Document and Entity Information
Document and Entity Information - Jun. 30, 2015 - shares | Total |
Document and Entity Information: | |
Entity Registrant Name | FULLNET COMMUNICATIONS INC |
Document Type | 10-Q |
Document Period End Date | Jun. 30, 2015 |
Trading Symbol | fulo |
Amendment Flag | false |
Entity Central Index Key | 1,092,570 |
Current Fiscal Year End Date | --12-31 |
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 | 2,015 |
Document Fiscal Period Focus | Q2 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 | |
ASSETS | |||
Cash | $ 15,265 | $ 14,614 | |
Accounts receivable, net | 14,664 | 12,389 | |
Prepaid expenses and other current assets | 15,420 | 9,377 | |
Total current assets | 45,349 | 36,380 | |
PROPERTY AND EQUIPMENT, net | 104,223 | 109,288 | |
OTHER ASSETS AND INTANGIBLE ASSETS | 7,862 | 8,661 | |
TOTAL ASSETS | 157,434 | 154,329 | |
LIABILITIES AND STOCKHOLDERS' DEFICIT | |||
Accounts payable | 232,245 | 214,917 | |
Accrued and other liabilities | 539,050 | 486,961 | |
Convertible notes payable, related party - current portion | 46,811 | 46,811 | |
Deferred revenue | 353,223 | 354,967 | |
Total current liabilities | 1,171,329 | 1,103,656 | |
CONVERTIBLE NOTES PAYABLE, related party - less current portion | 183,809 | 199,063 | |
Total liabilities | 1,355,138 | 1,302,719 | |
STOCKHOLDERS' DEFICIT | |||
Preferred stock | [1] | 517,804 | 490,905 |
Common stock | [2] | 91 | 91 |
Additional paid-in capital | 8,663,820 | 8,678,869 | |
Accumulated deficit | (10,379,419) | (10,318,255) | |
Total stockholders' deficit | (1,197,704) | (1,148,390) | |
TOTAL LIABILITES AND STOCKHOLDERS' DEFICIT | $ 157,434 | $ 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 BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 30, 2015 | Dec. 31, 2014 |
Statement of Financial Position Parenthetical | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
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 | $ 0.00001 | $ 0.00001 |
Common stock, shares authorized | 40,000,000 | 40,000,000 |
Common stock, shares outstanding | 9,118,161 | 9,118,161 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) | 3 Months Ended | 6 Months Ended | 18 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2015 | |
REVENUES | ||||
Access service revenues | $ 19,082 | $ 19,279 | $ 39,365 | $ 43,068 |
Co-location and other revenues | 449,279 | 438,454 | 878,152 | 838,442 |
Total revenues | 468,361 | 457,733 | 917,517 | 881,510 |
OPERATING COSTS AND EXPENSES | ||||
Cost of access service revenues | 21,401 | 22,503 | 42,894 | 49,717 |
Cost of co-location and other revenues | 76,216 | 88,978 | 148,998 | 174,395 |
Selling, general and administrative expenses | 397,256 | 356,300 | 759,448 | 701,994 |
Depreciation and amortization | 10,990 | 10,915 | 19,189 | 18,830 |
Total operating costs and expenses | 505,863 | 478,696 | 970,529 | 944,936 |
LOSS FROM OPERATIONS | (37,502) | (20,963) | (53,012) | (63,426) |
INTEREST EXPENSE | (4,011) | (3,996) | (8,152) | (8,091) |
NET LOSS | (41,513) | (24,959) | (61,164) | (71,517) |
Preferred stock dividends | (13,450) | (15,131) | (26,899) | (30,262) |
Net loss available to common stockholders | $ (54,963) | $ (40,090) | $ (88,063) | $ (101,779) |
Net loss per common share - basic and diluted | $ (0.01) | $ 0 | $ (0.01) | $ (0.01) |
Weighted average common shares outstanding - basic and diluted | 9,118,161 | 9,118,161 | 9,118,161 | 9,118,161 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - 6 months ended Jun. 30, 2015 | Common StockUSD ($)shares | Preferred StockUSD ($)shares | Additional Paid In CapitalUSD ($) | Accumulated DeficitUSD ($) | USD ($)shares |
Stockholders' deficit at Dec. 31, 2014 | $ 91 | $ 490,905 | $ 8,678,869 | $ (10,318,255) | $ (1,148,390) |
Shares outstanding at Dec. 31, 2014 | shares | 9,118,161 | 987,102 | 10,105,263 | ||
Stock options compensation | $ 11,850 | $ 11,850 | |||
Amortization of increasing dividend rate preferred stock discount | 26,899 | (26,899) | 26,899 | ||
Net loss | (61,164) | $ (61,164) | |||
Stockholders' deficit at Jun. 30, 2015 | $ 91 | $ 517,804 | $ 8,663,820 | $ (10,379,419) | $ (1,197,704) |
Shares outstanding at Jun. 30, 2015 | shares | 9,118,161 | 987,102 | 10,105,263 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | 6 Months Ended | |
Jun. 30, 2015USD ($) | Jun. 30, 2014USD ($) | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (61,164) | $ (71,517) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities | ||
Depreciation and amortization | 19,189 | 18,830 |
Stock options compensation | 11,850 | 11,324 |
Provision for uncollectible accounts receivable | 3,168 | (9,938) |
Net (increase) decrease in Accounts receivable | (5,443) | 13,300 |
Net (increase) decrease in Prepaid expenses and other current assets | (6,043) | (5,476) |
Net increase (decrease) in Accounts payable | 17,328 | 11,533 |
Net increase (decrease) in Accrued and other liabilities | 52,089 | 38,765 |
Net increase (decrease) in Deferred revenue | (1,744) | 37,332 |
Net cash provided by (used in) operating activities | 29,230 | 44,153 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchases of property and equipment | (13,325) | (56,266) |
Net cash used in investing activities | (13,325) | (56,266) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Principal payments on borrowings under notes payable - related party | (15,254) | (13,563) |
Net cash used in financing activities | (15,254) | (13,563) |
Net decrease in cash | 651 | (25,676) |
Cash at beginning of period | 14,614 | 30,072 |
Cash at end of period | 15,265 | 4,396 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||
Cash paid for interest | $ 8,152 | 8,091 |
NON-CASH INVESTING AND FINANCING ACTIVITIES | ||
Property and equipment purchased on accounts | $ 38,532 | |
Amortization of increasing dividend rate preferred stock discount | 26,899 | 30,262 |
Unaudited Interim Financial Sta
Unaudited Interim Financial Statements | 6 Months Ended |
Jun. 30, 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. |
Going Concern And Management's
Going Concern And Management's Plans | 6 Months Ended |
Jun. 30, 2015 | |
Notes | |
Going Concern And Management's Plans | 2. GOING CONCERN AND MANAGEMENTS PLANS At June 30, 2015, current liabilities exceed current assets by $1,125,980. The Company does not have a line of credit or credit facility to serve as an additional source of liquidity. Historically the Company has relied on shareholder loans as an additional source of funds. These factors raise substantial doubts about the Companys ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon continued operations of the Company that in turn is dependent upon the Companys ability to meet its financing requirements on a continuing basis, to maintain present financing, to achieve the objectives of its business plan and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence. The Companys business plan includes, among other things, expansion through mergers and acquisitions and the development of its co-location and advanced voice and data solutions. Execution of the Companys business plan will require significant capital to fund capital expenditures, working capital needs and debt service. Current cash balances will not be sufficient to fund the Companys current business plan beyond the next few months. As a consequence, the Company is currently focusing on revenue enhancement and cost cutting opportunities as well as working to sell non-core assets and to extend vendor payment terms. The Company continues to seek additional convertible debt or equity financing as well as the placement of a credit facility to fund the Companys liquidity. There can be no assurance that the Company will be able to obtain additional capital on satisfactory terms, or at all, or on terms that will not dilute the shareholders interests. |
Convertible Notes Payable Relat
Convertible Notes Payable Related Party | 6 Months Ended |
Jun. 30, 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 six months ended June 30, 2015, the Company made principal and interest payments totaling $19,804. The secured convertible promissory note had a balance of $185,313 at June 30, 2015 of which $39,611 is short-term and $145,702 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 six months ended June 30, 2015, the Company made principal and interest payments totaling $3,602. The secured convertible promissory note had a balance of $45,307 at June 30, 2015 of which $7,200 is short-term and $38,107 is long-term. |
Stock Based Compensation
Stock Based Compensation | 6 Months Ended |
Jun. 30, 2015 | |
Notes | |
Stock Based Compensation | 4. STOCK BASED COMPENSATION The following table summarizes the Companys employee stock option activity for the six months ended June 30, 2015: Options Weighted average exercise price Weighted average remaining contractual life (yrs) Aggregate intrinsic value Options outstanding, December 31, 2014 3,295,382 $0.029 8.20 Options exercisable, December 31, 2014 1,933,549 $0.025 7.84 $ 50,788 Options granted during the period 177,000 $0.043 Options expired during the period (3,000) $0.080 Options forfeited during the period (155,500) $0.040 Options outstanding, June 30, 2015 3,313,882 $0.030 7.73 Options exercisable, June 30, 2015 2,051,215 $0.025 7.39 $ 54,328 During the six months ended June 30, 2015, 177,000 nonqualified employee stock options were granted with exercise prices ranging from $0.040 to $0.065 and 149,000 of those options were forfeited. The options were valued using Black-Scholes option pricing model on the respective date of issuance and the fair value of the shares was determined to be $7,524 of which $239 was recognized as stock-based compensation expense for the six months ended June 30, 2015. The remaining 28,000 stock options will vest one-third on each annual anniversary date of the grant and will expire ten years from the date of the grant. During the six months ended June 30, 2015, 6,500 employee stock options were forfeited that were related to options granted in prior years. Stock-based compensation expense for the three and six months ended June 30, 2015 was $5,719 and $11,850, respectively. Stock-based compensation is measured at the grant date, based on the calculated fair value of the option, and is recognized as an expense on a straight-line basis over the requisite employee service period (generally the vesting period of the grant). The Black-Scholes option pricing model was used with the following weighted-average assumptions for options granted during the six months ended June 30, 2015: Risk-free interest rate 1.38% - Expected option life 5 years Expected volatility 215% - 218% Expected dividend yield 0% |
Series A Convertible Preferred
Series A Convertible Preferred Stock | 6 Months Ended |
Jun. 30, 2015 | |
Notes | |
Series A Convertible Preferred Stock | 5. SERIES A CONVERTIBLE PREFERRED STOCK On March 31, 2015 the Companys board of directors made the determination that it was in the best interest of the Company and its stockholders to conserve the Companys working capital at this time and not make the annual dividend payment for the year ending December 31, 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 Companys common stock are entitled to vote. The amortization of the increasing dividend rate preferred stock discount for the three and six months ended June 30, 2015 was $13,450 and $26,899, respectively. The amortization of the increasing dividend rate preferred stock discount for the three and six months ended June 30, 2014 was $15,131 and $30,262, respectively. |
Property and Equipment Disclosu
Property and Equipment Disclosure | 6 Months Ended |
Jun. 30, 2015 | |
Notes | |
Property and Equipment Disclosure | 6. PROPERTY AND EQUIPMENT During the six months ended June 30, 2015, $13,325 was paid for property and equipment. During the three and six months ended June 30, 2015, $10,590 and $18,390 was recorded as depreciation expense. |
Change in Estimate
Change in Estimate | 6 Months Ended |
Jun. 30, 2015 | |
Notes | |
Change in Estimate | 7. CHANGE IN ESTIMATE As a result of a change in managements estimation of a contingent liability arising from the acquisition of certain business assets in 2012, the Company recorded an additional expense in the amount of $32,749 during the three months ended June 30, 2015. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2015 | |
Notes | |
Subsequent Events | 8. SUBSEQUENT EVENTS In July 2015, the Company granted 3,000 employee stock options to one employee with an exercise price of $.050. The stock options shall vest one-third each year starting from July 6, 2016, and shall expire on July 6, 2025. |
Unaudited Interim Financial S15
Unaudited Interim Financial Statements: Basis of Accounting, Policy (Policies) | 6 Months Ended |
Jun. 30, 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_ Share
Stock Based Compensation: Share-based Compensation, Option and Incentive Plans Policy (Policies) | 6 Months Ended |
Jun. 30, 2015 | |
Policies | |
Share-based Compensation, Option and Incentive Plans Policy | 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) | 6 Months Ended |
Jun. 30, 2015 | |
Tables/Schedules | |
Schedule of Share-based Compensation, Stock Options, Activity | Options Weighted average exercise price Weighted average remaining contractual life (yrs) Aggregate intrinsic value Options outstanding, December 31, 2014 3,295,382 $0.029 8.20 Options exercisable, December 31, 2014 1,933,549 $0.025 7.84 $ 50,788 Options granted during the period 177,000 $0.043 Options expired during the period (3,000) $0.080 Options forfeited during the period (155,500) $0.040 Options outstanding, June 30, 2015 3,313,882 $0.030 7.73 Options exercisable, June 30, 2015 2,051,215 $0.025 7.39 $ 54,328 |
Convertible Notes Payable Rel18
Convertible Notes Payable Related Party (Details) - USD ($) | 6 Months Ended | |
Jun. 30, 2015 | Dec. 31, 2014 | |
Details | ||
Convertible Debt | $ 185,313 | $ 198,363 |
Repayments of Convertible Debt | 19,804 | |
Convertible Notes Payable | 45,307 | $ 47,511 |
Repayments of Debt | $ 3,602 |
Stock Based Compensation_ Sch19
Stock Based Compensation: Schedule of Share-based Compensation, Stock Options, Activity (Details) - USD ($) | 1 Months Ended | 6 Months Ended | |
Jul. 31, 2015 | Jun. 30, 2015 | Dec. 31, 2014 | |
Details | |||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number | 3,313,882 | 3,295,382 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price | $ 0.030 | $ 0.029 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number | 2,051,215 | 1,933,549 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price | $ 0.025 | $ 0.025 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Intrinsic Value | $ 54,328 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | 3,000 | 177,000 | |
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price | $ 0.050 | $ 0.043 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period | (3,000) | ||
Share-based Compensation Arrangements by Share-based Payment Award, Options, Expirations in Period, Weighted Average Exercise Price | $ 0.080 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested Options Forfeited, Number of Shares | (155,500) | ||
Share-based Compensation Arrangements by Share-based Payment Award, Options, Forfeitures in Period, Weighted Average Exercise Price | $ 0.040 |
Stock Based Compensation (Detai
Stock Based Compensation (Details) - Jun. 30, 2015 - USD ($) | Total | Total |
Details | ||
Allocated Share-based Compensation Expense | $ 5,719 | $ 11,850 |
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate, Minimum | 1.38% | |
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate, Maximum | 1.61% | |
Fair Value Assumptions, Expected Term, Simplified Method | 5 years | |
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate, Minimum | 215.00% | |
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate, Maximum | 218.00% | |
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate | 0.00% |
Series A Convertible Preferre21
Series A Convertible Preferred Stock (Details) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Details | ||||
Preferred Stock, Participation Rights | 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 | 13,450 | 15,131 | 26,899 | 30,262 |
Property and Equipment Disclo22
Property and Equipment Disclosure (Details) - USD ($) | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Details | ||
Purchases of property and equipment | $ 13,325 | $ 56,266 |
Subsequent Events (Details)
Subsequent Events (Details) - $ / shares | 1 Months Ended | 6 Months Ended |
Jul. 31, 2015 | Jun. 30, 2015 | |
Details | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | 3,000 | 177,000 |
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price | $ 0.050 | $ 0.043 |
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Date | Jul. 6, 2025 |