FULLNET COMMUNICATIONS INC. - Form 10-Q SEC filing

FullNet Communications, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS


	MARCH 31,	DECEMBER 31,
	2018	2017
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash	`$143,423`	`$29,399`
Accounts receivable, net	`673`	`8,854`
Prepaid expenses and other current assets	`28,867`	`6,110`

Total current assets	`172,963`	`44,363`

PROPERTY AND EQUIPMENT, net	`43,184`	`39,448`

OTHER ASSETS AND INTANGIBLE ASSETS	`19,604`	`21,813`

ASSETS OF DISCONTINUED OPERATIONS, net (NOTE 8)	`23,779`	`29,343`

TOTAL ASSETS	`$259,530`	`$134,967`

LIABILITIES AND STOCKHOLDERS’ DEFICIT

CURRENT LIABILITIES
Accounts payable	`$41,110`	`$37,371`
Accounts payable, related party	`516`	`7,982`
Accrued and other liabilities	`638,540`	`610,107`
Convertible notes payable, related party - current portion	`7,203`	`5,354`
Deferred revenue	`435,279`	`397,931`

Total current liabilities	`1,122,648`	`1,058,745`

CONVERTIBLE NOTES PAYABLE, related party - less current portion	`24,730`	`27,888`

LIABILITIES OF DISCONTINUED OPERATIONS (NOTE 8)	`82,255`	`193,812`

Total liabilities	`1,229,633`	`1,280,445`

STOCKHOLDERS’ DEFICIT
Preferred stock — $0.001 par value; authorized, 10,000,000 shares; Series A convertible; issued and outstanding, 987,102 shares in 2018 and 2017	`625,399`	`618,675`
Common stock — $0.00001 par value; authorized, 40,000,000 shares; issued and outstanding, 11,871,009 shares in 2018 and 2017	`119`	`119`
Additional paid-in capital	`8,702,982`	`8,640,769`
Accumulated deficit	`(10,298,603)`	`(10,405,041)`

Total stockholders’ deficit	`(970,103)`	`(1,145,478)`

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	`$259,530`	`$134,967`

See accompanying notes to unaudited condensed consolidated financial statements.

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FullNet Communications, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


	Three Months Ended
		March 31, 2018	March 31, 2017
REVENUES
Access service revenues		`$10,206`	`$11,859`
Co-location and other revenues		`496,854`	`453,724`

Total revenues		`507,060`	`465,583`

OPERATING COSTS AND EXPENSES
Cost of access service revenues		`2,527`	`2,429`
Cost of co-location and other revenues		`46,309`	`33,988`
Selling, general and administrative expenses		`550,357`	`393,125`
Depreciation and amortization		`4,389`	`4,773`

Total operating costs and expenses		`603,582`	`434,315`

INCOME (LOSS) FROM OPERATIONS		`(96,522)`	`31,268`

OTHER INCOME		`6,000`	`-`
INTEREST EXPENSE		`(330)`	`(754)`
INCOME TAX EXPENSE		`(4,666)`	`-`

Net income (loss) from continuing operations		`(95,518)`	`30,514`
Gain from sale of discontinued asset		`233,277`	`-`
Net income (loss) from discontinued operations (NOTE 8)		(31,321)	`(25,325)`
NET INCOME		`$106,438`	`$5,189`

Preferred stock dividends		`(6,724)`	`(6,724)`

Net income (loss) available to common stockholders		`$99,714`	`$(1,535)`

Net income (loss) per share:
Continuing operations – basic		`(0.01)`	`0.00`
Continuing operations – diluted		`(0.01)`	`0.00`
Discontinued operations – basic		`0.02`	`(0.00)`
Discontinued operations – diluted		`0.02`	`(0.00)`
Net Income - basic and diluted		`$0.01`	`$(0.00)`

Weighted average common shares outstanding:
Basic		`11,871,009`	`11,871,009`
Diluted		`11,871,009`	`14,289,011`

See accompanying notes to unaudited condensed consolidated financial statements.

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FullNet Communications, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT (UNAUDITED)

Three Months Ended March 31, 2018

Common stock

Preferred stock

Additional

Accumulated

Amount

paid-in capital

deficit

Total

Balance at January 1, 2018

11,871,009

$119

987,102

$618,675

$8,640,769

$(10,405,041)

$(1,145,478)

Stock options compensation

-

68,937

-

68,937

Amortization of increasing dividend rate preferred stock discount

-

6,724

(6,724)

-

Net income

-

106,438

Balance at March 31, 2018 – (unaudited)

11,871,009

$119

987,102

$625,399

$8,702,982

$(10,298,603)

$(970,103)

See accompanying notes to unaudited condensed consolidated financial statements.

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FullNet Communications, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Three Months Ended
	March 31, 2018	March 31, 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	`$106,438`	`$5,189`
(Income) loss from discontinued operations	`(201,956)`	`25,325`
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation and amortization	`4,389`	`4,773`
Stock options compensation	`68,937`	`1,651`
Provision for uncollectible accounts receivable	`110`	`238`
Net (increase) decrease in
Accounts receivable	`8,071`	`378`
Prepaid expenses and other current assets	`(22,757)`	`(19,019)`
Net increase (decrease) in
Accounts payable	`3,739`	`(17,171)`
Accounts payable – related party	`(7,466)`	`(13,935)`
Accrued and other liabilities	`28,433`	`22,160`
Deferred revenue	`37,348`	`39,598`
Net cash provided by operating activities	`25,286`	`49,187`

CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for property and equipment	`(5,916)`	`(766)`
Cash paid for intangible asset	`-`	`(7,700)`
Net cash used in investing activities	`(5,916)`	`(8,466)`

CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on borrowings under notes payable – related party	`(1,309)`	`(1,648)`
Net cash used in financing activities	`(1,309)`	`(1,648)`

DISCONTINUED OPERATIONS
Net cash used in operating activities	`(5,598)`	`(19,814)`
Net cash provided by investing activities	`218,153`	`-`
Net cash used in financing activities	`(116,592)`	`(9,192)`
Net cash provided by (used in) discontinued operations	`95,963`	`(29,006)`

NET INCREASE (DECREASE) IN CASH – CONTINUING OPERATIONS	`114,024`	`10,067`
Cash at beginning of period	`29,399`	`19,383`
Cash at end of period	`$143,423`	`$29,450`

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid for income tax	`$4,666`	`$-`
Cash paid for interest – continuing operations	`492`	`754`
Cash paid for interest – discontinued operations	`51`	`4,010`

NON-CASH INVESTING AND FINANCING ACTIVITIES

Intangible asset purchased on account	`$-`	`$8,300`
Amortization of increasing dividend rate preferred stock discount	`$6,724`	`$6,724`

See accompanying notes to the unaudited condensed consolidated financial statements.

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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, 2017.

Certain reclassifications have been made to prior period balances to conform with the presentation for the current period. These reclassifications did not impact the net income (loss).

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, 2018.

Recent Accounting Pronouncement

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09 (Topic 606) “Revenue from Contracts with Customers.” Topic 606 supersedes the revenue recognition requirements in Accounting Standards Codification Topic 605, “revenue Recognition”, and requires entities to recognize revenue when they transfer control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. We adopted Topic 606 as of January 1, 2018. The adoption of Topic 606 did not have any impact to our consolidated financial statements, including the presentation of revenues in our Consolidated Statements of Income.

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.

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Schedule of Income (Loss) Per Share
	Three Months Ended
	March 31, 2018	March 31, 2017
Net income (loss):
Income (loss) from continuing operations	`$(95,518)`	`$30,514`
Income (loss) from discontinued operations - See Note 8	`201,956`	`(25,325)`
Net income	`106,438`	`5,189`
Preferred stock dividends	`(6,724)`	`(6,724)`
Net income (loss) available to common shareholders	`99,714`	`(1,535)`

Basic income (loss) per share:
Weighted average common shares outstanding used in income (loss) per share computation	`11,871,009`	`11,871,009`

Basic income (loss) per share:
Continuing operations	`(0.01)`	`0.00`
Discontinued operations – See Note 8	`0.02`	`(0.00)`
Basic income (loss) per share	`0.01`	`(0.00)`

Diluted income (loss) per share:
Shares used in diluted income (loss) per share	`11,871,009`	`14,289,011`

Diluted income (loss) per share
Continuing operations	`(0.01)`	`0.00`
Discontinued operations – See Note 8	`0.02`	`(0.00)`
Diluted income (loss) per share	`0.01`	`(0.00)`

Computation of shares used in income (loss) per share:
Weighted average shares and share equivalents outstanding - basic	`11,871,009`	`11,871,009`
Effect of preferred stock	`-`	`987,102`
Effect of dilutive stock options	`-`	`1,228,407`
Effect of dilutive warrants	`-`	`202,493`
Weighted average shares and share equivalents outstanding – diluted	`11,871,009`	`14,289,011`

Schedule of Anti-dilutive Securities Excluded
	Three Months Ended
	March 31, 2018	March 31, 2017
Preferred stock	`987,102`	-
Stock options	`4,120,834`	`36,000`
Warrants	`250,000`	-
Convertible promissory notes	`31,933`	`172,411`
Total anti-dilutive securities excluded	`5,389,869`	`208,411`

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 MANAGEMENT'S PLANS

At March 31, 2018 current liabilities exceeded current assets by $949,685. 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 Company’s 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 Company’s 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.

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The Company’s 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 Company’s 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 Company’s 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 Company’s 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, 2017 the Company had a secured convertible promissory note from a shareholder with a balance of $33,242. 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 three months ended March 31, 2018, the Company made principal and interest payments totaling $1,801, of which $1,309 applied to the principal. The secured convertible promissory note had a balance of $31,933 at March 31, 2018 of which $7,203 is short-term and $24,730 is long-term.

4. STOCK BASED COMPENSATION

The following table summarizes the Company’s employee stock option activity for the three months ended March 31, 2018:

Schedule of Employee Stock Option Activity
	Options	Weighted average exercise price	Weighted average remaining contractual life (yrs)	Aggregate Intrinsic value
Options outstanding, December 31, 2017	2,110,834	$.006	8.18

Options exercisable, December 31, 2017	626,834	$0.003	6.03	$ 22,902

Options issued during the period	2,010,000	0.040

Options outstanding, March 31, 2018	4,120,834	$0.023	8.88

Options exercisable, March 31, 2018	2,822,167	$0.027	8.81	$ 26,678

During the three months ended March 31, 2018, 2,010,000 nonqualified employee stock options were granted with an exercise price of $.04. 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 $76,895 of which $67,280 was recognized as stock-based compensation expense for the three months ended March 31, 2018. 1,750,000 of the stock options vested immediately and 260,000 will vest one-fifth on each annual anniversary date of the grant. The total 2,010,000 will expire ten years from the date of the grant.

Total stock-based compensation expense for the three months ended March 31, 2018 was $68,937 of which $67,280 was related to options issued during the three months ended March 31, 2018 and $1,657 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 three months ended March 31, 2018:

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		2018
Risk free interest rate		2.65%
Expected lives (in years)		5
Expected volatility		178%
Dividend yield		0%

5. SERIES A CONVERTIBLE PREFERRED STOCK

On March 9, 2018 the Company’s board of directors made the determination that it was in the best interest of the Company and its stockholders to conserve the Company’s working capital at this time and not make the annual dividend payment for the year ending December 31, 2017, 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 months ended March 31, 2018 was $6,724.

6. PROPERTY AND EQUIPMENT

During the three months ended March 31, 2018, 5,916 was paid for property and equipment and $2,180 was recorded as depreciation expense.

During the three months ended March 31, 2017, $766 was paid for property and equipment and $2,432 was recorded as depreciation expense.

7. INTANGIBLE ASSET

During the three months ended March 31, 2018, $2,209 was recorded as amortization expense.

During the three months ended March 31, 2017, $7,700 was paid for an intangible asset and $2,341 was recorded as amortization expense.

8. DISCONTINUED OPERATIONS

In response to the changes in the telecommunications market and deterioration in the Company’s ability to effectively compete, the Company made the decision to exit the CLEC business. On October 27, 2017, the Company’s board of directors adopted a plan to exit the CLEC business as soon as possible through the sale of its wholly owned CLEC subsidiary and/or substantially all of its CLEC subsidiary’s operating assets. The Company was in negotiations with a potential buyer at December 31, 2017, which buyer subsequently purchased substantially all of its CLEC subsidiary’s operating assets pursuant to an asset purchase agreement which was executed and closed on February 1, 2018, (the “Sale”).

The Company determined that the Sale represented a strategic shift that will have a major effect on the Company’s operations and financial results since it represented a complete exit from the CLEC business and, therefore, classified it’s CLEC subsidiary as held for sale at December 31, 2017.

The Company recognized a gain of $233,277 on the Sale based on total considerations of $264,872 less total basis in the assets sold and transactions costs of $31,595. The assets sold consisted primarily of customers and associated customer premise equipment.

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Consideration:
Cash	$	246,500
Assumption of deferred revenue		8,366
Waived service obligation for February 2018		`10,006`
Total consideration	$	`264,872`

Total assets sold:
Customer contracts	$	`-`
Fiber innerduct		`3.248`
Fiber strands		`-`
Customer CPE		`-`
Total assets		`3,248`
Transactional costs		`28,347`
Total basis	$	`31,595`
Net gain	$	`233,277`

At December 31,2017, the Company had a secured convertible promissory note from a shareholder with a balance of $116,592. The interest rate of this note was 6% through December 31, 2014, 7% through December 31, 2015 and was 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 three months ended March 31, 2018, the Company paid the remaining balance of $116,592 in full.

Assets and Liabilities of Discontinued Operations

	March 31, 2018	December 31, 2017
Carrying amounts of assets included in discontinued operations
Cash	`$2,007`	`$1,801`
Prepaid expenses and other current assets	`2,467`	`2,671`
Property and equipment, net	`19,305`	`24,871`
Total Assets of Discontinued Operations	`$23,779`	`$29,343`

Carrying amounts of liabilities included in discontinued operations
Accounts payable	`$59,312`	`$57,342`
Accrued and other liabilities	`22,943`	`19,878`
Convertible notes payable, related party – current portion	`-`	`116,592`
Convertible notes payable, related party – less current portion	`-`	`-`
Total Liabilities of Discontinued Operations	`$82,255`	`$193,812`

Operating Results of Discontinued Operations

	March 31, 2018	March 31, 2017
Revenues included in discontinued operations
Total colocation and other revenues	`$28,091`	$ 42,280

Operating costs and expenses included in discontinued operations
Cost of services	`$53,886`	$ 56,396
Selling, general and administrative expenses	`3,157`	4,662
Depreciation and amortization	`2,318`	2,537
Interest expense	`51`	4,010
Total operating costs and expenses included in discontinued operations	`59,412`	67,605

Other Income included in discontinued operations
Gain on sale of assets	`233,277`	-
Net Income (Loss) from Discontinued Operations	`$201,956`	`$(25,325)`
Net Income (Loss) per share from discontinued operations basic and diluted	`$0.02`	`$(0.00)`

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Cash Flows from Discontinued Operations

	March 31,2018	March 31, 2017
Net cash used in operating activities	`(5,598)`		`(19,814)`
Net cash provided by investing activities	`218,153`		`-`
Net cash used in financing activities	`(116,592)`		`(9,192)`
Net cash provided by (used in) discontinued operations	`95,963`		`(29,006)`

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Item 2. Management's 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 2017 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, 2017 (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.

Overview

We are an integrated communications provider. Through our subsidiaries, we provide high quality, reliable and scalable Internet access, web hosting, equipment co-location, customized live help desk outsourcing services, group text and voice message delivery services, traditional telephone services as well as advanced voice and data solutions.

References to us in this Report include our subsidiaries: FullNet, Inc. (“FullNet”), FullTel, Inc. (“FullTel”), and FullWeb, Inc. (“FullWeb”). 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.

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; and traditional telephone services as well as advanced voice and data solutions. At December 31, 2017 FullTel provided us with local telephone access in approximately 232 cities.

In response to changes in the telecommunications market and deterioration in our ability to effectively compete, we made the decision in the fourth quarter of 2017, to affect an orderly exit from the CLEC business. We were in negotiations with a potential buyer at December 31, 2017, which buyer subsequently purchased substantially all of FullTel’s operating assets pursuant to an asset purchase agreement which was executed and closed on February 1, 2018.

Through CallMultiplier, our wholly owned subsidiary, we offer a comprehensive cloud-based solution to consumers and businesses for automated group voice and text 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.

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Results of Operations

The following table, which includes both continuing and discontinued operations (see Note 8 – Discontinued Operations of the financial statement appearing elsewhere in this Report), sets forth certain statement of operations data as a percentage of revenues for the three months ended March 31, 2018 and 2017:

Three Months Ended

March 31, 2018

March 31, 2017

Amount

Percent

Amount

Percent

Revenues:

Access service revenues

10,206

2.0

11,859

2.5

Co-location and other revenues

496,854

98.0

453,724

97.5

Total revenues

507,060

100.0

465,583

100.0

Cost of access service revenues

2,527

0.5

2,429

0.5

Cost of co-location and other revenues

46,309

9.1

33,988

7.3

Selling, general and administrative expenses

550,357

108.5

393,125

84.4

Depreciation and amortization

4,389

0.9

4,773

1.0

Total operating costs and expenses

603,582

119.0

434,315

93.2

Income (loss) from operations

(96,522)

(19.0)

31,268

6.7

Other income

6,000

1.2

-

Interest expense

(330)

(0.1)

(754)

(0.2)

Income tax expense

(4,666)

(0.9)

-

Net income (loss) from continuing operations

(95,518)

(18.8)

30,514

6.6

Net income (loss) from discontinued operations

201,956

39.8

(25,325)

(5.4)

Net income

106,438

21.0

5,189

1.1

Preferred stock dividends

(6,724)

(1.3)

(6,724)

(1.4)

Net income available to common stockholders

99,714

19.7

(1,535)

(0.3)

Three Months Ended March 31, 2018 (the “2018 1st Quarter”) Compared to Three Months Ended March 31, 2017 (the “2017 1st Quarter”)

Revenues

Access service revenues decreased $1,653 or 13.9% to $10,206 for the 2018 1st Quarter from $11,859 for the same period in 2017 primarily due to a decline in the number of customers.

Co-location and other revenues increased $43,130 or 9.5% to $496,854 for the 2018 1st Quarter from $453,724 for the same period in 2017. 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 increased $98 or 4.0% to $2,527 for the 2018 1st Quarter from $2,429 for the same period in 2017. This increase was primarily due to increases in costs of servicing access customers. Cost of access service revenues as a percentage of access service revenues remained unchanged at .5% during the 2018 1st Quarter from the same period in 2017.

Cost of co-location and other revenues increased $12,321 or 36.3% to $46,309 for the 2018 1st Quarter from $33,988 for the same period in 2017. This increase was primarily related to an increase in advertising costs. Cost of co-location and other revenues as a percentage of co-location and other revenues increased to 9.1% during the 2018 1st Quarter, compared to 7.3% during the same period in 2017.

Selling, general and administrative expenses increased $157,232 or 40.0% to $550,357 for the 2018 1st Quarter compared to $393,125 for the same period in 2017. This increase was primarily related to increases in employee costs, advertising,

- 14 -

professional services, rent expense, and credit card fees of $128,463, $21,634, $2,929, $2,452, and $2,005, respectively. Selling, general and administrative expenses as a percentage of total revenues increased to 108.5 during the 2018 1st Quarter from 84.4% during the same period in 2017.

Depreciation and amortization expense decreased $384 or 8.0% to $4,389 for the 2018 1st Quarter compared to $4,773 for the same period in 2017. This decrease was primarily related to several assets reaching full depreciation.

Interest Expense

Interest expense decreased $424 or 56.2% to $330 for the 2018 1st Quarter compared to $754 for the same period in 2017. This decrease was primarily related to the payoff of the related-party note payable made during the 2018 1st Quarter.

Liquidity and Capital Resources

As of March 31, 2018, we had $143,423 in cash and $1,122,648 in current liabilities, including $435,279 of deferred revenues that will not require settlement in cash.

At March 31, 2018 and December 31, 2017, we had working capital deficits of $949,685 and $1,014,382, 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 March 31, 2018, of the $41,110 we owed to our trade creditors $29,072 was past due. We have no formal agreements regarding payment of these amounts.

Cash flow for the three-month periods ended March 31, 2018 and 2017 consist of the following.

	For the Three-Months Periods Ended March 31,
	2018	2017
Net cash flows provided by operating activities	`$25,286`	`$49,187`
Net cash flows used in investing activities	`(5,916)`	`(8,466)`
Net cash flows used in financing activities	`(1,309)`	`(1,648)`

Cash used for the purchase of property and equipment was $5,916 and $766, respectively, for the three months ended March 31, 2018 and 2017.

No intangible assets were purchased in the three months ended March 31, 2018, and cash used for the purchase of intangible assets was $7,700 in the three months ended March 31, 2017.

Cash used for principal payments on notes payable was $1,309 and $1,648, respectively, for the three months ended March 31, 2018 and 2017.

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.

- 15 -

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 9, 2018, the Company’s 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, 2017. We have never made an annual dividend payment on our Series A convertible preferred stock.

Financing Activities

We had 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. The note was paid in full on February 1, 2018 in the amount of $116,592.

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 March 31, 2018, the outstanding principal and accrued interest of the secured convertible promissory note was $31,933.

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.

- 16 -

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 SEC’s 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, who is also our principal financial officer, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2018 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 SEC’s 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.

- 17 -

PART II—OTHER 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

None.

Item 5. Other Information

During the three months ended March 31, 2018 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 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)	#

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

	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).	#

- 18 -


Exhibit
Number			Exhibit

	4.4		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 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	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).			#

	10.5	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 September 30, 2000 and incorporated herein by reference).			#

	10.6	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).			#

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

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

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

	10.10	Employment Agreement with Jason Ayers dated January 1, 2011			#

	10.11	Employment Agreement with Timothy J. Kilkenny dated July 6, 2011			#

	10.12	Employment Agreement with Roger P. Baresel dated July 6, 2011			#

	10.13	Employment Agreement with Jason Ayers dated July 6, 2011			#

	10.14	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			#

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

- 19 -


Exhibit
Number			Exhibit

	10.16		Form of Exchange Offer Acceptance Agreement

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

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

	10.19		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 Company’s 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

	10.20		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.	#

	10.21		Form 8K dated December 7, 2016 reporting the sale of 2,752,848 restricted shares of common stock pursuant to the exercise of previously issued and outstanding common stock purchase options held by various officers and directors of the Company and their family members.	#

	22.1		Subsidiaries of the Registrant	#

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

	32.1		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.

- 20 -

EX-32.1 3 fn_ex32z1.htm CERTIFICATION Certification

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: May 15,2018	By:	/s/ ROGER P. BARESEL
		Roger P. Baresel
		Chief Executive Officer and Chief Financial Officer

- 21 -

EX-31.1 2 fn_ex31z1.htm CERTIFICATION Certification

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 March 31, 2018 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 registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

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 and Chief Financial and Accounting 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 March 31, 2018 (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: May 15, 2018	/s/ Roger P. Baresel,
	Chief Executive Officer and Chief Financial Officer

Recent Accounting Pronouncement In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09 (Topic 606) “Revenue from Contracts with Customers.” Topic 606 supersedes the revenue recognition requirements in Accounting Standards Codification Topic 605, “revenue Recognition”, and requires entities to recognize revenue when they transfer control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. We adopted Topic 606 as of January 1, 2018. The adoption of Topic 606 did not have any impact to our consolidated financial statements, including the presentation of revenues in our Consolidated Statements of Income.

0 987102 0 1228407 0 202493

2. GOING CONCERN AND MANAGEMENT'S PLANS At March 31, 2018 current liabilities exceeded current assets by $949,685. 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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.

949685

3. CONVERTIBLE NOTES PAYABLE RELATED PARTY At December 31, 2017 the Company had a secured convertible promissory note from a shareholder with a balance of $33,242. 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 three months ended March 31, 2018, the Company made principal and interest payments totaling $1,801, of which $1,309 applied to the principal. The secured convertible promissory note had a balance of $31,933 at March 31, 2018 of which $7,203 is short-term and $24,730 is long-term.

a secured convertible promissory note from a shareholder

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

5. SERIES A CONVERTIBLE PREFERRED STOCK On March 9, 2018 the Company’s board of directors made the determination that it was in the best interest of the Company and its stockholders to conserve the Company’s working capital at this time and not make the annual dividend payment for the year ending December 31, 2017, 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 months ended March 31, 2018 was $6,724.

6724

6. PROPERTY AND EQUIPMENT During the three months ended March 31, 2018, 5,916 was paid for property and equipment and $2,180 was recorded as depreciation expense. During the three months ended March 31, 2017, $766 was paid for property and equipment and $2,432 was recorded as depreciation expense.

7. INTANGIBLE ASSET During the three months ended March 31, 2018, $2,209 was recorded as amortization expense. During the three months ended March 31, 2017, $7,700 was paid for an intangible asset and $2,341 was recorded as amortization expense.

NOTE 8 NOTE 8 NOTE 8 See Note 8 See Note 8 Note 8 XML 10 R1.htm IDEA: XBRL DOCUMENT

Document and Entity Information - $ / shares		3 Months Ended
Document and Entity Information - $ / shares	May 15, 2018	Mar. 31, 2018
Details
Registrant Name		FULLNET COMMUNICATIONS INC.
Registrant CIK		0001092570
SEC Form		10-Q
Period End date		Mar. 31, 2018
Fiscal Year End		--12-31
Trading Symbol		fulo
Tax Identification Number (TIN)		731473361
Number of common stock shares outstanding	11,871,009
Filer Category		Smaller Reporting Company
Current with reporting		Yes
Voluntary filer		No
Well-known Seasoned Issuer		No
Amendment Flag		false
Document Fiscal Year Focus		2018
Document Fiscal Period Focus		Q1
Entity Incorporation, State Country Name		OKLAHOMA
Entity Address, Address Line One		201 Robert S. Kerr Avenue, Suite 210
Entity Address, City or Town		Oklahoma City
Entity Address, State or Province		Oklahoma
Entity Address, Postal Zip Code		73102
City Area Code		405
Local Phone Number		236-8200
Entity Listing, Par Value Per Share	$ 0.00001

XML 11 R2.htm IDEA: XBRL DOCUMENT

CONDENSED CONSOLIDATED BALANCE SHEETS (March 31, 2018 unaudited) - USD ($)

CURRENT ASSETS

Accounts receivable, net

673

8,854

Prepaid expenses and other current assets

PROPERTY AND EQUIPMENT, net

43,184

39,448

OTHER ASSETS AND INTANGIBLE ASSETS

19,604

21,813

ASSETS OF DISCONTINUED OPERATIONS, net (NOTE 8)

Accounts payable, related party

CURRENT LIABILITIES

Accounts payable

41,110

37,371

516

7,982

Accrued and other liabilities

638,540

610,107

Convertible notes payable, related party - current portion

Total current liabilities

1,122,648

1,058,745

CONVERTIBLE NOTES PAYABLE, related party - less current portion

24,730

27,888

Liabilities of Discontinued Operations

^[2]

STOCKHOLDERS' DEFICIT

Preferred Stock, Value

Additional paid-in capital

Total stockholders' deficit

(970,103)

(1,145,478)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$ 259,530

$ 134,967

[1]	NOTE 8
[2]	NOTE 8

XML 12 R3.htm IDEA: XBRL DOCUMENT

CONDENSED CONSOLIDATED BALANCE SHEETS (March 31, 2018 unaudited) - Parenthetical - $ / shares	Mar. 31, 2018	Dec. 31, 2017
Details
Preferred Stock, Par or Stated Value Per Share	$ 0.001	$ 0.001
Preferred Stock, Shares Authorized	10,000,000	10,000,000
Preferred Stock, Shares Issued	987,102	987,102
Preferred Stock, Shares Outstanding	987,102	987,102
Common Stock, Par or Stated Value Per Share	$ 0.00001	$ 0.00001
Common Stock, Shares Authorized	40,000,000	40,000,000
Common Stock, Shares, Issued	11,871,009	11,871,009
Common Stock, Shares, Outstanding	11,871,009	11,871,009

XML 13 R4.htm IDEA: XBRL DOCUMENT

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($)

Co-location and other revenues

Mar. 31, 2017

REVENUES

Access service revenues

$ 10,206

$ 11,859

OPERATING COSTS AND EXPENSES

Cost of access service revenues

2,527

2,429

Cost of co-location and other revenues

46,309

33,988

Selling, general and administrative expenses

550,357

393,125

Depreciation and amortization

4,389

4,773

Total operating costs and expenses

603,582

434,315

INCOME (LOSS) FROM OPERATIONS

Net income (loss) from continuing operations

(95,518)

30,514

Gain from sale of discontinued asset

233,277

Net Income (Loss) from Discontinued Operations

Net Income (Loss) Attributable to Parent

(31,321)

(25,325)

106,438

5,189

Preferred stock dividends

(6,724)

Net income (loss) available to common stockholders

$ 99,714

$ (1,535)

Net income (loss) per share:

Continuing operations - basic

$ (0.01)

$ 0.00

Continuing operations - diluted

(0.01)

0.00

Discontinued operations - basic

^[2]

Discontinued operations - diluted

^[3]

Net Income - basic and diluted

$ 0.01

$ (0.00)

Weighted average common shares outstanding:

Weighted average shares and share equivalents outstanding - basic

Weighted average shares and share equivalents outstanding - diluted

XML 14 R5.htm IDEA: XBRL DOCUMENT

14,289,011

[1]	NOTE 8
[2]	See Note 8
[3]	Note 8

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT (UNAUDITED) - 3 months ended Mar. 31, 2018 - USD ($)	Common Stock	Preferred Stock	Additional Paid-in Capital	Retained Earnings	Total
Equity Balance, Starting at Dec. 31, 2017	$ 119	$ 618,675	$ 8,640,769	$ (10,405,041)	$ (1,145,478)
Shares Outstanding, Starting at Dec. 31, 2017	11,871,009	987,102
Stock Granted, Value, Share-based Compensation, Net of Forfeitures	$ 0	$ 0	68,937	0	68,937
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures	0	0
Amortization of increasing dividend rate preferred stock discount	$ 0	$ 6,724	(6,724)	0	0
Net Income (Loss)	0	0	0	106,438	106,438
Equity Balance, Ending at Mar. 31, 2018	$ 119	$ 625,399	$ 8,702,982	$ (10,298,603)	$ (970,103)
Shares Outstanding, Ending at Mar. 31, 2018	11,871,009	987,102

XML 15 R6.htm IDEA: XBRL DOCUMENT

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($)

CASH FLOWS FROM OPERATING ACTIVITIES

Mar. 31, 2017

Net income (loss)

$ 106,438

$ 5,189

(Income) loss from discontinued operations

Adjustments to reconcile net income (loss) to net cash provided by operating activities

(201,956)

25,325

Depreciation and amortization

4,389

4,773

Stock options compensation

68,937

1,651

Provision for uncollectible accounts receivable

110

238

Increase (Decrease) in Operating Assets

Accounts receivable

8,071

378

Prepaid expenses and other current assets

(22,757)

(19,019)

Increase (Decrease) in Operating Liabilities

Accounts payable

3,739

(17,171)

Accounts payable - related party

(7,466)

(13,935)

Accrued and other liabilities

Net cash provided by operating activities

25,286

49,187

CASH FLOWS FROM INVESTING ACTIVITIES

Cash paid for property and equipment

(5,916)

(766)

Cash paid for intangible asset

(7,700)

Net cash used in investing activities

(5,916)

(8,466)

CASH FLOWS FROM FINANCING ACTIVITIES

Principal payments on borrowings under notes payable - related party

(1,309)

(1,648)

Net cash used in financing activities

(1,309)

(1,648)

DISCONTINUED OPERATIONS

Net cash used in operating activities

(5,598)

(19,814)

Net cash provided by investing activities

218,153

Net cash used in financing activities

(116,592)

(9,192)

Net cash provided by (used in) discontinued operations

95,963

(29,006)

NET INCREASE (DECREASE) IN CASH - CONTINUING OPERATIONS

114,024

10,067

Cash and Cash Equivalents, at Carrying Value, Beginning Balance

29,399

19,383

Cash and Cash Equivalents, at Carrying Value, Ending Balance

143,423

29,450

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid for income tax

4,666

Cash paid for interest - continuing operations

492

754

Cash paid for interest - discontinued operations

4,010

NON-CASH INVESTING AND FINANCING ACTIVITIES

Intangible asset purchased on account

8,300

Amortization of increasing dividend rate preferred stock discount

$ 6,724

[1]	See Note 8

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1. UNAUDITED INTERIM FINANCIAL STATEMENTS

1. UNAUDITED INTERIM FINANCIAL STATEMENTS

Notes

1. UNAUDITED INTERIM FINANCIAL STATEMENTS

Certain reclassifications have been made to prior period balances to conform with the presentation for the current period. These reclassifications did not impact the net income (loss).

Recent Accounting Pronouncement

Income (Loss) Per Share

Schedule of Income (Loss) Per Share
	Three Months Ended
	March 31, 2018	March 31, 2017
Net income (loss):
Income (loss) from continuing operations	`$(95,518)`	`$30,514`
Income (loss) from discontinued operations - See Note 8	`201,956`	`(25,325)`
Net income	`106,438`	`5,189`
Preferred stock dividends	`(6,724)`	`(6,724)`
Net income (loss) available to common shareholders	`99,714`	`(1,535)`

Basic income (loss) per share:
Weighted average common shares outstanding used in income (loss) per share computation	`11,871,009`	`11,871,009`

Basic income (loss) per share:
Continuing operations	`(0.01)`	`0.00`
Discontinued operations – See Note 8	`0.02`	`(0.00)`
Basic income (loss) per share	`0.01`	`(0.00)`

Diluted income (loss) per share:
Shares used in diluted income (loss) per share	`11,871,009`	`14,289,011`

Diluted income (loss) per share
Continuing operations	`(0.01)`	`0.00`
Discontinued operations – See Note 8	`0.02`	`(0.00)`
Diluted income (loss) per share	`0.01`	`(0.00)`

Computation of shares used in income (loss) per share:
Weighted average shares and share equivalents outstanding - basic	`11,871,009`	`11,871,009`
Effect of preferred stock	`-`	`987,102`
Effect of dilutive stock options	`-`	`1,228,407`
Effect of dilutive warrants	`-`	`202,493`
Weighted average shares and share equivalents outstanding – diluted	`11,871,009`	`14,289,011`

Schedule of Anti-dilutive Securities Excluded
	Three Months Ended
	March 31, 2018	March 31, 2017
Preferred stock	`987,102`	-
Stock options	`4,120,834`	`36,000`
Warrants	`250,000`	-
Convertible promissory notes	`31,933`	`172,411`
Total anti-dilutive securities excluded	`5,389,869`	`208,411`

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2. GOING CONCERN AND MANAGEMENT'S PLANS

2. GOING CONCERN AND MANAGEMENT'S PLANS

Notes

2. GOING CONCERN AND MANAGEMENT'S PLANS

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3. CONVERTIBLE NOTES PAYABLE RELATED PARTY

3. CONVERTIBLE NOTES PAYABLE RELATED PARTY

Notes

3. CONVERTIBLE NOTES PAYABLE RELATED PARTY

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4. STOCK BASED COMPENSATION

4. STOCK BASED COMPENSATION

Notes

Schedule of Employee Stock Option Activity
	Options	Weighted average exercise price	Weighted average remaining contractual life (yrs)	Aggregate Intrinsic value
Options outstanding, December 31, 2017	2,110,834	$.006	8.18

Options exercisable, December 31, 2017	626,834	$0.003	6.03	$ 22,902

Options issued during the period	2,010,000	0.040

Options outstanding, March 31, 2018	4,120,834	$0.023	8.88

Options exercisable, March 31, 2018	2,822,167	$0.027	8.81	$ 26,678

The Black-Scholes option pricing model was used with the following weighted-average assumptions for options granted during the three months ended March 31, 2018:

		2018
Risk free interest rate		2.65%
Expected lives (in years)		5
Expected volatility		178%
Dividend yield		0%

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5. SERIES A CONVERTIBLE PREFERRED STOCK

5. SERIES A CONVERTIBLE PREFERRED STOCK

Notes

5. SERIES A CONVERTIBLE PREFERRED STOCK

The amortization of the increasing dividend rate preferred stock discount for the three months ended March 31, 2018 was $6,724.

XML 21 R12.htm IDEA: XBRL DOCUMENT

6. PROPERTY AND EQUIPMENT

6. PROPERTY AND EQUIPMENT

Notes

6. PROPERTY AND EQUIPMENT

During the three months ended March 31, 2018, 5,916 was paid for property and equipment and $2,180 was recorded as depreciation expense.

During the three months ended March 31, 2017, $766 was paid for property and equipment and $2,432 was recorded as depreciation expense.

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7. INTANGIBLE ASSET

XML 23 R14.htm IDEA: XBRL DOCUMENT

Notes

7. INTANGIBLE ASSET

7. INTANGIBLE ASSET

During the three months ended March 31, 2018, $2,209 was recorded as amortization expense.

During the three months ended March 31, 2017, $7,700 was paid for an intangible asset and $2,341 was recorded as amortization expense.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References + Details

8. DISCONTINUED OPERATIONS

8. DISCONTINUED OPERATIONS

Notes

8. DISCONTINUED OPERATIONS


Consideration:
Cash	$	246,500
Assumption of deferred revenue		8,366
Waived service obligation for February 2018		`10,006`
Total consideration	$	`264,872`

Total assets sold:
Customer contracts	$	`-`
Fiber innerduct		`3.248`
Fiber strands		`-`
Customer CPE		`-`
Total assets		`3,248`
Transactional costs		`28,347`
Total basis	$	`31,595`
Net gain	$	`233,277`

Assets and Liabilities of Discontinued Operations

	March 31, 2018	December 31, 2017
Carrying amounts of assets included in discontinued operations
Cash	`$2,007`	`$1,801`
Prepaid expenses and other current assets	`2,467`	`2,671`
Property and equipment, net	`19,305`	`24,871`
Total Assets of Discontinued Operations	`$23,779`	`$29,343`

Carrying amounts of liabilities included in discontinued operations
Accounts payable	`$59,312`	`$57,342`
Accrued and other liabilities	`22,943`	`19,878`
Convertible notes payable, related party – current portion	`-`	`116,592`
Convertible notes payable, related party – less current portion	`-`	`-`
Total Liabilities of Discontinued Operations	`$82,255`	`$193,812`

Operating Results of Discontinued Operations

	March 31, 2018	March 31, 2017
Revenues included in discontinued operations
Total colocation and other revenues	`$28,091`	$ 42,280

Operating costs and expenses included in discontinued operations
Cost of services	`$53,886`	$ 56,396
Selling, general and administrative expenses	`3,157`	4,662
Depreciation and amortization	`2,318`	2,537
Interest expense	`51`	4,010
Total operating costs and expenses included in discontinued operations	`59,412`	67,605

Other Income included in discontinued operations
Gain on sale of assets	`233,277`	-
Net Income (Loss) from Discontinued Operations	`$201,956`	`$(25,325)`
Net Income (Loss) per share from discontinued operations basic and diluted	`$0.02`	`$(0.00)`

Cash Flows from Discontinued Operations

	March 31,2018	March 31, 2017
Net cash used in operating activities	`(5,598)`		`(19,814)`
Net cash provided by investing activities	`218,153`		`-`
Net cash used in financing activities	`(116,592)`		`(9,192)`
Net cash provided by (used in) discontinued operations	`95,963`		`(29,006)`

XML 24 R15.htm IDEA: XBRL DOCUMENT

1. UNAUDITED INTERIM FINANCIAL STATEMENTS: Recent Accounting Pronouncement (Policies)

Recent Accounting Pronouncement

Policies

XML 25 R16.htm IDEA: XBRL DOCUMENT

1. UNAUDITED INTERIM FINANCIAL STATEMENTS: Income (Loss) Per Share (Policies)

XML 26 R17.htm IDEA: XBRL DOCUMENT

Policies

Income (Loss) Per Share

Schedule of Income (Loss) Per Share
	Three Months Ended
	March 31, 2018	March 31, 2017
Net income (loss):
Income (loss) from continuing operations	`$(95,518)`	`$30,514`
Income (loss) from discontinued operations - See Note 8	`201,956`	`(25,325)`
Net income	`106,438`	`5,189`
Preferred stock dividends	`(6,724)`	`(6,724)`
Net income (loss) available to common shareholders	`99,714`	`(1,535)`

Basic income (loss) per share:
Weighted average common shares outstanding used in income (loss) per share computation	`11,871,009`	`11,871,009`

Basic income (loss) per share:
Continuing operations	`(0.01)`	`0.00`
Discontinued operations – See Note 8	`0.02`	`(0.00)`
Basic income (loss) per share	`0.01`	`(0.00)`

Diluted income (loss) per share:
Shares used in diluted income (loss) per share	`11,871,009`	`14,289,011`

Diluted income (loss) per share
Continuing operations	`(0.01)`	`0.00`
Discontinued operations – See Note 8	`0.02`	`(0.00)`
Diluted income (loss) per share	`0.01`	`(0.00)`

Computation of shares used in income (loss) per share:
Weighted average shares and share equivalents outstanding - basic	`11,871,009`	`11,871,009`
Effect of preferred stock	`-`	`987,102`
Effect of dilutive stock options	`-`	`1,228,407`
Effect of dilutive warrants	`-`	`202,493`
Weighted average shares and share equivalents outstanding – diluted	`11,871,009`	`14,289,011`

Schedule of Anti-dilutive Securities Excluded
	Three Months Ended
	March 31, 2018	March 31, 2017
Preferred stock	`987,102`	-
Stock options	`4,120,834`	`36,000`
Warrants	`250,000`	-
Convertible promissory notes	`31,933`	`172,411`
Total anti-dilutive securities excluded	`5,389,869`	`208,411`

1. UNAUDITED INTERIM FINANCIAL STATEMENTS: Income (Loss) Per Share: Schedule of Earnings Per Share, Basic and Diluted (Tables)

Schedule of Earnings Per Share, Basic and Diluted

Schedule of Income (Loss) Per Share
	Three Months Ended
	March 31, 2018	March 31, 2017
Net income (loss):
Income (loss) from continuing operations	`$(95,518)`	`$30,514`
Income (loss) from discontinued operations - See Note 8	`201,956`	`(25,325)`
Net income	`106,438`	`5,189`
Preferred stock dividends	`(6,724)`	`(6,724)`
Net income (loss) available to common shareholders	`99,714`	`(1,535)`

Basic income (loss) per share:
Weighted average common shares outstanding used in income (loss) per share computation	`11,871,009`	`11,871,009`

Basic income (loss) per share:
Continuing operations	`(0.01)`	`0.00`
Discontinued operations – See Note 8	`0.02`	`(0.00)`
Basic income (loss) per share	`0.01`	`(0.00)`

Diluted income (loss) per share:
Shares used in diluted income (loss) per share	`11,871,009`	`14,289,011`

Diluted income (loss) per share
Continuing operations	`(0.01)`	`0.00`
Discontinued operations – See Note 8	`0.02`	`(0.00)`
Diluted income (loss) per share	`0.01`	`(0.00)`

Computation of shares used in income (loss) per share:
Weighted average shares and share equivalents outstanding - basic	`11,871,009`	`11,871,009`
Effect of preferred stock	`-`	`987,102`
Effect of dilutive stock options	`-`	`1,228,407`
Effect of dilutive warrants	`-`	`202,493`
Weighted average shares and share equivalents outstanding – diluted	`11,871,009`	`14,289,011`

XML 27 R18.htm IDEA: XBRL DOCUMENT

1. UNAUDITED INTERIM FINANCIAL STATEMENTS: Income (Loss) Per Share: Schedule of Anti-dilutive Securities Excluded (Tables)

Schedule of Anti-dilutive Securities Excluded

Schedule of Anti-dilutive Securities Excluded
	Three Months Ended
	March 31, 2018	March 31, 2017
Preferred stock	`987,102`	-
Stock options	`4,120,834`	`36,000`
Warrants	`250,000`	-
Convertible promissory notes	`31,933`	`172,411`
Total anti-dilutive securities excluded	`5,389,869`	`208,411`

XML 28 R19.htm IDEA: XBRL DOCUMENT

4. STOCK BASED COMPENSATION: Schedule of Employee Stock Option Activity (Tables)

Schedule of Employee Stock Option Activity

Schedule of Employee Stock Option Activity
	Options	Weighted average exercise price	Weighted average remaining contractual life (yrs)	Aggregate Intrinsic value
Options outstanding, December 31, 2017	2,110,834	$.006	8.18

Options exercisable, December 31, 2017	626,834	$0.003	6.03	$ 22,902

Options issued during the period	2,010,000	0.040

Options outstanding, March 31, 2018	4,120,834	$0.023	8.88

Options exercisable, March 31, 2018	2,822,167	$0.027	8.81	$ 26,678

XML 29 R20.htm IDEA: XBRL DOCUMENT

4. STOCK BASED COMPENSATION: Fair Value Assumptions for options granted (Tables)

Fair Value Assumptions for options granted

		2018
Risk free interest rate		2.65%
Expected lives (in years)		5
Expected volatility		178%
Dividend yield		0%

- Definition

The entire disclosure for a company's election to apply the fair value option for measurement and reporting of eligible financial assets and liabilities (as defined), as well as certain other eligible items (as defined) included in the statement of financial position, whether such option is elected for a single eligible item or a group of similar eligible items and is in addition to other disclosures concerning fair value which the company may be required to provide. Such disclosure might be expected to include: (1) for items included in the statement of financial position: (a) the reasons for electing a fair value option for each eligible item or group of similar eligible items; (b) if the fair value option is elected for some but not all eligible items within a group of similar eligible items: (i) a description of those similar items and the reasons for partial election and (ii) information of how the group of similar items relates to individual balance sheet line items; (c) for each line item in the statement of financial position that includes an item or items for which the fair value option has been elected: (i) information of how each line item in the statement of financial position relates to major categories of assets and liabilities presented in accordance with other fair value disclosures and (ii) the aggregate carrying amount of ineligible items included in each line item in the balance sheet, if any; (d) the difference between the aggregate fair value and the aggregate unpaid principal balance (assuming contractual principal amounts and fair value option elected) of: (i) loans and long-term receivables (other than securities otherwise reported at fair value) and (ii) long-term debt instruments; (e) for loans held as assets for which the fair value option has been elected: (i) the aggregate fair value of loans that are 90 days or more past due, (ii) if the policy is to recognize interest income separately from other changes in fair value, the aggregate fair value of loans in nonaccrual status, and (iii) the difference between the aggregate fair value and the aggregate unpaid principal balance for loans that are 90 days or more past due, in nonaccrual status, or both; (f) for investments that would have been accounted for under the equity method if the entity had not chosen to apply the fair value option, the information required for such investments, if material either individually or in the aggregate; (2) for items included in the income statement: (a) the amounts of gains and losses from fair value changes included in earnings and in which line in the income statement those gains and losses are reported whether or not combined with gains and losses from items required to be accounted for at fair value; (b) a description of how interest and dividends are measured and where they are reported in the income statement; (c) for loans and other receivables held as assets: (i) the estimated amount of gains or losses included in earnings attributable to changes in instrument-specific credit risk and (ii) how the gains or losses attributable to changes in instrument-specific credit risk were determined; (d) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk: (i) the estimated amount of gains and losses from fair value changes included in earnings that are attributable to changes in the instrument-specific credit risk, (ii) qualitative information about the reasons for those changes, and (iii) how the gains and losses attributable to changes in instrument-specific credit risk were determined; and (3) certain other disclosures as required or determined to be provided.

+ References + Details

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8. DISCONTINUED OPERATIONS: Schedule of Assets and Consideration - Discontinued Operations (Tables)

Schedule of Assets and Consideration - Discontinued Operations


Consideration:
Cash	$	246,500
Assumption of deferred revenue		8,366
Waived service obligation for February 2018		`10,006`
Total consideration	$	`264,872`

Total assets sold:
Customer contracts	$	`-`
Fiber innerduct		`3.248`
Fiber strands		`-`
Customer CPE		`-`
Total assets		`3,248`
Transactional costs		`28,347`
Total basis	$	`31,595`
Net gain	$	`233,277`

XML 31 R22.htm IDEA: XBRL DOCUMENT

8. DISCONTINUED OPERATIONS: Schedule of Assets and Liabilities of Discontinued Operations (Tables)

Schedule of Assets and Liabilities of Discontinued Operations

Assets and Liabilities of Discontinued Operations

	March 31, 2018	December 31, 2017
Carrying amounts of assets included in discontinued operations
Cash	`$2,007`	`$1,801`
Prepaid expenses and other current assets	`2,467`	`2,671`
Property and equipment, net	`19,305`	`24,871`
Total Assets of Discontinued Operations	`$23,779`	`$29,343`

Carrying amounts of liabilities included in discontinued operations
Accounts payable	`$59,312`	`$57,342`
Accrued and other liabilities	`22,943`	`19,878`
Convertible notes payable, related party – current portion	`-`	`116,592`
Convertible notes payable, related party – less current portion	`-`	`-`
Total Liabilities of Discontinued Operations	`$82,255`	`$193,812`

XML 32 R23.htm IDEA: XBRL DOCUMENT

8. DISCONTINUED OPERATIONS: Schedule of Operating Results of Discontinued Operations (Tables)

Schedule of Operating Results of Discontinued Operations

Operating Results of Discontinued Operations

	March 31, 2018	March 31, 2017
Revenues included in discontinued operations
Total colocation and other revenues	`$28,091`	$ 42,280

Operating costs and expenses included in discontinued operations
Cost of services	`$53,886`	$ 56,396
Selling, general and administrative expenses	`3,157`	4,662
Depreciation and amortization	`2,318`	2,537
Interest expense	`51`	4,010
Total operating costs and expenses included in discontinued operations	`59,412`	67,605

Other Income included in discontinued operations
Gain on sale of assets	`233,277`	-
Net Income (Loss) from Discontinued Operations	`$201,956`	`$(25,325)`
Net Income (Loss) per share from discontinued operations basic and diluted	`$0.02`	`$(0.00)`

XML 33 R24.htm IDEA: XBRL DOCUMENT

8. DISCONTINUED OPERATIONS: Schedule of Cash Flows from Discontinued Operations (Tables)

Schedule of Cash Flows from Discontinued Operations

Cash Flows from Discontinued Operations

	March 31,2018	March 31, 2017
Net cash used in operating activities	`(5,598)`		`(19,814)`
Net cash provided by investing activities	`218,153`		`-`
Net cash used in financing activities	`(116,592)`		`(9,192)`
Net cash provided by (used in) discontinued operations	`95,963`		`(29,006)`

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1. UNAUDITED INTERIM FINANCIAL STATEMENTS: Income (Loss) Per Share: Schedule of Earnings Per Share, Basic and Diluted (Details) - USD ($)

Net income (loss) from continuing operations

Mar. 31, 2017

Net income (loss):

$ (95,518)

$ 30,514

Income (loss) from discontinued operations - See Note 8

Net Income (Loss) Attributable to Parent

201,956

(25,325)

106,438

5,189

Preferred stock dividends

(6,724)

Net income (loss) available to common stockholders

$ 99,714

$ (1,535)

Basic income (loss) per share:

Weighted average shares and share equivalents outstanding - basic

Continuing operations - basic

Basic income (loss) per share:

$ (0.01)

$ 0.00

Discontinued operations - basic

^[2]

Basic income (loss) per share

$ 0.01

$ (0.00)

Diluted income (loss) per share:

Shares used in diluted income (loss) per share

Continuing operations - diluted

14,289,011

Diluted income (loss) per share

$ (0.01)

$ 0.00

Discontinued operations - diluted

^[3]

Diluted income (loss) per share

$ 0.01

$ (0.00)

Computation of shares used in income (loss) per share:

Weighted average shares and share equivalents outstanding - basic

Effect of preferred stock

$ 0

$ 987,102

Effect of dilutive stock options

1,228,407

Effect of dilutive warrants

$ 0

$ 202,493

Weighted average shares and share equivalents outstanding - diluted