FullNet Communications (FULO) 10-Q 14 May 15 2015 Q1 Quarterly report Financial data

Document_and_Entity_Informatio

Document and Entity Information	3 Months Ended
	Mar. 31, 2015
Document and Entity Information:
Entity Registrant Name	FULLNET COMMUNICATIONS INC
Document Type	10-Q
Document Period End Date	31-Mar-15
Amendment Flag	FALSE
Entity Central Index Key	1092570
Current Fiscal Year End Date	-19
Entity Common Stock, Shares Outstanding	9,118,161
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	No
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1

CONDENSED_CONSOLIDATED_BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)	Mar. 31, 2015		Dec. 31, 2014
ASSETS
Cash	$677		$14,614
Accounts receivable, net	9,079		12,389
Prepaid expenses and other current assets	20,182		9,377
Total current assets	29,938		36,380
PROPERTY AND EQUIPMENT, net	106,660		109,288
OTHER ASSETS AND INTANGIBLE ASSETS	8,261		8,661
TOTAL ASSETS	144,859		154,329
LIABILITIES AND STOCKHOLDERS' DEFICIT
Accounts payable	212,203		214,917
Accrued and other liabilities	494,823		486,961
Convertible notes payable, related party - current portion	46,811		46,811
Deferred revenue	361,431		354,967
Total current liabilities	1,115,268		1,103,656
CONVERTIBLE NOTES PAYABLE, related party - less current portion	191,501		199,063
Total liabilities	1,306,769		1,302,719
STOCKHOLDERS' DEFICIT
Preferred stock	504,354	[1]	490,905	[1]
Common stock	91	[2]	91	[2]
Additional paid-in capital	8,671,551		8,678,869
Accumulated deficit	-10,337,906		-10,318,255
Total stockholders' deficit	-1,161,910		-1,148,390
TOTAL LIABILITES AND STOCKHOLDERS' DEFICIT	$144,859		$154,329
[1]	$.001 par value; authorized, 10,000,000 shares; Series A convertible issued and outstanding, 987,102 shares
[2]	$.00001 par value; authorized, 40,000,000 shares; issued and outstanding, 9,118,161 shares

CONDENSED_CONSOLIDATED_BALANCE1

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Statement of Financial Position Parenthetical
Preferred stock, par value	$0.00	$0.00
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock Series A convertible, shares outstanding	987,102	987,102
Common stock, par value	$0.00	$0.00
Common stock, shares authorized	40,000,000	40,000,000
Common stock, shares outstanding	9,118,161	9,118,161

CONDENSED_CONSOLIDATED_STATEME

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Income Statement
Access service revenues	$20,283	$23,789
Co-location and other revenues	428,873	399,988
Total revenues	449,156	423,777
Cost of access service revenues	21,493	27,214
Cost of co-location and other revenues	72,782	85,417
Selling, general and administrative expenses	362,192	345,694
Depreciation and amortization	8,199	7,915
Total operating costs and expenses	464,666	466,240
LOSS FROM OPERATIONS	-15,510	-42,463
INTEREST EXPENSE	-4,141	-4,095
NET LOSS	-19,651	-46,558
Preferred stock dividends	-13,449	-15,131
Net loss available to common stockholders	($33,100)	($61,689)
Net loss per common share - basic and diluted	$0	($0.01)
Weighted average common shares outstanding - basic and diluted	9,118,161	9,118,161

CONDENSED_CONSOLIDATED_STATEME1

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (USD $)	Common Stock	Preferred Stock	Additional Paid In Capital	Accumulated Deficit	Total
Stockholders' deficit at Dec. 31, 2014	$91	$490,905	$8,678,869	($10,318,255)	($1,148,390)
Shares outstanding at Dec. 31, 2014	9,118,161	987,102			10,105,263
Stock options compensation			6,131		6,131
Amortization of increasing dividend rate preferred stock discount		13,449	-13,449		13,449
Net loss				-19,651	-19,651
Stockholders' deficit at Mar. 31, 2015	$91	$504,354	$8,671,551	($10,337,906)	($1,161,910)
Shares outstanding at Mar. 31, 2015	9,118,161	987,102			10,105,263

CONDENSED_CONSOLIDATED_STATEME2

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Cash Flow Statement
Net loss	($19,651)	($46,558)
Depreciation and amortization	8,199	7,915
Stock options compensation	6,131	5,692
Provision for uncollectible accounts receivable	1,316	-8,176
Net (increase) decrease in Accounts receivable	1,995	12,579
Net (increase) decrease in Prepaid expenses and other current assets	-10,805	-3,304
Net increase (decrease) in Accounts payable	-2,714	-12,397
Net increase (decrease) in Accrued and other liabilities	7,861	32,179
Net increase (decrease) in Deferred revenue	6,464	50,521
Net cash provided by (used in) operating activities	-1,204	38,451
Purchases of property and equipment	-5,171	-39,086
Net cash used in investing activities	-5,171	-39,086
Principal payments on borrowings under notes payable - related party	-7,562	-6,557
Net cash used in financing activities	-7,562	-6,557
Net decrease in cash	-13,937	-7,192
Cash at beginning of period	14,614	30,072
Cash at end of period	677	22,880
Cash paid for interest	4,141	4,095
Property and equipment purchased on accounts		44,710
Amortization of increasing dividend rate preferred stock discount	$13,449	$15,131

Unaudited_Interim_Financial_St

Unaudited Interim Financial Statements	3 Months Ended
	Mar. 31, 2015
Notes
Unaudited Interim Financial Statements	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, 2014.
	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, 2015.  Certain reclassifications have been made to prior period balances to conform with the presentation for the current period.

Going_Concern_And_Managements_

Going Concern And Management's Plans	3 Months Ended
	Mar. 31, 2015
Notes
Going Concern And Management's Plans	2	GOING CONCERN AND MANAGEMENT’S PLANS
	At March 31, 2015, current liabilities exceed current assets by $1,085,330. 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.

Convertible_Notes_Payable_Rela

Convertible Notes Payable Related Party	3 Months Ended
	Mar. 31, 2015
Notes
Convertible Notes Payable Related Party
	3	CONVERTIBLE NOTES PAYABLE RELATED PARTY
	At December 31, 2014 the Company had a secured convertible promissory note from a shareholder with a balance of $198,363.  The interest rate of this note was 6% through December 31, 2014 and is 7% through December 31, 2015, 8% through December 31, 2016, 8.5% through December 31, 2017, and 9% through May 31, 2018, with fixed monthly payments of $3,301 and matures May 31, 2018, at which time the remaining balance of principal and all accrued interest shall be due and payable.  This convertible promissory note is secured by all tangible and intangible assets of the Company. The note holder has the right to convert the note, in its entirety or in part, into common stock of the Company at the rate of $1.00 per share.  During the three months ended March 31, 2015, the Company made principal and interest payments totaling $9,902.  The secured convertible promissory note had a balance of $191,895 at March 31, 2015 of which $39,611 is short-term and $152,284 is long-term.
	At December 31, 2014 the Company had a secured convertible promissory note from a shareholder with a balance of $47,511.  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, 2015, the Company made principal and interest payments totaling $1,801.  The secured convertible promissory note had a balance of $46,417 at March 31, 2015 of which $7,200 is short-term and $39,217 is long-term.

Stock_Based_Compensation

Stock Based Compensation	3 Months Ended
	Mar. 31, 2015
Notes
Stock Based Compensation
	4		STOCK BASED COMPENSATION
	The following table summarizes the Company’s employee stock option activity for the three months ended March 31, 2015:
		Options		Weighted average	Weighted average remaining contractual life (yrs)	Aggregate intrinsic value
				exercise price
	Options outstanding, December 31, 2014	3,295,382		$       0.029	8.2
	Options exercisable, December 31, 2014	1,933,549		$0.03	7.84	$     50,788
	Options granted during the period	153,000		$0.04
	Options forfeited during the period	(3,500)		$       0.024
	Options outstanding, March 31, 2015	3,444,882		$       0.030	8.04
	Options exercisable, March 31, 2015	1,933,549		$       0.025	7.6	$60,105
	During the three months ended March 31, 2015, 153,000 nonqualified employee stock options were granted with an exercise price of $0.040.  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 $6,032 of which $332 was recognized as stock-based compensation expense for the three months ended March 31, 2015. Of these options 3,000 will vest one-third on each annual anniversary date of the grant and will expire ten years from the date of the grant and 150,000 will vest annually based upon the commissions earned by the employee at the rate of one share of stock for each dollar in commissions earned and will expire ten years from the date of the grant.  During the three months ended March 31, 2015, 3,500 employee stock options were forfeited that were related to options granted in prior years.
	Stock-based compensation expense for the three months ended March 31, 2015 was $6,131.  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, 2015:
	Risk-free interest rate 1.38%
	Expected option life 5 years
	Expected volatility 218%
	Expected dividend yield 0%

Series_A_Convertible_Preferred

Series A Convertible Preferred Stock	3 Months Ended
	Mar. 31, 2015
Notes
Series A Convertible Preferred Stock
	5	SERIES A CONVERTIBLE PREFERRED STOCK
	On March 31, 2015 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, 2014.  As a result, pursuant to the Certificate of Designations, Preferences, and Rights of the Series A Convertible Preferred Stock, each share of the Series A Convertible Preferred Stock shall hereafter be entitled to two votes upon any matter that the holders of the Company’s common stock are entitled to vote.
	The amortization of the increasing dividend rate preferred stock discount for the three months ended March 31, 2015 was $13,449.  The amortization of the increasing dividend rate preferred stock discount for the three months ended March 31, 2014 was $15,131.

Property_And_Equipment

Property And Equipment	3 Months Ended
	Mar. 31, 2015
Notes
Property And Equipment
	6.      PROPERTY AND EQUIPMENT
	During the three months ended March 31, 2015, $5,171 was paid for property and equipment and $7,799 was recorded as depreciation expense.

Subsequent_Events

Subsequent Events	3 Months Ended
	Mar. 31, 2015
Notes
Subsequent Events
	7.      SUBSEQUENT EVENT
	In May 2015, the Company granted 3,000 and 18,000 employee stock options to two employee with an exercise price of $.065. The stock options shall vest one-third each year starting from May 8, 2016 and May 11, 2016, respectively, and shall expire on May 8, 2025 and May 11, 2025, respectively.
	In February 2015, the Company granted 150,000 employee stock options to one employee with an exercise price of $.04. The stock options were to vest annually based upon the commissions earned by the employee at the rate of one share of stock for each dollar in commissions earned and was to expire on February 3, 2025. In May 2015, the Company cancelled 146,000 and vested 4,000 of these stock options.

Fair_Value_Measures_and_Disclo

Fair Value Measures and Disclosures	3 Months Ended
	Mar. 31, 2015
Fair Value Measures and Disclosures:
Fair Value Assumptions, Expected Term, Simplified Method	5 years
Fair Value Assumptions, Expected Volatility Rate	218.00%
Fair Value Assumptions, Expected Dividend Rate	0.00%
Fair Value Assumptions, Risk Free Interest Rate	1.38%

Unaudited_Interim_Financial_St1

Unaudited Interim Financial Statements: Basis of Accounting, Policy (Policies)	3 Months Ended
	Mar. 31, 2015
Policies
Basis of Accounting, Policy	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, 2014.

Stock_Based_Compensation_Stock

Stock Based Compensation: Stock Based Compensation (Policies)	3 Months Ended
	Mar. 31, 2015
Policies
Stock Based Compensation	Stock-based compensation expense for the three months ended March 31, 2015 was $6,131.  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).

Stock_Based_Compensation_Sched

Stock Based Compensation: Schedule of Share-based Compensation, Stock Options, Activity (Tables)	3 Months Ended
	Mar. 31, 2015
Tables/Schedules
Schedule of Share-based Compensation, Stock Options, Activity	The following table summarizes the Company’s employee stock option activity for the three months ended March 31, 2015:
		Options	Weighted average	Weighted average remaining contractual life (yrs)	Aggregate intrinsic value
			exercise price
	Options outstanding, December 31, 2014	3,295,382	$       0.029	8.2
	Options exercisable, December 31, 2014	1,933,549	$0.03	7.84	$     50,788
	Options granted during the period	153,000	$0.04
	Options forfeited during the period	(3,500)	$       0.024
	Options outstanding, March 31, 2015	3,444,882	$       0.030	8.04
	Options exercisable, March 31, 2015	1,933,549	$       0.025	7.6	$60,105

Going_Concern_And_Managements_1

Going Concern And Management's Plans (Details)	3 Months Ended
	Mar. 31, 2015
Details
Going Concern Note	At March 31, 2015, current liabilities exceed current assets by $1,085,330. 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.

Convertible_Notes_Payable_Rela1

Convertible Notes Payable Related Party (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Details
Convertible Debt	$191,895	$198,363
Repayments of Convertible Debt	9,902
Convertible Notes Payable	46,417	47,511
Repayments of Debt	$1,801

Stock_Based_Compensation_Sched1

Stock Based Compensation: Schedule of Share-based Compensation, Stock Options, Activity (Details) (USD $)	0 Months Ended		3 Months Ended	12 Months Ended
	12-May-15	14-May-15	Mar. 31, 2015	Dec. 31, 2014	11-May-15	8-May-15
Details
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Beginning Balance			3,444,882	3,295,382
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price		$0.07	$0.03	$0.03	$0.07	$0.07
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term			8 years 14 days	8 years 2 months 12 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number			1,933,549	1,933,549
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price			$0.03	$0.03
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Remaining Contractual Term			7 years 7 months 6 days	7 years 10 months 2 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Intrinsic Value			$60,105	$50,788
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross			153,000
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price			$0.04
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period	-146,000	-146,000	-3,500
Share-based Compensation Arrangements by Share-based Payment Award, Options, Forfeitures in Period, Weighted Average Exercise Price	$0.04		$0.02

Stock_Based_Compensation_Detai

Stock Based Compensation (Details)	3 Months Ended
	Mar. 31, 2015
Details
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate	1.38%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term, Simplified Method	5
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate	218.00%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate	0.00%

Stock_Based_Compensation_Stock1

Stock Based Compensation: Stock Based Compensation (Details) (USD $)	3 Months Ended
	Mar. 31, 2015
Details
Allocated Share-based Compensation Expense	$6,131

Series_A_Convertible_Preferred1

Series A Convertible Preferred Stock (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Details
Dividends Declared	On March 31, 2015 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, 2014.
Preferred Stock, Voting Rights	each share of the Series A Convertible Preferred Stock shall hereafter be entitled to two votes upon any matter that the holders of the Company’s common stock are entitled to vote.
Amortization of increasing dividend rate preferred stock discount	$13,449	$15,131

Property_And_Equipment_Details

Property And Equipment (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Details
Purchases of property and equipment	$5,171	$39,086
Depreciation	$7,799

Subsequent_Events_Details

Subsequent Events (Details) (USD $)	0 Months Ended				3 Months Ended
	12-May-15	11-May-15	8-May-15	14-May-15	Mar. 31, 2015	12-May-15	11-May-15	8-May-15	Dec. 31, 2014
Details
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures		18,000	3,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price				$0.07	$0.03		$0.07	$0.07	$0.03
Share-based Compensation Arrangements by Share-based Payment Award, Options, Forfeitures in Period, Weighted Average Exercise Price	$0.04				$0.02
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period	146,000			146,000	3,500
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Exercisable, Number				4,000		4,000