As filed with the Securities and Exchange Commission on April 16, 2003
An Exhibit List can be found on page II-4.
Registration No. 333-________
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
_____________________________
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_____________________________
FULLCIRCLE REGISTRY, INC.
(Name of small business issuer in its charter)
Nevada 7375 87-0653761
(State or other (Primary Standard Industrial (I.R.S. Employer
Jurisdiction of Classification Code Number) Identification No.)
Incorporation or
Organization)
2310 PNC Plaza
Louisville, KY 40202
(502) 540-5112
(Address and telephone number of principal executive offices and
principal place of business)
Steven A. Whitten, Chief Executive Officer
FULLCIRCLE REGISTRY, INC.
2310 PNC Plaza
Louisville, KY 40202
(502) 540-5112
(Name, address and telephone number of agent for service)
Copies to:
Gregory Sichenzia, Esq.
Sichenzia Ross Friedman Ference LLP
1065 Avenue of the Americas, 21st Flr.
New York, New York 10018
(212) 930-9700
(212) 930-9725 (fax)
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. ________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. _________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. _________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. _________
CALCULATION OF REGISTRATION FEE
- ------------------------------- -------------------- ---------------- ------------------ --------------------
Title of each class of Amount to be Proposed Proposed Amount of
securities to be registered registered (1) maximum maximum registration fee
offering aggregate
price per offering price
share (2)
- ------------------------------- -------------------- ---------------- ------------------ --------------------
Common Stock, $.001 par value 8,145,456 (3) $0.33 $2,688,000.48 $217.46
- ------------------------------- -------------------- ---------------- ------------------ --------------------
Common Stock, $.001 par 3,600,000 (4) $0.75 $2,700,000 $218.43
value, issuable upon
exercise of Warrants
- ------------------------------- -------------------- ---------------- ------------------ --------------------
Total 11,745,456 (3) $5,388,000.48 $435.89
- ------------------------------- -------------------- ---------------- ------------------ --------------------
(1) Includes shares of our common stock, par value $0.001 per share, which
may be offered pursuant to this registration statement, which shares are
issuable upon conversion of secured convertible debentures and the exercise of
warrants held by the selling stockholders. In addition to the shares set forth
in the table, the amount to be registered includes an indeterminate number of
shares issuable upon conversion of the debentures and exercise of the warrants,
as such number may be adjusted as a result of stock splits, stock dividends and
similar transactions in accordance with Rule 416. The number of shares of common
stock registered hereunder represents a good faith estimate by us of the number
of shares of common stock issuable upon conversion of the debentures and upon
exercise of the warrants. For purposes of estimating the number of shares of
common stock to be included in this registration statement, we calculated a good
faith estimate of the number of shares of our common stock that we believe will
be issuable upon conversion of the debentures and upon exercise of the warrants
to account for market fluctuations, and antidilution and price protection
adjustments, respectively. Should the conversion ratio result in our having
insufficient shares, we will not rely upon Rule 416, but will file a new
registration statement to cover the resale of such additional shares should that
become necessary.
(2) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(c) and Rule 457(g) under the Securities Act of 1933,
using the average of the high and low price as reported on the Over-The-Counter
Bulletin Board on April 15, 2003, which was $0.33 per share.
(3) Includes a good faith estimate of the shares underlying convertible
debentures to account for market fluctuations.
(4) Includes a good faith estimate of the shares underlying warrants
exercisable at $.75 per share to account for anti-dilution provisions.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the commission, acting pursuant to said Section 8(a),
may determine.
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED APRIL 16, 2003
FULLCIRCLE REGISTRY, INC.
11,745,456 SHARES OF
COMMON STOCK
This prospectus relates to the resale by the selling stockholders of up to
11,745,456 shares of our common stock, based on current market prices. The
selling stockholders may sell common stock from time to time in the principal
market on which the stock is traded at the prevailing market price or in
negotiated transactions. The selling stockholders may be deemed underwriters of
the shares of common stock, which they are offering. We will pay the expenses of
registering these shares.
Our common stock is registered under Section 15(d) of the Securities
Exchange Act of 1934 and is listed on the Over-The-Counter Bulletin Board under
the symbol "FLCR". The last reported sales price per share of our common stock
as reported by the Over-The-Counter Bulletin Board on April 15, 2003, was $0.33.
Investing in these securities involves significant risks. See "Risk
Factors" beginning on page 4.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
Prospectus is truthful or complete and any representation to the contrary is a
criminal offense.
The date of this prospectus is __________.
The information in this Prospectus is not complete and may be changed. This
Prospectus is included in the Registration Statement that was filed by
FullCircle Registry, Inc. with the Securities and Exchange Commission. The
selling stockholders may not sell these securities until the Registration
Statement becomes effective. This Prospectus is not an offer to sell these
securities and is not soliciting an offer to buy these securities in any state
where the sale is not permitted.
1
PROSPECTUS SUMMARY
The following summary highlights selected information contained in this
prospectus. This summary does not contain all the information you should
consider before investing in the securities. Before making an investment
decision, you should read the entire prospectus carefully, including the "risk
factors" section, the financial statements and the notes to the financial
statements.
FULLCIRCLE REGISTRY, INC.
We are a technology-based company that provides emergency document and
information management to consumers. Through the use of coded customer IDs and
personal identification numbers (PINs), our system is designed to allow
customers and/or medical personnel to quickly obtain critical information about
our customers' special medical needs, wishes (living wills, do not resuscitate
orders, etc.) and emergency contact information. Additionally, through our
BrightStar Photo ID Kit, we provide critical child photo and identification
information for missing or abducted persons.
Through our subsidiary, Paradigm Solutions Group, LLC, we offer model plans
for employer-sponsored medical reimbursement plans, together with administrative
support services for the implementation, maintenance and reporting of those
plans. The reimbursements are tax deductible for the employer and tax-free for
the employee.
Our principal offices are located at 2310 PNC Plaza, Louisville, Kentucky
40202, and our telephone number is (502) 540-5112. We are a Nevada corporation.
The Offering
Common stock offered by selling stockholders...................... Up to 11,745,456 shares, based on
current market prices and assuming full
conversion of the convertible debentures,
with interest for one year and the full
exercise of the warrants (includes a good
faith estimate of the shares underlying
convertible debentures and shares underlying
warrants to account for market fluctuations,
and antidilution and price protection
adjustments, respectively). This number
represents 34.3% of our current outstanding
stock.
Common stock to be outstanding after the offering................. Up to 34,271,486 shares
Use of proceeds................................................... We will not receive any proceeds
from the sale of the common stock.
Over-The-Counter Bulletin Board Symbol............................ FLCR
The above information regarding common stock to be outstanding after the
offering is based on 22,526,030 shares of common stock outstanding as of April
14, 2003 and assumes the subsequent conversion of our issued convertible
debentures, with interest, and exercise of warrants by our selling stockholders.
2
The debentures bear interest at 12%, mature one year from the date of
issuance, and are convertible into our common stock, at the selling
stockholders' option, at the lower of (i) $0.75 or (ii) 50% of the average of
the three lowest intraday trading prices for the common stock on a principal
market for the 20 trading days before but not including the conversion date.
Accordingly, there is in fact no limit on the number of shares into which the
debentures may be converted.
The selling stockholders have contractually agreed to restrict their
ability to convert their debentures or exercise their warrants and receive
shares of our common stock such that the number of shares of common stock held
by them and their affiliates after such conversion or exercise does not exceed
4.99% of the then issued and outstanding shares of common stock. See the
"Selling Stockholders" and "Risk Factors" sections for a complete description of
the convertible debentures.
3
RISK FACTORS
This investment has a high degree of risk. Before you invest you should
carefully consider the risks and uncertainties described below and the other
information in this prospectus. If any of the following risks actually occur,
our business, operating results and financial condition could be harmed and the
value of our stock could go down. This means you could lose all or a part of
your investment.
Risks Relating to Our Business:
We Have a History Of Losses Which May Continue, Requiring Us To Seek
Additional Sources of Capital Which May Not Be Available, Requiring Us To
Curtail Or Cease Operations.
We incurred net losses of $3,321,402 for the year ended December 31, 2002
and $474,414 for the year ended December 31, 2001. We cannot assure you that we
can achieve or sustain profitability on a quarterly or annual basis in the
future. If revenues grow more slowly than we anticipate, or if operating
expenses exceed our expectations or cannot be adjusted accordingly, we will
continue to incur losses. We will continue to incur losses until we are able to
establish significant sales of FullCircle Registry memberships and significantly
increase the number of HealthIER Plan participants. Our possible success is
dependent upon the successful development and marketing of our services and
products, as to which there is no assurance. Any future success that we might
enjoy will depend upon many factors, including factors out of our control or
which cannot be predicted at this time. These factors may include changes in or
increased levels of competition, including the entry of additional competitors
and increased success by existing competitors, changes in general economic
conditions, increases in operating costs, including costs of supplies, personnel
and equipment, reduced margins caused by competitive pressures and other
factors. These conditions may have a materially adverse effect upon us or may
force us to reduce or curtail operations.
If We Are Unable to Obtain Additional Funding Our Business Operations Will
be Harmed and If We Do Obtain Additional Financing Our Then Existing
Shareholders May Suffer Substantial Dilution.
We will require additional funds to sustain and expand our sales and
marketing activities, particularly if a well-financed competitor emerges. We
anticipate that we will require up to approximately $1,600,000 to fund our
continued operations for the next twelve months, depending on revenue from
operations. Additional capital will be required to effectively support the
operations and to otherwise implement our overall business strategy. There can
be no assurance that financing will be available in amounts or on terms
acceptable to us, if at all. The inability to obtain additional capital will
restrict our ability to grow and may reduce our ability to continue to conduct
business operations. If we are unable to obtain additional financing, we will
likely be required to curtail our marketing and development plans and possibly
cease our operations. Any additional equity financing may involve substantial
dilution to our then existing shareholders.
Our Independent Auditors Have Expressed Substantial Doubt About Our Ability
to Continue As a Going Concern, Which May Hinder Our Ability to Obtain Future
Financing.
In their report dated February 13, 2003, our independent auditors stated
that our financial statements for the year ended December 31, 2002 were prepared
assuming that we would continue as a going concern. Our ability to continue as a
going concern is an issue raised as a result of a loss for the year ended
December 31, 2002 in the amount of $3,321,402. We continue to experience net
operating losses. Our ability to continue as a going concern is subject to our
ability to generate a profit and/or obtain necessary funding from outside
sources, including obtaining additional funding from the sale of our securities,
increasing sales or obtaining loans and grants from various financial
institutions where possible. Our continued net operating losses and
stockholders' deficit increases the difficulty in meeting such goals and there
can be no assurances that such methods will prove successful.
4
Our Industry Has Low Barriers to Entry For New Competitors, and Competition
Could Have a Material Adverse Effect on Our Financial Results.
While we believe that we are the only company that currently provides the
broad array of our services, several companies do compete against us in one or
more of our services, including living will storage, medical records retrieval,
digital document storage, child identification information, and medical
reimbursement plans. If one or more of these competitors combined and offered
their services on a bundled basis like we do, it could result in lost market
share. Additionally, since the barriers to entry in our industry are low, a
competitor may emerge with substantially greater managerial, engineering and
technical systems and/or have the ability to adapt more quickly to changes in
the industry. Lost market share will decrease our revenue and increase our
marketing costs, thereby lowering or eliminating our ability to make a profit
and increasing our losses.
A Significant Portion of Our Income Comes From Individual Purchases Not
Long-Term Contracts; As a Result, Our Revenue Is not Guaranteed From
Quarter-to-Quarter and We Cannot Always Operate Efficiently.
A large percentage of our customer base involves purchases from resellers
and the customers who purchase through the resellers do not enter into long-term
purchase orders or commitments. Therefore, a large number of cancellations and
non-renewals could exceed new subscribers, resulting in a loss of revenue. We
make significant decisions regarding staffing and component procurement,
personnel and resource requirements, and the level of business we seek and
accept based upon long-term estimates of our number of customers. The short-term
nature of our customers' commitments could result in large deviations from our
estimates, resulting in severe excesses or shortages in staffing and resources.
This makes it difficult for us to maximize our potential efficiency.
Our Computer System is Vulnerable to Being Hacked, Resulting in Loss of
Customer Confidence and Liability for Damages to Customers.
We employ a state-of-the-art computer system and security protections.
However, no computer system is 100% impenetrable. If our computer system does
get hacked, it could lead to incorrect or misinformation provided to customers
and a loss of confidence by our customers, who would stop using our services,
leading to a decrease in revenue and potential liability.
As a Result of the Sensitive Nature of Our Customers Documents and the Need
for Immediate Access, Mistakes Could Lead to Lawsuits Demanding Large Verdicts.
Our customers entrust us with sensitive medical documents, including
advance directives (living wills and do not resuscitate orders) and lists of
prescriptions, allergies, and medical conditions. A customer's inability to
access these documents on a moments notice, or the release of wrong information,
could result in serious injury or possible death. As a result, our company could
face huge amounts of liability for medical mistakes, serious injuries, and
death. While we have an insurance policy in the amount of $1,000,000, we cannot
be assured of full coverage or continuing coverage in the future. A large
settlement or monetary award against us could result in a loss of all or nearly
all of our assets or cause us to cease operations.
As a Result of Our Industry, We Need to Maintain Substantial Insurance
Coverage, Which Could Become Very Expensive or Have Limited Availability.
Our marketing and sale of products and services related to the medical and
emergency care fields creates an inherent risk of claims for liability. As a
result, we have secured and will continue to maintain insurance in amounts we
consider adequate to protect us from claims. We cannot, however, be assured to
have resources sufficient to satisfy liability claims in excess of policy limits
if required to do so. Also, there is no assurance that our insurance provider
will not drop our insurance or that our insurance rates will not substantially
rise in the future, resulting in increased costs to us or forcing us to either
pay higher premiums or reduce our coverage amounts which would result in
increased liability to claims.
5
Our HealthIER Plan, a Medical Reimbursement Plan, is Subject to Scrutiny,
Which Could Result in Audits of Customers and Challenges by the Internal Revenue
Service.
Our HealthIER Plan, a medical reimbursement plan, provides certain tax
advantages to employers and employees alike. The Internal Revenue Service could
decide to audit our customers, which could result in tax penalties and a loss of
that customer's business with us. Additionally, although we believe that our
HealthIER Plan complies with the necessary regulations, there is no guarantee
that the IRS will not challenge our plan as being non-compliant with the
exemptions provided. A negative ruling by the IRS could result in fines against
us or a termination of this part of our business.
Future Laws, Regulations, and Rulings Could Result in the Reduction or
Elimination of our HealthIER Plan Business.
As with any tax procedure, medical expense reimbursement plans may be
impacted by changes in the U. S. Tax Code and regulations promulgated
thereunder, as well as Internal Revenue Service Rulings, Private Letter Rulings,
Revenue Procedures, proposed regulations and an other interpretations of the
Internal Revenue Code. Future laws, regulations, or rulings could restrict or
eliminate the exemption in the law under which our HealthIER Plan operates,
resulting in a reduction or loss of our revenue from this part of our business.
Risks Relating to Our Current Financing Arrangement:
There is a Large Number of Shares Underlying Our Convertible Debentures and
Warrants That May be Available for Future Sale and the Sale of These Shares May
Depress the Market Price of Our Common Stock.
As of April 14, 2003, we had 22,526,030 shares of common stock issued and
outstanding and convertible debentures outstanding that may be converted into an
estimated 1,212,121 shares of common stock at current market prices and
outstanding warrants to purchase 600,000 shares of common stock. In addition,
there are $400,000 of the debentures and 1.2 million warrants not yet
oustanding, and the number of shares of common stock issuable upon conversion of
the debentures and exercise of the warrants may increase if the market price of
our stock declines. All of the shares, including all of the shares issuable upon
conversion of the debentures and upon exercise of our warrants, may be sold
without restriction. The sale of these shares may adversely affect the market
price of our common stock.
The Continuously Adjustable Conversion Price Feature of Our Convertible
Debentures Could Require Us to Issue a Substantially Greater Number of Shares,
Which Will Cause Dilution to Our Existing Stockholders.
Our obligation to issue shares upon conversion of our convertible
debentures is essentially limitless. The following is an example of the amount
of shares of our common stock that are issuable, upon conversion of our
convertible debentures (excluding accrued interest), based on market prices 25%,
50% and 75% below the market price, as of April 15, 2003 of $0.33.
Number % of
% Below Price Per With Discount of Shares Outstanding
Market Share at 50% Issuable Stock
25% $.2475 $.12375 4,848,484 17.7%
50% $.165 $.0825 7,272,727 24.4%
75% $.0825 $.04125 14,545,454 39.2%
As illustrated, the number of shares of common stock issuable upon
conversion of our convertible debentures will increase if the market price of
our stock declines, which will cause dilution to our existing stockholders.
The Continuously Adjustable Conversion Price Feature of our Convertible
Debentures May Encourage Investors to Make Short Sales in Our Common Stock,
Which Could Have a Depressive Effect on the Price of Our Common Stock.
6
The convertible debentures are convertible into shares of our common stock
at a 50% discount to the trading price of the common stock prior to the
conversion. The significant downward pressure on the price of the common stock
as the selling stockholder converts and sells material amounts of common stock
could encourage short sales by investors. This could place further downward
pressure on the price of the common stock. The selling stockholder could sell
common stock into the market in anticipation of covering the short sale by
converting their securities, which could cause the further downward pressure on
the stock price. In addition, not only the sale of shares issued upon conversion
or exercise of debentures, warrants and options, but also the mere perception
that these sales could occur, may adversely affect the market price of the
common stock.
The Issuance of Shares Upon Conversion of the Convertible Debentures and
Exercise of Outstanding Warrants May Cause Immediate and Substantial Dilution to
Our Existing Stockholders.
The issuance of shares upon conversion of the convertible debentures and
exercise of warrants may result in substantial dilution to the interests of
other stockholders since the selling stockholders may ultimately convert and
sell the full amount issuable upon conversion. Although the selling stockholders
may not convert their convertible debentures and/or exercise their warrants if
such conversion or exercise would cause them to own more than 4.99% of our
outstanding common stock, this restriction does not prevent the selling
stockholders from converting and/or exercising some of their holdings and then
converting the rest of their holdings. In this way, the selling stockholders
could sell more than this limit while never holding more than this limit. There
is no upper limit on the number of shares that may be issued, which will have
the effect of further diluting the proportionate equity interest and voting
power of holders of our common stock, including investors in this offering.
If We Are Required for any Reason to Repay Our Outstanding Convertible
Debentures, We Would Be Required to Deplete Our Working Capital, if Available,
Or Raise Additional Funds. Our Failure to Repay the Convertible Debentures, if
Required, Could Result in Legal Action Against Us, Which Could Require the Sale
of Substantial Assets.
In February 2003, we entered into a Securities Purchase Agreement for the
sale of an aggregate of $600,000 principal amount of convertible debentures. The
convertible debentures are due and payable, with 12% interest, one year from the
date of issuance, unless sooner converted into shares of our common stock.
Although we currently have $200,000 of convertible debentures outstanding, the
investor is obligated to purchase additional convertible debentures in the
aggregate of $400,000. In addition, any event of default as described in the
convertible debentures could require the early repayment of the convertible
debentures, including a default payment of 130% on the outstanding principal
balance of the debentures, including interest at a default rate of 15%, if the
default is not cured within the specified grace period. We anticipate that the
full amount of the convertible debentures, together with accrued interest, will
be converted into shares of our common stock, in accordance with the terms of
the convertible debentures. If we are required to repay the convertible
debentures, we would be required to use our limited working capital and raise
additional funds. If we were unable to repay the debentures when required, the
debenture holders could commence legal action against us and foreclose on all of
our assets to recover the amounts due. Any such action would require us to
curtail or cease operations.
Risks Relating to Our Common Stock:
If We Fail to Remain Current on Our Reporting Requirements, We Could be
Removed From the OTC Bulletin Board Which Would Limit the Ability of
Broker-Dealers to Sell Our Securities and the Ability of Stockholders to Sell
Their Securities in the Secondary Market.
Companies trading on the OTC Bulletin Board, such as us, must be reporting
issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and
must be current in their reports under Section 13, in order to maintain price
quotation privileges on the OTC Bulletin Board. If we fail to remain current on
our reporting requirements, we could be removed from the OTC Bulletin Board. As
a result, the market liquidity for our securities could be severely adversely
affected by limiting the ability of broker-dealers to sell our securities and
the ability of stockholders to sell their securities in the secondary market.
7
Our Common Stock is Subject to the "Penny Stock" Rules of the SEC and the
Trading Market in our Securities is Limited, Which Makes Transactions in our
Stock Cumbersome and May Reduce the Value of an Investment in our Stock.
The Securities and Exchange Commission has adopted Rule 15g-9 that
establishes the definition of a "penny stock," for the purposes relevant to us,
as any equity security that has a market price of less than $5.00 per share or
with an exercise price of less than $5.00 per share, subject to certain
exceptions. For any transaction involving a penny stock, unless exempt, the
rules require:
o that a broker or dealer approve a person's account for transactions in
penny stocks; and
o the broker or dealer receive from the investor a written agreement to
the transaction, setting forth the identity and quantity of the penny
stock to be purchased.
In order to approve a person's account for transactions in penny stocks,
the broker or dealer must:
o obtain financial information and investment experience objectives of
the person; and
o make a reasonable determination that the transactions in penny stocks
are suitable for that person and the person has sufficient knowledge
and experience in financial matters to be capable of evaluating the
risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prescribed by the Commission relating to the penny
stock market, which, in highlight form:
o sets forth the basis on which the broker or dealer made the suitability
determination; and
o that the broker or dealer received a signed, written agreement from the
investor prior to the transaction.
Generally, brokers may be less willing to execute transactions in
securities subject to the "penny stock" rules. This may make it more difficult
for investors to dispose of our common stock and cause a decline in the market
value of our stock.
Disclosure also has to be made about the risks of investing in penny stocks
in both public offerings and in secondary trading and about the commissions
payable to both the broker-dealer and the registered representative, current
quotations for the securities, and the rights and remedies available to an
investor in cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny stocks.
8
USE OF PROCEEDS
This prospectus relates to shares of our common stock that may be offered
and sold from time to time by the selling stockholders. We will not receive any
proceeds from the sale of shares of common stock in this offering. However, we
will receive the sale price of any common stock we sell to the selling
stockholder upon exercise of the warrants. We expect to use the proceeds of any
such sales for general working capital purposes.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is quoted on the OTC Bulletin Board under the symbol
"FLCR". Our common stock has been quoted on the OTCBB since April of 2002.
For the periods indicated, the following table sets forth the high and low
bid prices per share of common stock. These prices represent inter-dealer
quotations without retail markup, markdown, or commission and may not
necessarily represent actual transactions.
High($) Low ($)
------ --------
2002
Second Quarter 11.00 2.60
Third Quarter 2.50 1.01
Fourth Quarter 1.45 0.40
2003
First Quarter 2.27 0.58
Second Quarter (1) 0.69 0.32
(1) As of April 15, 2003.
HOLDERS
As of April 14, 2003, we had approximately 126 record holders of our common
stock. The number of record holders was determined from the records of our
transfer agent and does not include beneficial owners of common stock whose
shares are held in the names of various security brokers, dealers, and
registered clearing agencies. The transfer agent of our common stock is
Interwest Transfer Company, Inc., 1981 East Murray Holladay Road, Suite 100,
Salt Lake City, Utah 84117.
We have never declared or paid any cash dividends on our common stock. We
do not anticipate paying any cash dividends to stockholders in the foreseeable
future. In addition, any future determination to pay cash dividends will be at
the discretion of the Board of Directors and will be dependent upon our
financial condition, results of operations, capital requirements, and such other
factors as the Board of Directors deem relevant.
9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Some of the information in this Form SB-2 contains forward-looking
statements that involve substantial risks and uncertainties. You can identify
these statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate" and "continue," or similar words. You should
read statements that contain these words carefully because they:
o discuss our future expectations;
o contain projections of our future results of operations or of our
financial condition; and
o state other "forward-looking" information.
We believe it is important to communicate our expectations. However, there
may be events in the future that we are not able to accurately predict or over
which we have no control. Our actual results and the timing of certain events
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth under "Risk
Factors," "Business" and elsewhere in this prospectus. See "Risk Factors."
The essence of FullCircle Registry member benefits is the secure electronic
storage of critical data so that both our members and emergency personnel may
immediately retrieve it anytime, anywhere. Prospective buyers perceive the
intrinsic value of FullCircle membership. Nevertheless, as with other purchases
that cause people to reflect upon their vulnerability and mortality, they tend
to procrastinate in buying memberships on a stand-alone basis.
Understanding this psychology, we are moving away from selling FullCircle
Registry memberships to individuals and groups on a stand-alone basis, and,
instead, are bundling our membership with products that are more
consumer-driven. While the lifesaving value of a FullCircle Registry membership
cannot be overstated, consumers are predisposed to buy products they perceive to
have immediate economic benefit. By aggressively bundling our services with
other products, we are able to covert FullCircle Registry memberships into
revenue, while providing our critical services to more people.
Often, joint marketing arrangements allow us to utilize the services of
entire sales forces at no cost to us. We can harness the momentum they already
have, and bring their sales volume to bear on ours, simply by including our
value-added memberships in the products they are already selling.
The identification and courting of these relationships, which, over time,
can greatly increase our customer base over selling memberships one-by-one, has
been the focus of management during the past several months. The first few joint
marketing arrangements have been consummated and are either beginning to or
expected to generate sales revenue during this fiscal year.
We are establishing these marketing alliances by contract, acquisition and
merger. In July 2002, we announced the acquisition of Electronic Luminescent
Technologies, Inc., which holds certain rights to develop and market
electroluminiscent lighting for safety-related purposes. This acquisition would
have required development and further research to fully expand the product and
marketing strategies, so we conveyed our interest into a new venture in which we
retain an interest and allowed that new venture to raise funds and focus on the
development, marketing, production and sales of those products. The new venture,
called GloTech Industries, Inc. recently had an initial public offering and is
traded on the Over-the-Counter Bulletin Board under the symbol "GTHI".
In August 2002, we announced a joint marketing arrangement with Paradigm
Solutions Group, LLC, which agreed to bundle FullCircle Registry memberships in
the administrative fees it charges to assist employers in implementing and
maintaining the HealthIER Plan. Paradigm Solutions Group, LLC promoted the sale
of a medical reimbursement arrangement to companies. This arrangement offers
certain tax advantages pursuant to Section 105 of the Internal Revenue Code. By
entering into a marketing plan to include memberships in FullCircle Registry,
Paradigm was able to market its plan as offering unique benefits that
10
distinguished it from other similar plans beginning their promotions. Since the
primary benefits of medical reimbursement arrangements are structured under the
Internal Revenue Code, plans must be similar by their nature to be compliant and
while the Paradigm Solutions Group offering used unique and proprietary
methodology, the inclusion of the bundled services allows it to claim a level of
uniqueness for maximum marketing effectiveness.
Likewise, Paradigm's health reimbursement plan, the HealthIER Plan,
provides a significant bundling opportunity for FullCircle Registry in the
employee benefits arena. HealthIER enables employers to achieve substantial tax
savings in the provision of group health coverage to their employees. Employees
receive additional benefits without paying for them. Enrollment in the HealthIER
Plan provides added benefits from FullCircle Registry at no cost to employees.
In October 2002, we announced the acquisition of Paradigm Solutions Group.
We determined that the value proposition of bundling the HealthIER Plan with
FullCircle Registry memberships was compelling and that owning both companies
made sense in terms of a joint-marketing effort and anticipated efficiencies in
the fulfillment and delivery of the combined products. This transaction was
reflected in our filing of a Form 8-K, filed with the Securities and Exchange
Commission on November 7, 2002.
While the acquisition of Paradigm Solutions Group resulted in less initial
sales volume than originally anticipated due to IRS Revenue Rulings in the
health reimbursement arena, sales revenues are increasing and gaining momentum,
based upon a restructuring of the Paradigm reimbursement model to satisfy new
IRS guidance.
In December 2002, we announced the acquisition of AskPhysicians.com, Inc.
AskPhysicians.com operates a website where visitors can get basic information
and, for a fee, pose questions to board-certified physicians. While this service
does not replace traditional medical care, it offers a high-quality and
efficient way to inform consumers of treatment options; a service most
healthcare insurers currently provide using only nurses. We have the right to
offer this highly-desirable information service to consumers of our other
products at a reduced rate, both exposing them to the value of this service by
cross-marketing and providing another component to our bundled products and
services.
Discussion of Cash Flow and Operations
We have previously relied on financing from investors and other sources for
cash sufficient to sustain our operations. Without continued financing,
including the completion of funding for arrangements presently in place, we will
not be able to continue our operations with current overhead and expenses.
Significant steps will be required to reduce expenses and would limit our
ability to continue our pursuit of the business strategies we feel most likely
will produce successful growth and operations of our Company.
Compared to the previous year, our revenues increased to $221,321 for the
fiscal year ended December 31, 2002 from $41,131 for the fiscal year ended
December 31, 2001. Much of this increase came from sales of products of our
subsidiary, Paradigm Solutions Group. Costs of operations have grown as we
attempt to develop and execute marketing strategies that will create sustainable
sales volume. We have expended significant amounts of cash for reduction of
debts previously incurred, for advances and other costs for developing a sales
force, and for the continued development of our products, including legal fees
to ensure that our products will produce certain tax-advantaged results that
corporate purchasers rely upon in making a decision to purchase the HealthIER
Plan. Therefore, without a dramatic increase in sales, we must rely on financing
from other sources to continue operations.
We believe that revenue from sales will not only continue to grow but will
increase dramatically during 2003. We base this belief on the relationships
which have developed in the sales and marketing of our products. We believe that
continued refinements of the HealthIER Plan and working with our legal
counselors will insure the marketability of that plan on a wider scale, and that
certain customers who were reluctant to commit during 2002, based on uncertainty
about tax consequences, will enter into contracts to the extent that we can
offer assurance from independent counsel. We also believe that our mix of
benefits, including the core products of FullCircle Registry with the HealthIER
Plan, will allow us to compete favorably with anticipated competition from other
companies offering health expense reimbursement arrangements.
11
General and Administrative expenses, which includes operations, overhead
and other costs of operating our company, rose from $336,393 for the fiscal year
ended December 31, 2001 to $3,321,402 for the fiscal year ended December 31,
2002. In connection with financing from some of our existing shareholders, we
issued stock for investments and some of these transactions have been treated as
expenses. For fiscal year ending December 31, 2002, $1,839,625 of our general
and administrative expenses were attributable to stock issuances. This
represents greater than 50% of our total expenses. We expect to pursue and
obtain alternative sources of financing in the future to prevent large expense
expenditures. These expenses do not represent an expenditure of cash although it
does have an effect of dilution on the currently outstanding shares of common
stock. Additionally, a large percentage of these expenses represented salary and
commissions for the sale of our HealthIER Plan. It is likely that these costs
will remain about the same for this year as significant reductions might limit
our ability to continue the pursuit of sales.
Costs of operations have grown as we attempt to develop and execute our
marketing strategies to create sustainable sales. We have expended significant
amounts of cash for reduction of debts previously incurred, advances and other
costs for developing a sales force and continued development of our products
including legal fees to insure that our products will produce certain
tax-advantaged results that corporate purchasers rely upon in making a decision
to implement the HealthIER Plan.
One area of expenses relates to costs of developing a viable sales force.
Frequently, this includes advances against future commissions or salaries when
salespeople begin. While we anticipate that we will continue to expend cash to
develop our sales force, we also believe that this will result in significant
growth in revenues. Our cost of sales will decrease with additional future sales
as a result of commissions replacing advances and salaries of salespeople.
Therefore, we believe that our expenses measured against sales will decrease
allowing us to approach profitability.
Compared to the previous year, our net loss increased to $3,321,042 for
fiscal year 2002 from $474,414 in fiscal year 2001. This represents a loss of
roughly $.22 per share for fiscal year 2002 up from $.04 per share in fiscal
year 2001 (adjusted for the weighted average number of shares outstanding in
each year). This reflects a significant increase in expenses. As discussed
above, significant expenses were attributable to issuances of stock to
investors, and efforts made to compensate starting salespeople, to develop
marketing and other strategic partnerships, and to market our product, all
resulted in higher expenses in the early stages of our business model. We expect
that our salespeople will generate greater revenue and reduce expenses in this
fiscal year, reducing our net loss. We anticipate that future revenues will be
the result of these efforts and we believe that our Company will eventually
become profitable. Notwithstanding this, we have not yet stabilized the expense
structure of our Company, primarily as a result of acquisitions and costs
relating to consolidation of marketing and operations, and we have not yet
reached a point in our sales cycle where sales are predictable with any degree
of reliability; therefore, we are not able to predict when the Company will
become profitable. More importantly, continued costs of development and
marketing, while necessary for the long-term success of our Company, could
result in larger, rather than smaller, losses in the foreseeable future.
Discussion of Capital Assets and Resources
Presently, we have nominal cash reserves and have had to rely on financing
for short-term cash-flow requirements. We have recently arranged financing which
should allow us to continue operations in a consistent manner for the next six
to nine months. If we need to obtain additional capital, no assurance can be
given that we will be able to obtain this capital on acceptable terms, if at
all. Without completion of the present financing arrangement, we will not have
sufficient cash to meet anticipated expenses. In the event we cannot raise
adequate financing, we may have to reduce the scope of our business activities
until other financing can be arranged.
On February 12, 2003, we entered into a Securities Purchase Agreement with
private investors for the sale of (i) $600,000 in convertible debentures and
(ii) a warrants to buy 1,800,000 shares of our common stock. The investors are
obligated to provide us with the funds as follows:
o $200,000 was disbursed on February 12, 2003;
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o $200,000 will be disbursed within 10 days of filing a prospectus; and
o $200,000 will be disbursed within 10 days of the effectiveness of the
prospectus.
Accordingly, we have received a total of $200,000 pursuant to the
Securities Purchase Agreement.
The debentures bear interest at 12%, mature one year from the date of
issuance, and are convertible into our common stock, at the investors' option,
at the lower of:
o $0.75; or
o 50% of the average of the three lowest intraday trading prices for the
common stock on a principal market for the 20 trading
days before but not including the conversion date.
The full principal amount of the convertible debentures are due upon
default under the terms of convertible debentures. In addition, we have granted
the investors a security interest in substantially all of our assets and
intellectual property and registration rights with respect to the shares
underlying the debentures and warrants.
The warrants are exercisable until seven years from the date of issuance at
a purchase price of $0.75 per share. In addition, the exercise price of the
warrants will be adjusted in the event we issue common stock at a price below
market, with the exception of any securities issued as of the date of the
warrant.
In the past, we have relied on loans from shareholders, but we do not
believe that those loans are available on a consistent basis in amounts and on
terms that insure our continued operations. Furthermore, a significant portion
of our assets is allocated to goodwill. While the value of these assets has been
estimated based on appropriate accounting methodology, we do not consider any of
these assets appropriate sources of cash, should liquidation become necessary.
Thus, while we have taken steps to insure the continued operation of our
business, we are not at a point where funding from operations allows us to
operate on a self-sustaining basis. Without significant cash reserves or hard
assets that may be sold, pledged or hypothecated, we are at a disadvantage when
seeking financing and we may be forced to accept financing on less than
favorable terms than those offered to a company with greater cash-flow or a more
significant asset base.
Discussion of Inflation and Other Factors
Presently, we pursue contracts for sales of our products with one-year
duration and some of our products are sold with no assurance of renewal. This
allows us to keep pricing flexible enough to reflect inflation or other costs
that might arise on a non-localized level. Our expenses are primarily related
variable costs (such as salaries and commissions), with only part of our costs
fixed (such as office rent and equipment rental). As a result, we have a greater
amount of flexibility and a commensurate exposure to increases relative to these
costs. This degree of control suggests that we have the ability to pass on
increased costs, but this ability is limited by the elasticity of the markets in
which we sell our products. If our markets prove to be rigid and make raising
prices difficult, we could be subject to increased costs from inflationary
pressure without any recourse to recoup these costs. At present, we are pursuing
pricing plans that we believe reflects the demands of the marketplace. In the
past, the impact from inflation and interest rates has not been significant.
13
BUSINESS
OVERVIEW
We are a Nevada corporation providing document management and
technology-based emergency information to consumers. Through the use of coded
customer IDs and personal identification numbers (PINs), our system is designed
to allow medical personnel to quickly obtain critical information about our
customers' special medical needs, wishes (living wills, do not resuscitate
orders, etc.) and emergency contact information. Additionally, we provide
critical child photo and identification information for missing persons.
FULLCIRCLE REGISTRY, INC.
Our current business began with the formation of FullCircle Registry, Inc.,
a Nevada corporation, in 1991. Founder Steven Whitten (who is currently our
Chief Executive Officer and a director) conceived of a company that would
provide customers with secure storage and immediate access to their critical
medical records, wishes (living will, do not resuscitate, etc.) and emergency
contact information. FullCircle would obtain the customers' information,
providing them with a user identification and PIN that is required to access the
information. Customers can contact FullCircle's Emergency Response Personnel,
who can make the information available to the consumer electronically through
the internet, by mail, fax, and even courier, anywhere in the world, 24 hours a
day, 7 days a week.
THE MERGER
On April 10, 2002, we entered into a Plan and Agreement of Reorganization
with FullCircle Registry, Inc. which became effective on April 17, 2002. Prior
to April 10, 2002, we operated under the name, Excel Publishing, Inc. We were a
publishing company until our merger with FullCircle Registry. The Plan and
Agreement of Reorganization provided for a share exchange in which shareholders
of FullCircle Registry received 12,000,000 shares of Excel Publishing for all of
the issued and outstanding shares of common stock of FullCircle Registry. The
shares were offered by us in reliance on the exemption from registration
provided by Rule 506 of Regulation D. The Plan and Agreement of Reorganization
provided further that, after we had acquired all of the outstanding stock of
FullCircle Registry, we would effect a merger of FullCircle Registry into our
company. On April 17, 2002 we filed an Amendment to Articles of Incorporation
with the State of Nevada changing our name from Excel Publishing, Inc. to
FullCircle Registry, Inc.
On October 10, 2002, we entered into a Plan and Agreement of Reorganization
with Paradigm Solutions Group, LLC, a Delaware limited liability company which
became effective on October 25, 2002. The Plan and Agreement of Reorganization
provided for a share exchange in which we offered shareholders of Paradigm
Solutions Group 6,000,000 shares of our common stock in exchange for the 3,000
issued and outstanding shares of Paradigm Solutions Group common stock. The
shares were offered by us in reliance on the exemption from registration
provided by Rule 506 of Regulation D. The Plan and Agreement of Reorganization
provided further that, after we had acquired all of the outstanding stock of
Paradigm Solutions Group, we would effect a merger of Paradigm Solutions Group
into our company.
OPERATIONS
Subscribers join FullCircle by completing a simple, one page enrollment
form that includes the primary subscriber's name and address, along with the
names of his or her spouse and children to be included if a family membership is
purchased, and payment information. Payment options include payroll deduction,
if FullCircle is offered by an employer, and no payment information is requested
if it is an included prepaid benefit. When FullCircle receives the enrollment
form, unique User IDs and Personal Identification Numbers ("PINs") are assigned
to each subscriber together with unique User IDs and PINs for each family
member. A complete membership package is generated and immediately mailed
directly to the subscriber. This package contains a wallet-size ID Card for each
member with the unique User ID and PIN for that member and all instructions and
all forms needed for membership including medical history and emergency contact
questionnaires, the BrightStar emergency identification tools and forms to
create the appropriate advanced directives (such as living wills) for the
applicable state. The subscriber and/or family members complete the documents
and return them in the postage paid envelopes provided to them.
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When the completed documents are received by FullCircle, they are
immediately scanned into a secure electronic database, linked to the customer's
assigned User ID and PIN, and the service is activated. In addition, customers
may store legal and other documents using the Company's "Electronic Safe Deposit
Box" feature. These additional documents are also linked to the member's User ID
and PIN, but require an additional password, known only to the member, to be
accessed. Once activation occurs, members or emergency medical personnel acting
in an emergency can access the appropriate information and documents by using
the customer's ID Card directly via the internet or by calling FullCircle's
Emergency Response Personnel 24-hours a day. Upon security verification, our
Emergency Response Personnel can provide direction to the FullCircle website
and/or immediately send the documents via fax, mail or courier. Members
accessing personal information and stored documents in their "Electronic Safe
Deposit Box" must use their assigned User ID and PIN along with their password.
CALL CENTER
Our call center operates 24 hours a day, seven days a week to process
emergency calls and provides access to information and documents to members,
emergency personnel, or the authorities as applicable. FullCircle personnel
handle all calls between 9:00 AM and 5:00 PM Monday through Friday. We contract
with Answer Xact to handle all after-hours and weekend calls. The contract with
Answer Xact is on a 30 day basis, renewable from month to month. We provide
extensive training for all call center staff and have implemented a strict
protocol that must be followed.
SECURITY
Our security system includes designs, methodology and systems to prevent
intrusion both to the physical space where documents, records and systems are
stored as well as the virtual space where images and other data are stored. In
each case, the system balances reasonable access against appropriate levels of
security so that the system can be claimed to be virtually impenetrable while
still allowing reasonably convenient access in fulfillment of the promise of
making emergency information immediately accessible to the needs of our
customers. Customer information is stored in both paper and digital form in an
ultra-secure, access controlled environment with 24-hour video surveillance,
motion detectors, and numerous other security measures. Visitors to our
operations center have to pass five video cameras, with the last video camera
requiring identification by a staff member, prior to being granted access to the
outer office. Direct access to the further secured document storage and
retrieval area is limited to only a few individuals. Hardcopies and originals of
all documents are catalogued and stored for immediate access as a backup in the
event the computer system goes down.
FullCircle's computer system is contained in its own autonomous network
behind multiple layers of hardware-based and software-based firewalls allowing
only authorized Internet traffic to access the system. The system utilizes
multiple layering of passwords and all transmissions use the high level of 128
bit Secure Socket Layer encryption. Access to the network is routed through the
firewalls into one of the primary processing computers set up with multiple
processors, redundant services including RAID 5 hard drive arrays, redundant
power, auto-loading backups, and multi-homed internet connectivity. The
computers and network are monitored offsite, 24 hours a day to insure
accessibility.
BRIGHTSTAR PHOTO ID REGISTRY
In the event of a missing or abducted person, FullCircle Registry's
BrightStar Photo ID Kit provides police and other authorities with instant
access to key identification data. This critical information is stored on a
secure server and aids police in properly identifying missing or abducted
persons, especially during the most critical first minutes.
The BrightStar Photo ID Kit incorporates all five identification elements
as recommended by the National Center for Missing and Exploited Children and
includes: member data; descriptive information, a color photograph (which can be
updated on our system as necessary); an identifying marks chart, fingerprint
chart, dental records, as well as friend and family contact information.
15
FullCircle Registry makes this information available immediately worldwide,
24 hours a day, 7 days a week, via access through its website or toll-free
telephone number.
MEDICAL REIMBURSEMENT PLANS
Through our wholly-owned subsidiary, Paradigm Solutions Group, LLC, we
offer the HealthIER Plan, a medical reimbursement plan under Section 105(b) of
the Internal Revenue Code of 1986. The HealthiER Plan is designed to offer
tax-saving benefits to client-companies by allowing them to take advantage of
the health care cost reimbursement provisions of the Internal Revenue Code.
Payments made to employees under the HealthIER Plan are exempt from taxable
income under the Internal Revenue Code. An employer-funded Smart Card for
employee cardholders can be made available to pay for qualifying medical
expenses. Employees then submit their receipts to verify the medical expenses
incurred.
We believe that our HealthIER Plan should qualify as a medical care
reimbursement plan under Section 105(b) of the Internal Revenue Code of 1986, as
amended, and that the HealthIER Plan should be a health reimbursement
arrangement where the amounts properly paid to eligible employees covered by the
HealthIER Plan should be excludable from taxable income under the Internal
Revenue Code of 1986. The success of the HealthIER Plan must be viewed in light
of the applicable provisions of the Internal Revenue Code of 1986, the Employee
Retirement Income Security Act of 1974, as each is amended, and the regulations
under each of these sets of laws generally. Presently, there are no statutes,
judicial cases, U.S. Department of Labor rulings, IRS rulings or other binding
authority directly addressing all of the issues raised in the implementation and
maintenance of our plan. Our belief is necessarily based on a reasoned
interpretation of the existing legal authorities. If either the Internal Revenue
Code of 1986 or the Employee Retirement Income Security Act of 1974 is amended,
we will work to try to ensure that the HealthIER Plan meets all the changes or
new interpretations.
BUSINESS STRATEGY
Our strategic goal is to establish FullCircle Registry as the premier
emergency document and information management company and the HealthIER Plan as
the preeminent medical reimbursement plan. To accomplish these goals, FullCircle
has entered into several reseller agreements with corporate and institutional
organizations, including Fortune 100 companies, insurance agencies, and
non-profit organizations to provide our bundled services to their employees and
customers. Additionally, we continue to recruit sales representatives with a lot
of existing contacts, who are trained and tested to qualify to sell our
HealthIER Plan.
PRICING
A basic individual membership in FullCircle Registry is priced at $99.00. A
basic family membership is priced at $129.00, which includes a family of seven
in the same household, as well as students away at college. Aging parents are
also included if they live in the same household.
FullCircle Registry has established special pricing structures for affinity
groups, associations, and medical advocacy groups.
FullCircle Registry has entered into a number of wholesale agreements
whereby membership in FullCircle Registry is included as part of employee
benefit packages, and into other arrangements whereby membership is included as
part of the total benefit packages provided through health care cards.
The HealthIER Plan and other health reimbursement plans offered by Paradigm
Solutions Group, LLC, are intended to be ERISA-compliant medical expense
reimbursement accident and health plans. ERISA requires that fees charged in
conjunction with such plans pass a test of reasonableness, and Paradigm
Solutions Group believes that the HealthIER Plan passes such test. In addition
16
to administrative costs commensurate with legal compliance, fulfillment, and
sales fees, pricing includes the cost of ancillary benefits as may be
incorporated from time to time, including but not limited to, those provided
through FullCircle Registry and its contractors, as well as access fees charged
by Best Benefits for provider access. The fees charged are uniform from client
to client at any given time, but may be adjusted for clients in effect with
prior notice.
EXPANSION PLANS
Marketing
We continue to pursue a variety of opportunities whereby one or more of our
benefit components can be distributed through resellers on a stand-alone or
bundled basis.
FullCircle Registry membership greatly compliments various other products
for which there is existing distribution in place. Examples of existing bundled
product offerings are the automatic inclusion of FullCircle Registry membership
as value-added service alongside medical reimbursement plans (both the HealthIER
Plan, offered by Paradigm Solutions Group, LLC and the 105 Plan, now in the
offing with Superior Solutions Group, LLC) and health care cards (including
those offered by independent contractors Wellness Premium Plus, Good Health,
LLC, and Wellness Benefits Group).
Negotiations for other reseller agreements are ongoing. One such
opportunity is the incorporation of FullCircle Registry member benefits with
electronic emergency alert systems. Through global positioning systems (GPS)
there is a large market in both home-based and hand-held devices. These devices,
in the event of an emergency, pinpoint the exact location of persons in need and
alert emergency personnel as to their whereabouts. FullCircle Registry, as an
emergency information retrieval service, is an obvious fit as a companion
benefit, enabling emergency personnel to access vital medical history, contact
data, advance directives, and other information, such as fingerprints and dental
records for positive identification. This lifesaving information is delivered
expediently via the Internet, fax, or courier.
Sales
We currently have 90 independent salespeople and will continue to recruit
and train additional salespeople in targeted geographically areas. Recruiting
and training incentives are provided to productive, certified representatives,
creating an opportunity for them to earn the privilege of managing other
salespeople and increase income.
Infrastructure
A contract with Superior Solutions Group, LLC gives us the capacity to
support large-scale growth. Superior Solutions has developed and maintains
Paradigm Solutions Group's proprietary software for all data storage and
automated administrative support associated with health reimbursement plans,
such as billings and commissions, as well as on-line access by sales
representatives, prospects and customers. Superior Solutions continues to
program additional software components and provide maintenance of a robust,
secured Virtual Private Network server, with data storage capacity sufficient to
handle millions of customers.
Acquisitions
FullCircle Registry has recently acquired certain technologies that are
designed to give it competitive advantages.
Ask.Physicians.com is a web forum for questions, answers and discussion of
medical and health related issues. It is offered either on a stand-alone or
bundled basis to employees, members of affinity groups, and the public.
By providing straightforward answers to medical questions in a confidential
environment, AskPhysicians.com provides personalized information directly from
board-certified or board-eligible physicians, via the Internet, in the privacy
17
of a member's home or office. In addition, members may search through the forums
to view previous member postings and physician responses within a selected
category. They may also research the expansive medical libraries to study health
issues on their own.
By providing individual members access to these essential medical tools,
FullCircle Registry helps employers avoid the loss of valuable production hours
spent at the doctor's office. Additionally, through use of the medical advice
and information provided by the doctors at AskPhysicians.com, rising health care
costs can be significantly reduced by lessening employees' reliance upon more
costly doctors' office visits.
Spoken Data is a text-to-voice service that will allow emergency personnel
to access certain medical and emergency information that the member deems
critical in the event of an emergency. Medical conditions, drug allergies, blood
type, family contact information, current medications or any other pertinent
information can be made available via telephone to assist emergency personnel in
their efforts to treat FullCircle Registry members. Spoken Data allows the
verbal conveyance of critical information while maintaining our company's
philosophy of no human interaction with the data.
We will develop implementation strategies over the next several months and
will continue to acquire programs and technology that can keep us ahead of the
competition.
MARKETING STRATEGY
FullCircle has clearly-defined target markets:
EMPLOYEE BENEFITS. We sell our services to employers as an enhancement to
their existing employee benefit offerings, including employer-paid benefits,
voluntary employee-paid benefits, and company-endorsed direct purchase options.
Marketing efforts target both large and small employers and service providers
and have resulted in relationships with companies ranging from local printing
companies who are offering FullCircle as a voluntary payroll deducted benefit to
a regional funeral home operator that is providing FullCircle to its employees
as a paid benefit, to large companies who are making FullCircle available to
employees as a direct purchase option.
RESELLERS. We develop relationships with both large and small marketing
organizations for the resale of our services to their business and/or individual
clientele. Existing resellers include insurance agencies, affinity groups and
Internet-based wellness programs, as well as consumer-direct and multi-level
marketing organizations.
PROFESSIONALS. We develop relationships whereby professionals, such as
CPAs, insurance agents and physicians, refer our salespeople to their client or
patient base, respectively.
FUND RAISERS. We develop relationships with associations and organizations
that sell our service to their constituency and/or the public as a means of fund
raising. Non-profit organizations, associations, schools, churches and other
groups are in constant need of new and effective fundraising methods. When
offering FullCircle to their membership, constituency and/or donor base, an
organization is able to earn a commission on sales while providing a valuable
and much needed service. Existing fundraising agreements include national and
regional medical associations, schools, churches and support groups.
INDIVIDUALS IN NEED. Individual may find themselves at greater risk for the
kinds of medical or other emergencies that could be mitigated by our services.
Examples include: seniors, particularly those living alone or without family in
the vicinity; parents with young children or teenagers of driving age or
attending college; adults who are frequent travelers or who live alone; and
anyone with medical conditions, drug allergies or on medications that could
interfere with emergency treatment; amateur and professional athletes.
SUPPLIERS
FullCircle Registry uses subcontractors in the provision of its services.
Fulfillment contractors prepare enrollment materials and member kits for a fee,
allowing predictability, accountability and efficiencies in our cost and
18
management of member services. Fulfillment contractors are bound by
confidentiality and the standards under the Health Insurance Portability and
Accountability Act of 1996 (HIPAA), as those regulations may be applicable to
our services. The receipt, scanning and processing of membership materials could
also be outsourced, should the demands of expansion require.
FullCircle Registry relies upon subcontractors to supply both our computer
equipment and the networking and connectivity which allows access to information
stored for our members.
We have several suppliers upon whom we rely for the administration and
development of our HealthIER Plan. Kuhlmann Enterprises LLC has a 10--year,
non-exclusive contract with us, which was effective June 1, 2002, to provide
administrative services support and fulfillment for the HealthIER Plan.
We currently have contracts with ninety (90) independent salespeople, who
promote and sell our HealthIER Plan to employers nationwide.
Best Benefits provides nationwide dental, chiropractice, vision, hearing
and homeopathic networks. Best Benefits also provides mail-order vitamin and
herbal remedies, as well as an emergency travel benefit that includes guarantee
of payment for medical emergency treatment in foreign countries.
Superior Solutions Group, LLC currently supplies us with information
technology and proprietary software development for direct medical care expense
reimbursement by client-employers under our HealthIER Plan. Superior Solutions
Group is also in the process of working with FullCircle Registry to move their
database and website to aSuperior Solutions Group database and web servers. The
Superior Solutions Group servers in Indianapolis, Indiana will be the primary
servers, and mirrored servers will be located in Louisville, Kentucky.
COMPETITION
There are numerous companies, both large and small, who address, with a
wide range of methodology, the need to access certain information in the event
of an emergency. These companies provide services that range from printing
information on bracelets to smart cards and implanted chips and tracking
devices. FullCircle believes that they have shortcomings compared to our
product, such as the limited amount of medical information that can be printed
on a bracelet and the lack of support infrastructure (primarily device readers)
that render higher technology solutions ineffective. Other companies offer
telephonic and/or online access to certain data with various levels of security
and efficiency. Each of these represents a form of competition. However, we do
not believe that there are currently any competing businesses that provide the
full range of services, flexibility, security and support infrastructure
provided by FullCircle.
o Advance Directives. Competitors could include, but not be limited to,
LastRights.org, Right to Die, and Die with Dignity.
o Medical Registry. Competitors could include, but not be limited to,
Medifile, MedicAlert, MyOnlineMedicalRecord.com,
EMSfile, and MedRecordsWeb.com
o Missing Person Identification Service. Competitors could include, but
not be limited to, Amber Alert and Fingerprint America.
o Digital Safe Deposit Box. Competitors could include, but not be
limited to, Mnempolis and FleetBoston Financial Corp.
o Personal Contract Information Storage. Competitors could include,
but not be limited to, HealthTracer.
o On-line Physician Question and Answer Forum and Medical Data Look-up.
Competitors could include, but not be limited to, WebMD and various
"Nurse Hotline" services.
o Health Reimbursement Plans. Competitors could include, but not be
limited to, any number of insurance carriers or administrators
(including those that are in-house, carrier-owned or independently
owned), which either administer, or have existing infrastructure that
could be adapted to administer, the processing of receipts for non-
insured medical reimbursement or adjudicate claims for insured or
self-funded group health coverage. Specifically, large insurance
companies including, but not limited to, Aetna, Principal, Fortes,
Trustmark and Humana, currently offer, or may offer, non-insured
medical reimbursement below the threshold of a high deductible
insurance plan. In addition, certain insurance companies, including,
but not limited to Principal, Fortes, American Republic and Trustmark,
offer, or may offer, medical savings account-qualified insurance
products to groups or self-employed individuals. In addition,
insurance companies that provide premium-only cafeteria plan documents
19
and administrative assistance at no cost in exchange for the sale of
their voluntary products, including, but not limited to, Aflac,
Colonial and American Heritage, while not in direct competition
for medical reimbursement, could be perceived by employers as
achieving the same or similar tax savings as employer-sponsored,
non-insured medical reimbursement.
In another arena, "Health Reimbursement Arrangements" (HRAs) offered by
insurance companies, including, but not limited to, Principal, Trustmark and
Humana, could appear to be the same as the HealthIER Plan. However, while
HealthIER Plan can serve as an HRA, an HRA, per se, cannot achieve the same tax
savings as HealthIER Plan.
INTELLECTUAL PROPERTY
On December 10, 2002, the United States Patent and Trademark Office issued
us a registered trademark for FullCircle. The registration number is 2658050.
Additionally, we hold numerous other trademarks under common law, including:
1. Collar I.D. Pet Registry;
2. Paradigm Solutions Group;
3. HealthIER Plan;
4. Superior Solutions Group Section 105 Plan;
5. SSG Medical Reimbursement Plan;
6. Brightstar Photo I.D. Registry;
7. "Lighting the way for missing persons";
8. "Seconds matter in an emergency";
9. "Information is useless, until you need it. Now."; and
10. "Convenience, peace of mind and it might just save your life."
for which we may seek registration with the US Patent and Trademark Office.
We have developed proprietary software for the administrative support of
health reimbursement plans, billing, commissions, general corporate accounting,
and client-firm payroll integration. We have proprietary information, including
internal marketing plans and methodology and trade secrets, and we claim
copyrights on all published materials, developed for both internal and external
distribution. We enter into confidentiality agreements with employees,
consultants and sales agents who might have access to proprietary information.
We have taken steps to enforce our intellectual property rights including
prosecution of legal action where disclosure and/or misuse of confidential
information was threatened.
EMPLOYEES
We currently have 98 persons working for us, of whom five are full-time
employees, three are full-time consultants (two in information technology and
one in investor relations) and 90 of which are independent sales representatives
(independent contractors) for Paradigm Solutions Group. Our independent sales
representatives must undergo extensive training, including curriculum studies, a
75-question test that requires a perfect score, and field training prior to
soliciting customers on their own.
DESCRIPTION OF PROPERTIES
Our principal executive offices are located at 2310 PNC Plaza, Louisville,
Kentucky 40202, and our telephone number is (502) 540-5112. The facility is
utilized in the following manner:
o administrative offices;
o professional offices;
o storage and warehousing; and
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o product development.
The facility consists of approximately 1,730 square feet of office and
warehouse space, leased for $2,739.17 per month in 2003 and $2,883.33 per month
in 2004. The lease expires on December 31, 2004. We believe that our existing
facilities are adequate for our current use.
LEGAL PROCEEDINGS
From time to time, we are a party to litigation or other legal proceedings
that we consider to be a part of the ordinary course of our business. We are not
involved currently in legal proceedings that could reasonably be expected to
have a material adverse effect on our business, prospects, financial condition
or results of operations. We may become involved in material legal proceedings
in the future.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
NAME AGE POSITION
Steven A. Whitten 46 Chief Executive Officer and Director
W. Garriott Baker 50 President and Chairman of the Board of Directors
Trent Oakley 44 Senior Vice President, Sales and Marketing and
Director
David Less 44 Chief Information Officer
David E. Allen 49 Director
Issac M. Boutwell 70 Director
John M. Bruington 49 Director
Myron Feinberg 62 Director
Christopher E. Rhodes 49 Director
J. Matthew Skiles 32 Director
Janice Whelan 47 Director
Toby G. Wolcott 58 Director
Directors are elected to serve until the next annual meeting of
stockholders and until their successors are elected and qualified. Currently
there are eleven seats on our board of directors.
Directors receive 2,000 shares of common stock for each Board meeting that
they attend in person. Officers are elected by the Board of Directors and serve
until their successors are appointed by the Board of Directors. Biographical
resumes of each officer and director are set forth below.
Steven A. Whitten, Chief Executive Officer and Director. Mr. Whitten has
been the Chief Executive Officer and a Director of FullCircle since April 2002.
He is the founder of Willrequest.com, Inc., the predecessor to FullCircle
Registry and has served as a director since 2000. Mr. Whitten was the Chief
21
Executive Officer of Willrequest.com from January 2000 until May 2000 when
Willrequest.com became FullCircle Registry. From May through November 2000, Mr.
Whitten served as the Chief Operations Officer of FullCircle Registry. From July
through October 2001, Mr. Whitten served as a sales manager for Chaz Concrete,
LLC in Louisville, Kentucky. From 1996 to 1999 he served as an independent
environmental consultant with numerous companies to ensure state and federal
environmental compliance and provided guidance for proper transportation,
storage, and disposal of EPA regulated hazardous waste. From 1994-1996 he was
National Sales Manager, Hazardous Waste Division C.I.W., Inc. Indianapolis, IN.
From 1991-1994 he was National Sales Manager, Hazardous Waste Division T.S.M.T.,
Joplin, MO.
W. Garriott Baker, President and Chairman of the Board of Directors. Mr.
Baker has been the President and Chairman of the Board of Directors since April
2003. Prior to being named President of FullCircle Registry, Mr. Baker was the
President of Paradigm Solutions Group, LLC, a wholly-owned subsidiary of
FullCircle Registry, since November 2002. Prior to his appointment as President
of Paradigm Solutions Group, Mr. Baker served as Senior Vice President,
Marketing and Sales from July through October 2002, Regional Director from
August 2001 through June 2002, and Managing General Agent from March through
July 2001. Prior to joining Paradigm Solutions Group in March 2001, Mr. Baker
was the President of BeneSOURCE Brokerage Services, Inc., a Las Vegas based
insurance provider, from January 1990 until March 2002. Mr. Baker has also
previously worked for Samaritan Health Plans, Central Reserve Life Insurance
Company, Lone Star Life Insurance Company, and TLC Associates.
Trent Oakley, Senior Vice President, Sales and Marketing and Director. Mr.
Oakley has been the Senior Vice President, Sales and Marketing for FullCircle
since April 2002 and a Director since April 2003. Prior to joining FullCircle,
Mr. Oakley was an independent marketing agent and sales manager for 10 years,
contracting his services to various insurance companies including Transamerica
Life, American United Life, and Guarantee Reserve Life. Mr. Oakley has also been
a sales manager with John Hancock Financial Services from 1985 to 1992 and a
marketing representative with Prudential Financial Services from 1993 to 1995.
David Less, Chief Information Officer. Mr. Less has been the Chief
Information Officer for FullCircle Registry since August 2002. Mr. Less is also
a member of Deed Rooms Services, a supplier of information services to the
mortgage industry, and has been a member since July 2001. Since July 1999, Mr.
Less has also been a member of SL & Consulting, providing human resource and
employee benefit management services. Mr. Less has also worked for Keane, Inc.
from July 1997 through July 1999 and The Human Resource Team from July 1997
through September 2000.
David E. Allen, Director. Mr. Allen was appointed a director of FullCircle
Registry in April 2003. Since 1978, Mr. Allen has been the owner and general
manager of Allen Air Conditioning and Heating.
Issac M. Boutwell, Director. Mr. Boutwell was elected a director of
FullCircle Registry in October 2002. Mr. Boutwell is the sole owner of two movie
theatres in Kentucky, The Movie Palace in Elizabethtown, and The Dixie Dozen in
Louisville, and has been an owner since 1980. Mr. Boutwell has also owned an
1800 acre commercial cattle ranch in Kentucky since 1982.
John M. Bruington, Director. Mr. Bruington was appointed a director of
FullCircle Registry in April 2003. Mr. Bruington is currently the Owner and
Director of Bruington-Jenkins-Sturgeon, Neurather & Underwood ana Schoppenhort,
and Underwood Funeral Homes in Kentucky, a position he has held since January
2001. From October 1997 until January 2001, Mr. Bruington was the Manager for
Jenkins Funeral Home.
Myron Feinberg, Director. Mr. Feinberg was appointed a director of
FullCircle Registry in April 2003. Mr. Feinberg has been the President of
American Employee Benefit Association, Inc. since December 1997. Currently, Mr.
Feinberg is also the Vice President of Marketing for LPI Companies, Inc. in
Miami, Florida. Mr. Feinberg is also a Certified Area Manager for Paradigm
Solutions Group, LLC, a FullCircle Registry subsidiary, a position he has held
since April 2002.
Christopher E. Rhodes, Director. Mr. Rhodes was elected a director of
FullCircle Registry in November 2002. Mr. Rhodes is currently the Senior
Vice-President of Operations for Paradigm Solutions Group, LLC, a wholly-owned
22
subsidiary of FullCircle Registry, a position he has held since July 2002. From
June 2000 until July 2002, Mr. Rhodes was the Chief Operations Officers for The
Redwood Group, LLC. From 1994-1996, Mr. Rhodes was a Regional Sales Manager for
CompuCom, and from 1998-2000 as a Professional Services Manager. Mr. Rhodes
worked as the General Manager for Pomeroy Computer Resources from 1996-1998.
J. Matthew Skiles, Director. Mr. Skiles was appointed a director of
FullCircle Registry in April 2003. Mr. Skiles is currently the Chief Financial
Officer of Benefits Management Consulting, LLC, a position he has held since
April 2003. From August 2001 until March 2003, Mr. Skiles was the manager of
Huth Thompson, LLP. From February 1999 until July 2001, Mr. Skiles was the
Controller and Chief Financial Officer of Atlas Excavating, Inc. From June 1993
until February 1999, Mr. Skiles was a Senior Accountant for Huth Thompson, LLP.
Mr. Skiles is a Certified Public Accountant and Certified Valuation Analyst.
Janice Whelan, Director. Ms. Whelan was appointed a director of FullCircle
Registry in April 2003. Ms. Whelan is currently the office manager for Stone Law
Office, a position that she has held since November 1997.
Toby G. Wolcott, Director. Mr. Wolcott was elected a director of FullCircle
Registry in April 2003. Mr. Wolcott currently is a sales representative for
Business Technology solutions, a position he has held since July 2002. From
August 2001 until July 2002, Mr. Wolcott was a sales representative for Tom
Sexton & Assoc. From August 2000 until August 2001, Mr. Wolcott was a sales
representative for Central School Supply. Mr. Wolcott has also been a sales
representative for Panax from August 1998 until August 2000 and for Worldwide
Visioneering from June 1996 until August 1998.
EXECUTIVE COMPENSATION
The following tables set forth certain information regarding our CEO and
each of our most highly-compensated executive officers whose total annual salary
and bonus for the fiscal year ending December 31, 2002, 2001 and 2000 exceeded
$100,000:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
Name & Principal Position Year Salary ($) Bonus Other Restricted Option SARs LTIP All Other
($) Annual Stock (#) Payouts Compensation
Compensation Awards ($) ($)
($)
- ---------------------------- ------------ --------------- --------- ------------ ------------ ------------- ---------- -------------
James A. Reskin (1) 2002 $120,000 (2)
Chief Executive Officer 2001 5% (3)
W. Garriott Baker (4) 2002 $72,000 $87,000
President, Paradigm
Solutions Group, LLC
(1) Mr. Reskin's employment agreement with our company to serve as
President and Chief Executive Officer ended in March 2003, at which time Mr.
Reskin orally agreed to become a part-time Chief Executive Officer with our
company in exchange for $100 an hour, working from 5-20 hours a week. The salary
for 2003 is based upon his first two months salary under his employment
contract, plus the maximum number of hours a week (20) of work for the rest of
2003.
23
(2) As of March 15, 2003, the date Mr. Reskin's written employment
agreement ended, the Company owed Mr. Reskin approximately $20,000 in past due
compensation for 2003. Additionally, Mr. Reskin holds unpaid expenses pending
reimbursement in the amount of $13,500. $38,000 of his 2002 annual compensation
was deferred in April, 2002, at which time it began to accrue interest.
Presently, he is owed approximately $41,500 in deferred compensation and
interest from 2002.
(3) Mr. Reskin's employment contract granted him options to purchase five
percent (5%) of the then-outstanding shares of common stock at the time of
execution, at an exercise price of $0.01 a share. On April 17, 2002, Mr. Reskin
exercised his option for 3% of the then-outstanding shares of common stock of
the company, for a total of 384,000 shares of common stock, for a total exercise
price of $3,840. On December 18, 2002, Mr. Reskin exercised his option for the
remaining 2% of the then-outstanding shares of common stock of the company, for
a total of 414,000 shares of common stock, for a total exercise price of $4,140.
(4) Mr. Baker signed an employment agreement on July 1, 2002 to be the
President of Paradigm Solutions Group, LLC for an annual salary of $72,000. The
contract expires on June 30, 2007. Mr. Baker also receives an office allowance
of $250 per month. Additionally, Mr. Baker is entitled to receive additional
monthly compensation at a minimum of $7,000, based upon the number of active
participants in the HealthIER Plan. Mr. Baker receives $7,000 a month, and an
additional $1.00 for each HealthIER Plan participant that exceeds 7,000.
Option/SAR Grants in Last Fiscal Year
There were no options granted during the last fiscal year.
Directors receive 2,000 shares of common stock for each Board meeting that
they attend in person. Several of our directors receive commission-based fees.
Directors are reimbursed for all reasonable expenses incurred in connection
therewith and will be insured against liability for their services to the
Company under a group liability policy that also protects officers of the
Company.
Equity compensation plan information
We do not have any stock option plans.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Superior Solutions Group, LLC is co-owned by Paul Crouse and Carmelo
Zanfei, who are both former directors of FullCircle Registry, Inc. Superior
Solutions Group has a contract with Paradigm Solutions Group, our wholly-owned
subsidiary, as a Super Certified Area Manager for the sale of Paradigm's
HealthIER Plan. Under the contract, Superior Solutions Group will receive $6.50
per employee per month who is enrolled in a HealthIER Plan that Superior
Solutions Group procures directly. Superior Solutions Group also receives the
difference between $6.50 per employee per month and the per employee per month
compensation paid to any sub-managers or sub-producers in Superior Solutions
Group's sales hierachy for their HelathIER Plan sales. Additionally, as part of
the contract, Paul Crouse and Carmelo Zanfei each receive direct compensation
from Paradigm Solutions Group in the amount of $1.00 per month for every
enrolled employee in the HealthIER Plan. Superior Solutions Group also provides
us information technology and proprietary software development for direct
medical care expense reimbursement by employers under our HealthIER Plan.
Chris Rhodes, a director of FullCircle Registry, also serves as the Senior
Vice President of Operations for Paradigm Solutions Group, LLC. Mr. Rhodes
maintains an office and works full-time in Superior Solutions' office facility,
located at 5172 East 65th Street, Suite 105, Indianapolis, Indiana 46220, where
24
he oversees IT services Superior Solutions performs for Paradigm Solutions Group
and FullCircle Registry. Under his direction, Superior Solutions has developed
and maintains Paradigm Solutions Group's proprietary software for secure data
storage, automation of administrative functions, billings, commissions, on-line
access by sales representatives, prospects and customers, and automated support
for health reimbursement plans. Superior Solutions continues to program
additional software components and maintain hardware.
25
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of our common stock as of April 14, 2003
o by each person who is known by us to beneficially own more than 5% of
our common stock;
o by each of our officers and directors; and
o by all of our officers and directors as a group.
NUMBER OF SHARES PERCENTAGE OF CLASS PERCENTAGE OF CLASS
NAME AND ADDRESS OF OWNER OWNED (1) PRIOR TO OFFERING AFTER OFFERING (3)
(2)
- --------------------------------- -------------------- --------------------- ----------------------
Steve A. Whitten 1,632,000 7.2% 4.8%
288 Pike Lane
Guston, KY 40142
W. Garriott Baker 12,500 * *
1605 Verspertina Court
Las Vegas, NV 89128
Trent Oakley 165,000 (4) * *
8210 Smithtown Road
Louisville, KY 40219
David Less 20,000 * *
522 East St. Joe Road
Sellersburg, IN 47172
David E. Allen 4,967 * *
5350 Stiles Road
Howardstown, KY 40051
Issac M. Boutwell 919,820 (5) 4.1% 2.7%
1815 Cann School Road
Eastview, KY 42732
John M. Bruington 106,284 * *
PO Box 546
Bradenburg, KY 40108
Myron Feinberg -- -- --
9060 SW 69 Terrace
Miami, FL 33173
Christopher Rhodes 12,500 * *
8327 W. 1000 S
Fortville, IN 46040
J. Matthew Skiles -- -- --
7129 Greenview Drive
Battle Ground, IN 47920
26
Janice Whelan 106,284 * *
626 St. Martins Road
Vine Grove, KY 40175
Toby G. Wolcott -- -- --
7521 Newton Drive
Louisville, KY 40228
All Officers and Directors as a 2,979,355 13.2% 8.7%
Group (12 persons)
Paul Crouse 3,000,000 13.3% 8.8%
5127 E. 65th Street, Suite 105
Indianapolis, IN 46220
George Harman 2,477,730 (6) 11.0% 7.2%
3033 Ring Road
Elizabethtown, KY 42701
Alec Stone 2,495,592 (7) 11.1% 7.3%
P.O. Box 487
Brandenburg, KY 40108
Carmelo Zanfei 3,000,000 13.3% 8.8%
5127 E. 65th Street, Suite 105
Indianapolis, IN 46220
* Less than 1%
(1) Beneficial Ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock subject to options or
warrants currently exercisable or convertible, or exercisable or convertible
within 60 days of April 16, 2003 are deemed outstanding for computing the
percentage of the person holding such option or warrant but are not deemed
outstanding for computing the percentage of any other person.
(2) Percentage based on 22,526,030 shares of common stock outstanding.
(3) Percentage based on 34,271,486 shares of common stock outstanding.
(4) Includes 10,000 shares held by Mr. Oakley's mother, Sandra Oakley, and
10,000 shares held by Mr. Oakley's father, Bobby Oakley, as to which Mr. Oakley
exercises no investment or voting power and disclaims beneficial ownership.
(5) Includes 390,000 shares held by Mr. Boutwell's wife, Rosewitha
Boutwell, as to which Mr. Boutwell exercises no voting power and disclaims
beneficial ownership.
(6) Includes 195,000 shares held by Mr. Harman's wife, Donna Harman, as to
which Mr. Harman exercises no voting power and disclaims beneficial ownership.
(7) Includes 107,500 shares held by Mr. Stone's daughter, Amanda Stone, as
to which Mr. Stone exercises no voting power and disclaims beneficial ownership.
27
DESCRIPTION OF SECURITIES
COMMON STOCK
We are authorized to issue up to 50,000,000 shares of Common Stock, par
value $.001. As of April 14, 2003, there were 22,526,030 shares of common stock
outstanding, 400,000 shares reserved for issuance pursuant to our stock option
plans, 970,000 shares reserved for issuance pursuant to warrants and convertible
debentures, and 5,892,994 shares reserved for the warrants and convertible
debentures held by the Selling Stockholders. Holders of the common stock are
entitled to one vote per share on all matters to be voted upon by the
stockholders. Holders of common stock are entitled to receive ratably such
dividends, if any, as may be declared by the Board of Directors out of funds
legally available therefor. Upon the liquidation, dissolution, or winding up of
our company, the holders of common stock are entitled to share ratably in all of
our assets which are legally available for distribution after payment of all
debts and other liabilities and liquidation preference of any outstanding common
stock. Holders of common stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of common stock are validly issued,
fully paid and nonassessable.
We have engaged Interwest Transfer Company, Inc., located in Salt Lake
City, Utah, as independent transfer agent or registrar.
PREFERRED STOCK
The Company is authorized to issue up to 10,000,000 shares of preferred
stock. As of April 14, 2003, there were 210,750 shares of Series A Preferred
Stock issued and outstanding. On July 15, 2002, the Company sold 210,750 shares
of 8% Cumulative Series A Preferred Stock in a private placement, for a price of
$5.00 per preferred share. Each share of Series A Preferred Stock is convertible
into shares of Common Stock at a conversion price equal to the greater of (1)
the average of the lowest seven inter-day trading prices during the twenty-one
trading days immediately prior to conversion discounted by 50% or (ii) $0.50 per
share of Common Stock.
OPTIONS
The Company does not currently have any outstanding options to purchase
common stock of the Company.
WARRANTS
In connection with a Securities Purchase Agreement dated February 12, 2003,
we have issued 600,000 warrants to purchase shares of common stock and we are
obligated to issue an additional 1,200,000 warrants to purchase shares of common
stock. The warrants are exercisable until seven years from the date of issuance
at a purchase price of $0.75 per share.
CONVERTIBLE SECURITIES
To obtain funding for our ongoing operations, we entered into a Securities
Purchase Agreement with the selling stockholders on February 12, 2003 for the
sale of (i) $600,000 in convertible debentures and (ii) a warrants to purchase
1,800,000 shares of our common stock. The investors are obligated to provide us
with the funds as follows:
o $200,000 was disbursed on February 12, 2003;
o $200,000 will be disbursed within 10 days of filing this prospectus;
and
o $200,000 will be disbursed within 10 days of the effectiveness of this
prospectus.
Accordingly, we have received a total of $200,000 pursuant to the
Securities Purchase Agreement.
The debentures bear interest at 12%, mature one year from the date of
issuance, and are convertible into our common stock, at the investors' option,
at the lower of:
28
o $0.75; or
o 50% of the average of the three lowest intraday trading prices for the
common stock on a principal market for the 20 trading days before but
not including the conversion date.
The full principal amount of the convertible debentures are due upon
default under the terms of convertible debentures. In addition, we have granted
the investors a security interest in substantially all of our assets and
intellectual property and registration rights.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our Articles of Incorporation, as amended, provide to the fullest extent
permitted by Nevada law, our directors or officers shall not be personally
liable to us or our shareholders for damages for breach of such director's or
officer's fiduciary duty. The effect of this provision of our Articles of
Incorporation, as amended, is to eliminate our rights and our shareholders
(through shareholders' derivative suits on behalf of our company) to recover
damages against a director or officer for breach of the fiduciary duty of care
as a director or officer (including breaches resulting from negligent or grossly
negligent behavior), except under certain situations defined by statute. We
believe that the indemnification provisions in our Articles of Incorporation, as
amended, are necessary to attract and retain qualified persons as directors and
officers.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act" or "Securities Act") may be permitted to directors, officers
or persons controlling us pursuant to the foregoing provisions, or otherwise, we
have been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
PLAN OF DISTRIBUTION
The selling stockholders and any of their respective pledgees, donees,
assignees and other successors-in-interest may, from time to time, sell any or
all of their shares of common stock on any stock exchange, market or trading
facility on which the shares are traded or in private transactions. These sales
may be at fixed or negotiated prices. The selling stockholders may use any one
or more of the following methods when selling shares:
o ordinary brokerage transactions and transactions in which the broker-
dealer solicits the purchaser;
o block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of
the block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the broker-
dealer for its account;
o an exchange distribution in accordance with the rules of the applicable
exchange;
o privately-negotiated transactions;
o short sales;
o broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
o through the writing of options on the shares
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus. The selling
stockholders shall have the sole and absolute discretion not to accept any
purchase offer or make any sale of shares if they deem the purchase price to be
unsatisfactory at any particular time.
The selling stockholders may pledge their shares to their brokers under the
margin provisions of customer agreements. If a selling stockholders defaults on
a margin loan, the broker may, from time to time, offer and sell the pledged
shares.
The selling stockholders may also engage in short sales against the box,
puts and calls and other transactions in our securities or derivatives of our
securities and may sell or deliver shares in connection with these trades.
29
The selling stockholders or their respective pledgees, donees, transferees
or other successors in interest, may also sell the shares directly to market
makers acting as principals and/or broker-dealers acting as agents for
themselves or their customers. Such broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the selling stockholders
and/or the purchasers of shares for whom such broker-dealers may act as agents
or to whom they sell as principal or both, which compensation as to a particular
broker-dealer might be in excess of customary commissions. Market makers and
block purchasers purchasing the shares will do so for their own account and at
their own risk. It is possible that a selling stockholder will attempt to sell
shares of common stock in block transactions to market makers or other
purchasers at a price per share which may be below the then market price. The
selling stockholders cannot assure that all or any of the shares offered in this
prospectus will be issued to, or sold by, the selling stockholders. The selling
stockholders and any brokers, dealers or agents, upon effecting the sale of any
of the shares offered in this prospectus, may be deemed to be "underwriters" as
that term is defined under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, or the rules and regulations under
such acts. In such event, any commissions received by such broker-dealers or
agents and any profit on the resale of the shares purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act.
We are required to pay all fees and expenses incident to the registration
of the shares, including fees and disbursements of counsel to the selling
stockholders, but excluding brokerage commissions or underwriter discounts.
The selling stockholders, alternatively, may sell all or any part of the
shares offered in this prospectus through an underwriter. No selling stockholder
has entered into any agreement with a prospective underwriter and there is no
assurance that any such agreement will be entered into.
The selling stockholders and any other persons participating in the sale or
distribution of the shares will be subject to applicable provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations under
such act, including, without limitation, Regulation M. These provisions may
restrict certain activities of, and limit the timing of purchases and sales of
any of the shares by, the selling stockholders or any other such person.
Furthermore, under Regulation M, persons engaged in a distribution of securities
are prohibited from simultaneously engaging in market making and certain other
activities with respect to such securities for a specified period of time prior
to the commencement of such distributions, subject to specified exceptions or
exemptions. In regards to short sells, the selling stockholder can only cover
its short position with the securities they receive from us upon conversion. All
of these limitations may affect the marketability of the shares.
We have agreed to indemnify the selling stockholders, or their transferees
or assignees, against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or to contribute to payments the selling
stockholders or their respective pledgees, donees, transferees or other
successors in interest, may be required to make in respect of such liabilities.
If the selling stockholders notify us that they have a material arrangement
with a broker-dealer for the resale of the common stock, then we would be
required to amend the registration statement of which this prospectus is a part,
and file a prospectus supplement to describe the agreements between the selling
stockholders and the broker-dealer.
PENNY STOCK
The Securities and Exchange Commission has adopted Rule 15g-9 which
establishes the definition of a "penny stock," for the purposes relevant to us,
as any equity security that has a market price of less than $5.00 per share or
with an exercise price of less than $5.00 per share, subject to certain
exceptions. For any transaction involving a penny stock, unless exempt, the
rules require:
o that a broker or dealer approve a person's account for transactions in
penny stocks; and
o the broker or dealer receive from the investor a written agreement to
the transaction, setting forth the identity and quantity of the penny
stock to be purchased.
30
In order to approve a person's account for transactions in penny stocks,
the broker or dealer must
o obtain financial information and investment experience objectives of
the person; and
o make a reasonable determination that the transactions in penny stocks
are suitable for that person and the person has sufficient knowledge
and experience in financial matters to be capable of evaluating the
risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prescribed by the Commission relating to the penny
stock market, which, in highlight form:
o sets forth the basis on which the broker or dealer made the suitability
determination; and
o that the broker or dealer received a signed, written agreement from the
investor prior to the transaction.
Disclosure also has to be made about the risks of investing in penny stocks
in both public offerings and in secondary trading and about the commissions
payable to both the broker-dealer and the registered representative, current
quotations for the securities and the rights and remedies available to an
investor in cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny stocks.
31
SELLING STOCKHOLDERS
The table below sets forth information concerning the resale of the shares
of common stock by the selling stockholders. We will not receive any proceeds
from the resale of the common stock by the selling stockholders. We will receive
proceeds from the exercise of the warrants. Assuming all the shares registered
below are sold by the selling stockholders, none of the selling stockholders
will continue to own any shares of our common stock.
The following table also sets forth the name of each person who is offering
the resale of shares of common stock by this prospectus, the number of shares of
common stock beneficially owned by each person, the number of shares of common
stock that may be sold in this offering and the number of shares of common stock
each person will own after the offering, assuming they sell all of the shares
offered.
Total Shares of
Common Stock Total Percentage Percentage of Percentage of
Issuable Upon of Common Stock, Shares of Common Beneficial Common Stock Beneficial Common Stock
Conversion of Assuming Full Stock Included in Ownership Owned Before Ownership Owned After
Debentures and/or Conversion Prospectus (1) Before the the Offering After the the Offering
Name Warrants* Offering ** ** Offering (3) (3)
- ------------------- ----------------- ----------------- ----------------- ------------ --------------- --------------- -------------
AJW Offshore, Ltd. 2,495,910 10.0% Up to 4,991,820 1,183,084 4.99% --- ---
(2) shares of common
stock
- ------------------- ----------------- ----------------- ----------------- ------------ --------------- --------------- -------------
AJW Qualified 1,688,409 7.0% Up to 3,376,818 1,183,084 4.99% --- ---
Partners, LLC (2) shares of common
stock
- ------------------- ----------------- ----------------- ----------------- ------------ --------------- --------------- -------------
AJW Partners, LLC 1,688,409 7.0% Up to 3,376,818 1,183,084 4.99% --- ---
(2) shares of common
stock
- ------------------- ----------------- ----------------- ----------------- ------------ --------------- --------------- -------------
* This column represents an estimated number based on a conversion price as
of a recent date of April 15, 2003 of $.165, divided into the principal amount
and interest thereon for one year.
** These columns represents the aggregate maximum number and percentage of
shares that the selling stockholders can own at one time (and therefore, offer
for resale at any one time) due to their 4.99% limitation.
The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rule, beneficial ownership includes any shares as to which
the selling stockholders has sole or shared voting power or investment power and
also any shares, which the selling stockholders has the right to acquire within
60 days. The actual number of shares of common stock issuable upon the
conversion of the convertible debentures is subject to adjustment depending on,
among other factors, the future market price of the common stock, and could be
materially less or more than the number estimated in the table.
(1) Includes a good faith estimate of the shares issuable upon conversion
of the convertible debentures, including interest thereon for one year, and
exercise of warrants, based on current market prices. Because the number of
shares of common stock issuable upon conversion of the convertible debentures is
dependent in part upon the market price of the common stock prior to a
conversion, the actual number of shares of common stock that will be issued upon
conversion will fluctuate daily and cannot be determined at this time. Under the
terms of the convertible debentures, if the convertible debentures had actually
been converted on April 15, 2003, the conversion price would have been $0.165.
The actual number of shares of common stock offered in this prospectus, and
32
included in the registration statement of which this prospectus is a part,
includes such additional number of shares of common stock as may be issued or
issuable upon conversion of the convertible debentures and exercise of the
related warrants by reason of any stock split, stock dividend or similar
transaction involving the common stock, in accordance with Rule 416 under the
Securities Act of 1933. However the selling stockholders have contractually
agreed to restrict their ability to convert their convertible debentures or
exercise their warrants and receive shares of our common stock such that the
number of shares of common stock held by them in the aggregate and their
affiliates after such conversion or exercise does not exceed 4.99% of the then
issued and outstanding shares of common stock as determined in accordance with
Section 13(d) of the Exchange Act. Accordingly, the number of shares of common
stock set forth in the table for the selling stockholders exceeds the number of
shares of common stock that the selling stockholders could own beneficially at
any given time through their ownership of the convertible debentures and the
warrants. In that regard, the beneficial ownership of the common stock by the
selling stockholder set forth in the table is not determined in accordance with
Rule 13d-3 under the Securities Exchange Act of 1934, as amended.
(2) The selling stockholders are affiliates of each other because they are
under common control. AJW Partners, LLC is a private investment fund that is
owned by its investors and managed by SMS Group, LLC. SMS Group, LLC, of which
Mr. Corey S. Ribotsky is the fund manager, has voting and investment control
over the shares listed below owned by AJW Partners, LLC. AJW Offshore, Ltd.,
formerly known as AJW/New Millennium Offshore, Ltd., is a private investment
fund that is owned by its investors and managed by First Street Manager II, LLC.
First Street Manager II, LLC, of which Corey S. Ribotsky is the fund manager,
has voting and investment control over the shares owned by AJW Offshore, Ltd.
AJW Qualified Partners, LLC, formerly known as Pegasus Capital Partners, LLC, is
a private investment fund that is owned by its investors and managed by AJW
Manager, LLC, of which Corey S. Ribotsky and Lloyd A. Groveman are the fund
managers, have voting and investment control over the shares listed below owned
by AJW Qualified Partners, LLC. We have been notified by the selling
stockholders that they are not broker-dealers or affiliates of broker-dealers
and that they believe they are not required to be broker-dealers.
(3) Assumes that all securities registered will be sold.
Terms of Convertible Debentures
To obtain funding for our ongoing operations, we entered into a Securities
Purchase Agreement with the selling stockholders on February 12, 2003 for the
sale of (i) $600,000 in convertible debentures and (ii) a warrants to buy
1,800,000 shares of our common stock. The investors are obligated to provide us
with the funds as follows:
o $200,000 was disbursed on February 12, 2003;
o $200,000 will be disbursed within 10 days of filing this prospectus;
and
o $200,000 will be disbursed within 10 days of the effectiveness of this
prospectus.
Accordingly, we have received a total of $200,000 pursuant to the
Securities Purchase Agreement.
The debentures bear interest at 12%, mature one year from the date of
issuance, and are convertible into our common stock, at the investors' option,
at the lower of:
o $0.75; or
o 50% of the average of the three lowest intraday trading prices for the
common stock on a principal market for the 20 trading days before but
not including the conversion date.
The full principal amount of the convertible debentures are due upon
default under the terms of convertible debentures. In addition, we have granted
the investors a security interest in substantially all of our assets and
intellectual property and registration rights.
The warrants are exercisable until seven years from the date of issuance at
a purchase price of $0.75 per share. In addition, the exercise price of the
warrants will be adjusted in the event we issue common stock at a price below
market, with the exception of any securities issued as of the date of this
warrant.
33
The conversion price of the debentures and the exercise price of the
warrants may be adjusted in certain circumstances such as if we pay a stock
dividend, subdivide or combine outstanding shares of common stock into a greater
or lesser number of shares, or take such other actions as would otherwise result
in dilution of the selling stockholder's position.
The selling stockholders have contractually agreed to restrict their
ability to convert their convertible debentures or exercise their warrants and
receive shares of our common stock such that the number of shares of common
stock held by them in the aggregate and their affiliates after such conversion
or exercise does not exceed 4.99% of the then issued and outstanding shares of
common stock.
We have granted the selling stockholders a security interest in all of our
assets against the convertible debentures.
A complete copy of the Securities Purchase Agreement and related documents
were filed with the SEC as exhibits to our Form SB-2 relating to this
prospectus.
Sample Conversion Calculation
The number of shares of common stock issuable upon conversion of the
debentures is determined by dividing that portion of the principal of the
debenture to be converted and interest, if any, by the conversion price. For
example, assuming conversion of $600,000 of debentures on April 15, 2003, a
conversion price of $0.165 per share, and the payment of accrued interest in the
approximate amount of $72,000 in additional shares rather than in cash, the
number of shares issuable upon conversion would be:
$600,000 + $72,000 = $672,000/$.165 = 4,072,727 shares
The following is an example of the amount of shares of our common stock
that are issuable, upon conversion of the principal amount of our convertible
debentures, based on market prices 25%, 50% and 75% below the market price, as
of April 15, 2003 of $0.33.
Number % of
% Below Price Per With Discount of Shares Outstanding
Market Share at 50% Issuable Stock
25% $.2475 $.12375 4,848,484 17.7%
50% $.165 $.0825 7,272,727 24.4%
75% $.0825 $.04125 14,545,454 39.2%
LEGAL MATTERS
The validity of the shares of common stock being offered hereby will be
passed upon for us by Sichenzia Ross Friedman Ference LLP, New York, New York.
EXPERTS
Chisholm & Associates, Certified Public Accountants, have audited, as set
forth in their report thereon appearing elsewhere herein, our financial
statements at December 31, 2002 and 2001, and for the years then ended that
appear in the prospectus. The financial statements referred to above are
included in this prospectus with reliance upon the auditors' opinion based on
their expertise in accounting and auditing.
34
AVAILABLE INFORMATION
We have filed a registration statement on Form SB-2 under the Securities
Act of 1933, as amended, relating to the shares of common stock being offered by
this prospectus, and reference is made to such registration statement. This
prospectus constitutes the prospectus of FullCircle Registry, Inc., filed as
part of the registration statement, and it does not contain all information in
the registration statement, as certain portions have been omitted in accordance
with the rules and regulations of the Securities and Exchange Commission.
We are subject to the informational requirements of the Securities Exchange
Act of 1934 which requires us to file reports, proxy statements and other
information with the Securities and Exchange Commission. Such reports, proxy
statements and other information may be inspected at public reference facilities
of the SEC at Judiciary Plaza, 450 Fifth Street N.W., Washington D.C. 20549;
Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661; and 5670 Wilshire Boulevard, Los Angeles, California 90036. Copies of
such material can be obtained from the Public Reference Section of the SEC at
Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C. 20549 at prescribed
rates. Because we file documents electronically with the SEC, you may also
obtain this information by visiting the SEC's Internet website at
http://www.sec.gov.
35
FULLCIRCLE REGISTRY, INC.
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002 and 2001
C O N T E N T S
Independent Auditor's Report.................................................................................... F-3
Consolidated Balance Sheets..................................................................................... F-4
Consolidated Statements of Operations........................................................................... F-6
Consolidated Statements of Stockholders' Equity................................................................. F-7
Consolidated Statements of Cash Flows........................................................................... F-9
Notes to the Consolidated Financial Statements................................................................. F-11
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
FullCircle Registry, Inc.
We have audited the accompanying consolidated balance sheets of FullCircle
Registry, Inc. and Subsidiaries as of December 31, 2002 and 2001 and the related
consolidated statements of operations, stockholders' equity 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 consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall 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 consolidated financial position of
FullCircle Registry, Inc. and Subsidiaries as of December 31, 2002 and 2001 and
the consolidated results of its operations and 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 the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has recurring operating losses,
negative working capital and is dependent on financing to continue operations.
These factors raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described in the
Note 2. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Chisholm & Associates
North Salt Lake, Utah
February 13, 2003
F-3
FULLCIRCLE REGISTRY, INC.
Consolidated Balance Sheets
ASSETS
December 31,
--------------------------------------
2002 2001
------------------ ------------------
CURRENT ASSETS
Cash $ 709 $ 3,251
Accounts receivable 2,005 -
Commission Advances 94,567 -
Note receivable - related party - 20,000
------------------ ------------------
Total Current Assets 97,281 23,251
------------------ ------------------
PROPERTY AND EQUIPMENT
Computers and equipment 62,596 60,952
Office furniture and fixtures 10,153 10,153
Software 390,796 244,296
------------------ ------------------
463,545 315,401
------------------ ------------------
Less:
Accumulated depreciation - software (180,898) (91,855)
Accumulated depreciation (28,945) (15,194)
------------------ ------------------
Total Property and Equipment 253,702 208,352
------------------ ------------------
OTHER ASSETS
Investments - available for sale 117,750 -
Product development/Operating rights 354,063 -
Goodwill 4,464,718 -
Deposits 1,000 1,717
------------------ ------------------
Total Other Assets 4,937,531 1,717
------------------ ------------------
TOTAL ASSETS $ 5,288,514 $ 233,320
================== ==================
The accompanying notes are an integral part of these financial statements.
F-4
FULLCIRCLE REGISTRY, INC.
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
--------------------------------------
2002 2001
------------------ ------------------
CURRENT LIABILITIES
Accounts payable $ 272,133 $ 170,016
Accounts payable-related party 106,798 -
Accrued expenses 106,187 110,586
Deferred revenue 14,863 -
Line of credit - 25,135
Current portion of long-term liabilities 311,384 595,000
------------------ ------------------
Total Current Liabilities 811,365 900,737
------------------ ------------------
LONG-TERM LIABILITIES
Notes Payable 195,258 -
Convertible bonds - 365,000
Notes payable-related party 616,126 680,931
Less: current portion of long-term liabilities (311,384) (595,000)
------------------ ------------------
Total Long-Term Liabilities 500,000 450,931
------------------ ------------------
TOTAL LIABILITIES 1,311,365 1,351,668
------------------ ------------------
STOCKHOLDERS' EQUITY
Preferred stock, authorized 5,000,000 shares,
$.001 par value, issued and outstanding 210,750
and 0 shares, respectively 211 -
Common stock, authorized 50,000,000 shares
$.001 par value, issued and outstanding 22,577,696
and 12,000,000 shares, respectively 22,578 12,000
Additional paid-in capital 8,420,213 14,103
Retained earnings (deficit) (4,465,853) (1,144,451)
------------------ ------------------
Total Stockholders' Equity 3,977,149 (1,118,348)
------------------ ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,288,514 $ 233,320
================== ==================
The accompanying notes are an integral part of these financial statements.
F-5
FULLCIRCLE REGISTRY, INC.
Consolidated Statements of Operations
December 31,
--------------------------------------
2002 2001
------------------ ------------------
REVENUES $ 221,321 $ 41,131
COST OF SALES 166,717 20,687
------------------ ------------------
GROSS PROFIT 54,604 20,444
------------------ ------------------
SELLING EXPENSES 17,210 29,065
GENERAL AND ADMINISTRATIVE
EXPENSES 3,014,455 336,393
------------------ ------------------
TOTAL OPERATING EXPENSES (3,031,665) (365,458)
------------------ ------------------
OPERATING INCOME (LOSS) (2,977,061) (345,014)
------------------ ------------------
OTHER INCOME (EXPENSE)
Reorganization expense (310,000) -
Interest expense ( 34,341) (110,834)
Loss on disposal of assets - (4,300)
Bad debts - (14,266)
------------------ ------------------
TOTAL OTHER INCOME (EXPENSE) (344,341) (129,400)
------------------ ------------------
INCOME (LOSS) BEFORE INCOME TAXES (3,321,402) (474,414)
PROVISION FOR INCOME TAXES - -
------------------ ------------------
NET INCOME (LOSS) $ (3,321,402) $ (474,414)
================== ==================
NET INCOME (LOSS) PER SHARE $ ( 0.22) $ ( 0.04)
================== ==================
WEIGHTED AVERAGE OUTSTANDING
SHARES 15,022,714 12,000,000
================== ==================
The accompanying notes are an integral part of these financial statements.
F-6
FULLCIRCLE REGISTRY, INC.
Consolidated Statements of Stockholders' Equity
For the Years Ended December 31, 2002 and 2001
Retained
Preferred Stock Common Stock Paid-In Earnings
Shares Amount Shares Amount Capital (Deficit)
------------ ------ ----------------- ------------- -------------- -------------
Balance at December
31, 2000 - $ - 11,999,900 $ 12,000 $ (10,897) $ (670,037)
June 2001 - shares issued for
cash at $250 per share 100 - 25,000 -
Net income (loss) for the year
ended December 31, 2001 - - - - - (474,414)
------------- ---------- ---------------- ------------- -------------- -------------
Balance at December 31, 2001 - - 12,000,000 12,000 14,103 (1,144,451)
April 02-Reverse merger
adjustment 753,360 753 (753) -
April 02-Shares cancelled (53,330) (53) 53 -
May 02-Shares issued for
services at $.50 per share 1,400,000 1,400 698,600 -
July 02-Shares issued for
services at $1.90 per share 30,000 30 56,970 -
July 02-Shares issued for
acquisition of ELTI 75,000 75 117,675 -
August 02-Shares issue for
cash at $5 per share 210,750 211 - - 1,089,515 -
Note forgiveness by share-
holders, contribution 728,693 -
September 02-Shares issued
for services at $1.70 per share 25,000 25 42,475 -
October 02-Shares issued
for services at $.72 per share 120,000 120 86,280 -
October 02-Shares issued for
acquisition of Paradigm 6,000,000 6,000 4,014,000 -
October 02-Shares issued for
acquisition of Spoken Data 210,000 210 140,490 -
The accompanying notes are an integral part of these financial statements.
F-7
FULLCIRCLE REGISTRY, INC.
Consolidated Statements of Stockholders' Equity
For the Period from Inception on January 20, 2000
Through December 31, 2002
Retained
Preferred Stock Common Stock Paid-In Earnings
Shares Amount Shares Amount Capital (Deficit)
------------ ------ ----------------- ------------- -------------- -------------
October 02-shares issued as
Incentive for Preferred share-
holders - - 970,000 970 885,006 -
December 02-Shares issued for
exercise of options at $.01 per share 414,000 414 3,726 -
December 02-Shares issued for
cash at $.25 per share 20,000 20 4,980 -
December 02-Shares issued for
employee bonuses at $1.05 50,000 50 52,450 -
December 02-Shares issued for
services at $1.13 per share 25,000 25 28,225 -
December 02-Shares issued for
acquisition of AskPhysician.com 462,000 462 470,778 -
December 02-Shares issued for
cash at $.30 per share 76,666 77 22,923
Net (loss) for the year
ended December 31, 2002 - - - - - (3,321,402)
------------- ----------- ----------------- -------------- --------------- -------------
Balance at December 31, 2002 210,750 $ 211 22,577,696 $ 22,578 $ 8,420,213 $ (4,465,853)
============= =========== ================= ============== =============== =============
The accompanying notes are an integral part of these financial statements.
F-8
FULLCIRCLE REGISTRY, INC.
Consolidated Statements of Cash Flows
December 31,
--------------------------------------
2002 2001
------------------ ------------------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) $ (3,321,402) $ (474,414)
Non-cash items:
Depreciation and amortization 402,794 86,928
Stock issued for services 1,839,625 -
Write off of deposits 717 -
Loss on disposal of asset - 4,300
(Increase) decrease in current assets(net of acquisitions):
Accounts receivable 800 -
Commission Advances (94,567) -
Increase (decrease) in current liabilities(net of acquisitions)
Bank overdraft - (3,562)
Accounts payable 239,194 (111,558)
Deferred revenues 6,558 -
Accrued expenses (4,399) 5,337
------------------ ------------------
Net Cash Provided (Used) by
Operating Activities (930,680) (492,969)
------------------ ------------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Cash paid for product development (157,813)
Cash paid for deposits - (392)
Cash acquired from subsidiaries 5,493 -
Cash received for notes receivable 20,000 -
Cash paid for note receivable - (20,000)
Cash paid for property and equipment (7,444) (50,204)
Cash received from sale of property
and equipment - 500
------------------ ------------------
Net Cash Provided (Used) by
Investing Activities (139,764) (70,096)
------------------ ------------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Cash received on line of credit 9,731 10,135
Cash paid on line of credit (34,865) (20,000)
Cash received from convertible bonds - 295,000
Cash received from notes 550,977 278,274
Cash paid on notes (656,831) (22,093)
Cash received from treasury stock 100,000 -
Cash received from stock issuance 1,098,890 25,000
------------------ ------------------
Net Cash Provided (Used) by
Investing Activities 1,067,902 566,316
------------------ ------------------
INCREASE (DECREASE) IN CASH (2,542) 3,251
The accompanying notes are an integral part of these financial statements.
F-9
FULLCIRCLE REGISTRY, INC.
Consolidated Statements of Cash Flows (Continued)
December 31,
--------------------------------------
2002 2001
------------------ ------------------
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 3,251 -
------------------ ------------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 709 $ 3,251
================== ==================
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ 17,910 $ 7,676
Cash paid for income taxes $ - $ -
NON-CASH ACTIVITY:
Shares issued for services $ 1,842,925 $ -
Shares issued for investments $ 5,059,690 $ -
Note payable issued for investment $ 500,000 $ -
Forgiveness of convertible bond $ 728,693 $ -
The accompanying notes are an integral part of these financial statements.
F-10
FULLCIRCLE REGISTRY, INC.
Notes to Consolidated Financial Statements
December 31, 2002 and 2001
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 their 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 containing vital medical and
legal information of its customers. The Company is currently
focusing on raising capital to develop its operations
In July of 2002, the Company issued 75,000 shares of common stock
to acquire 100% of the shares of Electronic Luminescent
Technologies, Inc. ("ELTI") a Florida Corporation. ELTI was in
possession of a license agreement for a "Bicycle Illumination
System". Subsequent to the merger, ELTI transfered its interest in
the license for 1,000,000 shares (a 10% interest) in GloTech
Industries. (See investments available for sale).
On October 10, 2002, the Company issued 210,000 shares of common
stock for all issued and outstanding stock of Spoken Data
Technologies, a Florida corporation (SDT). SDT is in possession of
text-to-voice software technology developed by the University of
New Brunswick. The Company intends to incorporate this technology
with its digital medical and legal information database.
Also on October 10, 2002, the Company issued 6,000,000 shares of
common stock and a note payable for $500,000 for all issued and
outstanding shares of Paradigm Solutions Group, LLC. (Paradigm), a
Delaware Limited Liability Company. Paradigm promotes the
HealthIER Plan, a medical reimbursement plan designed to assist
employers to make use of qualified IRS tax free medical
reimbursement programs.
On December 20, 2002, the Company issued 462,000 shares of common
stock for all issued and outstanding shares of AskPhysicians.com,
Inc. (APC) a Florida corporation. APC possesses a website where
the public can ask questions of a physician and receive online
advice.
b. Accounting Method
The Company recognizes income and expenses on the accrual basis of
accounting. The Company has chosen a fiscal year end of December
31.
F-11
FULLCIRCLE REGISTRY, INC.
Notes to Consolidated Financial Statements
December 31, 2002 and 2001
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
c. 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. Common stock equivalents
have not been included in the weighted average number of shares
outstanding because of its anti-dilutive effects.
December 31,
--------------------------------------
2002 2001
-------------------- ------------------
Numerator - loss $ (3,321,402) (474,414)
Denominator - weighted average
of shares outstanding 15,022,714 12,000,000
------------------ ------------------
Loss per share $ (0.22) $ (0.04)
================== ==================
d. Cash and Cash Equivalents
The Company considers all highly liquid investments with
maturities of three months or less to be cash equivalents.
e. Provision for Income Taxes
No provision for income taxes has been recorded due to net
operating loss carryforwards totaling approximately $4,465,000
that will be offset against future taxable income. These NOL
carryforwards begin to expire in the year 2020. No tax benefit
will be recorded until the Company generates taxable income.
Deferred tax assets and the valuation account is as follows at
December 31, 2002 and 2001:
December 31,
--------------------------------------
2002 2001
------------------ ------------------
Deferred tax asset:
NOL carryforward $ 1,518,000 $ 389,100
Valuation allowance (1,518,000) (389,100)
------------------ ------------------
Total $ - $ -
================== ==================
f. 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.
F-12
FULLCIRCLE REGISTRY, INC.
Notes to Consolidated Financial Statements
December 31, 2002 and 2001
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
g. Property and Equipment
Expenditures for property and equipment and for renewals and
betterments, which extend the originally estimated economic life
of assets or convert the assets to a new use, are capitalized at
cost. Expenditures for maintenance, repairs and other renewals of
items are charged to expense. When items are disposed of, the cost
and accumulated depreciations are eliminated from the accounts,
and any gain or loss is included in the results of operations.
The provision for depreciation is calculated using the
straight-line method over the estimated useful lives of the
assets. Depreciation expense for the periods ended December 31,
2002 and 2001 is $102,794 and $86,928, respectively.
h. Principles of Consolidation
For the year ended December 31, 2002, the consolidated financial
statements include the books and records of FullCircle Registry,
Inc., Electronic Luminescent Technologies, Inc., Spoken Data
Technologies, Paradigm Solutions Group, LLC and AskPhysicians.com,
Inc. All inter-company transactions and accounts have been
eliminated in the consolidation. The financial statements for the
year ended December 31, 2001, are unconsolidated.
NOTE 2 - GOING CONCERN
The accompanying Consolidated Financial Statements have been
prepared assuming that the Company will continue as a going
concern. The Company has suffered recurring losses negative
working capital and is dependent upon raising capital to continue
operations. The consolidated financial statements do not include
any adjustments that might result from the outcome of this
uncertainty. It is management's plan to expand the marketing of
the Paradigm product and add value to the services by offering the
other products of the Company such as vital digital medical and
legal files.
NOTE 3 - LONG-TERM LIABILITIES
Long-term liabilities are detailed in the following schedules as
of December 31, 2002 and 2001:
2002 2001
------------------ ------------------
Convertible Bonds:
Convertible bonds convertible for 1,401,600 shares
of common stock, due March 2002, bears interest
at 8.0% per annum $ - $ 365,000
------------------ ------------------
Notes Payable - Related Party:
Note payable to a shareholder bears interest at
16.7% per annum, principal and interest due
March 2003 - 450,931
F-13
FULLCIRCLE REGISTRY, INC.
Notes to Consolidated Financial Statements
December 31, 2002 and 2001
NOTE 3 - LONG-TERM LIABILITIES (Continued)
Note payable to a shareholder, bears interest at
7.0% per annum, principal and interest due
July 2002 80,000 230,000
Note payable to shareholders bears interest at
7.0% per annum, principal and interest due
December 2004 500,000 -
Note payable to a shareholder bears interest at
8.0% per annum principal and interest due on demand 36,126 -
Notes payable -
Note payable to an individual bears interest at
8.0% per annum principal and interest due on demand 34,000 -
Note payable to various individuals bears interest at
7.0% per annum principal and interest due on demand 161,258 -
Total Notes Payable 811,384 680,931
------------------ ------------------
Total Long-Term Liabilities: 811,384 1,045,931
Less current portion: (311,384) (595,000)
----------------- ------------------
Net Long-Term Liabilities $ 500,000 $ 450,931
================== ==================
Future minimum principal payments on notes payable are as follows:
2003 $ 311,384
2004 500,000
-----------------
Total Long-Term Liabilities $ 811,384
=================
NOTE 4 - LINE OF CREDIT
In November 2000, the Company acquired a $35,000 unsecured line of
credit from a bank at an interest rate of 5.75%. The balances due
at December 31, 2002 and 2001 was $ -0- and $25,135, respectively.
NOTE 5 - RELATED PARTY
The Company entered into a lease agreement for office space with a
major shareholder. The monthly lease payment is $3,003 and the
lease expires in December 2004. Rent expense was approximately $
40,781 and $24,000 for 2002 and 2001, respectively.
The Company has a note payable due to a major shareholder in the
amount of $ -0- and $450,931 as of December 31, 2002 and 2001,
respectively [see Note 3].
F-14
FULLCIRCLE REGISTRY, INC.
Notes to Consolidated Financial Statements
December 31, 2002 and 2001
NOTE 5 - RELATED PARTY (Continued)
The Company has a note payable due to a major shareholder in the
amount of $80,000 and $230,000 as of December 31, 2002 and
December 31, 2001 [see Note 3].
The Company has a note receivable due from a major shareholder in
the amount of $0 and $20,000 as of December 31, 2002 and 2001. The
note is non-interest bearing and is due upon demand.
Prior to the acquisition by the Company, Paradigm signed a
management agreement with a company under common ownership.
Paradigm paid management fees to this related party of $134,000
post acquisition.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
During 2002, the Company entered into a employment agreement with
the CEO for monthly compensation of $100 per hour, month to month.
Pursuant to his prior employment agreement, the CEO was awarded
options which were exercised during 2002 into 414,000 shares of
common stock. No addition options have been awarded as of December
31, 2002.
The Company entered into a lease agreement for office space with a
major shareholder [see Note 5.
Future minimum operating lease payments are as follows:
2003 36,036
2004 $ 36,036
------------------
Total $ 72,072
==================
NOTE 7 - GOODWILL/ACQUISITIONS
The Company has adopted Statement of Financial Accounting
Standards (SFAS) No. 141 (SFAS 141), "Business Combinations" and
No. 142 (SFAS 142), "Goodwill and Other Intangible Assets", which
establishes new standards for the treatment of goodwill and other
intangible assets. SFAS 142 prescribes that amortization of
goodwill will cease as of the adoption date (January 1, 2002).
Additionally, the Company will be required to perform an
impairment test on goodwill and other intangible assets annually,
and whenever events and circumstances occur that might affect the
carrying value of such assets. The Company has performed an
internal impairment test of goodwill and has recorded impairments
as described below.
In July of 2002, the Company issued 75,000 shares of common stock
valued at $117,750 to acquire 100% of the shares of Electronic
Luminescent Technologies, Inc. ("ELTI") a Florida Corporation. As
such, ELTI became a wholly owned subsidiary of the Company. This
transaction was accounted for on the purchase method of accounting
using generally accepted accounting principles. Goodwill was not
recorded in this transaction and the asset was subsequently
exchange for 1,000,000 shares of GloTech stock. (see investments
available-for-sale. There were no operations of this subsidiary
during 2002.
F-15
FULLCIRCLE REGISTRY, INC.
Notes to Consolidated Financial Statements
December 31, 2002 and 2001
NOTE 7 - GOODWILL/ACQUISITIONS (Continued)
On October 10, 2002, the Company issued 210,000 shares of common
stock valued at $140,700, for all issued and outstanding stock of
Spoken Data Technologies, a Florida corporation (SDT) As such, SDT
became a wholly owned subsidiary of the Company. This transaction
was accounted for on the purchase method of accounting using
generally accepted accounting principles. Goodwill was not
recorded in this transaction as the software assets acquired were
valued at the market price of the stock issued. There were no
operations of this subsidiary during 2002.
On October 10, 2002, the Company issued 6,000,000 shares of common
stock valued at $4,020,000, and a note payable for $500,000 for
all issued and outstanding shares of Paradigm Solutions Group,
LLC. (Paradigm), a Delaware Limited Liability Company. As such,
Paradigm became a wholly owned subsidiary of the Company. This
transaction was accounted for on the purchase method of accounting
using generally accepted accounting principles. Goodwill was
recorded of $4,296,608 upon acquisition, and has been deemed by
management to not be impaired as of December 31, 2002. The
operations of this subsidiary have been included in the
consolidated financial statements of the Company from the date of
the acquisition.
On December 20, 2002, the Company issued 462,000 shares of common
stock valued at $471,240, for all issued and outstanding shares of
AskPhysicians.com, Inc. (APC) a Florida corporation. As such, APC
became a wholly owned subsidiary of the Company. This transaction
was accounted for on the purchase method of accounting using
generally accepted accounting principles. Goodwill was recorded of
$468,110 upon acquisition, and has been deemed by management to be
impaired as of December 31, 2002 by $300,000. The operations of
this subsidiary have been included in the consolidated financial
statements of the Company from the date of the acquisition.
Goodwill consists of the following at December 31, 2002:
Paradigm $4,296,608
APC 468,110
Total 4,764,718
Less impairment of APC ( 300,000)
-----------
Total Goodwill at December 31, 2002 $4,464,718
===========
F-16
FULLCIRCLE REGISTRY, INC.
Notes to Consolidated Financial Statements
December 31, 2002 and 2001
NOTE 8 - INVESTMENTS AVAILABLE-FOR-SALE
Management determines the appropriate classification of marketable
equity security investments at the time of purchase and
reevaluates such designation as of as of each balance sheet date.
Unrestricted marketable equity securities have been classified as
available for sale. Available for sale securities are carried at
fair market value, with unrealized gains and losses, net of tax,
reported as a net amount in accumulated comprehensive income.
Realized gains and losses and declines in value judged to be other
than temporary on available for sale securities are included in
investment income. The cost of securities sold is based on the
specific identification method. Interest and dividends on
securities classified as available for sale are included in
investment income.
At December 31, 2002, the Company owns restricted shares of common
stock of a public company. Investments in securities are
summarized as follows at December 31, 2002:
Unrealized Realized Fair
Cost Gain/(Loss) Gain/(Loss) Value
---------------- ----------- ----------- ----------------
Available-for-sale
securities
December 31, 2002 $ 117,750 $ -0- $ -0- $ 117,750
================ =============== =============== ================
NOTE 9 - PRODUCT DEVELOPMENT/ OPERATING RIGHTS
Paradigm incurred various legal and administrative costs
associated with the HEalthier Plan development. These costs will
be amortized beginning in 2003 on a straight line basis over 5
years. Product Development consists of the following at December
31, 2002:
Product Development/Operating Rights $354,063
Accumulated Amortization -0-
---------------
Total Product Development at December 31, 2002 $354,063
===============
F-17
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our Articles of Incorporation, as amended, provide to the fullest extent
permitted by Nevada law, our directors or officers shall not be personally
liable to us or our shareholders for damages for breach of such director's or
officer's fiduciary duty. The effect of this provision of our Articles of
Incorporation, as amended, is to eliminate our right and our shareholders
(through shareholders' derivative suits on behalf of our company) to recover
damages against a director or officer for breach of the fiduciary duty of care
as a director or officer (including breaches resulting from negligent or grossly
negligent behavior), except under certain situations defined by statute. We
believe that the indemnification provisions in its Articles of Incorporation, as
amended, are necessary to attract and retain qualified persons as directors and
officers.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth an itemization of all estimated expenses,
all of which we will pay, in connection with the issuance and distribution of
the securities being registered:
NATURE OF EXPENSE AMOUNT
SEC Registration fee $ 435.89
Accounting fees and expenses 10,000.00*
Legal fees and expenses 35,000.00*
Miscellaneous 4,564.11
TOTAL $50,000.00*
===========
* Estimated.
II-1
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
On July 26, 2002, the Company issued 75,000 shares of its common stock in
exchange for 1,000,000 shares of Electronic Luminescent Technologies, Inc. The
shares were issued in a transaction exempt under Rule 506 of Regulation D
promulgated under Section 4(2) of the Securities Act of 1933, as amended.
On August 1, 2002, the Company issued to one entity consultant of the
Company as consideration for consulting services 30,000 shares of its common
stock . The shares were issued in a transaction exempt under Rule 506 of
Regulation D promulgated under Section 4(2) of the Securities Act of 1933, as
amended.
On August 15, 2002, the Company sold 210,750 shares of Series A Preferred
stock to several private investors. The shares were issued in a transaction
exempt under Rule 506 of Regulation D promulgated under Section 4(2) of the
Securities Act of 1933, as amended.
On September 16, 2002, the Company issued to one entity consultant of the
Company as consideration for consulting services 25,000 shares of its common
stock . The shares were issued in a transaction exempt under Rule 506 of
Regulation D promulgated under Section 4(2) of the Securities Act of 1933, as
amended.
On October 24, 2002, the Company issued 6,000,000 shares of its common
stock in exchange for all of the issued and outstanding shares of Paradigm
Solutions Group, LLC. The shares were issued in a transaction exempt under Rule
506 of Regulation D promulgated under Section 4(2) of the Securities Act of
1933, as amended.
On October 24, 2002, the Company issued 210,000 shares of its common stock
in exchange for all of the issued and outstanding shares of Spoken Data. The
shares were issued in a transaction exempt under Rule 506 of Regulation D
promulgated under Section 4(2) of the Securities Act of 1933, as amended.
On December 18, 2002, the Company issued 414,000 shares of its common stock
upon the exercise of a warrant at an exercise price of $0.01 per share. The
holder of the warrant used cash as consideration for the exercise price. The
issuance was exempt from registration under Section 4(2) of the Securities Act
of 1933, as amended. The individual to whom the shares were issued had a
pre-existing relationship with the Company, was the president, chief executive
officer, and director of the Company, and had access to the same information as
would be included in a registration statement prepared by the Company.
On December 18, 2002, the Company issued 75,000 shares of its common stock
to employees as bonuses. The shares were issued in a transaction exempt under
Rule 506 of Regulation D promulgated under Section 4(2) of the Securities Act of
1933, as amended.
On December 20, 2002, the Company sold 20,000 shares of its common stock,
at a price of $0.25 per share, to a private investor. The investor was an
accredited investor. The shares were issued in a transaction exempt under Rule
506 of Regulation D promulgated under Section 4(2) of the Securities Act of
1933, as amended.
On December 20, 2002, the Company issued to 2 individual consultants of the
Company as consideration for lobbying services 25,000 shares of its common stock
.. The shares were issued in a transaction exempt under Rule 506 of Regulation D
promulgated under Section 4(2) of the Securities Act of 1933, as amended.
On December 20, 2002, the Company issued 462,000 shares of its common stock
in exchange for all of the issued and outstanding shares of AskPhysician.com,
Inc.. The shares were issued in a transaction exempt under Rule 506 of
Regulation D promulgated under Section 4(2) of the Securities Act of 1933, as
amended.
On February 12, 2003, we entered into a Securities Purchase Agreement with
private investors for the sale of (i) $600,000 in convertible debentures and
(ii) a warrants to buy 1,800,000 shares of our common stock. The investors are
obligated to provide us with the funds as follows:
o $200,000 was disbursed on February 12, 2003;
o $200,000 will be disbursed within 10 days of filing a prospectus; and
II-2
o $200,000 will be disbursed within 10 days of the effectiveness of the
prospectus.
Accordingly, we have received a total of $200,000 pursuant to the
Securities Purchase Agreement.
The debentures bear interest at 12%, mature one year from the date of
issuance, and are convertible into our common stock, at the investors' option,
at the lower of:
o $0.75; or
o 50% of the average of the three lowest intraday trading prices for the
common stock on a principal market for the 20 trading days before but
not including the conversion date.
The full principal amount of the convertible debentures are due upon
default under the terms of convertible debentures. In addition, we have granted
the investors a security interest in substantially all of our assets and
intellectual property and registration rights with respect to the shares
underlying the debentures and warrants.
The warrants are exercisable until seven years from the date of issuance at
a purchase price of $0.75 per share. In addition, the exercise price of the
warrants will be adjusted in the event we issue common stock at a price below
market, with the exception of any securities issued as of the date of the
warrant.
On February 25, 2003, the Company issued to one entity consultant of the
Company as consideration for consulting services 120,000 shares of its common
stock . The shares were issued in a transaction exempt under Rule 506 of
Regulation D promulgated under Section 4(2) of the Securities Act of 1933, as
amended.
* All of the above offerings and sales were deemed to be exempt under rule
506 of Regulation D and Section 4(2) of the Securities Act of 1933, as amended.
No advertising or general solicitation was employed in offering the securities.
The offerings and sales were made to a limited number of persons, all of whom
were accredited investors, business associates of FullCircle Registry or
executive officers of FullCircle Registry, and transfer was restricted by
FullCircle Registry in accordance with the requirements of the Securities Act of
1933. In addition to representations by the above-referenced persons, we have
made independent determinations that all of the above-referenced persons were
accredited or sophisticated investors, and that they were capable of analyzing
the merits and risks of their investment, and that they understood the
speculative nature of their investment. Furthermore, all of the above-referenced
persons were provided with access to our Securities and Exchange Commission
filings.
Except as expressly set forth above, the individuals and entities to whom
we issued securities as indicated in this section of the registration statement
are unaffiliated with the Company.
II-3
ITEM 27. EXHIBITS.
The following exhibits are included as part of this Form SB-2. References
to "the Company" in this Exhibit List mean FullCircle Registry, Inc., a Nevada
corporation.
Exhibit No. Description
3.1(1) Articles of Incorporation of Excel Publishing, Inc.,
incorporated by reference to Exhibit 3.1 of Excel Publishing,
Inc.'s Form SB-2, filed December 15, 2000.
3.2(1) Certificate of Amendment of Articles of Incorporation
(FullCircle Registry, Inc.), incorporated by reference to
Exhibit 3.1 of FullCircle Registry's Form 10-KSB, filed April
14, 2003.
3.3(1) Amended and Restated Bylaws of FullCircle Registry, Inc.,
incorporated by reference to Exhibit 3.2 of FullCircle
Registry's Form 10-KSB, filed April 14, 2003.
4.1 Common Stock Purchase Warrant with AJW Offshore, Ltd.,
incorporated by reference to Exhibit 4.1 of FullCircle
Registry's Form 10-KSB, filed April 14, 2003.
4.2 Common Stock Purchase Warrant with AJW Partners, LLC.,
incorporated by reference to Exhibit 4.2 of FullCircle
Registry's Form 10-KSB, filed April 14, 2003.
4.3 Common Stock Purchase Warrant with AJW Qualified Partners,
LLC., incorporated by reference to Exhibit 4.3 of
FullCircle Registry's Form 10-KSB, filed April 14, 2003.
4.4 Convertible Debenture with AJW Offshore, Ltd., incorporated
by reference to Exhibit 4.4 of FullCircle Registry's
Form 10-KSB, filed April 14, 2003.
4.5 Convertible Debenture with AJW Partners, LLC., incorporated
by reference to Exhibit 4.5 of FullCircle Registry's
Form 10-KSB, filed April 14, 2003.
4.6 Convertible Debenture with AJW Qualified Partners, LLC.,
incorporated by reference to Exhibit 4.6 of FullCircle
Registry's Form 10-KSB, filed April 14, 2003.
4.7 Securities Purchase Agreement for the $600,000 financing
entered on February 12, 2003., incorporated by reference
to Exhibit 4.7 of FullCircle Registry's Form 10-KSB, filed
April 14, 2003.
4.8 Security Agreement among FullCircle Registry, AJW Partners,
LLC, AJW Offshore, Ltd., and AJW Qualified Partners,
LLC, incorporated by reference to Exhibit 4.8 of FullCircle
Registry's Form 10-KSB, filed April 14, 2003.
4.9 Intellectual Property Security Agreement among FullCircle
Registry, AJW Partners, LLC, AJW Offshore, Ltd., and AJW
Qualified Partners, LLC, incorporated by reference to
Exhibit 4.9 of FullCircle Registry's Form 10-KSB, filed
April 14, 2003.
4.10 Registration Rights Agreement among FullCircle Registry, AJW
Partners, LLC, AJW Offshore, Ltd., and AJW Qualified
Partners, LLC, incorporated by reference to Exhibit 4.10 of
FullCircle Registry's Form 10-KSB, filed April 14, 2003.
4.11 Guarantee and Pledge Agreement among FullCircle Registry,
George Harman, AJW Partners, LLC, AJW Offshore, Ltd., and
AJW Qualified Partners, LLC, incorporated by reference to
Exhibit 4.11 of FullCircle Registry's Form 10-KSB,
filed April 14, 2003.
4.12 Guarantee and Pledge Agreement among FullCircle Registry,
Steven Whitten, AJW Partners, LLC, AJW Offshore, Ltd.,
and AJW Qualified Partners, LLC, incorporated by reference
to Exhibit 4.12 of FullCircle Registry's Form 10-KSB,
filed April 14, 2003.
II-4
5.1 Sichenzia Ross Friedman Ference LLP Opinion and Consent
(filed herewith).
10.1 Agreement and Plan of Reorganization with Excel Publishing,
Inc., incorporated by reference to Exhibit 2.2 of
FullCircle Registry's Form 10-KSB, filed April 14, 2003.
10.2 Agreement and Plan of Reorganization with Paradigm Solutions
Group, LLC, incorporated by reference to Exhibit 2.1
of FullCircle Registry's Form 10-KSB, filed April 14, 2003.
23.1 Consent of Chisholm & Associates (filed herewith).
23.3 Consent of legal counsel (see Exhibit 5).
ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes to:
(1) File, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933, as amended (the "Securities Act");
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of the securities offered would
not exceed that which was registered) and any deviation from the low or high end
of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) under the
Securities Act if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective registration
statement, and
(iii) Include any additional or changed material information on the plan of
distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(4) For purposes of determining any liability under the Securities Act,
treat the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act as part of this registration statement as of the time
it was declared effective.
(5) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
II-5
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-6
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorizes this registration
statement to be signed on its behalf by the undersigned, in the City of
Louisville, State of Kentucky, on April 16, 2003.
FULLCIRCLE REGISTRY, INC.
By: /s/ Steven A. Whitten
---------------------------------------
Steven A. Whitten, Chief Executive Officer and Director
By: /s/ Trent Oakley
---------------------------------------
Trent Oakley, Chief Financial Officer, Senior Vice
President, Marketing and Sales and Director
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
SIGNATURE TITLE DATE
/s/ Steven A. Whitten Chief Executive Officer and Director April 16, 2003
- --------------------------------
Steven A. Whitten
/s/ Trent Oakley Chief Financial Officer, Senior Vice President, April 16, 2003
- -------------------------------- Marketing and Sales and Director
Trent Oakley
/s/ W. Garriott Baker President, Chairman of the Board of Directors April 16, 2003
- --------------------------------
W. Garriott Baker
/s/ David E. Allen Director April 16, 2003
- --------------------------------
David E. Allen
/s/ Issac M. Boutwell Director April 16, 2003
- --------------------------------
Issac M. Boutwell
/s/ John M. Bruington Director April 16, 2003
- --------------------------------
John M. Bruington
/s/ Myron Feinberg Director April 16, 2003
- --------------------------------
Myron Feinberg
/s/ Christopher E. Rhodes Director April 16, 2003
- --------------------------------
Christopher E. Rhodes
/s/ J. Matthew Skiles Director April 16, 2003
- --------------------------------
J. Matthew Skiles
/s/ Janice Whelan Director April 16, 2003
- --------------------------------
Janice Whelan
/s/ Toby G. Wolcott Director April 16, 2003
- --------------------------------
Toby G. Wolcott