuous disclosure document.
We will continue to engage an outside CPA with SEC related experience to assist in correction of these material weaknesses. In addition we will continue to appoint an accountant to provide financial statements on a monthly basis and to assist with the preparation of our SEC financial reports, which will allow for proper segregation of duties as well as additional manpower for proper documentation.
Because of the material weakness described above, management concluded that, as of December 31, 2014 our internal control over financial reporting was not effective based on the criteria established in Internal Control-Integrated Framework issued by COSO.
There has been no change in our internal controls that occurred during our most recent fiscal period that has materially affected, or is reasonably likely to affect, our internal controls.
In May 2013, the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") released an updated version of its Internal Control - Integrated Framework ("2013 Framework"), Initially issued in 1992, the original framework ("1992 Framework") provided guidance to organizations to design, implement and evaluate the effectiveness of internal control concepts and simplify their use and application. The 2013 Framework is intended to improve upon systems of internal control over external financial reporting by formalizing the principles embedded in the 1992 Framework, incorporating business and operating environment changes and increasing the framework ease of use and application. The 1992 Framework remained available until December 15, 2014, after which it was superseded by the 2013 Framework. As of December 31, 2014, the Company transitioned to the 2013 Framework. The Company did not experience significant changes to its internal control over financial reporting as a result from the transition to the 2013 Framework.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the SEC that permit smaller reporting companies like us to provide only management’s report in this annual report.
This report shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that section, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
ITEM 9B.
ITEM 9B. Other Information.
None.
PART III
ITEM 10.
ITEM 10. Directors, Executive Officers, and Corporate Governance
The following table sets forth the name, age, position and office term of each executive officer and director of the Company.
Name
Age
Position
Since
Alec G. Stone
Chairman of the Board
Carl R. Austin
Director
Norman Frohreich
Director, President, CEO/CFO
Alec G. Stone, Chairman
Mr. Stone has been an attorney in private practice since 1968. Mr. Stone is not currently serving on the Board of any other public company. Mr. Stone is a major stockholder of the Company and holds multiple notes from the Company, representing loans for working capital.
Carl R. Austin.
Mr. Austin holds a B.S. degree from Indiana University. Mr. Austin is a retired developer and operator of supermarkets, shopping centers and various other businesses. He is not on the board of directors of any other public company. Mr. Austin is a major stockholder of the Company and holds multiple notes from the Company, representing loans for working capital.
Norman L. Frohreich, President and CEO/CFO and Director.
Mr. Frohreich joined the Company as a consultant and the CFO in March 2007 to develop the new business plans and design the new infrastructure for the complete transition of the company into that new business model. In August 2007 Mr. Frohreich was elected to the Board of Directors. On December 5, 2007 Mr. Frohreich was appointed as President and CEO. Mr. Frohreich owns his own consulting firm and prior to the FullCircle appointment he provided services to the business community for thirty-five years. He holds a degree in Economics from Purdue University with emphasis in financial management.
The Company has adopted a code of ethics that applies to the Company’s principal executive officer, principal financial officer, principal accounting officer or controller. Our Code of Ethics was included as an exhibit to our annual report on Form 10-K for the year ended December 31, 2004
ITEM 11.
ITEM 11. Executive Compensation.
Compensation of Directors:
Directors will be paid 250,000 shares per year for their services. Each director received compensation of 250,000 shares in 2014 for services in 2013.
Compensation of Officers:
The following table lists the compensation received by our former and current officers over the last two years.
ITEM 12.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth as of December 31, 2014 the name and shareholdings of each director, officer and stockholders holding more than five percent of the Company’s outstanding shares. Except as otherwise indicated, the persons named in the table have sole voting and dispositive power with respect to all shares beneficially owned, subject to community property laws where applicable.
ITEM 13.
ITEM 13. Certain Relationships and Related Transactions and Director Independence
None
ITEM 14.
ITEM 14. Principal Accounting Fees and Services.
The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of our annual financial statements and review of financial statements included in our Form 10-K and 10-Q reports and services normally provided by the accountant in connection with statutory and regulatory filings or engagements were:
Somerset CPA’s, P.C. $3,000 in 2014
Roderfer Moss & Co, PLLC $26,000 in 2014
Rodefer Moss & Co, PLLC $29,000 in 2013
Tax Fees:
There were no fees for tax compliance, tax advice and tax planning to our auditors for the fiscal years 2014 and 2013.
All Other Fees:
There were no other fees billed in either of the last two fiscal years for products and services provided by the principal accountant other than the services reported above.
We do not have an audit committee currently serving and as a result our Board of Directors performs the duties of an audit committee. Our Board of Directors will evaluate and approve in advance the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services. We do not rely on pre-approval policies and procedures.
PART IV
Item 15.
Item 15. Exhibits, Financial Statement Schedules.
Exhibit Number
Title
Location
3(i)
Articles of Incorporation*
Form SB-2 filed 2/15/00
3(ii)
Bylaws*
Form SB-2 filed 2/15/00
Code of Ethics*
Form 10-K for the Period
Ended December 31, 2004
Certification of the Chief Executive Officer and Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Attached
Certification of the Chief Executive Officer and Principal Accounting Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
Attached
16.1
8K filing Item 4.01 Changes in Registrant’s Certifying Accountant
Attached
16.3
8K filing Item 7.01 Regulation FD
Disclosure
Attached
* Incorporated by reference.
** The Exhibit attached to this Form 10-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to liability under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise set forth by specific reference in such filing.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: April 15, 2015
FullCircle Registry, Inc.
By: /s/ Norman L. Frohreich
Norman L. Frohreich
President, Chief Executive Officer, and
Principal Accounting Officer
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: April 15, 2015
By: /s/ Alec G. Stone
Alec G. Stone
Director
Date: April 15, 2015
By: /s/ Carl R. Austin
Carl R. Austin
Director
Date: April 15, 2015
By: /s/ Norman L. Frohreich
Norman L. Frohreich
President
Chief Executive Officer
Principal Accounting Officer
Director
FullCircle Registry, Inc.
Consolidated Financial Statements for the Period Ended
December 31, 2014 and 2013
Page
Reports of Independent Registered Public Accounting Firms
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Consolidated Statements of Stockholders’ Deficit
Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
FullCircle Registry, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of FullCircle Registry, Inc. (a Nevada Corporation) as of December 31, 2014, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements; assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of FullCircle Registry, Inc. and subsidiaries as of December 31, 2014, and the consolidated results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that FullCircle Registry, Inc. will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, FullCircle Registry, Inc. has suffered recurring losses from operations and has a net working capital deficiency that raises substantial doubt about the company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.
/s/Somerset CPAs, P.C.
Indianapolis, Indiana
April 15, 2015
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
FullCircle Registry, Inc.
We have audited the accompanying consolidated balance sheets of FullCircle Registry, Inc. (a Nevada Corporation) as of December 31, 2013 and 2012, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements; assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of FullCircle Registry, Inc. and subsidiaries as of December 31, 2013 and 2012, and the consolidated results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that FullCircle Registry, Inc. will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, FullCircle Registry, Inc. has suffered recurring losses from operations and has a net working capital deficiency that raises substantial doubt about the company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.
/s/ Rodefer Moss & Co., PLLC
Rodefer Moss & Co, PLLC
New Albany, Indiana
April 9, 2014
FullCircle Registry, Inc.
For Year Ending December 31, 2014 and December 31, 2013
Notes to Consolidated Financial Statements
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
a.
Organization
FullCircle Registry, Inc. (the Company), formerly Excel Publishing, Inc. (Excel) was incorporated on June 7, 2000 in the State of Nevada. On April 10, 2002, the Company merged with FullCircle Registry, Inc., a private Delaware corporation (FullCircle). Per the terms of the agreement, Excel agreed to deliver 12,000,000 shares of the Company’s common stock to the shareholders of FullCircle in exchange for 100% of FullCircle’s shares. The merger was treated as a reverse merger with FullCircle being the accounting acquirer; therefore, all historical financial information prior to the acquisition date is that of FullCircle. Pursuant to the merger, the Company changed its name from Excel Publishing, Inc. to FullCircle Registry, Inc.
FullCircle Registry, Inc., was incorporated as WillRequest.com, Inc. under the laws of the State of Delaware on January 20, 2000. In July 2000, the Company changed its name from WillRequest.com, Inc. to FullCircle Registry, Inc. The Company was formed to provide a digital safe deposit box for vital medical and legal information of its customers.
In 2008 the Company elected to revise the mission statement that it would become a holding company for the purpose of acquiring small profitable businesses to provide exit plans for those companies owners.
In 2008 the Company formed two new subsidiaries to begin to formulate the expansion of the new business model and the growth of FullCircle Registry, Inc. FullCircle Prescription Services, Inc. and FullCircle Insurance Agency, Inc. were formed in 2008. FullCircle Entertainment, Inc. was formed in 2010 to engage in the operation of a movie theater. In 2013 the Company formed FullCircle Medical Supplies, Inc. to engage in the medical equipment supply business. The details of these companies and plans are identified in the section Item 1. Description of Business of our Form 10-K for 2014
b.
Accounting Method & Revenue Recognition
The Company's policy is to use the accrual method of accounting to prepare and present financial statements that conform to generally accepted accounting principles (“GAAP”). Revenue is recognized for the performance of providing goods, services or other rights to customers.
c.
Principles of Consolidation
For the years ended December 31, 2014 and 2013, the consolidated financial statements include the books and records of FullCircle Registry, Inc., FullCircle Entertainment, Inc., FullCircle Medical Supplies, Inc., FullCircle Prescription Services, Inc. and FullCircle Insurance Agency, Inc. All inter-company transactions and accounts have been eliminated in the consolidation.
d.
Use of Estimates in the Preparation of Consolidated Financial Statements
The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and expenses during the reporting period. In these consolidated financial statements, assets, liabilities and expenses involve extensive reliance on management’s estimates. Actual results could differ from those estimates.
FullCircle Registry, Inc.
For Year Ending December 31, 2014 and December 31, 2013
Notes to Consolidated Financial Statements
e.
Fair value of financial instruments.
On January 1, 2008, the Company adopted FASB ASC 820-10-50, “Fair Value Measurements”. This guidance defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follows:
·
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
·
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
·
Level 3 inputs to valuation methodology are unobservable and significant to the fair measurement.
The carrying amounts reported in the balance sheets for the cash and cash equivalents, receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The carrying value of convertible notes payable approximates fair value because negotiated terms and conditions are consistent with current market rates as of December 31, 2014 and 2013. At December 31, 2014 and 2013, the Company had no assets or liabilities that are measured at fair value on a recurring or non-recurring basis.
f.
Capital Structure
The Company’s capital structure is as follows:
The Company is authorized 10,000,000 shares of Preferred stock with a par value of $.001. The Company’s Class A issued and outstanding shares is 10,000. The Company’s Class B issued and outstanding is 300,600.
The Class A Preferred Stock is non-voting shares and are available for conversion into Class A Common Stock. The remaining 10,000 shares of Class A Preferred outstanding shares are convertible into 500,000 shares of Class A Common stock.
The Class B Preferred Stock is entitled to an annual cumulative dividend of $.02 per share, and each share is convertible into ten shares of Common Stock. Until converted, each share of Class B Preferred Stock is entitled to ten votes on any matter subject to a vote of the shareholders. The shares of Class B Preferred Stock are entitled to a liquidation preference equal to ten times the amount received per share of Common Stock upon liquidation.
Preferred dividends declared were $6,046 and $6,012 for each of the years ending December 31, 2014 and 2013, respectively for the Class B shares issued.
Common stock, authorized 200,000,000 shares of $.001 par value, issued and outstanding 143,605,394 on December 31, 2014 and 131,784,426 on December 31, 2013. The common stock has one vote per share. The common stock is traded on the OTCBB under the symbol FLCR.
The Company has not paid, nor declared, any dividends on common shares since its inception and does not intend to declare any such dividends in the foreseeable future. The Company's ability to pay dividends is subject to limitations imposed by Nevada law. Under Nevada law, dividends may be paid to the extent that the corporation's assets exceed its liabilities and it is able to pay its debts as they become due in the usual course of business.
FullCircle Registry, Inc.
For Year Ending December 31, 2014 and December 31, 2013
Notes to Consolidated Financial Statements
g.
Property and Equipment
Property and equipment are recorded at cost. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation of property and equipment is provided using the straight-line method over the respective useful lives ranging from 3-39 years. Depreciation expense for the years ended December 31, 2014 and 2013 totaled $261,962 and $247,190, respectively.
h.
Impairment of Long Lived Assets
The Company assesses whether certain relevant factors limit the period over which acquired assets are expected to contribute directly or indirectly to future cash flows for amortization purposes. Under certain conditions the Company may assess the recoverability of the unamortized balance of its long-lived assets based on undiscounted expected future cash flows. Should the review indicate that the carrying value is not fully recoverable; the excess of the carrying value over the fair value of any intangible asset is recognized as an impairment loss.
i.
Earnings (Loss) Per Share
The computation of earnings per share of common stock is based on the weighted average number of shares outstanding at the date of the consolidated financial statements.
There are no outstanding common stock options and/or warrants.
FullCircle Registry, Inc.
For Year Ending December 31, 2014 and December 31, 2013
Notes to Consolidated Financial Statements
j.
Provision for Income Taxes
Deferred tax assets and the valuation account are as follows:
The Company has adopted FASB ASC 740-10 to account for income taxes. The Company currently has no items creating temporary differences that would give rise to deferred tax liabilities. Net operating losses give rise to possible tax assets in future years. Due to the uncertainty of the utilization of net operating loss carry forwards; an evaluation allowance has been made to the extent of any tax benefit that net-operating losses may generate. A provision for income taxes has not been made due to net operating loss carry-forwards of $3,260,096 and $3,025,016 as of December 31, 2014 and December 31, 2013, respectively, which may be offset against future taxable income. These NOL carry-forwards begin to expire in the year 2020. No tax benefit has been reported in the financial statements. Tax rates differ from statutory rates due to the uncertainty of the above.
The Company did not have any tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months.
The Company includes interest and penalties arising from the underpayment of income taxes in the consolidated statements of operations in the provision for income taxes. As of December 2014 and 2013, the Company had no accrued interest or penalties related to uncertain tax positions.
The tax years that remain subject to examination by major taxing jurisdictions are for the years ended December 31, 2014, 2013, and 2012.
FullCircle Registry, Inc.
For Year Ending December 31, 2014 and December 31, 2013
Notes to Consolidated Financial Statements
k.
Concentration of Risk
Financial instruments which potentially subject the Company to concentrations of credit risk are cash and cash equivalents. The Company places its cash with financial institutions deemed by management to be of high credit quality.
l.
Statements of Financial Accounting Standards
The Company does not believe that the recently issued Statements of Financial Accounting Standards will have any material impact on the Company’s Consolidated Statements of Operations or its Consolidated Balance Sheets.
m.
Advertising
Advertising costs are expensed as incurred. Advertising expense was $500 and $3,875 for the years ending December 31, 2014 and 2013, respectively.
n.
Cash and Cash Equivalents
For the purposes of the Statements of Cash Flows, the Company considers cash and cash equivalents to be cash in all bank accounts, including money market and temporary investments that have an original maturity of three months or less.
o.
Reclassifications
None
p.
Subsequent events
During 2014 we signed an agreement with Kodiak Capital for the purpose of acquiring equity funding to proceed with our acquisition plans. Subsequent to December 31, 2014 we exercised a put for $100,000 in funding to begin the process of accessing $1.5 million in funding.
Because of the immediate drop in our stock price our put for funding only resulted in funds of $47,500 because Kodiak Capital reached their limit of 9.9% holdings so the amount was capped because of the large number of shares to be issued.
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 $9,933,124 as of December 31, 2014 and $9,273,650 as of December 31, 2013, 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.
FullCircle Registry, Inc.
For Year Ending December 31, 2014 and December 31, 2013
Notes to Consolidated Financial Statements
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 our Indianapolis property.
·
Locating and merging with other profitable private companies where the owners are seeking liquidity and exit plans.
·
Maintaining the Company mission of minimal overheads while sourcing services in consulting roles to keep overheads at a minimum.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
FullCircle Registry, Inc.
For Year Ending December 31, 2014 and December 31, 2013
Notes to Consolidated Financial Statements
NOTE 3. NOTES PAYABLE
At the election of the lender, principal and interest under related party notes may be paid through the issuance of restricted shares of common voting stock of the Company at the price of $.04 per share.
Future minimum principal payments on notes payable are as follows:
2015 $ 312,593
2016 331,986
2017 4,174,897
2018 108,665
Total $4,928,141
FullCircle Registry, Inc.
For Year Ending December 31, 2014 and December 31, 2013
Notes to Consolidated Financial Statements
NOTE 4. RELATED PARTY
The Company received advances from related parties for $410,063 for operating needs in 2014. The balance of the notes payable to related parties was $836,561 and $426,248 as of December 31, 2014 and 2013 respectively.
NOTE 5. COMMITMENTS
Our principal executive offices are located at 161 Alpine Drive, Shelbyville, KY 40065. The facility consists of approximately 1,200 square feet of office space, leased for $750 per month. Our original lease expired on September 15, 2007 and we have maintained a verbal month-to-month lease agreement.
NOTE 6. INTANGIBLE ASSETS
The company’s intangible assets have been fully amortized.
NOTE 7-LEASES-LESSORS
The Company leases space to a Save A Lot grocery store at our Indianapolis location.
Save A Lot corporate assumed the lease in March 2014 for seven years with three five-year options.
Monthly rent charged to the tenant $13,280 per month. Total rental income relating to this lease is 159,360 for each of the years beginning with December 31, 2015. The following is a schedule for the next five years of future minimum rentals under the lease:
Year Ending December 31,
$
159,360
159,360
159,360
159,360
119,520
Total
$
756,960
The initial lease terms ends September 30, 2020. Save A Lot has the ability to exercise three five-year options, which would extend the maturity date to September 30, 2035.
FullCircle Registry, Inc.
For Year Ending December 31, 2014 and December 31, 2013
Notes to Consolidated Financial Statements
NOTE 8. STOCKHOLDERS EQUITY
During 2014, the Company issued 2,250,000 restricted shares of its common stock for $45,000 in cash at $.02 per share and 666,667 restricted shares for $10,000 at $.015 per share.
In 2013, the Company issued 12,000,000 restricted shares of its common stock for $240,000 in cash at $.04 per share.
In 2014, the Company issued 8,904,301 free trading and restricted shares of its common stock for services at the price of 132,175. In 2013 the Company issued 7,041,410 free trading and restricted shares of its common stock for services at the price of 140,828 or $.02 per share.
The Company estimates the fair value of its free trading and restricted shares issued for services based on prices obtained for cash from non-related third parties or the bid price of the market of our stock.
Subsequent to December 31, 2014, in January 2015, the Company issued 12,153,358 shares to Kodiak Capital at the price of $.00391 for $47,500.
In February 2015, the Company issued 3,000,000 restricted shares for marketing services valued at $.005 or $15,000.