Exhibit 99.1
FullNet Communications, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Financial Statements
The following unaudited pro forma condensed consolidated financial information is presented to illustrate the effect of FullNet Communications, Inc.’s (“we”, “our”, “us”, or the “Company”) sale of substantially all of our wholly-owned subsidiary FullTel, Inc.’s customers and certain operating assets (collectively the “FullTel Assets”) on our historical financial position and operating results. This pro forma information is based on the historical condensed consolidated financial statements of the Company and should be read in conjunction with the accompanying footnotes and the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016, and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2017.
The accompanying unaudited pro forma condensed consolidated balance sheet as of September 30, 2017 has been prepared to give effect to the sale as if it had occurred on September 30, 2017. The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2016 and the nine months ended September 30, 2017 have been prepared to give effect to the sale as if it had occurred on January 1, 2016, and January 1, 2017, respectively.
The unaudited pro forma condensed consolidated balance sheet and statements of operations included herein are for information purposes only and are not necessarily indicative of the results that might have occurred had the sale taken place on the respective dates assumed. Actual results may differ significantly from those reflected here in the unaudited condensed consolidated pro forma financial statements for various reasons, including but not limited to, the differences between the assumptions used to prepare the unaudited pro forma condensed consolidated financial statements and actual results. The pro forma adjustments in the unaudited pro forma condensed consolidated balance sheet and the statements of operations included herein include the use of estimates and assumptions as described in the accompanying notes. The pro forma adjustments are based on information available to management at the time these unaudited pro forma condensed consolidated financial statements were prepared. We believe our current estimates provide a reasonable basis of presenting the significant effects of the transaction. However, the estimates and assumptions are subject to change as additional information becomes available.
The unaudited pro forma condensed consolidated financial information gives effect to the following:
a)On February 1, 2018, FullTel, Inc. (“FullTel”), a wholly-owned subsidiary of FullNet Communications, Inc. (the “Company”), entered into an Asset Purchase Agreement (the “Agreement”) with Dobson Technologies – Transport and Telecom Solutions, LLC (“Dobson”), pursuant to which FullTel sold substantially all of its customers and certain operating assets to Dobson for $246,500 in cash as of the date of execution of the Agreement.
b)Assumes the utilization of the net proceeds received from the sale to repay in full the outstanding balance on the convertible promissory note from a shareholder secured by all of our assets, and to pay certain FullTel liabilities.
The preparation of the unaudited pro forma condensed consolidated financial information is based on financial statements prepared in accordance with accounting principles generally accepted in the United States. These principles require the use of estimates that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from those estimates.
FullNet Communications, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Balance Sheet
September 30, 2017
| | | | | | |
| | As Reported | Pro Forma Adjustments | Notes | Pro Forma Continuing Operations |
ASSETS | | | | | |
CURRENT ASSETS | | | | | |
Cash | | $23,958 | 40,011 | (1) | 63,969 |
Accounts receivable, net | | 7,672 | | | 7,672 |
Prepaid expenses and other current assets | | 19,966 | | | 19,966 |
| | | | | |
Total current assets | | 51,596 | 40,011 | | 91,607 |
| | | | | |
PROPERTY AND EQUIPMENT, net | | 64,280 | | (2) | 64,280 |
| | | | | |
OTHER ASSETS AND INTANGIBLE ASSETS | | 24,021 | | | 24,021 |
| | | | | |
TOTAL ASSETS | | $139,897 | 40,011 | | 179,908 |
| | | | | |
LIABILITIES AND STOCKHOLDERS’ DEFICIT | | | | | |
| | | | | |
CURRENT LIABILITIES | | | | | |
Accounts payable | | $86,342 | (54,229) | (1) | 32,113 |
Accounts payable, related party | | 3,461 | | | 3,461 |
Accrued and other liabilities | | 632,382 | 9,162 | (2) | 641,544 |
Convertible notes payable, related party - current portion | | 131,115 | (123,912) | (1) | 7,203 |
Deferred revenue | | 405,727 | | | 405,727 |
| | | | | |
Total current liabilities | | 1,259,027 | (168,979) | | 1,090,048 |
| | | | | |
CONVERTIBLE NOTES PAYABLE, related party - long-term portion | | 27,328 | | | 27,328 |
| | | | | |
Total liabilities | | 1,286,355 | (168,979) | | 1,117,376 |
| | | | | |
STOCKHOLDERS’ DEFICIT | | | | | |
Preferred stock — $.001 par value; authorized, 10,000,000 shares; Series A convertible; issued and outstanding, 987,102 shares in 2017 and 2016 | | 611,950 | | | 611,950 |
Common stock — $.00001 par value; authorized, 40,000,000 shares; issued and outstanding, 11,871,009 shares in 2017 and 2016 | | 119 | | | 119 |
Additional paid-in capital | | 8,645,840 | | | 8,645,840 |
Accumulated deficit | | (10,404,367) | 208,990 | (2) | (10,195,377) |
| | | | | |
Total stockholders’ deficit | | (1,146,458) | 208,990 | | (937,468) |
| | | | | |
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | | 139,897 | 40,011 | | 179,908 |
FullNet Communications, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Nine Months Ended September 30, 2017
| | | | | | | |
| | As Reported | Pro Forma Adjustments | Notes | Pro Forma Continuing Operations |
REVENUES | | | | | |
Access service revenues | | $32,892 | | | 32,892 |
Co-location and other revenues | | 1,471,535 | (184,797) | (3) | 1,286,738 |
| | | | | |
Total revenues | | 1,504,427 | (184,797) | (3) | 1,319,630 |
| | | | | |
OPERATING COSTS AND EXPENSES | | | | | |
Cost of access service revenues | | 35,709 | | | 35,709 |
Cost of co-location and other revenues | | 249,312 | (125,849) | (3) | 123,463 |
Selling, general and administrative expenses | | 1,214,067 | (6,608) | (3) | 1,207,459 |
Depreciation and amortization | | 21,188 | | | 21,188 |
| | | | | |
Total operating costs and expenses | | 1,520,276 | (132,457) | | 1,387,819 |
| | | | | |
LOSS FROM OPERATIONS | | (15,849) | (52,340) | | (68,189) |
| | | | | |
| | | | | |
INTEREST EXPENSE | | (10,264) | 8,652 | (4) | (1,612) |
| | | | | |
NET LOSS | | $(26,113) | (43,688) | | (69,801) |
Preferred stock dividends | | (20,174) | | | (20,174) |
Net loss available to common stockholders | | $(46,287) | (43,688) | | (89,975) |
| | | | | |
Net loss per common share Basic and diluted | | $(.00) | | | (.01) |
| | | | | |
Weighted average common shares outstanding Basic and diluted | | 11,871,009 | | | 11,871,009 |
FullNet Communications, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2016
| | As Reported | Pro Forma Adjustments | Notes | Pro Forma Continuing Operations |
REVENUES | | | | | |
Access service revenues | | $60,134 | | | 60,134 |
Co-location and other revenues | | 1,887,317 | (253,944) | (3) | 1,633,373 |
| | | | | |
Total revenues | | 1,947,451 | (253,944) | | 1,693,507 |
| | | | | |
OPERATING COSTS AND EXPENSES | | | | | |
Cost of access service revenues | | 78,003 | | | 78,003 |
Cost of co-location and other revenues | | 274,160 | (134,255) | (3) | 139,905 |
Selling, general and administrative expenses | | 1,557,489 | (9,079) | (3) | 1,548,410 |
Depreciation and amortization | | 28,530 | | | 28,530 |
| | | | | |
Total operating costs and expenses | | 1,938,182 | (143,334) | | 1,794,848 |
| | | | | |
INCOME (LOSS) FROM OPERATIONS | | 9,269 | (110,610) | | (101,341) |
| | | | | |
INTEREST EXPENSE | | (15,227) | 12,774 | (4) | (2,453) |
| | | | | |
NET LOSS | | $(5,958) | (97,836) | | (103,794) |
Preferred stock dividends | | (47,073) | | | (47,073) |
Net loss available to common stockholders | | $(53,031) | (97,836) | | (150,867) |
| | | | | |
Net loss per share Basic and diluted | | $(.01) | (.01) | | (.02) |
| | | | | |
Weighted average shares outstanding Basic and diluted | | 9,298,676 | | | 9,298,676 |
FullNet Communications, Inc. and Subsidiaries
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
Basis of Presentation
On February 1, 2018, FullTel, Inc. (“FullTel”), a wholly-owned subsidiary of FullNet Communications, Inc. (the “Company”), entered into an Asset Purchase Agreement (the “Agreement”) with Dobson Technologies – Transport and Telecom Solutions, LLC (“Dobson”), pursuant to which FullTel sold substantially all of its customers and certain operating assets to Dobson for $246,500 in cash as of the date of execution of the Agreement.
The accompanying unaudited pro forma condensed consolidated balance sheet as of September 30, 2017 has been prepared to give effect to the sale as if it had occurred on September 30, 2017. The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2016 and the nine months ended September 30, 2017 have been prepared to give effect to the sale as if it had occurred on January 1, 2016, and January 1, 2017, respectively.
Pro Forma Adjustments
The unaudited pro forma condensed consolidated financial statements reflect the following adjustments:
Balance Sheet Adjustments
1)Reflects the net proceeds received on the sale of the FullTel Assets and assumes the utilization of the net proceeds to repay in full the outstanding balance on the convertible loan from a shareholder secured by all of our assets, and to pay certain FullTel liabilities.
Gross Cash Proceeds | $246,500 |
Less Selling Costs | (28,348) |
Less Repayment of Secured Convertible Loan | (123,912) |
Less Repayment of Various FullTel Liabilities | (54,229) |
Net Cash | $40,011 |
2)Reflects the gain on disposition assuming that all assets sold are fully depreciated and the net impact to retained earnings as follows:
Gross Cash Proceeds | $246,500 |
Less Selling Costs | (28,348) |
Pre-tax Gain | $218,152 |
Less Estimated Tax on Gain | (9,162) |
Net After-tax Gain | $208,990 |
Statement of Operations Adjustments
3)Reflects adjustments to remove direct revenues and expenses associated with the FullTel Assets sold.
4)Reflects a reduction in interest expense as a result of the utilization of the sale proceeds to repay debt.
