Fullnet Communications Inc 10-Q for FY2023 Q2

Fullnet Communications Inc (FULO)

10-Q 2023-08-10 For: 2023-06-30

Added on April 06, 2026

About this 10-Q

Fullnet Communications Inc filed this 10-Q on August 10, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).

Headline figures

Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Net income: $166.91K; up 2.2% from net income of $163.31K a year earlier
Diluted EPS: $0.01; unchanged from $0.01 a year earlier

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Oklahoma		73-1473361

(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

Large accelerated filer o			Accelerated filer o		Non-accelerated filer þ		Smaller reporting company ☑
Emerging-growth company	☐


	Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets — Ju n e 30, 2023 (Unaudited) and December 31, 2022		3

Condensed Consolidated Statements of Operations — Three and six months ended June 30, 2023 and 2022 (Unaudited)		4

Condensed Consolidated Statements of Shareholders’ Equity — Six months end e d June 30, 2023 and 2022 (Unaudited)		5

Condensed Consolidated Statements of Cash Flows —Six months ended June 30, 2023 and 2022 (Unaudited)		6

Notes to Condensed Consolidated Financial Statements (Unaudited)		7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		10

Item 3. Quantitative and Qualitative Disclosures About Market Risk		14

Item 4. Controls and Procedures		14

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		15

Item 5. Other Information		15

Item 6. Exhibits		15

Signatures		16

Exhibit 31.1
Exhibit 32.1


	June 30, 2023 (Unaudited)	December 31, 2022
ASSETS
CURRENT ASSETS
Cash and cash equivalents	`$3,018,020`	`$2,753,551`
Accounts receivable, net	`5,671`	`1,584`
Prepaid expenses and other current assets	`33,129`	`36,740`

Total current assets	`3,056,820`	`2,791,875`

PROPERTY AND EQUIPMENT, net	`78,630`	`87,173`

OTHER ASSETS AND INTANGIBLE ASSETS	`20,616`	`18,250`

RIGHT OF USE LEASED ASSET	`213,682`	`279,086`

TOTAL ASSETS	`$3,369,748`	`$3,176,384`

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable	`$14,260`	`$18,999`
Accrued and other liabilities	`444,600`	`413,646`
Dividends payable	`-`	`61,826`
Operating lease liability – current portion	`139,418`	`133,637`
Deferred revenue	`1,098,722`	`1,001,298`

Total current liabilities	`1,697,000`	`1,629,406`

OPERATING LEASE LIABILITY – net of current portion	`74,264`	`145,449`
Total liabilities	`1,771,264`	`1,774,855`

SHAREHOLDERS’ EQUITY
Preferred stock - $0.001 par value; authorized, 10,000,000 shares; Series A convertible; issued and outstanding, 618,257 shares in 2023 and 2022, respectively	`409,531`	`409,531`
Common stock - $0.00001 par value; authorized, 40,000,000 shares; issued and outstanding, 19,565,087 shares and 19,182,754 shares in 2023 and 2022, respectively	`196`	`192`
Additional paid-in capital	`9,117,734`	`9,108,410`
Accumulated deficit	`(7,928,977)`	`(8,116,604)`
Total shareholders’ equity	`1,598,484`	`1,401,529`

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	`$3,369,748`	`$3,176,384`

	Three Months Ended		Six Months Ended
	June 30, 2023	June 30, 2022	June 30, 2023	June 30, 2022
REVENUE	`$1,053,868`	`$1,062,413`	`$2,100,741`	`$2,178,859`
COST OF REVENUE	`250,734`	`215,143`	`495,288`	`442,610`
Gross profit	`803,134`	`847,270`	`1,605,453`	`1,736,249`

OPERATING EXPENSES
Sales and marketing	`181,508`	`168,746`	`361,119`	`331,033`
General and administrative expenses	`434,765`	`458,604`	`882,342`	`916,064`
Depreciation and amortization	`4,134`	`4,353`	`8,544`	`6,907`
Total operating expenses	`620,407`	`631,703`	`1,252,005`	`1,254,004`

INCOME FROM OPERATIONS	`182,727`	`215,567`	`353,448`	`482,245`

OTHER INCOME	`41,070`	`3,911`	`69,927`	`4,296`

NET INCOME BEFORE INCOME TAX	`223,797`	`219,478`	`423,375`	`486,541`

Income tax expense	`(56,884)`	`(56,166)`	`(107,808)`	`(124,168)`
NET INCOME	`$166,913`	`$163,312`	`$315,567`	`$362,373`
Preferred stock dividends	`(17,002)`	`(15,105)`	`(34,004)`	`(30,210)`
Net income available to common shareholders	`$149,911`	`$148,207`	`$281,563`	`$332,163`

Net income per share:
Basic	`$0.01`	`$0.01`	`$0.02`	`$0.02`
Diluted	`$0.01`	`$0.01`	`$0.02`	`$0.02`

Weighted average common shares outstanding:
Basic	`19,543,846`	`18,060,819`	`19,363,300`	`17,603,470`
Diluted	`19,633,735`	`18,587,690`	`19,454,281`	`18,133,114`


☑		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Common stock		Preferred stock		Additional	Accumulated
	Shares	Amount	Shares	Amount	paid-in capital	deficit	Total

Balance at January 1, 2023	`19,182,754`	`$192`	`618,257`	`$409,531`	`$9,108,410`	`$(8,116,603)`	`$1,401,530`

Stock options expense	`-`	`-`	`-`	`-`	`3,945`	`-`	`3,945`

Stock options exercised	`382,333`	`4`	`-`	`-`	`5,379`	`-`	`5,383`

Common stock dividends paid	`-`	`-`	`-`	`-`	`-`	`(127,941)`	`(127,941)`

Net income	`-`	`-`	`-`	`-`	`-`	`315,567`	`315,567`

Balance at June 30, 2023 – (unaudited)	`19,565,087`	`$196`	`618,257`	`$409,531`	`$9,117,734`	`$(7,928,977)`	`$1,598,484`

	Three Months Ended		Six Months Ended
	June 30, 2023	June 30, 2022	June 30, 2023	June 30, 2022
Net income:
Net income	`$166,913`	`$163,312`	`$315,567`	`$362,373`
Preferred stock dividends	`(17,002)`	`(15,105)`	`(34,004)`	`(30,210)`
Net income available to common shareholders	`149,911`	`148,207`	`281,563`	`332,163`

Basic income per share:
Weighted average common shares outstanding used in income per share	`19,543,846`	`18,060,819`	`19,363,300`	`17,603,470`
Basic income per share	`0.01`	`0.01`	`0.02`	`0.02`

Diluted income per share:
Shares used in diluted income per share	`19,633,735`	`18,587,690`	`19,454,281`	`18,133,114`
Diluted income per share	`0.01`	`0.01`	`0.02`	`0.02`

Computation of shares used in income per share:
Weighted average shares and share equivalents outstanding – basic	`19,543,846`	`18,060,819`	`19,363,300`	`17,603,470`
Effect of dilutive stock options	`89,889`	`526,871`	`90,981`	`529,644`
Weighted average shares and share equivalents outstanding – diluted	`19,633,735`	`18,587,690`	`19,454,281`	`18,133,114`

Schedule of Anti-dilutive Securities Excluded
	Three Months Ended		Six Months Ended
	June 30, 2023	June 30, 2022	June 30, 2023	June 30, 2022
Preferred stock	`618,257`	`568,257`	`618,257`	`568,257`
Total anti-dilutive securities excluded	`618,257`	`568,257`	`618,257`	`568,257`

Schedule of Employee Stock Option Activity

	Options	Weighted average exercise price	Weighted average remaining contractual life (yrs)	Aggregate Intrinsic value
Options outstanding, December 31, 2022	`556,330`	`$0.051`	`6.74`	`$184,485`

Options exercised during the period	`382,333`	`$0.014`

Options forfeited during the period	`33,000`	`$0.003`

Options outstanding June 30, 2023	`140,997`	`$0.163`	`7.33`	`$29,898`

Options exercisable June 30, 2023	`61,497`	`$0.122`	`6.19`	`$14,913`

Year ending December 31,
2023 (six months remaining)	`$76,116`
2024	`152,232`
Total future minimum lease payments	`228,348`
Present value of discount	`(14,666)`
Current portion lease liability	`(139,418)`
Long-term lease liability	`$74,264`

	For the Six-Month Period Ended June 30,
	2023	2022
Net cash flows provided by operating activities	`$448,853`	`$568,366`
Net cash flows used in investing activities	`-`	`(47,889)`
Net cash flows used in financing activities	`(184,384)`	`(561,245)`

•		mergers and acquisitions;
•		improvements of existing services, development of new services; and
•		further development of operations support systems and other automated back-office systems.


	REGISTRANT: FULLNET COMMUNICATIONS, INC.
Date: August 10, 2023	By:	/s/ ROGER P. BARESEL
		Roger P. Baresel
		Chief Executive Officer and Chief Financial Officer

1.	I have reviewed this quarterly report on Form 10-Q for the period ended June 30, 2023, 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
5.	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):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 10, 2023			/s/ Roger P. Baresel,
			Chief Executive Officer and Chief Financial Officer