-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FoH9hREm48h+4NhuvQ6IDTivhsgj9oCywGCrwOlvr+WGULiXYdYJQy4ZkbrwZHEw tN1/oNtbTeo+KUO68i5ecQ== 0000950134-02-005269.txt : 20020513 0000950134-02-005269.hdr.sgml : 20020513 ACCESSION NUMBER: 0000950134-02-005269 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FULLNET COMMUNICATIONS INC CENTRAL INDEX KEY: 0001092570 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 731473361 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-27031 FILM NUMBER: 02644442 BUSINESS ADDRESS: STREET 1: 201 ROBERT S KERR AVENUE STREET 2: SUITE 210 CITY: OKLAHOMA CITY STATE: OK ZIP: 73102 BUSINESS PHONE: 4052320958 MAIL ADDRESS: STREET 1: 200 N HARVEY STREET 2: SUITE 1704 CITY: OKLAHOMA CITY STATE: OK ZIP: 73102 10QSB 1 d96845e10qsb.txt FORM 10QSB FOR QUARTER ENDING MARCH 31, 2002 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002 [ ] 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 incorporation or organization) Identification No.) 201 Robert S. Kerr Avenue, Suite 210,Oklahoma City, Oklahoma 73102 ------------------------------------------------------------------ (Address of principal executive offices) (405) 236-8200 -------------- (Issuer's telephone number) CHECK WHETHER THE ISSUER (1) FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE EXCHANGE ACT DURING THE PAST 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ] The number of shares outstanding of the Issuer's Common Stock, $.00001 par value, as of May 8, 2002 was 6,673,450. Transitional Small Business Disclosure Format (Check one): YES [ ] NO [X] FORM 10-QSB TABLE OF CONTENTS
Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets - March 31, 2002 (Unaudited) and December 31, 2001 ..................... 3 Consolidated Statements of Operations - Three months ended March 31, 2002 and 2001 (Unaudited)......................................................................................... 4 Consolidated Statement of Stockholders' Deficit - Three months ended March 31, 2002 (Unaudited)......................................................................................... 5 Consolidated Statements of Cash Flows - Three months ended March 31, 2002 and 2001 (Unaudited)......................................................................................... 6 Notes to Consolidated Financial Statements (Unaudited)......................................................................................... 8 Item 2. Management's Discussion and Analysis or Plan of Operation........................................... 12 PART II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds........................................................... 19 Item 4. Submission of Matters to a Vote of Security Holders................................................. 19 Item 6. Exhibits and Reports on Form 8-K.................................................................... 19 Signatures.................................................................................................. 23
-2- FULLNET COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
ASSETS MARCH 31, DECEMBER 31, 2002 2001 (Unaudited) CURRENT ASSETS Cash $ 2,293 $ 56,575 Accounts receivable, net 120,944 189,369 Prepaid expenses and other current assets 75,746 90,286 ----------- ----------- Total current assets 198,983 336,230 PROPERTY AND EQUIPMENT, net 1,067,046 1,152,565 INTANGIBLE ASSETS, net 832,654 954,852 OTHER ASSETS 34,637 42,875 ----------- ----------- TOTAL $ 2,133,320 $ 2,486,522 =========== =========== LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES Accounts payable - trade $ 447,119 $ 518,306 Accrued and other current liabilities 298,442 265,613 Notes payable, current portion 538,265 549,219 Capital lease obligations, current portion 54,260 55,537 Deferred revenue 435,367 468,645 ----------- ----------- Total current liabilities 1,773,453 1,857,320 NOTES PAYABLE, less current portion 844,324 866,366 CAPITAL LEASE OBLIGATIONS, less current portion 18,786 30,693 OTHER 151,649 126,786 STOCKHOLDERS' DEFICIT Common stock - $.00001 par value; authorized, 10,000,000 shares; issued and outstanding, 6,592,878 shares in 2002 and 6,592,878 shares in 2001 66 66 Common stock issuable, 68,757 in 2002 and 56,942 shares in 2001 57,596 45,781 Additional paid-in capital 7,990,562 7,964,091 Accumulated deficit (8,703,116) (8,404,581) ----------- ----------- Total stockholders' deficit (654,892) (394,643) ----------- ----------- TOTAL $ 2,133,320 $ 2,486,522 =========== ===========
See accompanying notes to financial statements. -3- FULLNET COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED -------------------------------- MARCH 31, 2002 MARCH 31, 2001 -------------- -------------- REVENUES Access service revenues $ 403,086 $ 307,950 Co-location and other revenues 215,268 224,984 -------------- -------------- Total revenues 618,354 532,934 OPERATING COSTS AND EXPENSES Cost of access service revenues 261,431 171,580 Cost of co-location and other revenues 23,830 18,246 Selling, general and administrative expenses 373,965 775,631 Depreciation and amortization 175,702 226,854 -------------- -------------- Total operating costs and expenses 834,928 1,192,311 -------------- -------------- LOSS FROM OPERATIONS (216,574) (659,377) INTEREST EXPENSE (81,961) (252,323) -------------- -------------- NET LOSS $ (298,535) $ (911,700) ============== ============== Net loss per common share Basic and Diluted $ (.04) $ (.22) ============== ============== Weighted average number of common shares outstanding Basic and diluted 6,659,666 4,114,858 ============== ==============
See accompanying notes to financial statements. -4- FULLNET COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT (UNAUDITED) THREE MONTHS ENDED MARCH 31, 2002
Common stock Common --------------------- stock Additional Accumulated Shares Amount issuable paid-in capital Deficit Total ---------- ---------- ----------- --------------- -------------- --------------- Balance at January 1, 2002 6,592,878 $ 66 $45,781 $7,964,091 $(8,404,581) $(394,643) Intrinsic value of beneficial conversion feature on debt -- -- -- 26,471 -- 26,471 Common stock issuable in payment of accrued interest -- -- 11,815 -- -- 11,815 Net loss -- -- -- -- (298,535) (298,535) --------- ------ ------- ---------- ----------- --------- Balance at March 31, 2002 6,592,878 $ 66 $57,596 $7,990,562 $(8,703,116) $(654,892) ========= ====== ======= ========== =========== =========
See accompanying notes to financial statements. -5- FULLNET COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED ---------------------------------- MARCH 31, 2002 MARCH 31, 2001 --------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (298,535) $ (911,700) Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization 175,702 226,854 Options and warrants issued for services -- 284,913 Amortization of discount and costs relating to financing 34,104 136,194 Accrued interest converted to equity 11,815 -- Loss on sale of assets 21,311 -- Provision for uncollectible accounts receivable (2,983) 13,056 Net (increase) decrease in Accounts receivable 71,408 (4,323) Prepaid expenses and other current assets 14,540 4,893 Other assets 3,939 1,750 Net increase (decrease) in Accounts payable - trade (71,187) 146,152 Accrued and other liabilities 47,732 47,383 Deposits 9,960 -- Deferred Revenue (33,278) 91,905 --------------- --------------- Net cash (used in) provided by operating activities (15,472) 37,077 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment (2,268) (213,335) Proceeds from sale of property and equipment, net of closing costs 12,972 -- Acquisitions of businesses, net of cash acquired -- (33,915) --------------- --------------- Net cash provided by (used in) investing activities 10,704 (247,250) CASH FLOWS FROM FINANCING ACTIVITIES Deferred offering costs -- 10,750 Principal payments on borrowings under notes payable (34,178) (49,967) Principal payments on note payable to related party (2,152) -- Proceeds from issuance of interim financing and warrants, net of offering costs -- 225,000 Proceeds from issuance of convertible notes payable -- 100,000 Convertible debt issue costs -- (14,336) Proceeds from exercise of warrants -- 1,825 Principal payments on capital lease obligations (13,184) (4,329) --------------- --------------- Net cash (used in) provided by financing activities (49,514) 268,943 --------------- --------------- NET (DECREASE) INCREASE IN CASH (54,282) 58,770 Cash at beginning of year 56,575 13,150 --------------- --------------- Cash at end of year $ 2,293 $ 71,920 =============== ===============
(continued) -6- FULLNET COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - CONTINUED
THREE MONTHS ENDED --------------------------------- MARCH 31, 2002 MARCH 31, 2001 --------------- --------------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid for interest $ 25,066 $ 39,145 NONCASH INVESTING AND FINANCING ACTIVITIES Net carrying value of debt converted to equity -- -- Assets acquired through issuance of capital lease -- 84,613 Conversion of acquisition notes payable to convertible notes payable -- 232,944 Conversion of trade payable to convertible note payable -- 94,680 Assets financed through accounts payable -- 15,388 LawtonNet Asset Purchase Fair value of common stock issuance $ -- $ 35,000 Fair value of intangible assets -- (55,000) --------------- --------------- Cash paid to purchase LawtonNet assets $ -- $ (20,000) =============== =============== Sonet Asset Purchase Fair value of assets acquired $ -- $ (11,516) Fair value of common stock issuable -- 30,000 Fair value of intangible assets -- (32,399) --------------- --------------- Cash paid to purchase Sonet assets $ -- $ (13,915) =============== ===============
(concluded) See accompanying notes to financial statements. -7- FULLNET COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. UNAUDITED INTERIM FINANCIAL STATEMENTS The unaudited 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 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, 2001. 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, 2002. Certain reclassifications have been made to prior period balances to conform with the presentation for the current period. 2. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures; accordingly, actual results could differ from those estimates. 3. LOSS PER COMMON SHARE Loss per common share is calculated based on the weighted average number of shares outstanding during the period, including common shares issuable without additional consideration. Basic and diluted loss per share were the same for each period in 2002 and 2001 because the outstanding convertible notes payable, stock options and warrants were not dilutive. 4. NOTES PAYABLE On January 5, 2001, the Company obtained a $250,000 interim loan. This loan bears interest at 10% per annum and requires payments equal to 50% of the net proceeds received by the Company from its private placement of convertible notes payable. On March 31, 2001, the principal balance of the note was increased to $320,000 and the due date was extended to July 31, 2001. Subsequently, the due date was extended until December 31, 2001. Through March 31, 2002, the Company had made aggregate payments of principal and interest of $35,834 on this loan. Pursuant to the terms of this loan the balance was due on December 31, 2001 and the Company has not made payment nor negotiated an extension of the note and the lender has not made any demands. During February 2001, the Company received $100,000 of subscriptions to the Company's private placement offering of convertible notes payable. These notes bear interest at an -8- annual rate of 12.5%, as adjusted, and become due three years following issuance. These notes are convertible into the Company's common stock at the rate of one share of common stock for each $1.00, subject to adjustment under certain circumstances, of principal and accrued unpaid interest at the option of the holders. During February 2001, the Company converted accounts payable of $94,680 to a note with terms substantially equivalent to the terms of the Company's convertible notes payable. Effective February 1, 2001, the holders exchanged their non-interest bearing acquisition note payable for a note bearing interest at 10% per annum commencing January 1, 2001, and a six-month deferral of payments of principal and interest from April 2001 to September 2001. Payments of principal and interest resumed in October 2001, and this note matures in June 2002. During March 2001, the Company converted acquisition notes payable of $232,944 to notes with terms substantially equivalent to the Company's convertible notes payable. Pursuant to the provisions of the convertible notes payable, the conversion price was reduced from $1.00 per share on January 15, 2001 to $.75 per share on March 15, 2002 for failure to register under the Securities Act of 1933, as amended, the common stock underlying the convertible notes payable and underlying warrants on March 15, 2002. Reductions in conversion price are recognized at the date of reduction by an increase to additional paid-in capital and an increase in the discount on the notes payable. Furthermore, the interest rate was increased to 12.5% per annum from 11% per annum because the registration statement was not filed before March 1, 2001. At March 31, 2002, the outstanding principal and interest of the convertible notes payable was $534,033. 5. ACQUISITIONS On February 28, 2001, the Company purchased substantially all of the assets of LawtonNet Communications (LAWTONNET), a sole proprietorship, including approximately 700 individual and business Internet access customer accounts. Pursuant to the purchase, the Company issued LAWTONNET 35,000 shares of its common stock. In addition, the Company agreed to pay LAWTONNET an amount based upon the future collected revenues received from all active LAWTONNET customers transferred at the time of closing of the purchase until the customers become inactive. During the 30 days following the closing of this purchase, advance payments totaling $30,000 were made on the future collected revenues received and were recorded as intangible assets acquired. As of March 31, 2002, $29,100 of the advance payments was earned. On February 28, 2001, the Company purchased substantially all of the assets of Computer Concepts & Research, Inc., doing business as SONET Communications (SONET), including approximately 900 individual and business Internet access customer accounts. Pursuant to this purchase, the Company agreed to issue 30,000 shares of its common stock to SONET. In addition, the Company agreed to pay SONET an amount based upon the future collected revenues received from all active SONET customers transferred at the time of closing of this purchase until the customers become inactive. As of March 31, 2002, $57,300 had been paid from collected revenues and recorded as intangible assets acquired. -9- These acquisitions were accounted for as purchases. The aggregate purchase price has been allocated to the underlying net assets purchased or net liabilities assumed, including intangible assets which consist primarily of acquired customer bases and covenants not to compete, based on their estimated fair values at the respective acquisition dates. Intangible assets acquired totaled approximately $107,547, which are being amortized based on decreases of acquired customer base. 6. COMMON STOCK OPTIONS AND WARRANTS The following table summarizes the Company's employee stock option activity for the three months ended March 31, 2002:
Three Months Ended Weighted Average March 31, 2002 Exercise Price -------------- -------------- Options outstanding, beginning of period 1,437,196 $ 1.08 Options issued during the period 243,000 .05 Options cancelled during the period (143,000) 1.11 -------------- -------------- Options outstanding, end of period 1,537,196 $ .91 ============== ==============
The following table summarizes the Company's common stock purchase warrant and certain stock option activity for the three months ended March 31, 2002:
Three Months Ended Weighted Average March 31, 2002 Exercise Price ------------------ -------------- Warrants and certain stock options outstanding, beginning and end of period 2,099,681 $ .69 ========= =========
7. RECENTLY ADOPTED ACCOUNTING STANDARDS In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) 141, Business Combinations, and SFAS 142, Goodwill and Intangible Assets. SFAS 141 is effective for all business combinations completed after June 30, 2001. SFAS 142 is effective for fiscal years beginning after December 15, 2001; however, certain provisions of this Statement apply to goodwill and other intangible assets acquired between July 1, 2001 and the effective date of SFAS 142. The provisions of 142 provide that goodwill, as well as intangible assets with indefinite lives, acquired after June 30, 2001, not be amortized and, effective January 1, 2002, all previously recognized goodwill and intangible assets with indefinite lives will no longer be subject to amortization. The statement also provides that upon initial application the useful lives of previously recognized intangible assets be reassessed and remaining amortization periods adjusted accordingly. The Company's previously recognized intangible assets consist primarily of customer bases and covenants not to compete relating to those customer bases. Upon initial application of SFAS 142 as of January 1, 2002, the Company reassessed useful lives and began amortizing these intangible assets over their estimated useful lives and in direct relation to any decreases in the acquired customer bases to which they relate. Management believes that such -10- amortization reflects the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up. The following information presents net loss for all periods presented as adjusted to reflect adjustments for changes in amortization periods for the Company's intangible assets pursuant to SFAS 142:
Three Months Ended Three Months Ended March 31, 2002 March 31, 2001 ---------------- ---------------- Reported net loss $ (298,535) $ (911,700) Adjust: Intangible amortization -- (123,263) ---------------- ---------------- Adjusted net income $ (298,535) $ (1,034,963) ================ ================ Basic and diluted loss per common share Reported net loss $ (.04) $ (.22) Intangible amortization -- (.03) ---------------- ---------------- Adjusted net income $ (.04) $ (.25) ================ ================
8. MANAGEMENT'S PLANS The Company sustained substantial net losses through March 31, 2002. In addition, at March 31, 2002, current liabilities exceed current assets by $1,574,470. 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 Company's ability to meet its financing requirements on a continuing basis, to maintain present financing, and to achieve the objectives of its business plan. 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 Company's business plan includes, among other things, expansion of its Internet access services through mergers and acquisitions and the development of its web hosting and co-location services. Execution of the Company's business plan will require significant capital to fund capital expenditures, working capital needs, debt service and the cash flow deficits generated by operating losses. Current cash balances will not be sufficient to fund the Company's current business plan beyond the next few months. As a consequence, the Company is currently seeking additional convertible debt or equity financing as well as the placement of a credit facility to fund the Company's liquidity. There can be no assurance that the Company will be able to raise additional capital on satisfactory terms or at all. -11- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The following discussion is qualified in its entirety by the more detailed information in our Form 10-KSB 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, 2001 (collectively referred to as the "Disclosure Documents"). Certain forward-looking statements contained herein and in such 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 such results is subject to certain risks and uncertainties, such as those inherent 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 herein represent our judgment as of the date hereof. 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") and FullWeb, Inc. ("FullWeb"). OVERVIEW We are an integrated communications provider offering integrated communications and Internet connectivity to individuals, businesses, organizations, educational institutions and government agencies. Through our subsidiaries, we provide high quality, reliable and scalable Internet access, web hosting, and equipment co-location. Our overall strategy is to become the dominant integrated communications provider for residents and small to medium-sized businesses in Oklahoma and contiguous states. 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 an Internet site on the World Wide Web ("WWW") at www.fullnet.net. Information contained on our Web site 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, and shifted our focus from offering dial-up services to providing wholesale and private label network connectivity and related services to other Internet service providers. During 1995 and 1996, we furnished wholesale and private label network connectivity services to Internet service providers in Bartlesville, Cushing, Durant, Perry, Tahlequah, and Tulsa. During 1996, we sold our Internet service provider operations in Enid, Oklahoma and began Internet service provider operations in Ponca City, Oklahoma. In 1997 we continued our focus on being a backbone provider by upgrading and acquiring more equipment. We also started offering our own Internet service provider brand access and services to our wholesale customers. As of March 31, 2002, there was one Internet service provider in Oklahoma that used the FullNet brand name for whom we provide the backbone to the Internet. There was also one Internet service provider that used a private label brand name, for whom we are its access backbone and provide on an outsource basis technical support, systems management and -12- operation. Additionally, we provide high-speed broadband connectivity, website hosting, network management and consulting solutions to over 100 businesses in Oklahoma. In 1998 our gross revenues exceeded $1,000,000 and we made the Metro Oklahoma City Top 50 Fastest Growing Companies list. In 1998 we commenced the process of organizing a competitive local exchange carrier ("CLEC") through FullTel, and acquired Animus Communications, Inc. ("Animus"), a wholesale Web-service company, thereby enabling us to become a total solutions provider to individuals and companies seeking a "one-stop shop" in Oklahoma. Animus was renamed FullWeb in January 2000. With the incorporation of FullTel and the acquisition of FullWeb, our current business strategy is to become the dominant integrated communications provider in Oklahoma and surrounding states, focusing on rural areas. We expect to grow through the acquisition of additional customers for our carrier-neutral co-location space, the acquisition of Internet service providers and network solutions providers, as well as through a FullNet brand marketing campaign. During the years ended 2000 and 2001, we completed eight separate acquisitions of Internet service provider companies, with customers in the Oklahoma cities of Tahlequah, Bartlesville, Enid, Nowata, Lawton, Oklahoma City, Adair, Jay Pryor, Wyandotte, Leach, Colcord and Moseley. During the month of February 2000, our common stock began trading on the NASD Electronic Bulletin Board under the symbol FULO. While our common stock trades on the NASD Electronic Bulletin Board, it is very thinly traded, and there can be no assurance that 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. In June 2000, we began providing co-location services to KMC Telecom V, Inc. ("KMC"), a facilities-based competitive local exchange carrier pursuant to an agreement that ends on January 31, 2004. Under the terms of this agreement, we receive $44,500 per month to provide co-location and support services for KMC's telecommunications equipment at our network operations center in Oklahoma City, Oklahoma. We completed our network operations center during the first quarter of 2001. KMC moved into our network operations center and began making payments during the third quarter of 2000. We plan to market additional 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 network operations center is Telco-grade and provides customers a high level of operative reliability and security. We offer flexible space arrangements for customers, 24-hour onsite support with both battery and generator backup. -13- RESULTS OF OPERATIONS The following table sets forth certain statement of operations data as a percentage of revenues for the three months ended March 31, 2002 and 2001:
------------------------------------------------------------- THREE MONTHS ENDED ------------------------------------------------------------- MARCH 31, 2002 MARCH 31, 2001 ---------------------------- ---------------------------- AMOUNT PERCENT AMOUNT PERCENT ------------ ------------ ------------ ------------ Revenues: Access service revenues $ 403,086 65.2% $ 307,950 57.8% Co-location and other revenues 215,268 34.8 224,984 42.2 ------------ ------------ ------------ ------------ Total revenues 618,354 100.0 532,934 100.0 Cost of access service revenues 261,431 42.3 171,580 32.2 Cost of co-location and other revenues 23,830 3.9 18,246 3.4 Selling, general and administrative expenses 373,965 60.4 775,631 145.5 Depreciation and amortization 175,702 28.4 226,854 42.6 ------------ ------------ ------------ ------------ Total operating costs and expenses 834,928 135.0 1,192,311 223.7 ------------ ------------ ------------ ------------ Loss from operations (216,574) (35.0) (659,377) (123.7) Interest expense (81,961) (13.3) (252,323) (47.3) ------------ ------------ ------------ ------------ Net loss $ (298,535) (48.3)% $ (911,700) (171.0)% ============ ============ ============ ============
THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO THREE MONTHS ENDED MARCH 31, 2001 Revenues Access service revenues increased $95,136 or 30.9% to $403,086 for the three-month period ended March 31, 2002 over $307,950 for the same period in 2001. This increase was the result of the acquisition of four Internet service providers during 2001, that accounted for an increase in dial-up Internet access revenue of approximately $109,221. Co-location and other revenues decreased $9,716 or 4.3% to $215,268 for the three-month period ended March 31, 2002 from $224,984 for the same period in 2001. This decrease was attributable to a decrease in web hosting and network solutions sales of $12,763 offset primarily by an increase in co-location services of $4,131 for the period ended March 31, 2002 compared to the same period in 2001. We do not actively market network solutions sales and consulting, and typically make such sales only to our existing customers. Operating Costs and Expenses Cost of access service revenues increased $89,851 or 52.4% to $261,431 for the three-month period ended March 31, 2002 from $171,580 for the same period in 2001, primarily due to the increased costs of providing Internet access in Lawton, Oklahoma City, Adair, Jay, Pryor, Wyandotte, Leach, Colcord and Moseley relating to the acquisition of Internet service providers in those towns during 2001. Cost of co-location and other revenues increased $5,584 or 30.6% to $23,830 for the period ended March 31, 2002 over $18,246 for the period ended March 31, 2001. This increase was primarily due to an increase in cost of equipment related to co-location services. -14- Selling, general and administrative expenses decreased $401,666 or 51.8% to $373,965 for the period ended March 31,2002 from $775,631 for the period ended March 31, 2001. This decrease was primarily due to decreases in professional fees and employee costs. Professional fees decreased $329,645 during the period ended March 31, 2002 compared to the same period in 2001. Professional fees include legal, accounting, investment banking and consulting fees. Employee costs decreased $49,451 for the period ended March 31, 2002 from the same period in 2001 primarily due to a decrease in the number of employees to 23 during the period ended March 31, 2002 from 28 during the period ended March 31, 2001. Advertising, rent and travel and meals decreased $8,825, $16,118 and $8,097, respectively, for the period ended March 31, 2002 from the comparable period in 2001. We incurred a loss on sale of assets of $21,311 during the period ended March 31, 2002. Selling, general and administrative expenses as a percentage of total revenues decreased to 60.4% during 2002 from 145.5% during 2001. Depreciation and amortization expense decreased $51,152 or 22.5% to $175,702 for the period ended March 31, 2002 from $226,854 for the period ended March 31, 2001. In January 2002, upon initially applying SFAS 142 we reassessed useful lives and we began amortizing our intangible assets over their estimated useful lives and in direct relation to any decreases in the acquired customer bases to which they relate. Amortization expense for the periods ended March 31, 2002 and 2001 relating to intangible assets was $122,197 and $163,968, respectively. Fixed asset depreciation decreased $9,382 for the period ended March 31,2002 compared to the same period in 2001 primarily due to fixed assets becoming fully depreciated. Interest Expense Interest expense decreased $170,362 or 67.5% to $81,961 for the period ended March 31, 2002 from $252,323 for the period ended March 31, 2001. This decrease was primarily attributable to the elimination of $463,095 of the loan discount associated with our interim financing issued with warrants and the future amortization of this discount. The elimination of the loan discount occurred in May 2001 as a result of the exchange of our common stock and warrants for our interim financing debt in the recorded amount of $1,283,893 (face amount of $1,746,988). LIQUIDITY AND CAPITAL RESOURCES At March 31, 2002, we had a deficit working capital of $1,574,470, while at December 31, 2001 we had a deficit working capital of $1,521,090. 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. Cash used in operations was $15,472 for the three months ended March 31, 2002. This was a decrease from cash provided by operations of $37,077 for the three months ended March 31, 2001. As of March 31, 2002, we had $2,293 in cash and $1,773,453 in current liabilities, including $435,367 of deferred revenues that will not require settlement in cash. Cash provided by the sales of equipment was $12,972 for the three months ended March 31, 2002. Cash used in investing activities was $247,250 for the three months ended March 31,2001. The cash used during 2001 was primarily related to leasehold improvements for our new office space and construction on our network operations center, which was completed during the first quarter 2001 and capital expenditures related to business acquisitions. -15- Net cash used for principal payments on notes payable and capital lease obligations was $49,514 for the three months ended March 31, 2002. Net cash provided by financing activities was $268,943 for the three months ended March 31, 2001. The cash provided in 2001 was due primarily to the issuance of interim notes payable and the sale of convertible promissory notes payable. The planned expansion of our business will require significant capital to fund capital expenditures, working capital needs, debt service and the cash flow deficits generated by operating losses. Our principal capital expenditure requirements will include: o the purchase and installation of telephone switches in Oklahoma, Arkansas and Kansas o purchase and installation of broadband Internet access equipment o mergers and acquisitions o further development of operations support systems and other automated back office systems As our cost of developing new networks and services, funding other strategic initiatives and operating our business will depend on a variety of factors (including, among other things, the number of subscribers 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 vary from expected amounts, very likely to a material degree, and that such variations are likely to affect our future capital requirements. Current cash balances as of May 13, 2002 will not be sufficient to fund our current business plan beyond a few months. As a consequence, we are currently seeking additional convertible debt and/or equity financing as well as the placement of a credit facility to fund our liquidity needs. There is no assurance that we will be able to raise additional capital on satisfactory terms or at all. In the event that we are unable to obtain such additional capital or to obtain it on acceptable terms or in sufficient amounts, we will be required to delay the development of our network or take other actions. This could have a material adverse effect on our business, operating results and financial condition and our ability to achieve sufficient cash flow to service debt requirements. Our ability to fund the capital expenditures and other costs contemplated by our business plan and to make scheduled payments with respect to bank borrowings will depend upon, among other things, our ability to seek and obtain additional financing during 2002. 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 flow from operations sufficient to permit us to pay the principal of, and interest and any other payments on, outstanding indebtedness. If we are unable to generate sufficient cash flows from operations to service our indebtedness, we may have to modify our growth plans, limit our capital expenditures, restructure or refinance our indebtedness or seek additional capital or liquidate our assets. There is no assurance (i) that any of these strategies could be effectuated on satisfactory terms, if at all, or (ii) that any such strategy would yield sufficient proceeds to service our debt or otherwise adequately fund operations. -16- FINANCING ACTIVITIES On January 1, 2002, we issued 11,815 shares of common stock in payment of $11,815 accrued interest on a portion of our convertible debt. On January 5, 2001, we obtained a $250,000 interim loan. This loan bears interest at 10% per annum and requires payments equal to 50% of the net proceeds received by us from our private placement of convertible notes payable. On March 31, 2001, the principal balance of the note was increased to $320,000 and the due date was extended to July 31, 2001. Subsequently, the due date was extended until December 31, 2001. Through March 31, 2002, we had made aggregate payments of principal and interest of $35,834 on this loan. Pursuant to the terms of this loan the balance was due on December 31, 2001 and we have not made payment nor negotiated an extension of the note and the lender has not made any demands. During February 2001, we received $100,000 of proceeds from our private placement offering of convertible notes payable. These notes bear interest at an annual rate of 12.5%, as adjusted, and become due three years following issuance. These notes are convertible into our common stock at the rate of one share of common stock for each $1.00, subject to adjustment under certain circumstances, of principal and accrued unpaid interest at the option of the holders. During February 2001, we converted accounts payable of $94,680 to a note with terms substantially equivalent to the terms of our convertible notes payable. Effective February 1, 2001, the holders exchanged their non-interest bearing acquisition note payable for a note bearing interest at 10% per annum commencing January 1, 2001, and a six-month deferral of payments of principal and interest from April 2001 to September 2001. Payments of principal and interest resumed in October 2001, and this note matures in June 2002. During March 2001, we converted acquisition notes payable of $232,944 to notes with terms substantially equivalent to our convertible notes payable. Pursuant to the provisions of the convertible notes payable, the conversion price was reduced from $1.00 per share on January 15, 2001 to $.75 per share on March 15, 2002 for failure to register under the Securities Act of 1933, as amended, the common stock underlying the convertible notes payable and underlying warrants on March 15, 2002. Reductions in conversion price are recognized at the date of reduction by an increase to additional paid-in capital and an increase in the discount on the notes payable. Furthermore, the interest rate was increased to 12.5% per annum from 11% per annum because the registration statement was not filed before March 1, 2001. At March 31, 2002, the outstanding principal and interest of the convertible notes payable was $534,033. RECENTLY ISSUED ACCOUNTING STANDARDS In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) 141, Business Combinations, and SFAS 142, Goodwill and Intangible Assets. SFAS 141 is effective for all business combinations completed after June 30, 2001. SFAS 142 is effective for fiscal years beginning after December 15, 2001; however, certain provisions of this Statement apply to goodwill and other intangible assets acquired between July 1, 2001 and the effective date of SFAS 142. The most signification provisions of SFAS 141 and 142 provide that goodwill, as well as intangible assets with indefinite lives, acquired after June 30, 2001, -17- not be amortized and, effective January 1, 2002, all previously recognized goodwill and intangible assets with indefinite lives will no longer be subject to amortization. In January 2002, upon initially applying SFAS 142 we reassessed useful lives and we began amortizing our intangible assets over their estimated useful lives and in direct relation to any decreases in the acquired customer bases to which they relate. Amortization expense for the periods ended March 31, 2002 and 2001 relating to intangible assets was $122,197 and $163,968, respectively. -18- PART II-OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS On January 1, 2002, we issued 11,815 shares of common stock in payment of $11,815 accrued interest on a portion of our convertible debt. This offering was pursuant to Rule 506 of Regulation D of the Securities Act. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are filed as part of this Report:
Exhibit Number Exhibit ------- ------- 3.1 Certificate of Incorporation, as amended (filed as Exhibit 2.1 to Registrant's Registration Statement on Form 10-SB, file number 000-27031 and incorporated herein by reference). # 3.2 Bylaws (filed as Exhibit 2.2 to Registrant's Registration Statement on Form 10-SB, file number 000-27031 and incorporated herein by reference) # 4.1 Specimen Certificate of Registrant's Common Stock (filed as Exhibit 4.1 to the Company's 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 Registrant's 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 Registrant's Bylaws (filed as Exhibit 2.1 to Registrant's Registration Statement on Form 10-SB, file number 000-27031 and incorporated herein by # reference). 4.4 Form of Warrant Agreement for Interim Financing in the amount of $505,000 (filed as Exhibit 4.1 to Registrant's Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference). # 4.5 Form of Warrant Certificate for Florida Investors for Interim Financing in the amount of $505,000 (filed as Exhibit 4.2 to Registrant's Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference). # 4.6 Form of Promissory Note for Florida Investors for Interim Financing in the amount of $505,000 (filed as Exhibit 4.3 to Registrant's Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference). # 4.7 Form of Warrant Certificate for Georgia Investors for Interim Financing in the amount of $505,000 (filed as Exhibit 4.4 to Registrant's Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference). # 4.8 Form of Promissory Note for Georgia Investors for Interim Financing in the amount of $505,000 (filed as Exhibit 4.5 to Registrant's Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference). #
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Exhibit Number Exhibit ------- ------- 4.9 Form of Warrant Certificate for Illinois Investors for Interim Financing in the amount of $505,000 (filed as Exhibit 4.6 to Registrant's Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference). # 4.10 Form of Promissory Note for Illinois Investors for Interim Financing in the amount of $505,000 (filed as Exhibit 4.7 to Registrant's Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference). # 4.11 Form of Warrant Agreement for Interim Financing in the amount of $500,000 (filed as Exhibit 4.8 to Registrant's Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference). # 4.12 Form of Warrant Certificate for Interim Financing in the amount of $500,000 (filed as Exhibit 4.9 to Registrant's Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference). # 4.13 Form of Promissory Note for Interim Financing in the amount of $500,000 (filed as Exhibit 4.10 to Registrant's Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference). # 4.14 Form of Convertible Promissory Note for September 29, 2000, private placement (filed as Exhibit 4.13 to Registrant's Form 10-KSB for the fiscal year ended December 31, 2000 and incorporated herein by reference). # 4.15 Form of Warrant Agreement for September 29, 2000, private placement (filed as Exhibit 4.13 to Registrant's Form 10-KSB for the fiscal year ended December 31, 2000 and incorporated herein by # reference). 4.16 Form of 2001 Exchange Warrant Agreement (filed as Exhibit 4.16 to Registrant's Form 10-QSB for the quarter ended June 30, 2001 and incorporated herein by reference) # 4.17 Form of 2001 Exchange Warrant Certificate (filed as Exhibit 4.17 to Registrant's Form 10-QSB for the quarter ended June 30, 2001 and incorporated herein by reference) # 10.1 Financial Advisory Services Agreement between the Company and National Securities Corporation, dated September 17, 1999 (filed as Exhibit 10.1 to Registrant's 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 Registrant's 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 Registrant's Registration Statement on Form 10-SB, file number 000-27031 and incorporated herein by reference). # 10.4 Stock Purchase Agreement between the Company and Animus Communications, Inc. (filed as Exhibit 6.2 to Registrant's 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 Registrant's Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference). # 10.6 Master License Agreement For KMC Telecom V, Inc., dated June 20, 2000, by and between FullNet Communications, Inc. and KMC Telecom V, Inc. (filed as Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-QSB for the Quarter ended June 30, 2000 and incorporated herein by reference). #
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Exhibit Number Exhibit ------- ------- 10.7 Domain Registrar Project Completion Agreement dated May 10, 2000, by and between FullNet Communications, Inc., FullWeb, Inc. d/b/a FullNic and Think Capital (filed as Exhibit 10.2 to Registrant's Quarterly Report on Form 10-QSB for the Quarter ended June 30, 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 Registrant's Quarterly Report on Form 10-QSB for the Quarter ended June 30, 2000 and incorporated herein by reference). # 10.9 Asset Purchase Agreement dated June 2, 2000, by and between FullNet of Nowata and FullNet Communications, Inc. (filed as Exhibit 99.1 to Registrant's Form 8-K filed on June 20, 2000 and incorporated herein by reference). # 10.10 Asset Purchase Agreement dated February 4, 2000, by and between FullNet of Bartlesville and FullNet Communications, Inc. (filed as Exhibit 2.1 to Registrant's Form 8-K filed on February 18, 2000 and incorporated herein by reference). # 10.11 Agreement and Plan of Merger Among FullNet Communications, Inc., FullNet, Inc. and Harvest Communications, Inc. dated February 29, 2000 (filed as Exhibit 2.1 to Registrant's Form 8-K filed on March 10, 2000 and incorporated herein by reference). # 10.12 Asset Purchase Agreement dated January 25, 2000, by and between FullNet of Tahlequah, and FullNet Communications, Inc. (filed as Exhibit 2.1 to Registrant's Form 8-K filed on February 9, 2000 and incorporated herein by reference). # 10.13 Promissory Note dated August 2, 2000, issued to Timothy J. Kilkenny (filed as Exhibit 10.13 to Registrant's Form 10-KSB for the fiscal year ended December 31, 2000). # 10.14 Warrant Agreement dated August 2, 2000, issued to Timothy J. Kilkenny (filed as Exhibit 10.14 to Registrant's Form 10-KSB for the fiscal year ended December 31, 2000). # 10.15 Warrant Certificate dated August 2, 2000 issued to Timothy J. Kilkenny (filed as Exhibit 10.15 to Registrant's Form 10-KSB for the fiscal year ended December 31, 2000). # 10.16 Stock Option Agreement dated December 8, 2000, issued to Timothy J. Kilkenny (filed as Exhibit 10.16 to Registrant's Form 10-KSB for the fiscal year ended December 31, 2000). # 10.17 Warrant Agreement dated November 9, 2000, issued to Roger P. Baresel (filed as Exhibit 10.17 to Registrant's Form 10-KSB for the fiscal year ended December 31, 2000). # 10.18 Warrant Agreement dated December 29, 2000, issued to Roger P. Baresel (filed as Exhibit 10.18 to Registrant's Form 10-KSB for the fiscal year ended December 31, 2000). # 10.19 Stock Option Agreement dated February 29, 2000, issued to Wallace L Walcher (filed as Exhibit 10.19 to Registrant's Form 10-KSB for the fiscal year ended December 31, 2000). # 10.20 Stock Option Agreement dated February 17, 1999, issued to Timothy J. Kilkenny (filed as Exhibit 3.1 to Registrant's Registration Statement on Form 10-SB, file number 000-27031 and incorporated herein by reference). # 10.21 Stock Option Agreement dated October 19, 1999, issued to Wesdon C. Peacock (filed as Exhibit 10.21 to Registrant's Form 10-KSB for the fiscal year ended December 31, 2000). # 10.22 Stock Option Agreement dated April 14, 2000, issued to Jason C. Ayers (filed as Exhibit 10.22 to Registrant's Form 10-KSB for the fiscal year ended December 31, 2000). # 10.23 Stock Option Agreement dated May 1, 2000, issued to B. Don Turner (filed as Exhibit 10.23 to Registrant's Form 10-KSB for the fiscal year ended December 31, 2000). #
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Exhibit Number Exhibit ------- ------- 10.24 Form of Stock Option Agreement dated December 8, 2000, issued to Jason C. Ayers, Wesdon C. Peacock, B. Don Turner and Wallace L. Walcher (filed as Exhibit 10.24 to Registrant's Form 10-KSB for the fiscal year ended December 31, 2000). # 10.25 Warrant Certificate Dated November 9, 2000, issued to Roger P. Baresel (filed as Exhibit 10.25 to Registrant's Form 10-KSB for the fiscal year ended December 31, 2000). # 10.26 Warrant Certificate Dated November 9, 2000, issued to Roger P. Baresel (filed as Exhibit 10.26 to Registrant's Form 10-KSB for the fiscal year ended December 31, 2000). # 10.27 Warrant Certificate Dated December 29, 2000, issued to Roger P. Baresel (filed as Exhibit 10.27 to Registrant's Form 10-KSB for the fiscal year ended December 31, 2000). # 10.28 Stock Option Agreement dated October 13, 2000, issued to Roger P. Baresel (filed as Exhibit 10.28 to Registrant's Form 10-KSB for the fiscal year ended December 31, 2000). # 10.29 Stock Option Agreement dated October 12, 1999, issued to Travis Lane (filed as Exhibit 10.29 to Registrant's Form 10-KSB for the fiscal year ended December 31, 2000). # 10.30 Promissory Note dated January 5, 2001, issued to Generation Capital Associates (filed as Exhibit 10.30 to Registrant's Form 10-KSB for the fiscal year ended December 31, 2000). # 10.31 Placement Agency Agreement dated November 8, 2000 between FullNet Communications, Inc. and National Securities Corporation (filed as Exhibit 10.31 to Registrant's Form 10-KSB for the fiscal year ended December 31, 2000). # 10.32 Promissory Note dated January 25, 2000, issued to Fullnet of Tahlequah, Inc. # 10.33 Promissory Note dated February 7, 2000, issued to David Looper # 10.34 Promissory Note dated February 29, 2000, issued to Wallace L. Walcher # 10.35 Promissory Note dated June 2, 2000, issued to Lary Smith # 10.36 Promissory Note dated June 15, 2001, issued to higganbotham.com L.L.C. # 10.37 Promissory Note dated November 19, 2001, issued to Northeast Rural Services # 10.38 Promissory Note dated November 19, 2001, issued to Northeast Rural Services # 22.1 Subsidiaries of the Registrant #
------------------------------------------- # Incorporated by reference. * Filed herewith. (b) Reports on Form 8-K Registrant filed no reports on Form 8-K during the three months ended March 31, 2002. -22- SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. REGISTRANT: FULLNET COMMUNICATIONS, INC. Date: May 13, 2002 By: /s/ TIMOTHY J. KILKENNY ---------------------------------------- Timothy J. Kilkenny President and Chief Executive Officer Date: May 13, 2002 By: /s/ ROGER P. BARESEL ---------------------------------------- Roger P. Baresel Chief Financial and Accounting Officer -23- -----END PRIVACY-ENHANCED MESSAGE-----