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UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

 

 

 

þ

 

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

For the quarterly period ended June 30, 2017

 

 

 

o

 

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

For the transition period from                      to                     

Commission File Number: 000-27031

FULLNET COMMUNICATIONS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

OKLAHOMA

 

73-1473361

 

 

 

(State or other jurisdiction of

 

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

incorporation or organization)

 

 

201 Robert S. Kerr Avenue, Suite 210

 Oklahoma City, Oklahoma 73102

(Address of principal executive offices)

(405) 236-8200

 (Registrants telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes  þ  No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  þ  No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

 

 

 

 

 

 

Large accelerated filer o

 

Accelerated filer o

 

Non-accelerated filer o

 

Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No  þ

As of August 10, 2017, 11,871,009 shares of the registrants common stock, $0.00001 par value, were outstanding. 

 







 

FORM 10-Q

TABLE OF CONTENTS

 

 

 

 

 

 

 

 

 

 

 

 

Page

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 1. Financial Statements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets June 30, 2017 (Unaudited) and December 31, 2016

 

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations Three and Six months ended June 30, 2017 and 2016 (Unaudited)

 

 

4

 

 

 

 

 

 










 

          Condensed Consolidated Statements of Stockholders Deficit Six months ended June 30, 2017

               (Unaudited)



5






 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows Six months ended June 30, 2017 and 2016 (Unaudited)

 

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

 

7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

 

 

9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

 

14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 4. Controls and Procedures

 

 

14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 1. Legal Proceedings

 

 

15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 5. Other Information

 

 

15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 6. Exhibits

 

 

15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signatures

 

 

18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Exhibit 31.1

 Exhibit 32.1

 


- 2 -











Table of Contents

FullNet Communications, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

 

 



JUNE 30,


DECEMBER 31,



2017


2016



(Unaudited)



ASSETS

 

 

 

 

CURRENT ASSETS

 




Cash

 

$

14,617 


$

20,389 

Accounts receivable, net

 

7,744 


6,614 

Prepaid expenses and other current assets

 

24,748 


3,061 

 

 




Total current assets

 

47,109 


30,064 

 

 




PROPERTY AND EQUIPMENT, net

 

68,765 


77,154 

 

 




OTHER ASSETS AND INTANGIBLE ASSETS

 

26,229 


30,864 

 

 




TOTAL ASSETS

 

$

142,103 


$

138,082 

 

 




LIABILITIES AND STOCKHOLDERS DEFICIT

 




 

 




CURRENT LIABILITIES

 




Accounts payable

 

$

104,071 


$

135,354 

Accounts payable, related party


516 


13,935 

Accrued and other liabilities

 

610,070 


567,643 

Convertible notes payable, related party - current portion

 

138,282 


46,811 

Deferred revenue

 

399,156 


369,248 

 

 




Total current liabilities

 

1,252,095 


1,132,991 

 

 




CONVERTIBLE NOTES PAYABLE, related party - long-term portion


28,599 


136,441 

 

 




Total liabilities

 

1,280,694 


1,269,432 

 

 




STOCKHOLDERS DEFICIT

 




Preferred stock $.001 par value; authorized, 10,000,000 shares; Series A convertible; issued and outstanding, 987,102 shares in 2017 and 2016


605,225 


591,776 

Common stock $.00001 par value; authorized, 40,000,000 shares; issued and outstanding, 11,871,009 shares in 2017 and 2016

 

119 


119 

Additional paid-in capital

 

8,644,808 


8,655,009 

Accumulated deficit

 

(10,388,743)


(10,378,254)

 

 




Total stockholders deficit

 

(1,138,591)


(1,131,350)

 

 









TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT

 

$

142,103 


$

138,082 

See accompanying notes to unaudited condensed consolidated financial statements.

- 3 -









 



Table of Contents

FullNet Communications, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)












Three Months Ended


Six Months Ended



June 30, 2017


June 30, 2016


June 30, 2017


June 30, 2016

REVENUES

 


 


 


 


Access service revenues

 

$

11,274 


$

14,918 


$

23,133 


$

31,801 

Co-location and other revenues

 

483,314 


457,982 


979,318 


932,378 

 

 








Total revenues

 

494,588 


472,900 


1,002,451 


964,179 

 

 








OPERATING COSTS AND EXPENSES

 








Cost of access service revenues

 

11,021 


19,138 


23,896 


39,582 

Cost of co-location and other revenues

 

85,550 


77,911 


165,488 


161,299 

Selling, general and administrative expenses

 

404,240 


367,322 


802,027 


774,930 

Depreciation and amortization

 

7,185 


6,946 


14,495 


14,039 

 

 








Total operating costs and expenses

 

507,996


471,317 


1,005,906 


989,850 

 

 








LOSS FROM OPERATIONS

 

(13,408)


1,583


(3,455)


(25,671)



















INTEREST EXPENSE

 

(2,270)


(3,884)


(7,034)


(7,917)










NET LOSS

 

$

(15,678)


$

(2,301)


$

(10,489)


$

(33,588) 

Preferred stock dividends


(6,725)


(11,768)


(13,449)


(23,536)

Net loss available to common stockholders


$

(22,403)


$

(14,069)


$

(23,938)


$

(57,124) 

 

 








Net loss per common share

Basic and diluted

 

$

(.00)


$

(.00)


$

(.00)


$

(.01) 

 

 








Weighted average common shares outstanding

    Basic and diluted  

 

     11,871,009 


9,118,161


11,871,009 


9,118,161 

See accompanying notes to unaudited condensed consolidated financial statements.

 


- 4 -















Table of Contents


FullNet Communications, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS DEFICIT (UNAUDITED)

Six Months Ended June 30, 2017














Common stock


Preferred stock


Additional


Accumulated





Shares


Amount


Shares


Amount


paid-in capital


deficit


Total
















Balance at January 1, 2017


11,871,009


$

119


987,102


$

591,776


$

8,655,009 


$

(10,378,254)


$

(1,131,350)

 

 














Stock options compensation


-


-


-


-


3,248 



3,248 

 

 














Amortization of increasing dividend rate preferred stock discount


-


-


-


13,449


(13,449)



 

 














Net loss


-


-


-


-



(10,489)


(10,489)

 

 














Balance at June 30, 2017 (unaudited)


11,871,009


$

119


987,102


$

605,225


$

8,644,808 


$

(10,388,743)


$

(1,138,591)


See accompanying notes to unaudited condensed consolidated financial statements.

 



- 5 -









 



Table of Contents

FullNet Communications, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)








Six Months Ended



June 30, 2017


June 30, 2016

CASH FLOWS FROM OPERATING ACTIVITIES

 


 

 

Net loss

 

$

(10,489)


$

(33,588)

Adjustments to reconcile net loss to net cash provided by operating activities

 




Depreciation and amortization

 

14,495 


14,039 

Stock options compensation

 

3,248 


8,230 

          Provision for uncollectible accounts receivable

 

429 


507 

          Net (increase) decrease in

 




Accounts receivable

 

(1,559)


(2,072)

Prepaid expenses and other current assets

 

(21,687)


(7,626)

Net increase (decrease) in

 




Accounts payable

 

(44,702)


(11,405)

Accrued and other liabilities

 

42,427 


37,248 

Deferred revenue

 

29,908 


21,363 

 

 




Net cash provided by operating activities

 

12,070 


26,696 

 

 




CASH FLOWS FROM INVESTING ACTIVITIES

 




Cash paid for property and equipment

 

(1,471)


(5,947)

 

 




Net cash used in investing activities

 

(1,471)


(5,947)

 

 




CASH FLOWS FROM FINANCING ACTIVITIES

 




Principal payments on borrowings under notes payable related party

 

(16,371)


(15,490)

 

 




Net cash used in financing activities

 

(16,371)


(15,490)

 

 




NET INCREASE (DECREASE) IN CASH

 

(5,772)


5,259 

Cash at beginning of period

 

20,389 


16,012 

Cash at end of period

 

$

14,617 


$

21,271 






SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

 









Cash paid for interest

 

$

7,033 


$

7,917






NON-CASH INVESTING AND FINANCING ACTIVITIES

 









Amortization of increasing dividend rate preferred stock discount


$

13,449 


$

23,536 

See accompanying notes to the unaudited condensed consolidated financial statements.

- 6 -











Table of Contents

FullNet Communications, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



1.


 

UNAUDITED INTERIM FINANCIAL STATEMENTS

The unaudited condensed consolidated financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. The accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements of the Company and notes thereto for the year ended December 31, 2016.


The information furnished reflects, in the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results of the interim periods presented. Operating results of the interim period are not necessarily indicative of the amounts that will be reported for the year ending December 31, 2017.  


Income (Loss) Per Share


Income (loss) per share basic is calculated by dividing net income (loss) by the weighted average number of shares of stock outstanding during the year, including shares issuable without additional consideration. Income per share assuming dilution is calculated by dividing net income by the weighted average number of shares outstanding during the year adjusted for the effect of dilutive potential shares calculated using the treasury stock method.


Schedule of Income (Loss) Per Share


Three Months Ended


Six Months Ended


June 30, 2017


June 30, 2016


June 30, 2017


June 30, 2016

Numerator:

   

 

   





Net loss available to common shareholders

$

(22,403)


$

(14,069)


$

(23,938)


$

(57,124)

Denominator:








Weighted average shares and share equivalents outstanding basic

11,871,009 


9,118,161 


11,871,009 


9,118,161 

Effect of preferred stock

987,102 


987,102 


987,102 


987,102 

Effect of dilutive stock options

1,716,630 


2,884,569 


1,581,341 


2,849,248 

Effect of dilutive warrants

233,852 


222,727 


225,917 


220,000 

Weighted average shares and share equivalents outstanding assuming dilution

14,808,593 


13,212,560 


14,665,369 


13,174,511 

 








Net loss per share basic and diluted

$

(.00)


$

(.00)


$

(.00)


$

(.01)


 Basic and diluted loss per share were the same for the three and six months ended June 30, 2017 and 2016 because there was a net loss for the period.  


Schedule of Anti-dilutive Securities Excluded


Three Months Ended


Six Months Ended


June 30, 2017


June 30, 2016


June 30, 2017


June 30, 2016

Stock options

-


9,000


-


9,000

Convertible promissory notes

166,881


199,346


166,881


199,346

Total anti-dilutive securities excluded

166,881


208,346


166,881


208,346


Anti-dilutive securities consist of stock options and convertible promissory notes whose exercise price or conversion price, respectively, was greater than the average market price of the common stock.



2.

 

GOING CONCERN AND MANAGEMENTS PLANS

At June 30, 2017, current liabilities exceeded current assets by $1,204,986. The Company does not have a line of credit or credit facility to serve as an additional source of liquidity. Historically the Company has relied on shareholder loans as an additional source of funds. These factors raise substantial doubts about the Companys ability to continue as a going concern.

The ability of the Company to continue as a going concern is dependent upon continued operations of the Company that in turn is dependent upon the Companys ability to meet its financing requirements on a continuing basis, to maintain present financing, to achieve the objectives of its business plan and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

The Companys business plan includes, among other things, expansion through mergers and acquisitions and the development of its co-location and advanced voice and data solutions. Execution of the Companys business plan will require significant capital to fund capital expenditures, working capital needs and debt service. Current cash balances will not be sufficient to fund the Companys current business plan beyond the next few months. As a consequence, the Company is currently focusing on revenue enhancement and cost cutting opportunities as well as working to sell non-core assets and to extend vendor payment terms. The Company continues to seek additional convertible debt or equity financing as well as the placement of a credit facility to fund the Companys liquidity. There can be no assurance that the Company will be able to obtain additional capital on satisfactory terms, or at all, or on terms that will not dilute the shareholders interests.


3.

 

CONVERTIBLE NOTES PAYABLE RELATED PARTY

At December 31, 2016 the Company had a secured convertible promissory note from a shareholder with a balance of $144,966.  The interest rate of this note was 6% through December 31, 2014 and is 7% through December 31, 2015, 8% through December 31, 2016, 8.5% through December 31, 2017, and 9% through May 31, 2018, with fixed monthly payments of $3,301 and matures May 31, 2018, at which time the remaining balance of principal and all accrued interest shall be due and payable.  This convertible promissory note is secured by all tangible and intangible assets of the Company. The note holder has the right to convert the note, in its entirety or in part, into common stock of the Company at the rate of $1.00 per share.  During the six months ended June 30, 2017, the Company made principal and interest payments totaling $19,804.  The secured convertible promissory note had a balance of $131,079 at June 30, 2017 which is all short-term.  

At December 31, 2016 the Company had a secured convertible promissory note from a shareholder with a balance of $38,286.  The interest rate of this note is 6%, required monthly installments of interest only through May 31, 2014, then requires monthly installments of $600 including principal and interest and matures May 31, 2023.  This convertible promissory note is secured by certain equipment of the Company.  The note holder has the right to convert the note, in its entirety or in part, into common stock of the Company at the rate of $1.00 per share.  During the six months ended June 30, 2017, the Company made principal and interest payments totaling $3,602.  The secured convertible promissory note had a balance of $35,802 at June 30, 2017 of which $7,203 is short-term and $28,599 is long-term.


4.

 

STOCK BASED COMPENSATION


The following table summarizes the Companys employee stock option activity for the six months ended June 30, 2017:

 

Schedule of Employee Stock Option Activity

 

Options

 

Weighted average

exercise price

 

Weighted average

remaining

contractual life (yrs)

 

Aggregate

Intrinsic value

 

Options outstanding, December 31, 2016

514,934


$.005


6.26



 









 

Options exercisable, December 31, 2016

425,934 


$.003


5.78


$ 9,350

 









 

Options granted during the period

1,503,000 


.007





 









 

Options forfeited during the period

 (23,000)


.007





 









 

Options expired during the period

(3,000)


0.003





 









 

Options outstanding, June 30, 2017

1,991,934 


$.006


8.55



 









 

Options exercisable, June 30, 2017

429,934 


$.003


5.28


$ 15,887

 









 


During the six months ended June 30, 2017, 850,000, 650,000 and 3,000 nonqualified employee stock options were granted with exercise prices of $.01, $.003 and $.02, respectively and 20,000 of these $.003 options were forfeited.  The options were valued using Black-Scholes option pricing model on the respective date of issuance and the fair value of the shares was determined to be $14,461 of which $2,376 was recognized as stock-based compensation expense for the six months ended June 30, 2017. The remaining  1,483,000 stock options will vest one-third on each annual anniversary date of the grant and will expire ten years from the date of the grant.  During the six months ended June 30, 2017, 3,000 employee stock options were forfeited and 3,000 employee stock options expired that were related to options granted in prior years.


Total stock-based compensation expense for the three months ended June 30, 2017 was $1,597 of which $1,174 was related to options issued during 2017 and $423 was related to options issued in prior years.  Total stock-based compensation expense for the six months ended June 30, 2017 was $3,248 of which $2,376 was related to options issued during 2017 and $872 was related to options issued in prior years.


Stock-based compensation is measured at the grant date, based on the calculated fair value of the option, and is recognized as an expense on a straight-line basis over the requisite employee service period (generally the vesting period of the grant).    


The Black-Scholes option pricing model was used with the following weighted-average assumptions for options granted during the six months ended June 30, 2017:


 

 

2017

Risk free interest rate

 

1.80% - 1.97 %

Expected lives (in years)

 

5   

Expected volatility

 

173% - 174 %

Dividend yield

 

0 %


5.

 

SERIES A CONVERTIBLE PREFERRED STOCK


On March 30, 2017 the Companys board of directors made the determination that it was in the best interest of the Company and its stockholders to conserve the Companys working capital at this time and not make the annual dividend payment for the year ending December 31, 2016, on its Series A Convertible Preferred Stock.  The Company has never made an annual dividend payment on its Series A convertible preferred stock.


The amortization of the increasing dividend rate preferred stock discount for the three and six months ended June 30, 2017 was $6,725 and $13,449, respectively.  


6.

 

PROPERTY AND EQUIPMENT


During the six months ended June 30, 2017, $1,471 was paid for property and equipment.  During the three and six months ended June 30, 2017, $4,891 and $9,860 was recorded as depreciation expense, respectively.


7.

 

INTANGIBLE ASSET


During the three and six months ended June 30, 2017, $2,294 and $4,635 was recorded as amortization expense, respectively.  



























- 8 -





 



Table of Contents

 

 

 

Item 2.

 

Managements Discussion and Analysis of Financial Condition and Results of Operations

The following discussion is qualified in its entirety by the more detailed information in our 2016 Annual Report on Form 10-K and the financial statements contained therein, including the notes thereto, and our other periodic reports filed with the Securities and Exchange Commission since December 31, 2016 (collectively referred to as the Disclosure Documents). Certain forward-looking statements contained in this Report and in the Disclosure Documents regarding our business and prospects are based upon numerous assumptions about future conditions which may ultimately prove to be inaccurate and actual events and results may materially differ from anticipated results described in such statements. Our ability to achieve these results is subject to certain risks and uncertainties, including those inherent risks and uncertainties generally in the Internet service provider and competitive local exchange carrier industries, the impact of competition and pricing, changing market conditions, and other risks. Any forward-looking statements contained in this Report represent our judgment as of the date of this Report. We disclaim, however, any intent or obligation to update these forward-looking statements. As a result, the reader is cautioned not to place undue reliance on these forward-looking statements. References to us in this report include our subsidiaries: FullNet, Inc. (FullNet), FullTel, Inc. (FullTel), FullWeb, Inc. (FullWeb) and CallMultiplier, Inc. (CallMultiplier).

Overview

We are an integrated communications provider.   Through our subsidiaries, we provide high quality, reliable and scalable Internet access, web hosting, equipment co-location, traditional telephone services as well as advanced voice and data solutions.

Our principal executive offices are located at 201 Robert S. Kerr Avenue, Suite 210, Oklahoma City, Oklahoma 73102, and our telephone number is (405) 236-8200. We also maintain Internet sites on the World Wide Web (WWW) at www.fullnet.net, www.fulltel.com  and www.callmultiplier.com. Information contained on our Web sites is not and should not be deemed to be a part of this Report.

Company History

We were founded in 1995 as CEN-COM of Oklahoma, Inc., an Oklahoma corporation, to bring dial-up Internet access and education to rural locations in Oklahoma that did not have dial-up Internet access. We changed our name to FullNet Communications, Inc. in December 1995. Today we are an integrated communications provider.

As an integrated communications provider, we intend to increase shareholder value by continuing to build scale through both acquisitions and internal growth and then leveraging increased revenues over our fixed-costs base. Our strategy is to meet the customer service requirements of retail, business, educational and government advanced voice and data solutions users in our target markets, while benefiting from the scale advantages obtained through being a fully integrated backbone and broadband provider.

We market our carrier neutral co-location solutions in our network operations center to other competitive local exchange carriers, Internet service providers and web-hosting companies. Our co-location facility is carrier neutral, allowing customers to choose among competitive offerings rather than being restricted to one carrier. Our data center is Telco-grade and provides customers a high level of operative reliability and security. We offer flexible space arrangements for customers and 24-hour onsite support with both battery and generator backup.

Through FullTel, our wholly owned subsidiary, we are a fully licensed competitive local exchange carrier or CLEC in Oklahoma. FullTel activates local access telephone numbers for the cities in which we market, sell and operate our retail FullNet Internet service provider brand, wholesale dial-up Internet service; our business-to-business network design, connectivity, domain and Web hosting businesses; traditional telephone services as well as advanced voice and data solutions. At June 30, 2017 FullTel provided us with local telephone access in approximately 232 cities.


Through CallMultiplier, our wholly owned subsidiary, we offer a comprehensive cloud-based solution to consumers and businesses for automated calling, texting and voice message delivery.

Our common stock trades on the OTC Pink Sheets under the symbol FULO.  While our common stock trades on the OTC Pink Sheets, it is very thinly traded and there can be no assurance that our stockholders will be able to sell their shares should they so desire. Any market for the common stock that may develop, in all likelihood, will be a limited one, and if such a market does develop, the market price may be volatile.


- 9 -













Table of Contents

Results of Operations

The following table sets forth certain statement of operations data as a percentage of revenues for the three and six months ended June 30, 2017 and 2016:


















Three Months Ended


Six Months Ended


June 30, 2017


June 30, 2016


June 30, 2017


June 30, 2016


Amount


Percent


Amount


Percent


Amount


Percent


Amount


Percent

















Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Access service revenues

$

11,274 

 

2.3%


$

14,918 


3.2%


$

23,133 


2.3%


$

31,801 


3.3%

Co-location and other revenues

483,314 

 

97.7  

 

457,982 


96.8  


979,318 


97.7  


932,378 


96.7  

Total revenues

494,588 

 

100.0  

 

472,900 


100.0  


1,002,451 


100.0  


964,179 


100.0  

 


 


 












Cost of access service revenues

11,021 

 

2.2  

 

19,138 


4.0  


23,896 


2.4  


39,582 


4.1  

Cost of co-location and other revenues

85,550 

 

17.3  

 

77,911 


16.5  


165,488 


16.5  


161,299 


16.7  

Selling, general and administrative expenses

404,240 

 

81.7  

 

367,322 


77.7  


802,027 


80.0  


774,930 


80.4  

Depreciation and amortization

7,185 

 

1.5  

 

6,946 


1.5  


14,495 


1.4  


14,039 


1.5  

Total operating costs and expenses

507,996 

 

102.7  

 

471,317 


99.7  


1,005,906 


100.3  


989,850 


102.7  

 


 


 












Income (loss) from operations

(13,408) 

 

(2.7)  

 

1,583 


0.3  


(3,455)


(0.3) 


(25,671)


(2.7) 

















Interest expense

(2,270)

 

(0.5) 

 

(3,884)


(0.8) 


(7,034)


(0.7) 


(7,917)


(0.8) 

















Net loss

$

(15,678)

 

(3.2)%


$

(2,301)


(0.5)%


$

(10,489)


(1.0)%


$

(33,588)


(3.5)%

















Preferred stock dividends

(6,725)


(1.3) 


(11,768)


(2.5) 


(13,449)


(1.3) 


(23,536)


(2.4) 

















Net loss available to common stockholders

$

(22,403)


(4.5)%


$

(14,069)


(3.0)%


$

(23,938)


(2.3)%


$

(57,124)


(5.9)%

Three Months Ended June 30, 2017 (the 2017 2nd Quarter) Compared to Three Months Ended June 30, 2016 (the 2016 2nd Quarter)

Revenues

Access service revenues decreased $3,644 or 24.4% to $11,274 for the 2017 2nd Quarter from $14,918 for the same period in 2016 primarily due to a decline in the number of customers.  

- 10 -















 



Table of Contents

Co-location and other revenues increased $25,332 or 5.5% to $483,314 for the 2017 2nd Quarter from $457,982 for the same period in 2016. This increase was primarily attributable to the net addition of new customers and the sale of additional services to existing customers.

Operating Costs and Expenses

Cost of access service decreased $8,117 or 42.4% to $11,021 for the 2017 2nd Quarter from $19,138 for the same period in 2016.  This decrease was primarily due to reductions in costs of servicing access customers due to a reduction in the number of customers.  Cost of access service revenues as a percentage of access service revenues decreased to 97.8% during the 2017 2nd Quarter, compared to 128.2% during the same period in 2016.

Cost of co-location and other revenues increased $7,639 or 9.8% to $85,550 for the 2017 2nd Quarter from $77,911 for the same period in 2016.  This increase was primarily related to increases in costs of servicing advanced voice and data solutions customers due to an increase in the number of customers utilizing those services.  Cost of co-location and other revenues as a percentage of co-location and other revenues increased to 17.7% during the 2017 2nd Quarter, compared to 17.0% during the period in 2016.                                                                                                                                                                                                

Selling, general and administrative expenses increased $36,918 or 10.1% to $404,240 for the 2017 2nd Quarter compared to $367,322 for the same period in 2016. This increase is primarily related to increases in property taxes, advertising and agent commissions of $13,639, $21,448 and $12,936, respectively.  These increases were offset by decreases in employee costs and professional services of $7,306 and $4,525, respectively.  In the 2017 2nd Quarter we had non-recurring agent commissions expense of $13,275.  In the 2016 2nd Quarter we received a refund of 2011 property taxes of $13,665 and had a related property tax consultant fee expense of $4,525.  Also in the 2016 2nd Quarter employee costs included $6,897 of stock-based compensation expense due to the reduction of the exercise price to $.003 on 2,968,782 employee stock options with exercise prices ranging from $.01 to $.065.  Selling, general and administrative expenses as a percentage of total revenues increased to 81.7% during the 2017 2nd Quarter from 77.7% during the same period in 2016.

Depreciation and amortization expense remained relatively the same at $7,185 for the 2017 Period compared to $6,946 for the 2016 Period.

Interest Expense

Interest expense decreased $1,614 or 41.6% to $2,270 for the 2017 2nd Quarter compared to $3,884 for the same period in 2016 which was related to us making only two note payments in the 2017 2nd Quarter compared to three note payments in the 2016 2nd Quarter.

Six Months Ended June 30, 2017 (the 2017 Period) Compared to Six Months Ended June 30, 2016 (the 2016 Period)

Revenues

Access service revenues decreased $8,668 or 27.3% to $23,133 for the 2017 Period from $31,801 for the 2016 Period primarily due to a decline in the number of customers.

Co-location and other revenues increased $46,940 or 5.0% to $979,318 for the 2017 Period from $932,378 for the 2016 Period.  This increase was primarily attributable to the net addition of new customers and the sale of additional services to existing customers.

Operating Costs and Expenses

Cost of access service revenues decreased $15,686 or 39.6% to $23,896 for the 2017 Period from $39,582 for the 2016 Period. This decrease was primarily due to reductions in costs of servicing access customers due to a reduction in the number of customers.  Cost of access service revenues as a percentage of access service revenues decreased to 103.3% during the 2016 Period, compared to 124.5% during the 2016 Period.

Cost of co-location and other revenues increased $4,189 or 2.6% to $165,488 for the 2017 Period from $161,299 for the 2016 Period.  This increase was primarily related to increases in costs of servicing advanced voice and data solutions customers due to an increase in the number of customers utilizing those services.  Cost of co-location and other revenues as a percentage of co-location and other revenues decreased to 16.9% during the 2017 Period compared to 17.3% during the 2016 Period.





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Table of Contents


Selling, general and administrative expenses increased $27,097 or 3.5% to $802,027 for the 2017 Period compared to $774,930 for the 2016 Period.  This increase is primarily related to increases in property taxes, advertising and agent commissions of $13,563, $29,484 and $12,936, respectively.  These increases were offset by decreases in employee costs and professional services of $19,386 and $7,227, respectively.  In the 2017 Period we had non-recurring agent commissions expense of $13,275.  In the 2016 Period we received a refund of 2011 property taxes of $13,665 and had a related property tax consultant fee expense of $4,525.  Also in the 2016 Period employee costs included $6,897 of stock-based compensation expense due to the reduction of the exercise price to $.003 on 2,968,782 employee stock options with exercise prices ranging from $.01 to $.065.  Selling, general and administrative expenses as a percentage of total revenues decreased to 80.0% during the 2016 Period from 80.4% during the 2016 Period.

Depreciation and amortization expense remained relatively the same at $14,495 for the 2017 Period compared to $14,039 for the 2016 Period.  

Interest Expense

Interest expense remained relatively the same at $7,034 for the 2017 Period compared to $7,917 for the 2016 Period.

Liquidity and Capital Resources

As of June 30, 2017, we had $14,617 in cash and $1,252,095 in current liabilities, including $399,156 of deferred revenues that will not require settlement in cash.

At June 30, 2017 and December 31, 2016, we had working capital deficits of $1,204,986 and $1,102,927, respectively. We do not have a line of credit or credit facility to serve as an additional source of liquidity. Historically we have relied on shareholder loans as an additional source of funds.

As of June 30, 2017, of the $104,071 we owed to our trade creditors $96,347 was past due. We have no formal agreements regarding payment of these amounts.

Cash flow for the six-month periods ended June 30, 2017 and 2016 consist of the following.

 

 

 

For the Six-Month Periods Ended

June 30,

 



2017


2016

Net cash flows provided by operations

 

$

12,070 

 

$

26,696 

Net cash flows used in investing activities

 

(1,471)


(5,947)

Net cash flows used in financing activities

 

(16,371)


(15,490)


Cash used for the purchase of property and equipment was $1,471 and $5,947, respectively, for the six months ended June 30, 2017 and 2016.


Cash used for principal payments on notes payable was $16,371 and $15,490, respectively, for the six months ended June 30, 2017 and 2016.      

The planned expansion of our business will require significant capital to fund capital expenditures, working capital needs, and debt service. Our principal capital expenditure requirements will include:


 

 

mergers and acquisitions and


 

 

further development of operations support systems and other automated back office systems

Because our cost of developing new networks and services, funding other strategic initiatives, and operating our business depend on a variety of factors (including, among other things, the number of customers and the service for which they subscribe, the nature and penetration of services that may be offered by us, regulatory changes, and actions taken by competitors in



 



response to our strategic initiatives), it is almost certain that actual costs and revenues will materially vary from expected amounts and these variations are likely to increase our future capital requirements. Our current cash balances will not be sufficient to fund our current business plan beyond a few months. As a consequence, we are currently focusing on revenue enhancement and cost cutting opportunities as well as working to sell non-core assets and to extend vendor payment terms. We continue to seek additional convertible debt or equity financing as well as the placement of a credit facility to fund our liquidity. There is no assurance that we will be able to obtain additional capital on satisfactory terms or at all or on terms that will not dilute our shareholders interests.

Until we obtain sufficient additional capital, the further development of our network will be delayed or we will be required to take other actions. Our inability to obtain additional capital resources has had and will continue to have a material adverse effect on our business, operating results and financial condition.

Our ability to fund the capital expenditures and other costs contemplated by our business plan and to make scheduled payments with respect to borrowings will depend upon, among other things, our ability to seek and obtain additional financing in the near term. Capital will be needed in order to implement our business plan, deploy our network, expand our operations and obtain and retain a significant number of customers in our target markets. Each of these factors is, to a large extent, subject to economic, financial, competitive, political, regulatory, and other factors, many of which are beyond our control.

There is no assurance that we will be successful in developing and maintaining a level of cash flows from operations sufficient to permit payment of our outstanding indebtedness. If we are unable to generate sufficient cash flows from operations to service our indebtedness, we will be required to modify or abandon our growth plans, limit our capital expenditures, restructure or refinance our indebtedness or seek additional capital or liquidate our assets. There is no assurance that (i) any of these strategies could be effectuated on satisfactory terms, if at all, or on a timely basis or (ii) any of these strategies will yield sufficient proceeds to service our debt or otherwise adequately fund operations.


On March 30, 2017 our board of directors made the determination that it was in the best interest of the Company and its stockholders to conserve our working capital at this time and not make the annual dividend payment for the year ending December 31, 2016.  The Company has never made an annual dividend payment on its Series A convertible preferred stock. 


Financing Activities


We have a secured convertible promissory note from a shareholder which requires monthly installments of $3,301 including principal and interest and is secured by all of our tangible and intangible assets.  At June 30, 2017, the outstanding principal of the secured convertible promissory note was $131,079.  


We have a secured convertible promissory note from a shareholder which requires monthly installments of interest only through May 31, 2014 then monthly installments of $600 including principal and interest.  This note is secured by certain equipment.  At June 30, 2017, the outstanding principal of the secured convertible promissory note was $35,802.




- 12 -




Table of Contents


Critical Accounting Policies and Estimates


The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect certain reported amounts and disclosures. In applying these accounting principles, we must often make individual estimates and assumptions regarding expected outcomes or uncertainties. As might be expected, the actual results or outcomes are generally different than the estimated or assumed amounts. These differences are usually minor and are included in our consolidated financial statements as soon as they are known. Our estimates, judgments and assumptions are continually evaluated based on available information and experience. Because of the use of estimates inherent in the financial reporting process, actual results could differ from those estimates.


     We periodically review the carrying value of our intangible assets when events and circumstances warrant such a review. One of the methods used for this review is performed using estimates of future cash flows. If the carrying value of our intangible assets is considered impaired, an impairment charge is recorded for the amount by which the carrying value of the intangible assets exceeds its fair value. We believe that the estimates of future cash flows and fair value are reasonable. Changes in estimates of these cash flows and fair value, however, could affect the calculation and result in additional impairment charges in future periods.






We periodically review the carrying value of our property and equipment whenever business conditions or events indicate that those assets may be impaired. If the estimated future undiscounted cash flows to be generated by the property and equipment are less than the carrying value of the assets, the assets are written down to fair market value and a charge is recorded to current operations. Significant and unanticipated changes in circumstances, including significant adverse changes in business climate, adverse actions by regulators, unanticipated competition, loss of key customers and/or changes in technology or markets, could require a provision for impairment in a future period.


We review loss contingencies and evaluate the events and circumstances related to these contingencies.  We disclose material loss contingencies that are possible or probable, but cannot be estimated. For loss contingencies that are both estimable

     and probable the loss contingency is accrued and expense is recognized in the financial statements.


Access service revenues are recognized on a monthly basis over the life of each contract as services are provided. Contract periods range from monthly to yearly. Carrier-neutral telecommunications co-location revenues, traditional telephone services and advanced voice and data services are recognized on a monthly basis over the life of the contract as services are provided. Revenue that is received in advance of the services provided is deferred until the services are provided by us. Revenue related to set up charges is also deferred and amortized over the life of the contract. We classify certain taxes and fees billed to customers and remitted to governmental authorities on a net basis in revenue.


Item 3. Quantitative and Qualitative Disclosures About Market Risk


   As a smaller reporting company, we are not required and have not elected to report any information under this item.


Item 4. Controls and Procedures


Evaluation of Disclosure Controls and Procedures


We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act that are designed to ensure that information required to be disclosed in our reports filed or submitted to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SECs rules and forms, and that information is accumulated and communicated to our management, including our principal executive and financial officer as appropriate, to allow timely decisions regarding required disclosures.


Our principal executive officer (CEO), who is also our principal financial officer (CFO), evaluated the effectiveness of disclosure controls and procedures as of June 30, 2017 pursuant to Rule 13a-15(b) under the Exchange Act.  Based upon that evaluation, our CEO/CFO concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to our management, including our CEO/CFO, as appropriate, to allow timely decisions regarding required disclosure.


A system of controls, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

  Changes in Internal Control over Financial Reporting

 

No change in our system of internal control over financial reporting occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.







 



PART IIOTHER INFORMATION

Item 1. Legal Proceedings

As a provider of telecommunications, we are affected by regulatory proceedings in the ordinary course of our business at the state and federal levels. These include proceedings before both the Federal Communications Commission and the Oklahoma Corporation Commission (OCC). In addition, in our operations we rely on obtaining many of our underlying telecommunications services and/or facilities from incumbent local exchange carriers or other carriers pursuant to interconnection or other agreements or arrangements. In January 2007, we concluded a regulatory proceeding pursuant to the Federal Telecommunications Act of 1996 before the OCC relating to the terms of our interconnection agreement with Southwestern Bell Telephone, L.P. d/b/a AT&T, which succeeds a prior interconnection agreement. The OCC approved this agreement in May 2007. This agreement may be affected by regulatory proceedings at the federal and state levels, with possible adverse impacts on us. We are unable to accurately predict the outcomes of such regulatory proceedings at this time, but an unfavorable outcome could have a material adverse effect on our business, financial condition or results of operations.


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


During the six months ended June 30, 2017, we issued 850,000, 650,000 and 3,000 nonqualified employee stock options with exercise prices of $.01, $.003 and $.02, respectively and 20,000 of these $.003 options were forfeited.  The remaining 1,483,000 stock options will vest one-third on each annual anniversary date of the grant and will expire ten years from the date of the grant.  We do not have a written employee stock option plan.  In connection with the issuance of these common stock options, no underwriting discounts or commissions were paid or will be paid. The common stock options were issued without registration under the Securities Act of 1933, as amended, in reliance on the registration exemption afforded by Regulation D and more specifically Rule 506 of Regulation D.

Item 5. Other Information

During the three months ended June 30, 2017 all events reportable on Form 8-K were reported.


 

 

Item 6.

 

Exhibits


 

(a)

 

The following exhibits are either filed as part of or are incorporated by reference in this Report:


 

 

 

 

 

 

 

Exhibit

 

 

 

 

Number

 

Exhibit

 

 

 

 

 

 

 

 

 

 

3.1

 

 

Certificate of Incorporation, as amended (filed as Exhibit 2.1 to Registrants Registration Statement on Form 10-SB, file number 000-27031 and incorporated herein by reference).

 

#

 

 

 

 

 

 

 

 

3.2

 

 

Bylaws (filed as Exhibit 2.2 to Registrants Registration Statement on Form 10-SB, file number 000-27031 and incorporated herein by reference)

 

#









3.3



Amended and Restated Certificate of Incorporation of FullNet Communications, Inc.


#

 

 

 

 

 

 

 

 

4.1

 

 

Specimen Certificate of Registrants Common Stock (filed as Exhibit 4.1 to the Companys Form 10-KSB for the fiscal year ended December 31, 1999, and incorporated herein by reference).

 

#

 

 

 

 

 

 

 

 

4.2

 

 

Certificate of Correction to the Amended Certificate of Incorporation and the Ninth Section of the Certificate of Incorporation (filed as Exhibit 2.1 to Registrants Registration Statement on form 10-SB, file number 000-27031 and incorporated by reference).

 

#









4.3



Certificate of Correction to Articles II and V of Registrants Bylaws (filed as Exhibit 2.1 to Registrants Registration Statement on Form 10-SB, file number 000-27031 and incorporated herein by reference).


#





- 14 -





Table of Contents

 

 

 

 

 

 

 

Exhibit

 

 

 

 

Number

 

Exhibit

 

 

 

 

 

 

 

 

 


4.18



Certificate of Designations, Preferences, and Rights of Series A Convertible Preferred Stock of FullNet Communications, Inc.


#

 

 

 

 

 

 

 

 

10.1

 

 

Financial Advisory Services Agreement between the Company and National Securities Corporation, dated September 17, 1999 (filed as Exhibit 10.1 to Registrants Form 10-KSB for the fiscal year ended December 31, 1999, and incorporated herein by reference).

 

#


 

 

 

 

 

 

 

10.2

 

 

Lease Agreement between the Company and BOK Plaza Associates, LLC, dated December 2, 1999 (filed as Exhibit 10.2 to Registrants Form 10-KSB for the fiscal year ended December 31, 1999, and incorporated herein by reference).

 

#

 

 

 

 

 

 

 

 

10.3

 

 

Interconnection agreement between Registrant and Southwestern Bell dated March 19, 1999 (filed as Exhibit 6.1 to Registrants Registration Statement on Form 10-SB, file number 000-27031 and incorporated herein by reference).

 

#

 

 

 

 

 

 

 

 

10.5

 

 

Registrar Accreditation Agreement effective February 8, 2000, by and between Internet Corporation for Assigned Names and Numbers and FullWeb, Inc. d/b/a FullNic f/k/a Animus Communications, Inc. (filed as Exhibit 10.1 to Registrants Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference).

 

#

 

 

 

 

 

 

 

 

10.8

 

 

Amendment to Financial Advisory Services Agreement between Registrant and National Securities Corporation, dated April 21, 2000 (filed as Exhibit 10.3 to Registrants Quarterly Report on Form 10-QSB for the Quarter ended June 30, 2000 and incorporated herein by reference).

 

#

 

 

 

 

 

 

 

 

10.31

 

 

Placement Agency Agreement dated November 8, 2000 between FullNet Communications, Inc. and National Securities Corporation (filed as Exhibit 10.31 to Registrants Form 10-KSB for the fiscal year ended December 31, 2000).

 

#

 

 

 

 

 

 

 


10.40



Employment Agreement with Timothy J. Kilkenny dated July 31, 2002


#









10.41



Employment Agreement with Roger P. Baresel dated July 31, 2002


#









10.45



Secured Promissory Note and Security Agreement dated December 30, 2009, issued to High Capital Funding, LLC


#









10.46



Employment Agreement with Jason Ayers dated January 1, 2011


#









10.47



Form 8-K dated May 9, 2013 reporting expansion of the Board of Directors and the election of Jason C. Ayers to the Board of Directors


#









10.48



Schedule 14C Definitive Information Statement dated May 15, 2013 reporting Notice of Action by Written Consent of Shareholders


#









10.49



Form 8-K dated June 3, 2013 reporting the Shareholder Consent to Action in Lieu of a Meeting approving the Amendment and Restatement of the Companys Certificate of Incorporation,  the re-election of the Board of Directors, the authorization of Series A Convertible Preferred Stock, the authorization of the Exchange Offer and the issuance of Series A Convertible Preferred Stock


#









10.50



Form of Exchange Offer Acceptance Agreement


#









- 15 -



Table of Contents

 

 

 

 

 

 

 

Exhibit

 

 

 

 

Number

 

Exhibit

 

 

 

 

 

 

 

 

 


10.51



Secured Exchange Promissory Note and Security Agreement dated May 31, 2013, issued to High Capital Funding, LLC


#









10.52



Secured Exchange Promissory Note and Security Agreement dated May 31, 2013, issued to High Capital Funding, LLC


#


10.53



Form 8-K dated June 6, 2016 reporting the appointment of Roger P. Baresel as Chief Executive Officer, the appointment of Jason C. Ayers as President and a modification in the exercise price for all of the outstanding unexercised common stock purchase options previously issued to employees.


#








 

22.1

 

 

Subsidiaries of the Registrant

 

#

 

 

 

 

 

 

 

 

31.1

 

 

Certification pursuant to Rules 13a-14(a) and 15d-14(a) of Roger P. Baresel

 

*

 

 

 

 

 

 

 

 

32.2

 

 

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Roger P. Baresel

 

*

 















101.INS



XBRL Instance Document


**









101.SCH



XBRL Taxonomy Extension Schema Document


**









101.CAL



XBRL Taxonomy Extension Calculation Linkbase Document


**









101.DEF



XBRL Taxonomy Extension Definition Linkbase Document


**









101.LAB



XBRL Taxonomy Extension Label Linkbase Document


**









101.PRE



XBRL Taxonomy Extension Presentation Linkbase Document


**

 

 

 

 

#

 

Incorporated by reference.

 

 

 

*

 

Filed herewith.




**


In accordance with Rule 406T of Regulation S-T, the XBRL (Extensible Business Reporting Language) related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act or the Exchange Act, except to the extent expressly set forth by specific reference in such filing.


 






- 16 -






Table of Contents

SIGNATURES

Pursuant to the requirements of the Exchange Act, the Registrant caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

 

 

 

REGISTRANT:

 FULLNET COMMUNICATIONS, INC.

  

 

Date: August 10, 2017

By:  

/s/ ROGER P. BARESEL  

 

 

 

Roger P. Baresel 

 

 

 

Chief Executive Officer and Chief Financial Officer

 





 









 


- 17





































 



EXHIBIT 31.1

CERTIFICATIONS

I, Roger P. Baresel, certify that:

1.

 

I have reviewed this quarterly report on Form 10-Q for the period ended June 30, 2017 of FullNet Communications, Inc.;

 

 

 

2.

 

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

 

3.

 

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

 

4.

 

The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


 

(a)

 

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

 

 

 

(b)

 

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

 

 

 

(c)

 

Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

 

 

 

(d)

 

Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and


5.

 

The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):


 

(a)

 

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and

 

 

 

 

 

(b)

 

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.

Date: August 10, 2017

 

 

 

/s/ Roger P. Baresel

  Chief Executive Officer and Chief Financial Officer

 

 

 


 





Exhibit 32.1

CERTIFICATION PURSUANT TO

 18 U.S.C. SECTION 1350,

 AS ADOPTED PURSUANT TO

 SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. §1350 (as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002), I, the undersigned Chief Executive Officer and Chief Financial Officer of FullNet Communications, Inc. (the Company), hereby certify that, to the best of my knowledge, the Quarterly Report on Form 10-Q of the Company for the period ended June 30, 2017 (the Report) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

 

 

 

 

Date: August 10, 2017 

/s/ Roger P. Baresel,  

 

 

Chief Executive Officer and Chief Financial Officer