UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549     FORM 10-K   (Mark One) þANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2012 or oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ___________________ to ___________________  Commission File Number: 000-27031  FULLNET COMMUNICATIONS, INC. (Exact name of registrant as specified in its charter) OKLAHOMA73-1473361(State or other jurisdiction of(I.R.S. Employer Identification No.)incorporation or organization)  201 Robert S. Kerr Avenue, Suite 210 Oklahoma City, Oklahoma 73102 (Address of principal executive offices)  (405) 236-8200 (Registrant’s telephone number)  Securities registered pursuant to Section 12(b) of the Act: None  Securities registered pursuant to Section 12(g) of the Act:  Title of class  Common Stock, $0.00001 Par Value  Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yeso Noþ  Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Exchange Act. Yeso Noþ  Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yesþ Noo      Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesþ   Noo  Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.þ  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filed, a non-accelerated file, or a small reporting company.  Large accelerated filer   o                                                                                             Accelerated filer   o Non-accelerated filer   o                                                                                               Smaller reporting company   þ  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso   Noþ  The aggregate market value of the Common Stock held by non-affiliates computed by reference to the price at which the Common Stock was last sold, or the average bid and asked price of the Common Stock, as of the last business day (June 30, 2012) of registrant’s completed second quarter was $15,792.  As of March 29, 2013, 9,118,161 shares of the registrant’s common stock, $0.00001 par value, were outstanding.  DOCUMENTS INCORPORATED BY REFERENCE: None      Table of Contents  FULLNET COMMUNICATIONS, INC. FORM 10-K  For the Fiscal Year Ended December 31, 2012  TABLE OF CONTENTS PART I.Item 1. Business5Item 1A. Risk Factors11Item 1B. Unresolved Staff Comments13Item 2. Properties13Item 3. Legal Proceedings13PART II.Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities15Item 6. Selected Financial Data16Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations16Item 7A. Quantitative and Qualitative Disclosures About Market Risk20Item 8. Financial Statements and Supplemental Data20Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure20Item 9A. Controls and Procedures20PART III.Item 10. Directors, Executive Officers and Corporate Governance22Item 11. Executive Compensation24Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters27Item 13. Certain Relationships and Related Transactions, and Director Independence29Item 14. Principal Accounting Fees and Services29Item 15. Exhibits, Financial Statement Schedules30SIGNATURES35Exhibit 31.1 Certification Pursuant to Rules 13a-14(a) and 15d-14(a)Exhibit 31.2  Certification Pursuant to Rules 13a-14(a) and 15d-14(a)Exhibit 32.1  Certification Pursuant to Section 906Exhibit 32.2  Certification Pursuant to Section 906      Table of Contents  Throughout this Report the first personal plural pronoun in the nominative case form “we” and its objective case form “us”, its possessive and the intensive case forms “our” and “ourselves” and its reflexive form “ourselves”  refer collectively to FullNet Communications, Inc. and its subsidiaries, and its and their executive officers and directors.  CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION  This Annual Report on Form 10-K and the information incorporated by reference may include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In particular, we direct your attention to Item 1. Business, Item 1A. Risk Factors, Item 2. Properties, Item 3. Legal Proceedings, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Item 8. Financial Statements and Supplementary Data. We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. All statements regarding our expected financial position and operating results, our business strategy, our financing plans and the outcome of any contingencies are forward-looking statements. These statements can sometimes be identified by our use of forward-looking words such as “may,” “believe,” “plan,” “will,” “anticipate,” “estimate,” “expect,” “intend” and other phrases of similar meaning. Known and unknown risks, uncertainties and other factors could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on various factors and was derived using numerous assumptions.  Although we believe that our expectations that are expressed in these forward-looking statements are reasonable, there is no assurance that our expectations will prove to be correct. Our actual results could be materially different from our expectations, including the following:  —We may lose customers or fail to grow our customer base;—We may not successfully integrate new customers or assets obtained through acquisitions, if any;—We may fail to compete with existing and new competitors;—We may not adequately respond to technological developments impacting the Internet;—We may experience a major system failure; and—We may not be able to obtain needed capital resources.  This list is intended to identify some of the principal factors that could cause actual results to differ materially from those described in the forward-looking statements included elsewhere in this report. These factors are not intended to represent a complete list of all risks and uncertainties inherent in our business, and should be read in conjunction with the more detailed cautionary statements included in this Report under the caption “Item 1A. Risk Factors,” our other Securities and Exchange Commission filings and our press releases.      Table of Contents  PART I  Item 1. Business  General  We are an integrated communications provider offering integrated communications and Internet connectivity to individuals, businesses, organizations, educational institutions and government agencies. Through our subsidiaries, we provide high quality, reliable and scalable Internet access, web hosting, equipment co-location, 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 Websites 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 a total solutions provider to individuals and companies seeking a “one-stop shop” in Oklahoma.  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, 2012 FullTel provided us with local telephone access in approximately 232 cities.  Our common stock trades on the OTC Bulletin Board under the symbol FULO. While our common stock trades on the OTC Bulletin Board, 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.  Mergers and Acquisitions  Our acquisition strategy is designed to leverage our existing network backbone and internal operations to enable us to enter new markets in Oklahoma, as well as to expand our presence in existing markets, and to benefit from economies of scale.  Our Business Strategy  As an integrated communications provider, we intend to increase shareholder value by continuing to build scale through both acquisitions and internal growth and then leveraging increased revenues over our fixed-costs base. Our strategy is to meet the customer service requirements of retail, business, educational and government Internet users in our target markets, while benefiting from the scale advantages obtained through being a fully integrated backbone and broadband provider. The key elements of our overall strategy with respect to our principal business operations are described below.  Target Strategic Acquisitions  The goal of our acquisition strategy is to accelerate market penetration by acquiring smaller competitors in the advanced voice and data market.  Additionally, we will continue to build upon our core competencies and expand our technical, customer service staff and Internet based marketing efforts. We evaluate acquisition candidates based on their compatibility with our overall business plan. When assessing an acquisition candidate, we focus on the following criteria:  oPotential revenue and customer growth;oLow customer turnover or churn rates;oFavorable competitive environment; andoFavorable consolidation savings.  Generate Internal Sales Growth  We intend to expand our customer base by increasing our marketing efforts. At December 31, 2012, our sales efforts are carried out by technical engineers and our senior management.  In addition, we have independent agents in certain markets. We are exploring other strategies to increase our sales, including other marketing partners and Internet based advertising programs. Increase Rural Area Market Share  We believe that the rural areas of Oklahoma are underserved by Internet service providers, and that we can profitably serve these markets by providing reliable Internet connectivity at a reasonable cost to the residents and businesses located in these areas. To that end, through our wholly-owned subsidiary, FullTel, we became a licensed competitive local exchange carrier in Oklahoma. Since March 2003 when we installed our telephone switch, FullTel, as a competitive local exchange carrier, has provided local telephone numbers for Internet access.  Internet Access Services  We provide Internet access services to individual and small business customers located in Oklahoma on both a retail and wholesale basis. Through FullNet, we provide our customers with a variety of dial-up and dedicated connectivity, as well as direct access to a wide range of Internet applications and resources, including electronic mail. FullNet’s full range of services includes:  o Private label retail and business direct dial-up connectivity to the Internet and  o Secure private networks through our backbone network.  Our branded and private label Internet access services are provided through a statewide network with points-of-presence in 232 communities throughout Oklahoma. Points-of-presence are local telephone numbers through which customers can access the Internet. Our business services consist of high-speed Internet access services and other services that enable wholesale customers to outsource their Internet and electronic commerce activities. We had approximately 400 and 500 customers at December 31, 2012 and 2011, respectively. Additionally, FullNet sells Internet access to other Internet service providers, who then resell Internet access to their own customers under their private label or under the “FullNet” brand name.  Currently, we offer the following two types of Internet connections:  o Dial-Up Connections  The simplest connection to the Internet is the dial-up account. This method of service connects the user to the Internet through the use of a modem and standard telephone line. Currently, FullNet users can connect via dial-up at speeds up to 56 Kbps. We support these users through the use of sophisticated modem banks located in our facility in Oklahoma City that send data through a router and out to the Internet. We support the higher speed 56K, V.92 MOH and Integrated Services Digital Network connections with state-of-the-art digital modems. With a dial-up connection, a user can gain access to the Internet for e-mail, the World Wide Web, file transfer protocol, news groups, and a variety of other useful applications.  o Leased Line Connections  Many businesses and some individuals have a need for more bandwidth to the Internet to support a network of users or a busy Website. We have the capacity to sell a leased line connection to users. This method of connection gives the user a full-time high-speed (up to 1.5 mbps) connection to the Internet. The leased line solution comes at greater expense to the user. These lines are leased through the telephone companies at a high installation and monthly fee.  We believe that our Internet access services provide customers with the following benefits:  Fast and Reliable Internet Access-We have implemented a network architecture providing exceptional quality and consistency in     Table of Contents Internet services, making us one of the recognized backbone leaders in the Oklahoma Internet service provider industry. We offer unlimited, unrestricted and reliable Internet access at a low monthly price. We have designed our network such that our users never have to worry about busy signals due to a lack of available modems. Dial-up access is available for the following modem speeds: 14.4K, 28.8K, 33.6K, K56Flex, 56K V.90, v.92 MOH, ISDN 64K and ISDN 128K. Our dial-up access supports all major platforms and operating systems, including MS Windows, UNIX(R), Mac OS, OS/2 and LINUX. This allows simplified access to all Internet applications, including the World Wide Web, email, and news and file transfer protocol.  Cost-Effective Access-We offer high quality Internet connectivity and enhanced business services at price points that are generally lower than those charged by other Internet service providers with national coverage. Additionally, we offer pre-bundled access services packages under monthly or prepaid plans.  Superior Customer Support-We provide superior customer service and support, with customer care and technical personnel available by telephone and on-line 24 hours per day, 365 days per year.  CLEC Operations  Through FullTel, our wholly owned subsidiary, we are a fully licensed competitive local exchange carrier or CLEC in Oklahoma. CLECs are new phone companies evolved from the Telecommunications Act of 1996 (Telecommunications Act) that requires the incumbent local exchange carriers or ILECs, generally the regional Bell companies including AT&T, to provide CLECs access to their local facilities, and to compensate CLECs for traffic originated by ILECs and terminated on the CLECs network. By adding our own telephone switch and infrastructure to the existing telephone network in March 2003, we offer certain local Internet access for dial-up services in most of Oklahoma. As a CLEC, we may subscribe to and resell all forms of local telephone service in Oklahoma.  While Internet access is the core focus of growth for us, we plan to also provide traditional telephone service throughout Oklahoma.  A core piece of our marketing strategy is the “cross pollination” between our Internet activities and FullTel’s local dial-up service. By organizing and funding FullTel, we gained local dial-up Internet access to approximately 80% of Oklahoma. In return, FullTel gained access to our entire Internet service provider customer base.  The FullTel data center telephone switching equipment was installed in March 2003. At which time, FullTel began the process of activating local access telephone numbers for every city in Oklahoma within the AT&T service area. At December 31, 2012, FullTel provided us with local telephone access in approximately 232 cities. However, our ability to fully take advantage of these opportunities will be dependent upon the availability of additional capital.  Advanced Voice and Data Solutions  Our primary advanced voice and data solution is marketed under our CallMultiplier brand name.  CallMultiplier is a comprehensive cloud-based solution to consumers and businesses for automated calling, texting and voice message delivery. CallMultiplier streamlines and automates call tree management to provide efficient delivery of time sensitive voice and text messages to groups. Satisfied customers include sports teams, businesses, religious groups, schools, political campaigns, staffing companies, clubs and civic groups throughout the United States and Canada.  Sales and Marketing  We focus on marketing our services to two distinct market segments: enterprises (primarily small and medium size businesses) and consumers. By attracting enterprise customers who use the network primarily during the daytime, and consumer customers who use the network primarily at night, we are able to utilize our network infrastructure more cost effectively.  We are now focusing the majority of our efforts on Internet based advertising and marketing.  Competition  The market for Internet connectivity and related services is extremely competitive. We anticipate that competition will continue to intensify as the use of the Internet continues to expand and grow. The tremendous growth and potential market size of the Internet access market has attracted many new start-ups as well as existing businesses from a variety of industries. We believe a reliable network, knowledgeable salespeople and the quality of technical support currently are the primary competitive factors in our targeted market and that price is usually secondary to these factors.  Our current and prospective competitors include, in addition to other national, regional and local Internet service providers, long distance and local exchange telecommunications companies, cable television, direct broadcast satellite, wireless communications     Table of Contents providers and online service providers. While we believe that our network, products and customer service distinguish us from these competitors, most of these competitors have significantly greater market presence, brand recognition, financial, technical and personnel resources than us.  Internet Service Providers  Our current primary competitors include other Internet service providers with a significant national presence that focuses on business customers, including Cox Communications and AT&T. These competitors have greater market share, brand recognition, financial, technical and personnel resources than us. We also compete with regional and local Internet service providers in our targeted markets.  Telecommunications Carriers  The major long distance companies, also known as inter-exchange carriers, including AT&T, Verizon, and Sprint, offer Internet access services and compete with us. Reforms in the federal regulation of the telecommunications industry have created greater opportunities for ILECs, including the Regional Bell Operating Companies or RBOCs, and other competitive local exchange carriers, to enter the Internet connectivity market. In order to address the Internet connectivity requirements of the business customers of long distance and local carriers, we believe that there is a move toward horizontal integration by ILECs and CLECs through acquisitions or joint ventures with, and the wholesale purchase of, connectivity from Internet service providers. The MCI/WorldCom merger (and the prior WorldCom/MFS/UUNet consolidation), GTE’s acquisition of BBN, the acquisition by ICG Communications, Inc. of Netcom, Global Crossing’s acquisition of Frontier Corp. (and Frontier’s prior acquisition of Global Center) and AT&T’s purchase of IBM’s global communications network are indicative of this trend. Accordingly, we expect that we will experience increased competition from the traditional telecommunications carriers. These telecommunication carriers, in addition to their greater network coverage, market presence, financial, technical and personnel resources also have large existing commercial customer bases.  Cable Companies, Direct Broadcast Satellite and Wireless Communications Companies  Many of the major cable companies are offering Internet connectivity, relying on the viability of cable modems and economical upgrades to their networks, including Media One and Time Warner Cablevision, Inc., Cox Communications and Tele-Communications, Inc. (“TCI”).  The companies that own these broadband networks could prevent us from delivering Internet access through the wire and cable connections that they own. Our ability to compete with telephone and cable television companies that are able to support broadband transmissions, and to provide better Internet services and products, may depend on future regulation to guarantee open access to the broadband networks. However, in January 1999, the Federal Communications Commission declined to take any action to mandate or otherwise regulate access by Internet service providers to broadband cable facilities at this time. It is unclear whether and to what extent local and state regulatory agencies will take any initiatives to implement this type of regulation, and whether they will be successful in establishing their authority to do so. Similarly, the Federal Communications Commission is considering proposals that could limit the right of Internet service providers to connect with their customers over broadband local telephone lines. In addition to competing directly in the Internet service provider market, both cable and television facilities operators are also aligning themselves with certain Internet service providers who would receive preferential or exclusive use of broadband local connections to end users. As high-speed broadband facilities increasingly become the preferred mode by which customers access the Internet, if we are unable to gain access to these facilities on reasonable terms, our business, financial condition and results of operations could be materially adversely affected.  Online Service Providers  The dominant online service providers, including Cox Communications, Comcast, AT&T, Road Runner, Verizon and EarthLink, have all entered the Internet access business by engineering their current proprietary networks to include Internet access capabilities. We compete to a lesser extent with these service providers, which currently are primarily focused on the consumer marketplace and offer their own content, including chat rooms, news updates, searchable reference databases, special interest groups and shopping.  We believe that our ability to attract business customers and to market value-added services is a key to our future success and profitability. However, there can be no assurance that our competitors will not introduce comparable services or products at similar or more attractive prices in the future or that we will not be required to reduce our prices to match competition. Recently, many competitive ISPs have shifted their focus from individual customers to business customers.  We believe that our ability to attract business customers and to market value-added services is a key to our future success. However, there can be no assurance that our competitors will not introduce comparable services or products at similar or more attractive prices in the future or that we will not be required to reduce our prices to match competition. Recently, many competitive     Table of Contents ISPs have shifted their focus from individual customers to business customers.  Moreover, there is no assurance that more of our competitors will not shift their focus to attracting business customers, resulting in even more competition for us. There can be no assurance that we will be able to offset the effects of any such competition or resulting price reductions. Increased competition could result in erosion of our market share and could have a material adverse effect on our business, financial condition and results of operations.  Government Regulations  The following summary of regulatory developments and legislation is not complete. It does not describe all present and proposed federal, state, and local regulation and legislation affecting the Internet service provider and telecommunications industries. Existing federal and state regulations are currently subject to judicial proceedings, legislative hearings, and administrative proposals that could change, in varying degrees, the manner in which our businesses operate. We cannot predict the outcome of these proceedings or their impact upon the Internet service provider and telecommunications industries or upon our business.  The provision of Internet access service and the underlying telecommunications services are affected by federal, state, local and foreign regulation. The Federal Communications Commission or FCC exercises jurisdiction over all facilities of, and services offered by, telecommunications carriers to the extent that they involve the provision, origination or termination of jurisdictionally interstate or international communications. The state regulatory commissions retain jurisdiction over the same facilities and services to the extent they involve origination or termination of jurisdictionally intrastate communications. In addition, as a result of the passage of the Telecommunications Act, state and federal regulators share responsibility for implementing and enforcing the domestic pro-competitive policies of the Telecommunications Act. In particular, state regulatory commissions have substantial oversight over the provision of interconnection and non-discriminatory network access by ILECs. Municipal authorities generally have some jurisdiction over access to rights of way, franchises, zoning and other matters of local concern.  Our Internet operations are not currently subject to direct regulation by the FCC or any other U.S. governmental agency, other than regulations applicable to businesses generally. However, the FCC continues to review its regulatory position on the usage of the basic network and communications facilities by Internet service providers. Although in an April 1998 Report, the FCC determined that Internet service providers should not be treated as telecommunications carriers and therefore should not be regulated, it is expected that future Internet service provider regulatory status will continue to be uncertain. Indeed, in that report, the FCC concluded that certain services offered over the Internet, including phone-to-phone Internet telephony, may be functionally indistinguishable from traditional telecommunications service offerings, and their non-regulated status may require reexamination.  Changes in the regulatory structure and environment affecting the Internet access market, including regulatory changes that directly or indirectly affect telecommunications costs or increase the likelihood of competition from RBOCs or other telecommunications companies, could have an adverse effect on our business. Although the FCC has decided not to allow local telephone companies to impose per-minute access charges on Internet service providers, and the reviewing court has upheld that decision, further regulatory and legislative consideration of this issue is likely. In addition, some telephone companies are seeking relief through state regulatory agencies. The imposition of access charges would affect our costs of serving dial-up customers and could have a material adverse effect on our business, financial condition and results of operations.  In addition to our Internet service provider operations, we have focused attention on acquiring telecommunications assets and facilities, which are subject to regulation. FullTel, our subsidiary, has received competitive local exchange carrier or CLEC certification in Oklahoma. The Telecommunications Act requires CLECs not to prohibit or unduly restrict resale of their services; to provide dialing parity, number portability, and nondiscriminatory access to telephone numbers, operator services, directory assistance, and directory listings; to afford access to poles, ducts, conduits, and rights-of-way; and to establish reciprocal compensation arrangements for the transport and termination of telecommunications traffic. In addition to federal regulation of CLECs, the states also impose regulatory obligations on CLECs. While these obligations vary from state to state, most states require CLECs to file a tariff for their services and charges; require CLECs to charge just and reasonable rates for their services, and not to discriminate among similarly-situated customers; to file periodic reports and pay certain fees; and to comply with certain services standards and consumer protection laws. As a provider of domestic basic telecommunications services, particularly competitive local exchange services, we could become subject to further regulation by the FCC or another regulatory agency, including state and local entities.  The Telecommunications Act has caused fundamental changes in the markets for local exchange services. In particular, the Telecommunications Act and the related FCC promulgated rules mandate competition in local markets and require that ILECs interconnect with CLECs. Under the provisions of the Telecommunications Act, the FCC and state public utility commissions share jurisdiction over the implementation of local competition: the FCC was required to promulgate general rules and the state commissions were required to arbitrate and approve individual interconnection agreements. The courts have generally upheld the FCC in its promulgation of rules, including a January 25, 1999 U.S. Supreme Court ruling which determined that the FCC has jurisdiction to promulgate national rules in pricing for interconnection.     Table of Contents In July 2000, the Eighth Circuit Court issued a decision on the earlier remand from the Supreme Court and rejected, as contrary to the Telecommunications Act, the use of hypothetical network costs, including total element long-run incremental costs methodology (“TELRIC”), which the FCC had used in developing certain of its pricing rules. The Eighth Circuit Court also vacated the FCC’s pricing rules related to unbundled network elements (UNEs), termination and transport, but upheld its prior decision that ILECs’ universal service subsidies should not be included in the costs of providing network elements. Finally, the Eighth Circuit Court also vacated the FCC’s rules requiring that: (1) ILECs recombine unbundled network elements for competitors in any technically feasible combination; (2) all preexisting interconnection agreements be submitted to the states for review; and (3) the burden of proof for retention of a rural exemption be shifted to the ILEC. The FCC sought review of the Eighth Circuit Court’s invalidation of TELRIC and was granted certiorari. On May 13, 2002, the Supreme Court reversed certain of the Eighth Circuit Court’s findings and affirmed that the FCC’s rules concerning forward looking economic costs, including TELRIC, were proper under the Telecommunications Act. The Supreme Court also restored the FCC’s requirement that the ILEC’s combine UNEs for competitors when they are unable to do so themselves.  In November 1999, the FCC released an order making unbundling requirements applicable to all ILEC network elements uniformly. UNE-P is created when a competing carrier obtains all the network elements needed to provide service from the ILEC. In December 1999, the FCC released an order requiring the provision of unbundled local copper loops enabling CLECs to offer competitive Digital Subscriber Loop Internet access. The FCC reconsidered both orders in its first triennial review of its policies on UNEs completed in early 2003, as further discussed below.  On August 21, 2003, the FCC released the text of its Triennial Review Order. In response to the remand of the United States Court of Appeals for the District of Columbia circuit, the FCC adopted new rules governing the obligations of ILECs to unbundle the elements of their local networks for use by competitors. The FCC made national findings of impairment or non-impairment for loops, transport and, most significantly, switching. The FCC delegated to the states the authority to engage in additional fact finding and make alternative impairment findings based on a more granular impairment analysis including evaluation of applicability of FCC-established “triggers.” The FCC created “mass market” and “enterprise market” customer classifications that generally correspond to the residential and business markets, respectively. The FCC found that CLECs were not impaired without access to local circuit switching when serving “enterprise market” customers on a national level. CLECs, however, were found to be impaired on a national level without access to local switching when serving “mass market” customers. State commissions had 90 days to ask the FCC to waive the finding of no impairment without switching for “enterprise market” customers. The FCC presumption that CLECs are impaired without access to transport, high capacity loops and “mass market” switching is subject to a more granular nine-month review by state commissions pursuant to FCC-established triggers and other economic and operational criteria.  The FCC also opened a further notice of proposed rulemaking to consider the “pick and choose” rules under which a competing carrier may select from among the various terms of interconnection offered by an ILEC in its various interconnection agreements. Comments have been filed, but the FCC has not issued a decision.  The Triennial Review Order also provided that:  · ILECs are not required to unbundle packet switching as a stand-alone network element.  · Two key components of the FCC’s TELRIC pricing rules were clarified. First, the FCC clarified that the risk-adjusted cost of capital used in calculating UNE prices should reflect the risks associated with a competitive market. Second, the FCC declined to mandate the use of any particular set of asset lives for depreciation, but clarified that the use of an accelerated depreciation mechanism may present a more accurate method of calculating economic depreciation.  · CLECs continue to be prohibited from avoiding any liability under contractual early termination clauses in the event a CLEC converts a special access circuit to an UNE.  We are monitoring the Oklahoma state commission proceedings and participating where necessary as the commission undertakes the 90-day and nine-month analyses to establish rules or make determinations as directed by the Triennial Review Order. In addition, numerous petitions and appeals have been filed in the courts and with the FCC challenging many of the findings in the Triennial Review Order and seeking a stay on certain portions of the order. The appeals have been consolidated in the D.C. Circuit Court of Appeals. Oral arguments were heard on January 28, 2004. On March 2, 2004, a three-judge panel in the D.C. Circuit Court of Appeals overturned the FCC’s Triennial Review Order with regard to network unbundling rules. A majority of the FCC Commissioners is seeking a court-ordered stay and plan to appeal the ruling to the U.S. Supreme Court. Until all of these proceedings are concluded, the impact of this order, if any, on our CLEC operations cannot be determined.  An important issue for CLECs is the right to receive reciprocal compensation for the transport and termination of Internet traffic. We believe that, under the Telecommunications Act, CLECs are entitled to receive reciprocal compensation from ILECs. However, some ILECs have disputed payment of reciprocal compensation for Internet traffic, arguing that Internet service provider traffic is not local traffic. Most states have required ILECs to pay CLECs reciprocal compensation. However, in October 1998, the FCC     Table of Contents determined that dedicated digital subscriber line service is an interstate service and properly tariffed at the interstate level. In February 1999, the FCC concluded that at least a substantial portion of dial-up Internet service provider traffic is jurisdictionally interstate. The FCC also concluded that its jurisdictional decision does not alter the exemption from access charges currently enjoyed by Internet service providers. The FCC established a proceeding to consider an appropriate compensation mechanism for interstate Internet traffic. Pending the adoption of that mechanism, the FCC saw no reason to interfere with existing interconnection agreements and reciprocal compensation arrangements. The FCC order has been appealed. In addition, there is a risk that state public utility commissions that have previously considered this issue and ordered the payment of reciprocal compensation by the ILECs to the CLECs may be asked by the ILECs to revisit their determinations, or may revisit their determinations on their own motion. To date, at least one ILEC has filed suit seeking a refund from a carrier of reciprocal compensation that the ILEC had paid to that carrier. There can be no assurance that any future court, state regulatory or FCC decision on this matter will favor our position. An unfavorable result may have an adverse impact on our potential future revenues as a CLEC. Reciprocal compensation is unlikely to be a significant or a long-term revenue source for us.  As we become a competitor in local exchange markets, we will become subject to state requirements regarding provision of intrastate services. This may include the filing of tariffs containing rates and conditions. As a new entrant, without market power, we expect to face a relatively flexible regulatory environment. Nevertheless, it is possible that some states could require us to obtain the approval of the public utilities commission for the issuance of debt or equity or other transactions that would result in a lien on our property used to provide intrastate services.  Employees  As of December 31, 2012, we had 14 employees employed in engineering, sales, marketing, customer support and related activities and general and administrative functions. None of our employees are represented by a labor union, and we consider our relations with our employees to be good. We also engage consultants from time to time with respect to various aspects of our business.  Item 1A. Risk Factors.  This Report includes “forward looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Although we believe that our plans, intentions and expectations reflected in such forward looking statements are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved. Important factors that could cause actual results to differ materially from our forward looking statements are set forth below and elsewhere in this Report. All forward looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth below.  Necessity of Successfully Overcoming Numerous Financial and Operational Challenges in Order to Continue as a Going Concern.  At December 31, 2012, our current liabilities exceeded our current assets by $1,205,576, our total liabilities exceeded our total assets by $1,923,252, and we had an accumulated deficit of $10,340,393.  In addition, as set forth below, we face a number of operational challenges which we must successfully meet.  Our ability to continue as a going concern is dependent upon our continued operations that in turn are dependent upon our ability to meet our financing requirements on a continuing basis, to maintain present financing, to achieve the objectives of our business plan and to succeed in our future operations. Our business plan includes, among other things, expansion of our Internet access services through mergers and acquisitions and the development of our web hosting, co-location and traditional telephone services. Execution of our 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 our current business plan beyond the next 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 can be 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.  Consequently we might be unsuccessful in overcoming the numerous financial and operational challenges required to continue as a going concern.  Necessity of Obtaining an Acceptable Successor Interconnection Agreement.  We are dependent upon obtaining certain services from AT&T (formerly SBC) pursuant to our interconnection agreement with it. We along with many other telecommunications companies in Oklahoma are currently a party to one or more proceedings before the Oklahoma Corporation Commission (the “OCC”) relating to the terms of our interconnection agreements with AT&T and an anticipated successor to these interconnection agreements. Consequently we might be unsuccessful in obtaining an acceptable successor interconnection agreement which would have a material adverse effect on our business prospects, financial condition and results of operation.      Table of Contents Necessity of Additional Financing.  In order for us to have any opportunity for significant commercial success and profitability, we must successfully obtain additional financing, either through borrowings, additional private placements or a public offering, or some combination thereof. Although we are actively pursuing a variety of funding sources, there can be no assurance that we will be successful in obtaining additional financing which would have a material adverse effect on our business prospects, financial condition and results of operation.  Limited Marketing Experience.  We have limited experience in developing and commercializing new services based on innovative technologies, and there is limited information available concerning the potential performance of our hardware or market acceptance of our proposed services. There can be no assurance that unanticipated expenses, problems or technical difficulties will not occur which would result in material delays in product commercialization or that our efforts will result in successful product commercialization.  Consequently our limited marketing experience could have a material adverse effect on our business prospects, financial condition and results of operation.  Uncertainty of Products/Services Development.  Although considerable time and financial resources were expended in the development of our services and products, there can be absolutely no assurance that problems will not develop which would have a material adverse effect on us. We will be required to commit considerable time, effort and resources to finalize our product/service development and adapt our products and services to satisfy specific requirements of potential customers. Continued system refinement, enhancement and development efforts are subject to all of the risks inherent in the development of new products/services and technologies, including unanticipated delays, expenses, technical problems or difficulties, as well as the possible insufficiency of funds to satisfactorily complete development, which could result in abandonment or substantial change in commercialization. There can be no assurance that development efforts will be successfully completed on a timely basis, or at all, that we will be able to successfully adapt our hardware or software to satisfy specific requirements of potential customers, or that unanticipated events will not occur which would result in increased costs or material delays in development or commercialization. In addition, the complex technologies planned to be incorporated into our products and services may contain errors that become apparent subsequent to commencement of commercial use. Remedying these errors could delay our plans and cause us to incur substantial additional costs.  Consequently the uncertainty of our products/services development could have a material adverse effect on our business prospects, financial condition and results of operation.  Competition; Technological Obsolescence.  The markets for our products and services are characterized by intense competition and an increasing number of potential new market entrants who have developed or are developing potentially competitive products and services. We will face competition from numerous sources, certain of which may have substantially greater financial, technical, marketing, distribution, personnel and other resources than us, permitting such companies to implement extensive marketing campaigns, both generally and in response to efforts by additional competitors to enter into new markets and market new products and services. In addition, our product and service markets are characterized by rapidly changing technology and evolving industry standards that could result in product obsolescence and short product life cycles. Accordingly, our ability to compete will be dependent upon our ability to complete the development of our products and to introduce our products and/or services into the marketplace in a timely manner, to continually enhance and improve our software and to successfully develop and market new products. There is no assurance that we will be able to compete successfully, that competitors will not develop technologies or products that render our products and/or services obsolete or less marketable or that we will be able to successfully enhance our products or develop new products and/or services.  Consequently our failure to successfully respond to the demands of competition and technological obsolescence could have a material adverse effect on our business prospects, financial condition and results of operation.  Risks Relating to the Internet.  Businesses reliant on the Internet may be at risk due to inadequate development of the necessary infrastructure, including reliable network backbones or complementary services, high-speed modems and security procedures. The Internet has experienced, and is expected to continue to experience, significant growth in the number of users and amount of traffic. There can be no assurance that the Internet infrastructure will continue to be able to support the demands placed on it by sustained growth. In addition, there may be delays in the development and adoption of new standards and protocols, the inability to handle increased levels of Internet activity or due to increased government regulation. If the necessary Internet infrastructure or complementary services are not developed to effectively support growth that may occur, our business, results of operations and financial condition would be materially adversely affected.  Potential Government Regulations.  We are subject to state commission, Federal Communications Commission and court decisions as they relate to the interpretation     Table of Contents and implementation of the Telecommunications Act, the interpretation of Competitive Local Exchange Carrier or CLEC interconnection agreements in general and our interconnection agreements in particular. In some cases, we may become bound by the results of ongoing proceedings of these regulatory and judicial bodies or the legal outcomes of other contested interconnection agreements that are similar to agreements to which we are a party. Consequently potential government regulations and judicial rulings could have a material adverse effect on our business, prospects, financial condition and results of operations.  Dependence on Key Personnel.  Our success depends in large part upon the continued successful performance of our current executive officers and key employees, Messrs. Timothy J. Kilkenny, Roger P. Baresel and Jason C. Ayers, for our continued research, development, marketing and operation. Although we have employed, and will employ in the future, additional qualified employees as well as retaining consultants having significant experience, if Messrs. Kilkenny, Baresel or Ayers fail to perform any of their duties for any reason whatsoever, our ability to market, operate and support our products/services will be adversely affected. While we are located in areas where the available pool of people is substantial, there is also significant competition for qualified personnel.  Consequently our dependence on these key personnel could have a material adverse effect on our business prospects, financial condition and results of operation.  Limited Public Market.  During February 2000, our common stock began trading on the OTC Bulletin Board under the symbol FULO. While our common stock continues to trade on the OTC Bulletin Board, 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.  Consequently the limited public market for our common stock could have a material adverse effect on our business prospects, financial condition and results of operation.  Penny Stock Regulation.  Broker-dealer practices in connection with transactions in “penny stocks” are regulated by certain penny stock rules adopted by the SEC. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and, if the broker dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, broker-dealers who sell these securities to persons other than established customers and accredited investors (generally, those persons with assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse), must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. Consequently, these requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that is or becomes subject to the penny stock rules. Our common stock is subject to the penny stock rules at the present time, and consequently our stockholders will find it more difficult to sell their shares.Consequently the Penny Stock regulations could have a material adverse effect on our business prospects, financial condition and results of operation.  Item 1B. Unresolved Staff Comments.  We do not have any unresolved staff comments to report.  Item 2. Properties  We maintain our executive office in approximately 13,000 square feet at 201 Robert S. Kerr Avenue, Suite 210 in Oklahoma City, at an effective annual rental rate of $16.50 per square foot. These premises are occupied pursuant to a lease that expires December 31, 2019.  Item 3. 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     Table of Contents 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.       Table of Contents PART II  Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.  Our common stock is traded in the over-the-counter market and is quoted on the OTC Bulletin Board under the symbol FULO. The closing sale prices reflect inter-dealer prices without adjustment for retail markups, markdowns or commissions and may not reflect actual transactions. The following table sets forth the high and low closing sale prices of our common stock during the calendar quarters presented as reported by the OTC Bulletin Board.  Common StockClosing Sale PricesHighLow2012 –Calendar Quarter Ended:March 31$
.003$
.003June 30.003.003September 30.010.010December 31.030.0212011–Calendar Quarter Ended:March 31$
.050$
.020June 30.050.050September 30.003.003December 31.003.003  Number of stockholders  The number of beneficial holders of record of our common stock as of the close of business on March 26, 2013 was approximately 117.  Dividend Policy  To date, we have declared no cash dividends on our common stock, and do not expect to pay cash dividends in the near term. We intend to retain future earnings, if any, to provide funds for operations and the continued expansion of our business.  Securities Authorized for Issuance under Equity Compensation Plans  The following table sets forth as of December 31, 2012, information related to each category of equity compensation plan approved or not approved by our shareholders, including individual compensation arrangements with our non-employee directors. We do not have any equity compensation plans that have been approved by our shareholders. All of our outstanding stock option grants and warrants were pursuant to individual compensation arrangements and exercisable for the purchase of our common stock shares. Number ofSecuritiesWeighted-RemainingNumber ofAverageAvailable forSharesExercise PriceFutureUnderlyingofIssuance underUnexercisedOutstandingEquityOptionsOptions andCompensationPlan Categoryand WarrantsWarrantsPlansEquity compensation plans approved by our shareholders:NoneNot ApplicableNot ApplicableNot ApplicableEquity compensation plans not approved by our shareholders:Stock option grants to non-employee directors-$
--Stock options granted to employees1,404,550$
.034-Warrants and certain stock options issued to non-employees300,000$
.003-Total1,704,550$
.028-      Table of Contents Recent Sales of Unregistered Securities  Employee stock options for 140,000 shares of our common stock were exercised in March 2012 for $420.  In December 2009 we agreed to issue additional shares of stock to the holder of a secured promissory note in the event that any additional shares are issued at less than $.50 per share, excluding employee stock options, prior to the payment in full of the secured promissory note (see Note D — Notes Payable of the financial statements appearing elsewhere in this Report).  These common stock shares were offered and sold pursuant to Rule 506 of Regulation D of the Securities Act, and no commissions and fees were paid.  With respect to the foregoing common stock transactions, we relied on Sections 4(2) and 3(b) of the Securities Act of 1933 and applicable registration exemptions of Rules 504 and 506 of Regulation D and applicable state securities laws.  Item 6. Selected Financial Data.  As a smaller reporting company, we are not required and have not elected to report any information under this item (see “Item 8. Financial Statements and Supplementary Data.”).  Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.  The following discussion should be read in conjunction with our Consolidated Financial Statements and notes thereto included in Part II, Item 8 of this Report. The results shown herein are not necessarily indicative of the results to be expected in any future periods. This discussion contains forward-looking statements based on current expectations that involve risks and uncertainties. Actual results and the timing of events could differ materially from the forward-looking statements as a result of a number of factors. For a discussion of the factors that could cause actual results to differ materially from the forward-looking statements, see “Item 1A. Risk Factors” and our other periodic reports and documents filed with the Securities and Exchange Commission.  Overview  We are an integrated communications provider offering integrated communications and Internet connectivity to individuals, businesses, organizations, educational institutions and government agencies. Through our subsidiaries, we provide high quality, reliable and scalable Internet access, web hosting, equipment co-location, traditional telephone services as well as advanced voice and data solutions.  Our overall strategy is to become a successful integrated communications provider for residents and small to medium-sized businesses in Oklahoma. We believe that the rural areas of Oklahoma are underserved by Internet service providers, and that significant profitable growth can be achieved in serving these markets by providing reliable Internet connectivity and value-added services at a reasonable cost to the residents and businesses located in these areas. We believe we can obtain a significant Internet service provider and business-to-business market share in Oklahoma. Our wholly-owned subsidiary, FullTel, is a licensed competitive local exchange carrier or CLEC and provides local telephone numbers for Internet access.  The market for Internet connectivity and related services is extremely competitive. We anticipate that competition will continue to intensify. The tremendous growth and potential market size of the Internet access market has attracted many new start-ups as well as existing businesses from a variety of industries. We believe that a reliable network, knowledgeable sales people and the quality of technical support currently are the primary competitive factors in our targeted market and that price is usually secondary to these factors.  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 these regulatory proceedings at this time, but an unfavorable outcome could have a material adverse effect on our business, financial condition or results of operations.  Results of Operations  The following table sets forth certain statement of operations data as a percentage of revenues for the years ended December 31,     Table of Contents 2012 and 2011:


|                                             |  |                                  |             |  |             |  |        |        |  |  |             |  |  |  |       |  |  |  |  |  | 
|-------------------------------------------- |  | -------------------------------- | ----------- |  | ----------- |  | ------ | ------ |  |  | ----------- |  |  |  | ----- |  |  |  |  |  | 
|                                             |  | For the Years Ended December 31, |             | 
|                                             |  | 2012                             |             |  | 2011        |  |       
|                                             |  |                                  |             |  | Percentage  |  |        |        |  |  | Percentage  |  | 
|                                             |  | Amount                           |             |  | of revenues |  |        | Amount |  |  | of revenues |  | 
|Revenues:                                    |  |                                  |             |  |             |  |        |        |  |  |             |  | 
|Access service revenues                      |  |                                  | $
159,692   |  |             |  | 10.0   |        |  |  | $
233,895   |  |  |  | 12.5  | 
|Co-location and other revenues               |  |                                  | 1,434,540   |  |             |  | 90.0   |        |  |  | 1,639,979   |  |  |  | 87.5  | 
|                                             |  |                                  |             |  |             |  |        |        |  |  |             |  |  |  |       | 
|Total revenues                               |  |                                  | 1,594,232   |  |             |  | 100.0  |        |  |  | 1,873,874   |  |  |  | 100.0 | 
|                                             |  |                                  |             |  |             |  |        |        |  |  |             |  |  |  |       | 
|Operating costs and expenses:                |  |                                  |             |  |             |  |        |        |  |  |             |  |  |  |       | 
|Cost of access service revenues              |  |                                  | 135,051     |  |             |  | 8.5    |        |  |  | 172,938     |  |  |  | 9.2   | 
|Cost of co-location and other revenues       |  |                                  | 348,133     |  |             |  | 21.8   |        |  |  | 365,926     |  |  |  | 19.5  | 
|Selling, general and administrative expenses |  |                                  | 1,246,363   |  |             |  | 78.2   |        |  |  | 1,228,533   |  |  |  | 65.6  | 
|Depreciation and amortization                |  |                                  | 31,694      |  |             |  | 2.0    |        |  |  | 54,267      |  |  |  | 2.9   | 
|Total operating costs and expenses           |  |                                  | 1,761,241   |  |             |  | 110.5  |        |  |  | 1,821,664   |  |  |  | 97.2  | 
|                                             |  |                                  |             |  |             |  |        |        |  |  |             |  |  |  |       | 
|Income (loss)from operations                 |  |                                  | (167,009)   |  |             |  | (10.5) |        |  |  | 52,210      |  |  |  | 2.8   | 
|                                             |  |                                  |             |  |             |  |        |        |  |  |             |  |  |  |       | 
|Other income                                 |  |                                  | -           |  |             |  | -      |        |  |  | 37,268      |  |  |  | 2.0   | 
|Interest expense                             |  |                                  | (22,604)    |  |             |  | (1.4)  |        |  |  | (24,148)    |  |  |  | (1.3) | 
|                                             |  |                                  |             |  |             |  |        |        |  |  |             |  |  |  |       | 
|Income (loss) before income taxes            |  |                                  | (189,613)   |  |             |  | (11.9) |        |  |  | 65,330      |  |  |  | 3.5   | 
|                                             |  |                                  |             |  |             |  |        |        |  |  |             |  |  |  |       | 
|Income tax (benefit) expense                 |  |                                  | -           |  |             |  | -      |        |  |  | -           |  |  |  | -     | 
|                                             |  |                                  |             |  |             |  |        |        |  |  |             |  |  |  |       | 
|Net income (loss)                            |  |                                  | $
(189,613) |  |             |  | (11.9) |        |  |  | $
65,330    |  |  |  | 3.5   | 

Year Ended December 31, 2012 Compared to Year Ended December 31, 2011 Revenues  Access service revenues decreased $74,203 or 31.7% to $159,692 for the year 2012 from $233,895 for the year 2011 primarily due to a decline in the number of customers.  Co-location and other revenues decreased $205,439 or 12.5% to $1,434,540 for the year 2012 from $1,639,979 for the year 2011. This decrease was primarily attributable to reductions in services to existing customers in addition to a decline in the number of traditional phone service customers.  Operating Costs and Expenses  Cost of access service revenues decreased $37,887 or 21.9% to $135,051 for the year 2012 from $172,938 for the year 2011. This decrease was primarily due to reductions in recurring costs associated with our network.  Cost of access service revenues as a percentage of access service revenues increased to 84.6% for the year 2012 from 73.9% for the year 2011.  Cost of co-location and other revenues decreased $17,793 or 4.9% to $348,133 for the year 2012 from $365,926 for the year 2011 primarily related to reductions in costs of servicing our traditional phone service customers due to a reduction in the number of customers utilizing that service.  Cost of co-location and other revenues as a percentage of co-location and other revenues increased to 24.3% for the year 2012 from 22.3% for the year 2011.  Selling, general and administrative expenses increased $17,830 or 1.5% to $1,246,363 for the year 2012 from $1,228,533 for the year 2011.  This increase was primarily related to increases in advertising expenses.   Selling, general and administrative expenses as a percentage of total revenues decreased to 78.2% for the year 2012 from 65.6% for the year 2011.  Depreciation and amortization expense decreased $8,050 or 12.9% to $54,267 for the year 2012 from $54,267 for the year 2011 primarily related to several assets reaching full depreciation.      Table of Contents Other Income  The year 2011 included $37,268, representing certain excess telecommunication taxes and fees for which we received refunds in 2012.  Interest Expense  Interest expense decreased $1,544 or 6.4% to $22,604 for the year 2012 from $24,148 for the year 2011 primarily related to a decrease in notes payable.  Liquidity and Capital Resources  As of December 31, 2012, we had $10,847 in cash and $1,267,137 in current liabilities, including $198,837 of deferred revenues that will not require settlement in cash.  At December 31, 2012 and 2011, we had working capital deficits of $1,205,576, and $1,051,707, 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.  At December 31, 2012, of the $166,791 we owed to our trade creditors $127,715 was past due. We have no formal agreements regarding payment of these amounts. At December 31, 2012, a temporary rent deferral totaling $62,326 was payable to our landlord.  The terms of the temporary rent deferral require it to be repaid over a period of 36 months beginning February 1, 2013, at the rate of $2,315.78 per month.  At December 31, 2012, $253,169 payable under a matured lease obligation was outstanding.  The lessor has not made any formal demands for payment or instituted collection action; however we are in discussions with the lessor to restructure this liability.  At December 31, 2012, we had outstanding principal and interest owed on a matured convertible promissory note totaling $58,466. We have been making quarterly interest payments on this note and the lender has not made any demands for payment of the principal amount of this note.  At December 31, 2012 we had outstanding principal and accrued interest owed on a matured secured promissory note totaling $249,861.  We have been making monthly principal and interest payments on this note and the lender has not made any demands for payment of the outstanding balance of this note.  In addition, during the year ended December 31, 2012, we had two customers that each comprised approximately 11% and 9% of total revenues, respectively.  During the year ended December 31, 2011, these two customers each comprised approximately 9% and 17% of total revenues, respectively.  Cash flow for the years ending December 31, 2012 and 2011 consist of the following:  For the Years Ended December 31,20122011Net cash flows provided by operations$
37,502$
61,751Net cash flows used in investing activities(14,190)(46,967)Net cash flowsused infinancing activities(23,452)(14,653)  Cash used for the purchases of equipment was $14,190 and $36,911, respectively, for the years ended December 31, 2012 and 2011.  Cash used for the acquisition of a business was $10,056 for the year ended December 31, 2011.  Cash used for principal payments on notes payable was $23,872 and $23,109, respectively, for the years ended December 31, 2012 and 2011.  Cash provided by the exercise of stock options was $420 and $8,456, respectively for the years ended December 31, 2012 and 2011.  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     Table of Contents variations are likely to increase our future capital requirements.  Our current cash balances will not be sufficient to fund our current business operations 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 needs.  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.  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.  As of December 31, 2012, our material contractual obligations and commitments were:


|                                   |  |                        |             |  |                  |  |           |             |  |  |             |  |  |                   |           |  |  |  |           |  |  |  |  |  |  | 
|---------------------------------- |  | ---------------------- | ----------- |  | ---------------- |  | --------- | ----------- |  |  | ----------- |  |  | ----------------- | --------- |  |  |  | --------- |  |  |  |  |  |  | 
|                                   |  | Payments Due By Period |             | 
|                                   |  | Total                  |             |  | Less than 1 Year |  |           | 1 – 3
Years |  |  | 3 – 5
Years |  |  | More than 5 Years |           | 
|Long-term debt (a)                 |  |                        | $
304,206   |  |                  |  | $
304,206 |             |  |  | $
-         |  |  |                   | $
-       |  |  |  | $
-       | 
|Interest on fixed rate debt (a)    |  |                        | 4,121       |  |                  |  | 4,121     |             |  |  | -           |  |  |                   | -         |  |  |  | -         | 
|Operating leases                   |  |                        | 1,577,715   |  |                  |  | 208,698   |             |  |  | 479,573     |  |  |                   | 445,880   |  |  |  | 443,564   | 
|Other agreements (b)               |  |                        | 253,169     |  |                  |  | 253,169   |             |  |  | -           |  |  |                   | -         |  |  |  | -         | 
|Total contractual cash obligations |  |                        | $
2,139,211 |  |                  |  | $
770,194 |             |  |  | $
479,573   |  |  |                   | $
445,880 |  |  |  | $
443,564 | 

——————————— (a)Included in this item is payment under a $249,206 secured promissory note payable that was matured at December 31, 2012.  Also included is payment under a convertible promissory note of $55,000 that was matured at December 31, 2012.  These notes are included in the Less than One Year total.  We continue to make monthly principal and interest payments on the secured promissory note. The lender has not made any demands for payment of the outstanding principal balance of this note.  We have been making quarterly interest payments on the convertible promissory note.  We have not negotiated an extension of the convertible promissory note and the lender has not made any demands for payment of the principal amount of this note.(b)This item represents a matured lease obligation.  The lessor has not made any formal demands for payment or instituted collection action; however we are in discussions with the lessor to restructure this liability.  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.     Table of Contents 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.  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 and traditional telephone 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.  We began billing AT&T (formerly SBC) reciprocal compensation (fees for terminating AT&T customer’s local calls onto our network) during 2004, and have billed for the periods of March 2003 through June 2006.  AT&T failed to pay and is disputing approximately $183,700.  We are pursuing AT&T for all balances due, however there is significant uncertainty as to whether or not we will be successful. Upon the ultimate resolution of AT&T’s challenge, we will recognize the associated revenue, if any. We do not expect reciprocal compensation to be a significant or a long-term revenue source.  Certain Accounting Matters  Fair Value Measurements The FASB issued updated authoritative guidance in May 2011 to amend fair value measurements and related disclosures; the guidance became effective for us at the beginning of our 2012 fiscal year. This guidance relates to a major convergence project of the FASB and the International Accounting Standards Board to improve International Financial Reporting Standards (“IFRS”) and U.S. GAAP. This guidance resulted in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between IFRS and U.S. GAAP. The guidance also changed some fair value measurement principles and enhanced disclosure requirements related to activities in Level 3 of the fair value hierarchy. The adoption of this updated authoritative guidance had no impact on our Consolidated Financial Statements.   Item 7A. 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 8. Financial Statements and Supplemental Data.  Our financial statements, prepared in accordance with Regulation S-K, are set forth in this Report beginning on page F-1.  Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.  During 2012 and 2011, we did not have disagreements with our principal independent accountants.  Item 9A. Controls and Procedures  Our Chief Executive Officer and Chief Financial Officer are responsible primarily for establishing and maintaining disclosure controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the U.S. Securities and Exchange Commission. These controls and procedures are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.  Furthermore, our Chief Executive Officer and Chief Financial Officer are responsible for the design and supervision of our internal     Table of Contents controls over financial reporting that are then effected by and through our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. These policies and procedures  •  pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;  •  provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and  •  provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.  Our Executive Officer and Chief Financial Officer conducted their evaluation using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework.  Based upon their evaluation of the effectiveness of our disclosure controls and procedures and the internal controls over financial reporting as of the last day of the period covered by this Report, they concluded that our disclosure controls and procedures and internal controls over financial reporting were fully effective during and as of the last day of the period covered by this Report and reported to our auditors and the audit committee of our board of directors that no change in our disclosure controls and procedures and internal control over financial reporting occurred during the period covered by this Report that would have materially affected or is reasonably likely to materially affect our disclosure controls and procedures or internal control over financial reporting. In conducting their evaluation of our disclosure controls and procedures and internal controls over financial reporting, these executive officers did not discover any fraud that involved management or other employees who have a significant role in our disclosure controls and procedures and internal controls over financial reporting. Furthermore, there were no significant changes in our disclosure controls and procedures, internal controls over financial reporting, or other factors that could significantly affect our disclosure controls and procedures or internal controls over financial reporting subsequent to the date of their evaluation. Because no significant deficiencies or material weaknesses were discovered, no corrective actions were necessary or taken to correct significant deficiencies and material weaknesses in our internal controls and disclosure controls and procedures.       Table of Contents PART III.  Item 10. Directors, Executive Officers, and Corporate Governance.  The following information is furnished as of March 26, 2013 for each person who serves on our Board of Directors or serves as one of our executive officers. Our Board of Directors currently consists of two members, although we intend to increase the size of the Board in the future. The directors serve one-year terms until their successors are elected. Our executive officers are elected annually by our Board. The executive officers serve terms of one year or until their death, resignation or removal by our Board. There are no family relationships between our directors and executive officers. In addition, there was no arrangement or understanding between any executive officer and any other person pursuant to which any person was selected as an executive officer.  NameAgePositionTimothy J.Kilkenny54Chairman of the Board of Directors and Chief Executive OfficerRoger P.Baresel57Director, President, Chief Financial Officer and SecretaryJason C. Ayers38Vice President of OperationsPatricia R.Shurley56Vice President of FinanceMichael D. Tomas40Vice President of Technology  Timothy J. Kilkenny has served as our Chief Executive Officer and Chairman of the Board of Directors since our inception in May 1995. Prior to that time, he spent 14 years in the financial planning business as a manager for both MetLife and Prudential. Mr. Kilkenny is a graduate of Central Bible College in Springfield, Missouri.  Roger P. Baresel became one of our directors and our Chief Financial Officer on November 9, 2000, and our President on October 13, 2003.  In addition, Mr. Baresel served as the Chief Financial Officer of Labock Technologies, Inc., an unrelated privately held corporation active in the defense contracting sector, from January 2007 to March 2008 and as their Chief Operating Officer from Mar 2007 to March 2008.  He also served as the Chief Financial Officer of Advanced Blast Protection, Inc. (“ABP”), an unrelated privately held corporation active in the defense contracting sector, from January 2008 to November 30, 2009.  ABP filed for protection under Chapter 11 of the U.S. Bankruptcy code on November 2, 2009.  Mr. Baresel is an accomplished senior executive and consultant who has served at a variety of companies. While serving as President and CFO of Advantage Marketing Systems, Inc., a publicly-held company engaged in the multi-level marketing of healthcare and dietary supplements, from June 1995 to May 2000, annual sales increased from $2.5 million to in excess of $22.4 million and annual earnings increased from $80,000 to more than $l.2 million. Also, during this period Advantage successfully completed two public offerings, four major acquisitions and its stock moved from the over the counter bulletin board to the American Stock Exchange. Mr. Baresel has the following degrees from Central State University in Edmond, Oklahoma: BA Psychology, BS Accounting and MBA Finance, in which he graduated Summa Cum Laude. Mr. Baresel is also a certified public accountant.  Jason C. Ayers has been our Vice President of Operations since December 8, 2000 and prior to that served as President of Animus, a privately-held web hosting company which we acquired on April 1, 1998. Mr. Ayers received a BS degree from Southern Nazarene University in Bethany, Oklahoma in May 1996 with a triple major in Computer Science, Math and Physics. Upon graduating, he was a co-founder of Animus.  Patricia R. Shurley has been our Vice President of Finance since May 2001. Prior to that, she served for three years as the Controller for Advantage Marketing Systems, Inc., a publicly-held company engaged in the multi-level marketing of healthcare and dietary supplements. Prior to that she was self-employed and owned an accounting practice. She graduated from the University of Central Oklahoma in Edmond, Oklahoma with a BS degree in Accounting and is a certified public accountant.  Michael D. Tomas has been our Vice President of Technology since September 2003. Prior to that, he was our Information Systems Manager since June 1999 and our employee since July 1996. Mr. Tomas has formal training with Cisco, Win 3.1, Win95/98, and Windows NT 4.0 as well as LAN/WAN setup, including experience with wireless networking and is Lucent certified.       Table of Contents Audit Committee Financial Expert  Because our board of directors only consists of two directors, each of whom does not qualify as an independent director; our board performs the functions of an audit committee. Our board of directors has determined that Roger P. Baresel, our President and Chief Financial Officer qualifies as a “financial expert.” This determination was based upon Mr. Baresel’s  ·  understanding of generally accepted accounting principles and financial statements;  ·  ability to assess the general application of generally accepted accounting principles in connection with the accounting for estimates, accruals and reserves;  ·  experience preparing, auditing, analyzing or evaluating financial statements that present the breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by our financial statements, or experience actively supervising one or more persons engaged in such activities;  ·  understanding of internal controls and procedures for financial reporting; and  ·  understanding of audit committee functions.  Mr. Baresel’s experience and qualification as a financial expert were acquired through the active supervision of a principal financial officer, principal accounting officer, controller, public accountant, auditor or person performing similar functions and overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing or evaluation of financial statements.  Mr. Baresel is not an independent director. We have been unable to attract a person to serve as one of our directors and that would qualify both as an independent director and as a financial expert because of inability to compensate our directors and provide liability insurance protection.  Compliance with Section 16(a) of the Exchange Act, Beneficial Ownership Reporting Requirements  Section 16(a) of the Securities and Exchange Act of 1934, as amended, requires our directors and executive officers and any persons who own more than 10% of a registered class of our equity securities to file with the Securities and Exchange Commission (“SEC”) and each exchange on which our securities are listed, reports of ownership and subsequent changes in ownership of our common stock and our other securities. Officers, directors and greater than 10% stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. Based solely on review of the copies of such reports furnished to us or written representations that no other reports were required, we believe that during 2012 all filing requirements applicable to our officers, directors and greater than 10% beneficial owners were met.  Code of Ethics  On March 25, 2003, our board of directors adopted our code of ethics that applies to all of our employees and directors, including our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions.  Our code of ethics may be found on our website at www.fullnet.net. We will describe the nature of amendments to the code on our website, except that we may not describe amendments that are purely a technical, administrative, or otherwise non-substantive. We will also disclose on our website any waivers from any provision of the code that we may grant.  We will also disclose on our website any violation of the code by our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. Information about amendments and waivers to the code will be available on our website for at least 12 months, and thereafter, the information will be available upon request for five years.       Table of Contents Item 11. Executive Compensation  The following table sets forth, for the last three fiscal years, the cash compensation paid by us to our Chairman and Chief Executive Officer and Chief Financial Officer (the “Named Executive Officers”). None of our executive officers earned annual compensation in excess of $100,000 during 2012.  Long-TermAnnual CompensationCompensationSecuritiesUnderlyingOptions andFiscalOtherWarrantsName and Principal PositionYearSalaryCompensation(#) (1)Timothy J.Kilkenny2012$
65,573(2)$
29,425(3)(1)110,000Chairman and CEO2011$
61,658$
30,570(4)(1)332,0002010$
108,620(5)$
30,106(6)—Roger P.Baresel2012$
59,268(7)$
34,239(8)(1)90,000President and CFO2011$
51,006$
35,457(9)(1)361,1972010$
101,604(10)$
31,221(11)— ———————————


|    |  |                                                                                                                                                                                                                                                                                                                                                                | 
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|(1) |  | Options are granted with an exercise price equal to the fair market value of our common stock on the date of the grant and are valued based on the Black-Scholes option pricing model.                                                                                                                                                                        
|    | 
|(2) |  | Includes $6,742 of deferred compensation.                                                                                                                                                                                                                                                                                                                     
|    | 
|(3) |  | Represents $10,351 of expense reimbursement for business use of Mr. Kilkenny’s automobile and parking, $1,800 of expense reimbursement for Mr. Kilkenny’s Internet connection and cell phone, $16,359 of insurance premiums, $602 of post-retirement benefits paid by us for the benefit of Mr. Kilkenny, and $313 of stock options issued to Mr. Kilkenny.   
|    | 
|(4) |  | Represents $10,351 of expense reimbursement for business use of Mr. Kilkenny’s automobile and parking, $1,800 of expense reimbursement for Mr. Kilkenny’s Internet connection and cell phone, $15,339 of insurance premiums, $633 of post- retirement benefits paid by us for the benefit of Mr. Kilkenny, and $2,447 of stock options issued to Mr. Kilkenny.
|    | 
|(5) |  | Includes $42,868 of deferred compensation.                                                                                                                                                                                                                                                                                                                    
|    |  |                                                                                                                                                                                                                                                                                                                                                               
|(6) |  | Represents $8,400 of expense reimbursement for business use of Mr. Kilkenny’s automobile, $1,800 of expense reimbursement for Mr. Kilkenny’s Internet connection and cell phone, $17,893 of insurance premiums, and $2,013 of post-retirement benefits paid by us for the benefit of Mr. Kilkenny.                                                            
|    |  |                                                                                                                                                                                                                                                                                                                                                               
|(7) |  | Includes $4,319 of deferred compensation.                                                                                                                                                                                                                                                                                                                     
|    |  |                                                                                                                                                                                                                                                                                                                                                               
|(8) |  | Represents $9,120 of expense reimbursement for business use of Mr. Baresel’s automobile and parking, $5,577 of expense reimbursement for Mr. Baresel’s home office and cell phone, $18,866 of insurance premiums, $420 of post-retirement benefits paid by us for the benefit of Mr. Baresel, and $256 of stock options issued to Mr. Baresel.                




|     |  |                                                                                                                                                                                                                                                                     
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(9)  |  | Represents $9,120 of expense reimbursement for business use of Mr. Baresel’s automobile and parking, $5,221 of expense reimbursement for Mr. Baresel’s home office and cell phone, $18,397 of insurance premiums, and $2,719 of stock options issued to Mr. Baresel.
|     |  |                                                                                                                                                                                                                                                                     
|(10) |  | Includes $53,479 of deferred compensation.                                                                                                                                                                                                                          
|     |  |                                                                                                                                                                                                                                                                     
|(11) |  | Represents $9,120 of expense reimbursement for business use of Mr. Baresel’s automobile and parking, $4,560 of expense reimbursement for Mr. Baresel’s home office and cell phone, and $17,541 of insurance premiums.                                               
|     |  |                                                                                                                                                                                                                                                                     

Table of Contents Stock Options Granted  All options granted during 2012 are nonqualified stock options. During 2012, an aggregate of 341,000 options were granted outside of a formal plan to employees. This included stock options exercisable for the purchase of 110,000 and 90,000 shares of our common stock granted to Mr. Kilkenny and Mr. Baresel, respectively, during 2012. Options granted generally become exercisable in part after one year from the date of grant and generally have a term of ten years following the date of grant, unless sooner terminated in accordance with the terms of the stock option agreement. 2012 Year End Option Values  The following table sets forth information related to the exercise of stock options during 2012 and the number and value of options held by the following Named Executive Officers at December 31, 2012. During 2012, Mr. Kilkenny and Mr. Baresel  exercised 80,000 and 60,000 options, respectively, and 40,000 of Mr. Baresel’s options expired.  We did not reprice any outstanding options. For the purposes of this table, the “value” of an option is the difference between the estimated fair market value at December 31, 2012 of the shares of common stock subject to the option and the aggregate exercise price of such option.  Number of UnexercisedValue of Unexercised In-the-Options atMoney Options atDecember 31, 2012December 31, 2012 (1)NameExercisableUnexercisableExercisableUnexercisableTimothy J.Kilkenny462,00020,000$
30$
60Chairman and CEORoger P.Baresel210,84820,000$
30$
60President and CFO ————————— (1)Based on the closing sale price on December 31, 2012 of our common stock of $.03 per share.      Table of Contents  Aggregate Stock Option Exercise  The following table sets forth information related to the number of stock options held by the named executive officers at December 31, 2012.  During 2012, Mr. Kilkenny and Mr. Baresel exercised 80,000 and 60,000 options, respectively, and 40,000 of Mr. Baresel’s options expired.  Outstanding Equity Awards at December 31, 2012
Stock Option AwardsNumber of Common StockOptionOptionUnderlying OptionsExerciseExpirationNameExercisableUnexercisablePrice(1)DateTimothy J.Kilkenny10,00020,000$
.00307/30/22Chairman and CEO452,000-$
.04010/09/13Roger P.Baresel10,00020,000$
.00307/30/22President and CFO200,848-$
.04010/09/13 —————————  (1)   The closing sale price of our common stock as reported on the OTC Bulletin Board on December 31, 2012 was $0.03  Director Compensation  During the fiscal year ended December 31, 2012, our directors did not receive any compensation for serving in such capacities.  Employment Agreements and Lack of Keyman Insurance  On July 6, 2011, we entered into employment agreements with Timothy J. Kilkenny, Roger P. Baresel and Jason Ayers. Each agreement is effective July 1, 2011 and continues through December 31, 2016; however, the term is automatically extended for additional three-year terms, unless we or the employee gives a six-month advance notice of termination. These agreements provide, among other things, (i) an annual base salary of at least $61,656 for Mr. Kilkenny, $45,012 for Mr. Baresel  and $68,436 for Mr. Ayers, (ii) bonuses at the discretion of the Board of Directors, (iii) entitlement to fringe benefits including medical and insurance benefits as may be provided to our other senior officers; and (iv) eligibility to participate in our incentive, bonus, benefit or similar plans. These agreements require the employee to devote the required time and attention to our business and affairs necessary to carry out his responsibilities and duties. These agreements may be terminated under certain circumstances and upon termination provide for (i) the employee to be released from personal liability for our debts and obligations, and (ii) the payment of any amounts we owe the employee.  We do not maintain any keyman insurance covering the death or disability of our executive officers.                         Table of Contents Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.  The following table sets forth information as of March 29, 2013, concerning the beneficial ownership of our Common Stock by each of our directors, each executive officer named in the table under the heading “Item 10. Directors and Executive Officers, and Corporate Governance” and all of our directors and executive officers as a group, as well as each person who is known by us to own more than 5% of the outstanding shares of our Common Stock.  The non-employee beneficial owner information is based on Schedules 13D or 13G filed by the applicable beneficial owner with the Securities and Exchange Commission or other information provided to us by the beneficial owner or our stock transfer agent.  Unless otherwise indicated, the beneficial owner has sole voting and investment power with respect to such stock.   Common StockBeneficially OwnedNumber ofPercent ofBeneficial Owner (1)SharesClass (1)Timothy J.Kilkenny* (2)(3)2,343,72227.8%Roger P.Baresel* (2)(4)725,3627.8%Jason C. Ayers (2)(5)515,7955.7%Patricia R.Shurley(2)(6)367,0004.1%Michael D. Tomas(2)(7)305,0003.4%All executive officers and directors as a group (5 individuals)4,571,87948.8%High Capital Funding, LLC (8)907,6649.9% ———————  *Director  (1)Percent of class for any stockholder listed is calculated without regard to shares of common stock issuable to others upon exercise of outstanding stock options. Any shares a stockholder is deemed to own by having the right to acquire by exercise of an option or warrant are considered to be outstanding solely for the purpose of calculating that stockholder’s ownership percentage. We computed the percentage ownership amounts in accordance with the provisions of Rule 13d-3(d), which includes as beneficially owned all shares of common stock which the person or group has the right to acquire within the next 60 days, based upon 9,118,161 shares being outstanding at March 29, 2013.(2)Address is c/o 201 Robert S. Kerr Avenue, Suite 210, Oklahoma City, Oklahoma 73102.(3)Timothy J. Kilkenny and Barbara J. Kilkenny, husband and wife, hold 1,881,722 and 315,000 shares of our common stock, respectively. The number of shares includes 462,000 shares of our common stock that are subject to currently exercisable stock options.  Amounts shown do not include options, held by Mr. Kilkenny, to purchase 10,000 shares of our common stock exercisable at $.003 per share beginning July 30, 2013 and 10,000 shares of our common stock exercisable at $.003 per share beginning July 30, 2014.(4)Roger P. Baresel and Judith A. Baresel, husband and wife, hold 109,350 and 405,164 shares of our common stock, respectively. The number of shares includes 10,000 and 200,848 shares of our common stock subject to currently exercisable stock options held by Mr. and Mrs. Baresel, respectively.  Amounts shown do not include options, held by Mr. Baresel, to purchase 10,000 shares of our common stock exercisable at $.003 per share beginning July 30, 2013 and 10,000 shares of our common stock exercisable at $.003 per share beginning July 30, 2014.(5)Jason C. Ayers holds 505,795 shares of our common stock.  The number of shares includes 10,000 shares of our common stock subject to currently exercisable stock options.  Amounts shown do not include options to purchase 10,000 shares of our common stock exercisable at $.003 per share beginning July 30, 2013 and 10,000 shares of our common stock exercisable at $.003 per share beginning July 30, 2014.(6)Patricia R. Shurley holds 342,000 shares of our common stock.  The number of shares includes 25,000 shares of our common stock subject to currently exercisable stock options.  Amounts shown do not include options to purchase 25,000 shares of our common stock exercisable at $.003 per share beginning July 30, 2013 and 25,000 shares of our common stock exercisable at $.003 per share beginning July 30, 2014.(7)Michael D. Tomas holds 295,000 shares of our common stock.  The number of shares includes 10,000 shares of our common stock subject to currently exercisable stock options.  Amounts shown do not include options to purchase 10,000 shares of our common stock exercisable at $.003 per share beginning July 30, 2013 and 10,000 shares of our common stock exercisable at $.003 per share beginning July 30, 2014.(8)High Capital Funding, LLC, 333 Sandy Springs Circle, Suite 230, Atlanta, Georgia 30328, the parent company of Generation Capital Associates, holds 497,156 shares of our common stock.  Generation Capital Associates holds 267,608 shares of our common stock. The number of shares includes 142,900 shares of our common stock that are subject to currently exercisable common stock purchase warrants held by Generation Capital Associates. Amounts shown do not include 422,100 shares of our common stock that are subject to common stock purchase warrants that are not currently exercisable because they contain a provision prohibiting their exercise to the extent that they would increase Generation Capital Associates’ percentage ownership beyond 9.9% of our outstanding shares of common stock. We have a secured promissory note with High Capital Funding, LLC and an operating lease with Generation Capital Associates.  At December 31, 2012 the outstanding principal and interest of the secured promissory note was $249,861 and we had recorded $253,169 in unpaid lease payments.       Table of Contents Item 13. Certain Relationships and Related Transactions, and Director Independence  We have an operating lease for certain equipment which is leased from one of our shareholders whose parent company holds a $249,206 secured promissory note (see Note D — Notes Payable of the financial statements appearing elsewhere in this Report). The original lease was dated November 21, 2001 and the terms were $6,088 per month for 12 months with a fair market purchase option at the end of the lease. Upon default on the lease, we were allowed to continue leasing the equipment on a month-to-month basis at the same monthly rate as the original lease. We have been unable to make the month-to-month payments.  In January and November 2006, we agreed to extend the expiration date on common stock purchase warrants exercisable for the purchase of 425,000 and 140,000common stock shares, respectively, for the lessor in return for a credit of $17,960 and $3,940, respectively, on the operating lease.  In September 2007, the lessor agreed to cease the monthly lease payments effective January 1, 2007 which generated a total of $54,795 of forgiveness of debt income.  The lessor also agreed to accept payments of $499 per month on the balance owed.  In January 2009, December 2009 and December 2012, we agreed to extend the expiration date on common stock purchase warrants exercisable for the purchase of 425,000, 140,000 and 140,000 common stock shares, respectively, for the lessor in return for a credit of $3,445, $773 and $3,274, respectively, on the operating lease.  At December 31, 2012 and 2011 we had recorded $253,169 and $256,443, respectively, in unpaid lease payments.  The loss of this equipment would have a material adverse effect on our business, financial condition and results of operations. We have been unable to make all of the required payments pursuant to the terms of the September 2007 agreement.  The lessor has not made any formal demands for payment or instituted collection action; however we are in discussions with the lessor to restructure this liability.  We also had an interim loan with the above shareholder which required payments equal to 50% of the net proceeds received by us from our private placement of convertible promissory notes.  This interim loan matured in December 2001.  In September 2007, the lender agreed to accept monthly payments of $5,800 beginning in December 2007 to be allocated 50% to principal and 50% to interest.   We were unable to make all of the required payments pursuant to the terms of the September 2007 agreement.  Beginning in June 2009, the lender agreed to accept temporary reduced monthly payments of $1,000 until such time as our financial position significantly improves.  We were unable to make all of the reduced monthly payments.  In October 2009 the lender assigned the interim loan to its parent company.  In December 2009 the parent company agreed to convert $248,578 of accrued interest on the interim loan into 497,156 restricted shares of our common stock valued at $.50 per share (the “Conversion”).  These shares were issuable at December 31, 2009, were equal to approximately 6.8% of the total number of shares outstanding and were issued in January 2010.  This transaction was accounted for as a troubled debt restructuring and a gain on debt forgiveness of $235,663 was recorded.  In December 2009 the parent company further agreed to make a new loan to us in the amount of $297,300.  This loan is secured by all our tangible and intangible assets.  The terms of this secured promissory note requires monthly installments of interest only for the first year then monthly installments of $3,301 including principal and interest.  The proceeds from this secured promissory note were used to repay the remaining principal amount of the interim loan of $292,300.  In connection with the Conversion, we also agreed to issue additional shares of stock to the parent company in the event that any additional shares are issued at less than $.50 per share, excluding employee stock options, prior to the payment in full of the secured promissory note.  In December 2011, we agreed to extend the expiration date on 150,000 and 275,000 common stock purchase warrants with exercise prices of $.01 and $1.00, respectively, from January 2, 2012 to January 2, 2015 and adjusted the exercise prices to $.003 in return for a credit of $1,113 on the outstanding principal balance of the secured promissory note.  This secured promissory note matured on December 30, 2011.  We continue to make monthly principal and interest payments.  The lender has not made any demands for payment of the outstanding principal balance of this note.  At December 31, 2012, the outstanding principal and accrued interest of the secured promissory note was $249,861.  Item 14. Principal Accounting Fees and Services  The following table sets forth the aggregate fees, including expenses, billed to us for the years ended December 31, 2012 and 2011 by our principal accountant.  20122011Audit Fees –Hood & Associates, CPAs, PC$
28,000$
32,000Tax Fees2,0222,000All Other Fees2,4592,034  The audit fees include services rendered by our principal accountant for the audit of our financial statements, review of financial statements included in our quarterly reports and other fees that are normally provided by the accountant in connection with statutory and regulatory filings or engagements. Because our Board of Directors only consists of two directors, each of whom does not qualify as an independent director; our Board of Directors performs the functions of an audit committee. It is our policy that the Board of Directors pre-approve all audit, tax and related services. All of the services described above in this Item 14 were approved in advance by our Board of Directors. No items were approved by the Board of Directors pursuant to paragraph (c)(7)(ii)(C) of Rule 2-01 of Regulation S-X.     Table of Contents Item 15. Exhibits, Financial Statement Schedules.  (a) The following exhibits are filed as part of this Report:  ExhibitNumberExhibit3.1Certificate 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).#3.2Bylaws (filed as Exhibit 2.2 to Registrant’s Registration Statement on Form 10-SB, file number 000-27031 and incorporated herein by reference)#4.1Specimen 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).#  4.2Certificate 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).#4.3Certificate 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).#4.4Form of Warrant Agreement for Interim Financing in the amount of $505,000 (filed as Exhibit 4.1 to Registrant’s Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference).#4.5Form of Warrant Certificate for Florida Investors for Interim Financing in the amount of $505,000 (filed as Exhibit 4.2 to Registrant’s Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference).#4.6Form of Promissory Note for Florida Investors for Interim Financing in the amount of $505,000 (filed as Exhibit 4.3 to Registrant’s Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference).#4.7Form of Warrant Certificate for Georgia Investors for Interim Financing in the amount of $505,000 (filed as Exhibit 4.4 to Registrant’s Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference).#4.8Form of Promissory Note for Georgia Investors for Interim Financing in the amount of $505,000 (filed as Exhibit 4.5 to Registrant’s Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference).#4.9Form of Warrant Certificate for Illinois Investors for Interim Financing in the amount of $505,000 (filed as Exhibit 4.6 to Registrant’s Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference).#4.10Form of Promissory Note for Illinois Investors for Interim Financing in the amount of $505,000 (filed as Exhibit 4.7 to Registrant’s Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference).#      Table of Contents  ExhibitNumberExhibit4.11Form of Warrant Agreement for Interim Financing in the amount of $500,000 (filed as Exhibit 4.8 to Registrant’s Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference).#4.12Form of Warrant Certificate for Interim Financing in the amount of $500,000 (filed as Exhibit 4.9 to Registrant’s Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference).#4.13Form of Promissory Note for Interim Financing in the amount of $500,000 (filed as Exhibit 4.10 to Registrant’s Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference).#4.14Form of Convertible Promissory Note for September 29, 2000, private placement (filed as Exhibit 4.13 to Registrant’s Form
10-KSB for the fiscal year ended December 31, 2000 and incorporated herein by reference).#4.15Form of Warrant Agreement for September 29, 2000, private placement (filed as Exhibit 4.13 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000 and incorporated herein by reference).#4.16Form of 2001 Exchange Warrant Agreement (filed as Exhibit 4.16 to Registrant’s Form 10-QSB for the quarter ended June 30, 2001 and incorporated herein by reference)#4.17Form of 2001 Exchange Warrant Certificate (filed as Exhibit 4.17 to Registrant’s Form 10-QSB for the quarter ended June 30, 2001 and incorporated herein by reference)#  10.1Financial 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).#10.2Lease 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).#10.3Interconnection 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).#10.4Stock Purchase Agreement between the Company and Animus Communications, Inc. (filed as Exhibit 6.2 to Registrant’s Registration Statement on Form 10-SB, file number 000-27031 and incorporated herein by reference).#10.5Registrar 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).#10.6Master License Agreement For KMC Telecom V, Inc., dated June 20, 2000, by and between FullNet Communications, Inc. and KMC Telecom V, Inc. (filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-QSB for the Quarter ended June 30, 2000 and incorporated herein by reference).#10.7Domain Registrar Project Completion Agreement, dated May 10, 2000, by and between FullNet Communications, Inc., FullWeb, Inc. d/b/a FullNic and Think Capital (filed as Exhibit 10.2 to Registrant’s Quarterly Report on Form 10-QSB for the Quarter ended June 30, 2000 and incorporated herein by reference).#      Table of Contents  ExhibitNumberExhibit10.8Amendment 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 June 30, 2000 and incorporated herein by reference).#10.9Asset Purchase Agreement dated June 2, 2000, by and between FullNet of Nowata and FullNet Communications, Inc. (filed as Exhibit 99.1 to Registrant’s Form 8-K filed on June 20, 2000 and incorporated herein by reference).#10.10Asset Purchase Agreement dated February 4, 2000, by and between FullNet of Bartlesville and FullNet Communications, Inc. (filed as Exhibit 2.1 to Registrant’s Form 8-K filed on February 18, 2000 and incorporated herein by reference).#10.11Agreement and Plan of Merger Among FullNet Communications, Inc., FullNet, Inc. and Harvest Communications, Inc. dated February 29, 2000 (filed as Exhibit 2.1 to Registrant’s Form 8-K filed on March 10, 2000 and incorporated herein by reference).#10.12Asset Purchase Agreement dated January 25, 2000, by and between FullNet of Tahlequah, and FullNet Communications, Inc. (filed as Exhibit 2.1 to Registrant’s Form 8-K filed on February 9, 2000 and incorporated herein by reference).#10.13Promissory Note dated August 2, 2000, issued to Timothy J. Kilkenny (filed as Exhibit 10.13 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).#10.14Warrant Agreement dated August 2, 2000, issued to Timothy J. Kilkenny (filed as Exhibit 10.14 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).#10.15Warrant Certificate dated August 2, 2000 issued to Timothy J. Kilkenny (filed as Exhibit 10.15 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).#10.16Stock Option Agreement dated December 8, 2000, issued to Timothy J. Kilkenny (filed as Exhibit 10.16 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).#10.17Warrant Agreement dated November 9, 2000, issued to Roger P. Baresel (filed as Exhibit 10.17 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).#10.18Warrant Agreement dated December 29, 2000, issued to Roger P. Baresel (filed as Exhibit 10.18 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).#10.19Stock Option Agreement dated February 29, 2000, issued to Wallace L Walcher (filed as Exhibit 10.19 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).#10.20Stock Option Agreement dated February 17, 1999, issued to Timothy J. Kilkenny (filed as Exhibit 3.1 to Registrant’s Registration Statement on Form 10-SB, file number 000-27031 and incorporated herein by reference).#10.21Stock Option Agreement dated October 19, 1999, issued to Wesdon C. Peacock (filed as Exhibit 10.21 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).#10.22Stock Option Agreement dated April 14, 2000, issued to Jason C. Ayers (filed as Exhibit 10.22 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).#10.23Stock Option Agreement dated May 1, 2000, issued to B. Don Turner (filed as Exhibit 10.23 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).#      Table of Contents  ExhibitNumberExhibit10.24Form of Stock Option Agreement dated December 8, 2000, issued to Jason C. Ayers, Wesdon C. Peacock, B. Don Turner and Wallace L. Walcher (filed as Exhibit 10.24 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).#10.25Warrant Certificate Dated November 9, 2000, issued to Roger P. Baresel (filed as Exhibit 10.25 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).#10.26Warrant Certificate Dated November 9, 2000, issued to Roger P. Baresel (filed as Exhibit 10.26 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).#10.27Warrant Certificate Dated December 29, 2000, issued to Roger P. Baresel (filed as Exhibit 10.27 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).#10.28Stock Option Agreement dated October 13, 2000, issued to Roger P. Baresel (filed as Exhibit 10.28 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).#10.29Stock Option Agreement dated October 12, 1999, issued to Travis Lane (filed as Exhibit 10.29 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).#10.30Promissory Note dated January 5, 2001, issued to Generation Capital Associates (filed as Exhibit 10.30 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).#10.31Placement 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).#10.32Promissory Note dated January 25, 2000, issued to FullNet of Tahlequah, Inc.#10.33Promissory Note dated February 7, 2000, issued to David Looper#10.34Promissory Note dated February 29, 2000, issued to Wallace L. Walcher#10.35Promissory Note dated June 2, 2000, issued to Lary Smith#10.36Promissory Note dated June 15, 2001, issued to higganbotham.com L.L.C.#10.37Promissory Note dated November 19, 2001, issued to Northeast Rural Services#10.38Promissory Note dated November 19, 2001, issued to Northeast Rural Services#10.39Form of Convertible Promissory Note dated September 6, 2002#      Table of Contents  ExhibitNumberExhibit10.40Employment Agreement with Timothy J. Kilkenny dated July 31, 2002#10.41Employment Agreement with Roger P. Baresel dated July 31, 2002#10.42Secured Promissory Note and Security Agreement dated December 30, 2009, issued to High Capital Funding, LLC#10.43Form 8-K dated January 30, 2003 reporting the change in certifying accountant.#10.44Form 8-K dated September 20, 2005 reporting the change in certifying accountant.#10.45Secured Promissory Note and Security Agreement dated December 30, 2009, issued to High Capital Funding, LLC#10.46Employment Agreement with Jason Ayers dated January 1, 2011#10.47Employment Agreement with Timothy J. Kilkenny dated July 6, 2011#10.48Employment Agreement with Roger P. Baresel dated July 6, 2011#10.49Employment Agreement with Jason Ayers dated July 6, 2011#21.1Subsidiaries of the Registrant#31.1Certification pursuant to Rules 13a-14(a) and 15d-14(a) of Timothy J. Kilkenny*31.2Certification pursuant to Rules 13a-14(a) and 15d-14(a) of Roger P. Baresel*32.1Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Timothy J. Kilkenny*32.2Certification 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*5.1Consent of Independent Registered Public Accounting Firm@  #Incorporated by reference.*Filed herewith.@To be filed by amendement to Form 10-K or by filing of Form 8-K.  The Consent is unavailable at time of filing due to compliance requirements imposed on Registrant’s Independent Registered Public Accounting Firm by the Public Company Accounting Oversite Board.      Table of Contents 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: April 15, 2013By:/s/ TIMOTHY J. KILKENNYTimothy J. KilkennyChief Executive Officer  Date: April 15, 2013By:/s/ ROGER P. BARESELRoger P. BareselPresident and Chief Financial and Accounting Officer   Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.  Date: April 15, 2013By:/s/ TIMOTHY J. KILKENNYTimothy J. KilkennyChairman of the Board and Director  Date: April 15, 2013By:/s/ ROGER P. BARESELRoger P. BareselDirector      Table of Contents  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  The Audit Committee FullNet Communications, Inc. and Subsidiaries Oklahoma City, Oklahoma  We have audited the accompanying consolidated balance sheets of FullNet Communications, Inc. and Subsidiaries for the years ended December 31, 2012 and 2011 and the related statements of operations, shareholders' equity, and cash flows for the years then ended  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards of the Public Company Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of FullNet Communications, Inc. and Subsidiaries as of December 31, 2012 and 2011, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note A to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters also are described in Note A. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.   Hood & Associates CPAs, P.C. Certified Public Accountants  March 29, 2013  Tulsa, Oklahoma     Table of Contents  FullNet Communications, Inc. and Subsidiaries  CONSOLIDATED BALANCE SHEETS


|                                                                                         |  |              |              |  |      |  |              |  |  |  |  |  | 
|---------------------------------------------------------------------------------------- |  | ------------ | ------------ |  | ---- |  | ------------ |  |  |  |  |  | 
|                                                                                         |  | December 31, |              | 
|                                                                                         |  | 2012         |              |  | 2011 |  |             
|ASSETS                                                                                   |  |              |              |  |      |  |             
|CURRENT ASSETS                                                                           |  |              |              |  |      |  |             
|Cash                                                                                     |  |              | $
10,847     |  |      |  | $
10,987     | 
|Accounts receivable, net                                                                 |  |              | 44,311       |  |      |  | 79,537       | 
|Prepaid expenses and other current assets                                                |  |              | 6,403        |  |      |  | 14,294       | 
|                                                                                         |  |              |              |  |      |  |              | 
|Total current assets                                                                     |  |              | 61,561       |  |      |  | 104,818      | 
|                                                                                         |  |              |              |  |      |  |              | 
|PROPERTY AND EQUIPMENT, net                                                              |  |              | 61,299       |  |      |  | 78,141       | 
|                                                                                         |  |              |              |  |      |  |              | 
|OTHER ASSETS                                                                             |  |              | 5,250        |  |      |  | 5,912        | 
|                                                                                         |  |              |              |  |      |  |              | 
|TOTAL                                                                                    |  |              | $
128,110    |  |      |  | $
188,871    | 
|                                                                                         |  |              |              |  |      |  |              | 
|LIABILITIES AND STOCKHOLDERS’ DEFICIT                                                    |  |              |              |  |      |  |              | 
|                                                                                         |  |              |              |  |      |  |              | 
|CURRENT LIABILITIES                                                                      |  |              |              |  |      |  |              | 
|Accounts payable                                                                         |  |              | $
482,286    |  |      |  | $
395,201    | 
|Accrued and other liabilities, current portion                                           |  |              | 281,808      |  |      |  | 259,252      | 
|Notes payable                                                                            |  |              | 304,206      |  |      |  | 328,078      | 
|Deferred revenue                                                                         |  |              | 198,837      |  |      |  | 173,954      | 
|                                                                                         |  |              |              |  |      |  |              | 
|Total current liabilities                                                                |  |              | 1,267,137    |  |      |  | 1,156,525    | 
|                                                                                         |  |              |              |  |      |  |              | 
|ACCRUED AND OTHER LIABILITIES, less current portion                                      |  |              | 784,225      |  |      |  | 773,091      | 
|                                                                                         |  |              |              |  |      |  |              | 
|Total liabilities                                                                        |  |              | 2,051,362    |  |      |  | 1,929,616    | 
|                                                                                         |  |              |              |  |      |  |              | 
|STOCKHOLDERS’ DEFICIT                                                                    |  |              |              |  |      |  |              | 
|Common stock — $.00001 par value; authorized, 10,000,000 shares; issued and outstanding, |  |              |              |  |      |  |              | 
|9,118,161and8,978,161in 2012and 2011, respectively                                       |  |              | 91           |  |      |  | 90           | 
|Additional paid-in capital                                                               |  |              | 8,417,050    |  |      |  | 8,409,945    | 
|Accumulated deficit                                                                      |  |              | (10,340,393) |  |      |  | (10,150,780) | 
|                                                                                         |  |              |              |  |      |  |              | 
|Total stockholders’ deficit                                                              |  |              | (1,923,252)  |  |      |  | (1,740,745)  | 
|                                                                                         |  |              |              |  |      |  |              | 
|TOTAL                                                                                    |  |              | $
128,110    |  |      |  | $
188,871    | 
|                                                                                         |  |              |              |  |      |  |              | 

See accompanying notes to financial statements.      Table of Contents  FullNet Communications, Inc. and Subsidiaries  CONSOLIDATED STATEMENTS OF OPERATIONS  Years ended December 31,20122011REVENUESAccess service revenues$
159,692$
233,895Co-location and other revenues1,434,5401,639,979Total revenues1,594,2321,873,874OPERATING COSTS AND EXPENSESCost of access service revenues135,051172,938Cost of co-location and other revenues348,133365,926Selling, general and administrative expenses1,246,3631,228,533Depreciation and amortization31,69454,267Total operating costs and expenses1,761,2411,821,664INCOME (LOSS)FROM OPERATIONS(167,009)52,210OTHER INCOME-37,268INTEREST EXPENSE(22,604)(24,148)INCOME (LOSS) before income taxes(189,613)65,330Income tax(benefit)expense--NET INCOME(LOSS)$
(189,613)$
65,330Net income(loss)per common shareBasic$
(.02)$
.01Assuming dilution$
(.02)$
.01Weighted average number of common shares outstandingBasic9,087,8288,316,517Assuming dilution9,439,5649,265,291  See accompanying notes to financial statements.      Table of Contents  FullNet Communications, Inc. and Subsidiaries  CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT  Years ended December 31, 2012 and 2011  Common stockAdditionalAccumulatedSharesAmountpaid-in capitaldeficitTotalBalance at January 1, 20117,852,464$
79$
8,397,829$
(10,216,110)$
(1,818,202)Stock compensation--2,558-2,558Stock options exercise1,125,697118,445-8,456Warrant extension granted in settlement of liabilities--1,113-1,113Netincome---65,33065,330Balance at December 31, 20118,978,161$
90$
8,409,945$
(10,150,780)$
(1,740,745)Stock compensation--3,412-3,412Stock options exercise140,0001419-420Warrant extension granted in settlement of liabilities--3,274-3,274Netloss---(189,613)(189,613)Balance at December 31, 20129,118,161$
91$
8,417,050$
(10,340,393)$
(1,923,252)  See accompanying notes to financial statements.        Table of Contents FullNet Communications, Inc. and Subsidiaries  CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                                     |  |                          |             |  |      |  |          | 
|------------------------------------------------------------------------------------ |  | ------------------------ | ----------- |  | ---- |  | -------- | 
|                                                                                     |  | Years ended December 31, |            
|                                                                                     |  | 2012                     |             |  | 2011 | 
|CASH FLOWS FROM OPERATING ACTIVITIES                                                 |  |                          |             |  |      | 
|Net income(loss)                                                                     |  |                          | $
(189,613) |  |      |  | $
65,330 | 
|Adjustments to reconcile netincome(loss)to net cash provided by operating activities |  |                          |             |  |      |  |          | 
|Depreciation and amortization                                                        |  |                          | 31,694      |  |      |  | 54,267   | 
|Stock compensation                                                                   |  |                          | 3,412       |  |      |  | 2,558    | 
|Other income                                                                         |  |                          | -           |  |      |  | (37,268) | 
|Provision for uncollectible accounts receivable                                      |  |                          | 15,405      |  |      |  | 3,079    | 
|Net (increase) decrease in                                                           |  |                          |             |  |      |  |          | 
|Accounts receivable                                                                  |  |                          | 19,821      |  |      |  | (29,229) | 
|Prepaid expenses and other current assets                                            |  |                          | 7,891       |  |      |  | (8,202)  | 
|Net increase (decrease) in                                                           |  |                          |             |  |      |  |          | 
|Accounts payable                                                                     |  |                          | 90,359      |  |      |  | (4,681)  | 
|Accrued and other liabilities                                                        |  |                          | 33,650      |  |      |  | (24,193) | 
|Deferred revenue                                                                     |  |                          | 24,883      |  |      |  | 40,090   | 
|                                                                                     |  |                          |             |  |      |  |          | 
|Net cash provided by operating activities                                            |  |                          | 37,502      |  |      |  | 61,751   | 
|                                                                                     |  |                          |             |  |      |  |          | 
|CASH FLOWS FROM INVESTING ACTIVITIES                                                 |  |                          |             |  |      |  |          | 
|Purchases of property and equipment                                                  |  |                          | (14,190)    |  |      |  | (36,911) | 
|Acquisition of business                                                              |  |                          | -           |  |      |  | (10,056) | 
|                                                                                     |  |                          |             |  |      |  |          | 
|Net cash used in investing activities                                                |  |                          | (14,190)    |  |      |  | (46,967) | 
|                                                                                     |  |                          |             |  |      |  |          | 
|CASH FLOWS FROM FINANCING ACTIVITIES                                                 |  |                          |             |  |      |  |          | 
|Principal payments on borrowings under notes payable                                 |  |                          | (23,872)    |  |      |  | (23,109) | 
|Proceeds from exercise of stock options                                              |  |                          | 420         |  |      |  | 8,456    | 
|                                                                                     |  |                          |             |  |      |  |          | 
|Net cash used in financing activities                                                |  |                          | (23,452)    |  |      |  | (14,653) | 
|                                                                                     |  |                          |             |  |      |  |          | 
|NET INCREASE (DECREASE) IN CASH                                                      |  |                          | (140)       |  |      |  | 131      | 
|                                                                                     |  |                          |             |  |      |  |          | 
|Cash at beginning of year                                                            |  |                          | 10,987      |  |      |  | 10,856   | 
|                                                                                     |  |                          |             |  |      |  |          | 
|Cash at end of year                                                                  |  |                          | $
10,847    |  |      |  | $
10,987 | 
|                                                                                     |  |                          |             |  |      |  |          | 
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                                    |  |                          |             |  |      |  |          | 
|                                                                                     |  |                          |             |  |      |  |          | 
|Cash paid for interest                                                               |  |                          | $
20,936    |  |      |  | $
21,698 | 
|Warrant extension granted in settlement of liabilities                               |  |                          | 3,274       |  |      |  | 1,113    | 

See accompanying notes to financial statements.      Table of Contents  FullNet Communications, Inc. and Subsidiaries  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  December 31, 2012 and 2011  [«33JE7SXV|LEVEL=1|LABEL=NOTE A — ORGANIZATION AND NATURE OF OPERATIONS|ABSTRACT=US-GAAP:DISCLOSURETEXTBLOCKABSTRACT|TAG=US-GAAP:NATUREOFOPERATIONS» NOTE A — ORGANIZATION AND NATURE OF OPERATIONS  FullNet Communications, Inc. and Subsidiaries (the Company) is an integrated communications provider (ICP) offering integrated communications, Internet connectivity and data storage to individuals, businesses, organizations, educational institutions and governmental agencies. Through its subsidiaries, FullNet, Inc., FullTel, Inc. and FullWeb, Inc., the Company provides high quality, reliable and scalable Internet solutions designed to meet customer needs. Services offered include:  •Dial-up and direct high-speed connectivity to the Internet through the FullNet brand name;•Backbone services to private label Internet services providers (ISPs) and businesses;•Carrier-neutral telecommunications premise co-location;•Web page hosting;•Equipment co-location;•Advanced voice and data solutions; and•Traditional telephone services.  [«23JCUTD7|LEVEL=2|LABEL=CONCENTRATION RISK, CREDIT RISK POLICY|ABSTRACT=US-GAAP:POLICYTEXTBLOCKABSTRACT|TAG=US-GAAP:CONCENTRATIONRISKCREDITRISK» The Company operates and grants credit, on an uncollateralized basis. Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers comprising the Company’s customer base and their dispersion across different industries. «23JCUTD7»]  [«23JCUVFE|LEVEL=2|LABEL=BASIS OF ACCOUNTING, POLICY|ABSTRACT=US-GAAP:POLICYTEXTBLOCKABSTRACT|TAG=US-GAAP:BASISOFACCOUNTINGPOLICYPOLICYTEXTBLOCK» The accompanying financial statements have been prepared in conformity with generally accepted accounting principles«23JCUVFE»] , which contemplate continuation of the Company as a going concern. [«23JA5EEP|LEVEL=2|LABEL=LIQUIDITY DISCLOSURE|ABSTRACT=US-GAAP:POLICYTEXTBLOCKABSTRACT|TAG=US-GAAP:LIQUIDITYDISCLOSURETEXTBLOCK» However, the Company has sustained substantial net losses. At December 31, 2012 and 2011 current liabilities exceeded current assets by $1,205,576 and $1,051,707, respectively. 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. In view of the matters described in the preceding paragraph, 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 web hosting, co-location, traditional telephone services 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. «23JA5EEP»]  «33JE7SXV»] [«31J97UC3|LEVEL=1|LABEL=NOTE B — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES|ABSTRACT=US-GAAP:DISCLOSURETEXTBLOCKABSTRACT|TAG=US-GAAP:SIGNIFICANTACCOUNTINGPOLICIESTEXTBLOCK» NOTE B — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  A summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows.  1.  Consolidation  [«21JF5GS9|LEVEL=2|LABEL=CONSOLIDATION, POLICY|ABSTRACT=US-GAAP:POLICYTEXTBLOCKABSTRACT|TAG=US-GAAP:CONSOLIDATIONPOLICYTEXTBLOCK» The consolidated financial statements include the accounts of FullNet Communications, Inc. and its wholly owned subsidiaries. All     Table of Contents material inter-company accounts and transactions have been eliminated. «21JF5GS9»]  2.  Revenue Recognition  [«23JA5FEP|LEVEL=2|LABEL=REVENUE RECOGNITION, DEFERRED REVENUE|ABSTRACT=US-GAAP:POLICYTEXTBLOCKABSTRACT|TAG=US-GAAP:REVENUERECOGNITIONDEFERREDREVENUE» 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 and traditional telephone 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 the Company. Revenue related to set up charges is also deferred and amortized over the life of the contract. «23JA5FEP»]  [«23JA581K|LEVEL=2|LABEL=REVENUE RECOGNITION ACCOUNTING POLICY, GROSS AND NET REVENUE DISCLOSURE|ABSTRACT=US-GAAP:POLICYTEXTBLOCKABSTRACT|TAG=US-GAAP:REVENUERECOGNITIONACCOUNTINGPOLICYGROSSANDNETREVENUEDISCLOSURE» The Company classifies certain taxes and fees billed to customers and remitted to governmental authorities on a net basis in revenue. «23JA581K»]  The Company began billing AT&T (formerly SBC) reciprocal compensation (fees for terminating AT&T customer’s local calls onto the Company’s network) during 2004, and has billed for the periods of March 2003 through June 2006.  AT&T failed to pay and is disputing approximately $183,700.  The Company is pursuing AT&T for all balances due, however there is significant uncertainty as to whether or not the Company will be successful. Upon the ultimate resolution of AT&T’s challenge, the Company will recognize the associated revenue, if any. The Company does not expect reciprocal compensation to be a significant or a long-term revenue source.  3.  Accounts Receivable  Accounts receivable consist of the following at December 31: [«23JFPXU3|LEVEL=3|LABEL=SCHEDULE OF ACCOUNTS RECEIVABLE|ABSTRACT=US-GAAP:TABLETEXTBLOCK|TAG=US-GAAP:SCHEDULEOFACCOUNTSNOTESLOANSANDFINANCINGRECEIVABLETEXTBLOCK»  Schedule of Accounts Receivable[«E5JCFTUY|TIME=2012-12-31»2012«E5JCFTUY»][«E7JGFTGG|TIME=2011-12-31»2011«E7JGFTGG»][«E5JC9G7J|TAG=US-GAAP:ACCOUNTSRECEIVABLEGROSSCURRENT|LABEL=*»Accounts receivable«E5JC9G7J»]$
261,273$
281,094[«E5JGCF37|TAG=US-GAAP:ALLOWANCEFORDOUBTFULACCOUNTSRECEIVABLECURRENT|LABEL=*»Less allowance for doubtful accounts«E5JGCF37»](216,962)(201,557)[«E7JGCWE1|TAG=US-GAAP:ACCOUNTSRECEIVABLENETCURRENT|LABEL=*»«E7JGCWE1»]$
44,311$
79,537 «23JFPXU3»]  [«23JF5AK7|LEVEL=2|LABEL=RECEIVABLES, POLICY|ABSTRACT=US-GAAP:POLICYTEXTBLOCKABSTRACT|TAG=US-GAAP:RECEIVABLESPOLICYTEXTBLOCK» Accounts receivable, other than certain large customer accounts which are evaluated individually, are considered past due for purposes of determining the allowance for doubtful accounts based on past experience of collectability as follows:  1 – 29 days1.5%30 – 59 days30%60 – 89 days50%> 90 days100%  In addition, if the Company becomes aware of a specific customer’s inability to meet its financial obligations, a specific reserve is recoded against amounts due to reduce the net recognized receivable to the amount reasonably expected to be collected. «23JF5AK7»]  4.  Property and Equipment  [«23JA5XZS|LEVEL=2|LABEL=DEPRECIATION, DEPLETION, AND AMORTIZATION|ABSTRACT=US-GAAP:POLICYTEXTBLOCKABSTRACT|TAG=US-GAAP:DEPRECIATIONDEPLETIONANDAMORTIZATIONPOLICYTEXTBLOCK» Property and equipment are stated at cost. Depreciation is computed primarily using the straight-line method over the estimated useful lives of the related assets as follows:  Software3 yearsComputers and equipment5 yearsFurniture and fixtures7 yearsLeasehold improvementsShorter of estimated life of improvement or the lease term «23JA5XZS»]  5.  Long-Lived Assets[«21JA5W47|LEVEL=2|LABEL=IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS, POLICY|ABSTRACT=US-GAAP:POLICYTEXTBLOCKABSTRACT|TAG=US-GAAP:IMPAIRMENTORDISPOSALOFLONGLIVEDASSETSPOLICYTEXTBLOCK»  All long-lived assets held and used by the Company, including intangible assets, are reviewed to determine whether any events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The Company bases its evaluation on such impairment indicators as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements, as well as other external market conditions or factors that may be present. If such impairment indicators are present or other factors exist that indicate that the carrying amount of the asset may not be recoverable the Company determines     Table of Contents whether impairment has occurred through the use of an undiscounted cash flows analysis of the asset. If impairment has occurred, the Company recognizes a loss for the difference between the carrying amount and the estimated value of the asset.  «21JA5W47»] The Company recorded no impairments during the years ended December 31, 2012 and 2011.  6.    Accrued and Other Liabilities  Accrued and other liabilities consist of the following at December 31: [«DJJG38W2|LEVEL=3|LABEL=SCHEDULE OF ACCRUED AND OTHER LIABILITIES|ABSTRACT=US-GAAP:TABLETEXTBLOCKSUPPLEMENTABSTRACT|TAG=US-GAAP:SCHEDULEOFACCRUEDLIABILITIESTABLETEXTBLOCK»  Schedule of Accrued and Other Current Liabilities[«E7JCADEC|TIME=2012-12-31»2012«E7JCADEC»][«E7JGAD55|TIME=2011-12-31»2011«E7JGAD55»][«E7JCAWUF|TAG=US-GAAP:INTERESTPAYABLECURRENTANDNONCURRENT|LABEL=*»Accrued interest«E7JCAWUF»]$
4,121$
2,451[«GLJAPAC5|TAG=US-GAAP:DEFERREDCOMPENSATIONLIABILITYCURRENTANDNONCURRENT|LABEL=*»Accrued deferred compensation«GLJAPAC5»]846,718832,897[«E7JGAZ4Y|TAG=US-GAAP:ACCRUEDVACATIONCURRENTANDNONCURRENT|LABEL=*»Accrued unused vacation and sick leave«E7JGAZ4Y»]117,359110,044[«E5JCATZX|TAG=US-GAAP:OTHERACCRUEDLIABILITIESCURRENTANDNONCURRENT|LABEL=*»Accrued other liabilities«E5JCATZX»]97,83588,425[«E7JGN8CZ|TAG=US-GAAP:OTHERLIABILITIES|LABEL=*|ROLE=SUM»«E7JGN8CZ»]1,066,0331,032,383[«E5JCNAAA|TAG=US-GAAP:OTHERLIABILITIESCURRENT|LABEL=*»Less current portion«E5JCNAAA»]281,808259,292[«E7JCNW4M|TAG=US-GAAP:OTHERLIABILITIESNONCURRENT|LABEL=*|ROLE=SUM»«E7JCNW4M»]$
784,225$
773,091 «DJJG38W2»]  Accrued net deferred compensation consists of the following as of December 31, 2012:  Net accrued (used) in:2012[«GLJARC2K|TAG=US-GAAP:INCREASEDECREASEINDEFERREDCOMPENSATION|LABEL=*|TIME=2012-01-01~2012-12-31|UNIT=USD|PRECISION=INF»
$
13,821«GLJARC2K»]2011[«GJJFRAFS|TAG=US-GAAP:INCREASEDECREASEINDEFERREDCOMPENSATION|LABEL=*|TIME=2011-01-01~2011-12-31|UNIT=USD|PRECISION=INF»
(34,685)«GJJFRAFS»]2010[«GJJARXWW|TAG=US-GAAP:INCREASEDECREASEINDEFERREDCOMPENSATION|LABEL=*|TIME=2010-01-01~2010-12-31|UNIT=USD|PRECISION=INF»
167,425«GJJARXWW»]2000-2009[«GJJARWSH|TAG=US-GAAP:INCREASEDECREASEINDEFERREDCOMPENSATION|LABEL=*|TIME=2000-01-01~2009-12-31|UNIT=USD|PRECISION=INF»
700,157«GJJARWSH»]$
846,718  All of the Company’s executive officers have voluntarily agreed to defer a portion of their compensation. This compensation is vested.  The Company’s top three executive officers have employment agreements which contain a “Change in Control” provision which provides for the immediate lump sum payment of their accrued deferred compensation in the event of a qualifying event.  Accrued deferred compensation subject to this provision totaled approximately [«GLJG2VTE|TAG=US-GAAP:DEFERREDCOMPENSATIONLIABILITYCURRENTANDNONCURRENT|LABEL=*|TIME=2012-12-31|DIM=US-GAAP:DEFERREDCOMPENSATIONARRANGEMENTWITHINDIVIDUALSHAREBASEDPAYMENTSBYTYPEOFDEFERREDCOMPENSATIONAXIS~FIL:DEFERREDCOMPENSATIONDUEUPONCHANGEINCONTROLMEMBER»$620,406«GLJG2VTE»] and [«GLJC2VER|TAG=US-GAAP:DEFERREDCOMPENSATIONLIABILITYCURRENTANDNONCURRENT|LABEL=*|TIME=2011-12-31|DIM=US-GAAP:DEFERREDCOMPENSATIONARRANGEMENTWITHINDIVIDUALSHAREBASEDPAYMENTSBYTYPEOFDEFERREDCOMPENSATIONAXIS~FIL:DEFERREDCOMPENSATIONDUEUPONCHANGEINCONTROLMEMBER»$609,691«GLJC2VER»] at December 31, 2012 and 2011, respectively.  7.  Income Taxes  [«23JA5ZDG|LEVEL=2|LABEL=INCOME TAX, POLICY|ABSTRACT=US-GAAP:POLICYTEXTBLOCKABSTRACT|TAG=US-GAAP:INCOMETAXPOLICYTEXTBLOCK» The Company follows the liability method of accounting for income taxes. Under the liability method, deferred income taxes are provided on temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated financial statements and carry forwards that will result in taxable or deductible amounts in future years. Deferred income tax assets or liabilities are determined by applying the presently enacted tax rates and laws. Additionally, the Company provides a valuation allowance on deferred tax assets if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense and does not believe it has any material unrealized tax benefits at December 31, 2012.  The Company files income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions.«23JA5ZDG»]       Table of Contents 8.    Income Per Share  [«23JF5TL6|LEVEL=2|LABEL=EARNINGS PER SHARE, POLICY|ABSTRACT=US-GAAP:POLICYTEXTBLOCKABSTRACT|TAG=US-GAAP:EARNINGSPERSHAREPOLICYTEXTBLOCK» Income (loss) per share – basic is calculated by dividing net income 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. [«23JAUYLD|LEVEL=3|LABEL=COMPUTATION OF BASIC AND DILUTED INCOME (LOSS) PER SHARE|ABSTRACT=US-GAAP:TABLETEXTBLOCK|TAG=US-GAAP:SCHEDULEOFEARNINGSPERSHAREBASICANDDILUTEDTABLETEXTBLOCK»  Schedule of Income (Loss) Per Share[«E3JFGXK0|TIME=2012-01-01~2012-12-31»2012«E3JFGXK0»][«E1JAGXG5|TIME=2011-01-01~2011-12-31»2011«E1JAGXG5»]Numerator:[«E7JFR91J|TAG=US-GAAP:NETINCOMELOSS|LABEL=*»Net income(loss)«E7JFR91J»]$
(189,613)$
65,330Denominator:[«E5JFRGDK|TAG=US-GAAP:WEIGHTEDAVERAGENUMBEROFSHARESISSUEDBASIC|LABEL=*»Weighted average shares and share equivalents outstanding – basic«E5JFRGDK»]9,087,8288,316,517[«E1JC2WXR|TAG=US-GAAP:INCREMENTALCOMMONSHARESATTRIBUTABLETOSHAREBASEDPAYMENTARRANGEMENTS|LABEL=*»Effect of dilutive stock options«E1JC2WXR»]58,024129,658[«E5JFMW7R|TAG=US-GAAP:INCREMENTALCOMMONSHARESATTRIBUTABLETOCALLOPTIONSANDWARRANTS|LABEL=*»Effect of dilutive warrants«E5JFMW7R»]293,712819,116[«E5JFMWR7|TAG=US-GAAP:INCREMENTALCOMMONSHARESATTRIBUTABLETOCONVERSIONOFDEBTSECURITIES|LABEL=*»Effect of dilutive convertible promissory notes«E5JFMWR7»]--[«E5JFRF37|TAG=US-GAAP:WEIGHTEDAVERAGENUMBEROFDILUTEDSHARESOUTSTANDING|LABEL=*»Weighted average shares and share equivalents outstanding – assuming dilution«E5JFRF37»]9,439,5649,265,291[«E5JANVC9|TAG=US-GAAP:EARNINGSPERSHAREBASIC|LABEL=*»Net income(loss)per share — basic«E5JANVC9»]$
(.02)$
.01[«E7JFNUEJ|TAG=US-GAAP:EARNINGSPERSHAREDILUTED|LABEL=*»Net income(loss)per share — assuming dilution«E7JFNUEJ»]$
(.02)$
.01 «23JAUYLD»]  Basic and diluted loss per share were the same for the year ended December 31, 2012 because there was a net loss for the year.  Stock options exercisable for the purchase of [«GJJAXXL1|TAG=US-GAAP:ANTIDILUTIVESHARESOUTSTANDING|LABEL=*|TIME=2012-01-01~2012-12-31|DIM=US-GAAP:ANTIDILUTIVESECURITIESEXCLUDEDFROMCOMPUTATIONOFEARNINGSPERSHAREBYANTIDILUTIVESECURITIESAXIS~US-GAAP:STOCKOPTIONSMEMBER|UNIT=SHARES|PRECISION=INF|FTNT=EXERCISE PRICES RANGING FROM $.04 TO $.14 PER SHARE»1,045,216 «GJJAXXL1»]and [«GJJAXA1Z|TAG=US-GAAP:ANTIDILUTIVESHARESOUTSTANDING|LABEL=*|TIME=2011-01-01~2011-12-31|DIM=US-GAAP:ANTIDILUTIVESECURITIESEXCLUDEDFROMCOMPUTATIONOFEARNINGSPERSHAREBYANTIDILUTIVESECURITIESAXIS~US-GAAP:STOCKOPTIONSMEMBER|UNIT=SHARES|PRECISION=INF|FTNT=EXERCISE PRICES RANGING FROM $.04 TO $.14 PER SHARE»1,263,783 «GJJAXA1Z»]common stock shares at exercise prices ranging from $.04 to $.14 per share, respectively, were outstanding for the years ended December 31, 2012 and 2011, but were not included in the calculation of income (loss) per share – assuming dilution because the options were not dilutive.  Warrants exercisable for the purchase of [«GJJAXC9R|TAG=US-GAAP:ANTIDILUTIVESHARESOUTSTANDING|LABEL=*|TIME=2012-01-01~2012-12-31|DIM=US-GAAP:ANTIDILUTIVESECURITIESEXCLUDEDFROMCOMPUTATIONOFEARNINGSPERSHAREBYANTIDILUTIVESECURITIESAXIS~US-GAAP:WARRANTMEMBER|FTNT=EXPERCISE PRICE OF $.01 PER SHARE»140,000 «GJJAXC9R»]common stock shares at an exercise price of $.01 per share were outstanding for the year ended December 31, 2012 and warrants exercisable for the purchase of [«GLJAXCTR|TAG=US-GAAP:ANTIDILUTIVESHARESOUTSTANDING|LABEL=*|TIME=2011-01-01~2011-12-31|DIM=US-GAAP:ANTIDILUTIVESECURITIESEXCLUDEDFROMCOMPUTATIONOFEARNINGSPERSHAREBYANTIDILUTIVESECURITIESAXIS~US-GAAP:WARRANTMEMBER|UNIT=SHARES|PRECISION=INF|FTNT=EXERCISE PRICES RANGING FROM $.08 TO $.13 PER SHARE»96,000 «GLJAXCTR»]common stock shares at exercise prices ranging from $.08 to $.13 per share were outstanding for the year ended December 31, 2011, but were not included in the calculation of income (loss) per share – assuming dilution because the warrants were not dilutive.  A convertible promissory note convertible into [«GGJACYTL|TAG=US-GAAP:ANTIDILUTIVESHARESOUTSTANDING|LABEL=*|TIME=2011-01-01~2011-12-31|DIM=US-GAAP:ANTIDILUTIVESECURITIESEXCLUDEDFROMCOMPUTATIONOFEARNINGSPERSHAREBYANTIDILUTIVESECURITIESAXIS~US-GAAP:CONVERTIBLEDEBTSECURITIESMEMBER|UNIT=SHARES|PRECISION=INF|FTNT=CONVERSION PRICE OF $.51 PER SHARE»[«GLJFX8UW|TAG=US-GAAP:ANTIDILUTIVESHARESOUTSTANDING|LABEL=*|TIME=2012-01-01~2012-12-31|DIM=US-GAAP:ANTIDILUTIVESECURITIESEXCLUDEDFROMCOMPUTATIONOFEARNINGSPERSHAREBYANTIDILUTIVESECURITIESAXIS~US-GAAP:CONVERTIBLEDEBTSECURITIESMEMBER|UNIT=SHARES|PRECISION=INF|FTNT=CONVERSION PRICE OF $.51 PER SHARE»107,843 «GLJFX8UW»]«GGJACYTL»]common stock shares at a conversion price of $.51 per share (see Note D - Notes Payable) was outstanding for the years ended December 31, 2012 and 2011, but was not included in the calculation of income (loss) per share – assuming dilution because the convertible note was not dilutive. «23JF5TL6»]  9.     Stock Options and Warrants  [«21JA5STP|LEVEL=2|LABEL=SHARE-BASED COMPENSATION, OPTION AND INCENTIVE PLANS POLICY|ABSTRACT=US-GAAP:POLICYTEXTBLOCKABSTRACT|TAG=US-GAAP:SHAREBASEDCOMPENSATIONOPTIONANDINCENTIVEPLANSPOLICY» The Company does not have a written employee stock option plan.  The Company has historically granted only employee stock options with an exercise price equal to the market price of the Company’s stock at the date of grant, a contractual term of ten years, and a vesting period of three years ratably on the first, second and third anniversaries of the date of grant (with limited exceptions).  All employee stock options granted during 2012 and 2011 were nonqualified stock options.   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 fair values of the granted options are estimated at the date of grant using the Black-Scholes option pricing model.  See Note N for further information on stock-based compensation. «21JA5STP»]                Table of Contents The following table summarizes the Company’s employee stock option activity for year ended December 31, 2012: [«21JFUVRU|LEVEL=3|LABEL=SCHEDULE OF EMPLOYEE STOCK OPTION ACTIVITY|ABSTRACT=US-GAAP:TABLETEXTBLOCK|TAG=US-GAAP:SCHEDULEOFSHAREBASEDCOMPENSATIONACTIVITYTABLETEXTBLOCK»  [«EZJEKX94|TIME=F|DIM=US-GAAP:AWARDTYPEAXIS~US-GAAP:STOCKOPTIONSMEMBER»«EZJEKX94»]Schedule of Employee Stock Option Activity[«EXJEKY1W»«EXJEKY1W»][«EZJ9KYFJ»«EZJ9KYFJ»][«EZJEKYGP»«EZJEKYGP»][«EZJEKYGP»«EZJEKYGP»]
Weighted[«EXJ9KYDV»«EXJ9KYDV»][«EXJEKYE0»«EXJEKYE0»][«EZJ9KYA5»«EZJ9KYA5»]WeightedaverageAggregateaverageremainingintrinsic2012exercise pricecontractual life (yrs)valueOptions outstanding, beginning of year[«DLJGKU64|TAG=US-GAAP:SHAREBASEDCOMPENSATIONARRANGEMENTBYSHAREBASEDPAYMENTAWARDOPTIONSOUTSTANDINGNUMBER|LABEL=*|ROLE=EN|TIME=2011-12-31|DIM=US-GAAP:AWARDTYPEAXIS~US-GAAP:STOCKOPTIONSMEMBER»1,462,783«DLJGKU64»][«DLJCXENC|TAG=US-GAAP:SHAREBASEDCOMPENSATIONARRANGEMENTBYSHAREBASEDPAYMENTAWARDOPTIONSOUTSTANDINGWEIGHTEDAVERAGEEXERCISEPRICE|LABEL=*|ROLE=EN|TIME=2011-12-31|DIM=US-GAAP:AWARDTYPEAXIS~US-GAAP:STOCKOPTIONSMEMBER»$.040«DLJCXENC»]Options granted during the year[«DJJGHACR|TAG=US-GAAP:SHAREBASEDCOMPENSATIONARRANGEMENTBYSHAREBASEDPAYMENTAWARDOPTIONSGRANTSINPERIODGROSS|LABEL=*|TIME=2012-01-01~2012-12-31|DIM=US-GAAP:AWARDTYPEAXIS~US-GAAP:STOCKOPTIONSMEMBER»341,000«DJJGHACR»][«DLJGHU51|TAG=US-GAAP:SHAREBASEDCOMPENSATIONARRANGEMENTSBYSHAREBASEDPAYMENTAWARDOPTIONSGRANTSINPERIODWEIGHTEDAVERAGEEXERCISEPRICE|LABEL=*|TIME=2012-01-01~2012-12-31|DIM=US-GAAP:AWARDTYPEAXIS~US-GAAP:STOCKOPTIONSMEMBER».003«DLJGHU51»]Options exercised during the year[«DLJCHX13|TAG=US-GAAP:STOCKISSUEDDURINGPERIODSHARESSTOCKOPTIONSEXERCISED|LABEL=*|ROLE=NEG|TIME=2012-01-01~2012-12-31|DIM=US-GAAP:AWARDTYPEAXIS~US-GAAP:STOCKOPTIONSMEMBER»(140,000)«DLJCHX13»][«DJJGLEY8|TAG=US-GAAP:SHAREBASEDCOMPENSATIONARRANGEMENTSBYSHAREBASEDPAYMENTAWARDOPTIONSEXERCISESINPERIODWEIGHTEDAVERAGEEXERCISEPRICE|LABEL=*|TIME=2012-01-01~2012-12-31|DIM=US-GAAP:AWARDTYPEAXIS~US-GAAP:STOCKOPTIONSMEMBER».003«DJJGLEY8»]Options forfeited during the year[«DLJGHW6M|TAG=US-GAAP:SHAREBASEDCOMPENSATIONARRANGEMENTBYSHAREBASEDPAYMENTAWARDOPTIONSFORFEITURESINPERIOD|LABEL=*|ROLE=NEG|TIME=2012-01-01~2012-12-31|DIM=US-GAAP:AWARDTYPEAXIS~US-GAAP:STOCKOPTIONSMEMBER»(75,566)«DLJGHW6M»][«DJJGLDJJ|TAG=US-GAAP:SHAREBASEDCOMPENSATIONARRANGEMENTSBYSHAREBASEDPAYMENTAWARDOPTIONSFORFEITURESINPERIODWEIGHTEDAVERAGEEXERCISEPRICE|LABEL=*|TIME=2012-01-01~2012-12-31|DIM=US-GAAP:AWARDTYPEAXIS~US-GAAP:STOCKOPTIONSMEMBER».021«DJJGLDJJ»]Options expired during the year[«DLJGHZTX|TAG=US-GAAP:SHAREBASEDCOMPENSATIONARRANGEMENTBYSHAREBASEDPAYMENTAWARDOPTIONSEXPIRATIONSINPERIOD|LABEL=*|ROLE=NEG|TIME=2012-01-01~2012-12-31|DIM=US-GAAP:AWARDTYPEAXIS~US-GAAP:STOCKOPTIONSMEMBER»(183,667)«DLJGHZTX»][«DJJGLGMA|TAG=US-GAAP:SHAREBASEDCOMPENSATIONARRANGEMENTSBYSHAREBASEDPAYMENTAWARDOPTIONSEXPIRATIONSINPERIODWEIGHTEDAVERAGEEXERCISEPRICE|LABEL=*|TIME=2012-01-01~2012-12-31|DIM=US-GAAP:AWARDTYPEAXIS~US-GAAP:STOCKOPTIONSMEMBER».050«DJJGLGMA»]Options outstanding, end of year[«DLJGHY3V|TAG=US-GAAP:SHAREBASEDCOMPENSATIONARRANGEMENTBYSHAREBASEDPAYMENTAWARDOPTIONSOUTSTANDINGNUMBER|LABEL=*|ROLE=EN|TIME=2012-12-31|DIM=US-GAAP:AWARDTYPEAXIS~US-GAAP:STOCKOPTIONSMEMBER»1,404,550«DLJGHY3V»][«DLJGLGAW|TAG=US-GAAP:SHAREBASEDCOMPENSATIONARRANGEMENTBYSHAREBASEDPAYMENTAWARDOPTIONSOUTSTANDINGWEIGHTEDAVERAGEEXERCISEPRICE|LABEL=*|ROLE=EN|TIME=2012-12-31|DIM=US-GAAP:AWARDTYPEAXIS~US-GAAP:STOCKOPTIONSMEMBER»$.034«DLJGLGAW»][«DLJCWFNL|TAG=US-GAAP:SHAREBASEDCOMPENSATIONARRANGEMENTBYSHAREBASEDPAYMENTAWARDOPTIONSOUTSTANDINGWEIGHTEDAVERAGEREMAININGCONTRACTUALTERM|LABEL=*|TIME=2012-01-01~2012-12-31|DIM=US-GAAP:AWARDTYPEAXIS~US-GAAP:STOCKOPTIONSMEMBER».75«DLJCWFNL»][«DJJGL89T|TAG=US-GAAP:SHAREBASEDCOMPENSATIONARRANGEMENTBYSHAREBASEDPAYMENTAWARDOPTIONSOUTSTANDINGINTRINSICVALUE|LABEL=*|TIME=2012-12-31|DIM=US-GAAP:AWARDTYPEAXIS~US-GAAP:STOCKOPTIONSMEMBER»$9,070«DJJGL89T»]Options exercisable at end of year[«DLJGHSNJ|TAG=US-GAAP:SHAREBASEDCOMPENSATIONARRANGEMENTBYSHAREBASEDPAYMENTAWARDOPTIONSEXERCISABLENUMBER|LABEL=*|TIME=2012-12-31|DIM=US-GAAP:AWARDTYPEAXIS~US-GAAP:STOCKOPTIONSMEMBER»1,249,550«DLJGHSNJ»][«DJJCLF0W|TAG=US-GAAP:SHAREBASEDCOMPENSATIONARRANGEMENTBYSHAREBASEDPAYMENTAWARDOPTIONSEXERCISABLEWEIGHTEDAVERAGEEXERCISEPRICE|LABEL=*|TIME=2012-12-31|DIM=US-GAAP:AWARDTYPEAXIS~US-GAAP:STOCKOPTIONSMEMBER»$.037«DJJCLF0W»][«DLJGKZZZ|TAG=US-GAAP:SHAREBASEDCOMPENSATIONARRANGEMENTBYSHAREBASEDPAYMENTAWARDOPTIONSEXERCISABLEWEIGHTEDAVERAGEREMAININGCONTRACTUALTERM|LABEL=*|TIME=2012-01-01~2012-12-31|DIM=US-GAAP:AWARDTYPEAXIS~US-GAAP:STOCKOPTIONSMEMBER»2.27«DLJGKZZZ»][«DJJGLCT9|TAG=US-GAAP:SHAREBASEDCOMPENSATIONARRANGEMENTBYSHAREBASEDPAYMENTAWARDOPTIONSEXERCISABLEINTRINSICVALUE1|LABEL=*|TIME=2012-12-31|DIM=US-GAAP:AWARDTYPEAXIS~US-GAAP:STOCKOPTIONSMEMBER»$4,920«DJJGLCT9»] «21JFUVRU»]  The following table summarizes the Company’s non-vested employee stock option activity for year ended December 31, 2012: [«23JAUUFE|LEVEL=3|LABEL=SCHEDULE OF CHANGES IN NON-VESTED OPTIONS|ABSTRACT=US-GAAP:TABLETEXTBLOCK|TAG=US-GAAP:SCHEDULEOFNONVESTEDSHAREACTIVITYTABLETEXTBLOCK»  Weightedaveragegrant date2012fair valueNon-vested options outstanding, beginning of year119,900$
1,605Options granted during the year341,0001,253Options vested during the year(230,334)(694)Options forfeited during the year(75,566)(1,428)Non-vested options outstanding, end of year155,000$
456 «23JAUUFE»]  The weighted-average grant date fair value of stock options granted was [«GEJA0Y8S|TAG=US-GAAP:SHAREBASEDCOMPENSATIONARRANGEMENTBYSHAREBASEDPAYMENTAWARDOPTIONSGRANTSINPERIODWEIGHTEDAVERAGEGRANTDATEFAIRVALUE|LABEL=*|TIME=2012-01-01~2012-12-31|DIM=US-GAAP:AWARDTYPEAXIS~US-GAAP:STOCKOPTIONSMEMBER|UNIT=USDPERSHARE|PRECISION=INF»$.003 «GEJA0Y8S»]and [«DJJC1SDW|TAG=US-GAAP:SHAREBASEDCOMPENSATIONARRANGEMENTBYSHAREBASEDPAYMENTAWARDOPTIONSGRANTSINPERIODWEIGHTEDAVERAGEGRANTDATEFAIRVALUE|LABEL=*|TIME=2011-01-01~2011-12-31|DIM=US-GAAP:STATEMENTCLASSOFSTOCKAXIS~US-GAAP:STOCKOPTIONSMEMBER|UNIT=USDPERSHARE|PRECISION=INF»$.01«DJJC1SDW»] in 2012 and 2011, respectively.  The fair value of stock options vested was [«DLJC1V08|TAG=US-GAAP:SHAREBASEDCOMPENSATIONARRANGEMENTBYSHAREBASEDPAYMENTAWARDOPTIONSVESTEDINPERIODFAIRVALUE|LABEL=*|TIME=2012-01-01~2012-12-31|DIM=US-GAAP:STATEMENTCLASSOFSTOCKAXIS~US-GAAP:STOCKOPTIONSMEMBER|UNIT=USD|PRECISION=INF»$694 «DLJC1V08»]and [«DLJG1US2|TAG=US-GAAP:SHAREBASEDCOMPENSATIONARRANGEMENTBYSHAREBASEDPAYMENTAWARDOPTIONSVESTEDINPERIODFAIRVALUE|LABEL=*|TIME=2011-01-01~2011-12-31|DIM=US-GAAP:STATEMENTCLASSOFSTOCKAXIS~US-GAAP:STOCKOPTIONSMEMBER|UNIT=USD|PRECISION=INF»$9,242 «DLJG1US2»]in 2012 and 2011, respectively.  Common Stock Purchase Warrants– A summary of common stock purchase warrant activity for the years ended December 31, 2012 and 2011 follows:  In December 2012, the Company agreed to extend the expiration date on 140,000 of common stock purchase warrants with exercise prices of $.01and $.13 from December 1, 2012 to December 21, 2015 and adjusted the exercise prices to $.01 in return for a credit of $3,274 on the outstanding balance of an operating lease payable (see Note I – Certain Relationships).  In December 2011, the Company agreed to extend the expiration date on 150,000 and 275,000 common stock purchase warrants with exercise prices of $.01 and $1.00, respectively, from January 2, 2012 to January 2, 2015 and adjusted the exercise prices to $.003 in return for a credit of $1,113 on the outstanding principal balance of a secured promissory note (see Note D - Notes Payable).           Table of Contents Outstanding common stock purchase warrants issued to non-employees outstanding at December 31, 2012 are as follows:  NumberExerciseExpirationof sharespriceyear140,000.0102012425,000.0032015565,000  The following table summarizes the Company’s common stock purchase warrant activity for the year ended December 31, 2012: [«23JE5D3J|LEVEL=3|LABEL=SCHEDULE OF COMMON STOCK PURCHASE WARRANT AND NON-EMPLOYEE STOCK OPTION ACTIVITY|ABSTRACT=US-GAAP:TABLETEXTBLOCK|TAG=US-GAAP:SCHEDULEOFOTHERSHAREBASEDCOMPENSATIONACTIVITYTABLETEXTBLOCK»  [«GJJF2DC7|TIME=F|DIM=US-GAAP:STATEMENTEQUITYCOMPONENTSAXIS~US-GAAP:WARRANTMEMBER»«GJJF2DC7»]Schedule of Common Stock Purchase Warrant and Non-employee Stock Option Activity[«GJJF2F42»«GJJF2F42»][«GLJA2FFY»«GLJA2FFY»]WeightedAverage2012Exercise PriceWarrants and non-employee stock options outstanding, beginning of year[«GJJF2ZV3|TAG=US-GAAP:SHAREBASEDCOMPENSATIONARRANGEMENTBYSHAREBASEDPAYMENTAWARDNONOPTIONEQUITYINSTRUMENTSOUTSTANDINGNUMBER|LABEL=*|ROLE=ST»
591,000«GJJF2ZV3»][«GJJFFZNJ|TAG=US-GAAP:SHAREBASEDCOMPENSATIONSHARESAUTHORIZEDUNDERSTOCKOPTIONPLANSEXERCISEPRICERANGEEXERCISABLEOPTIONSWEIGHTEDAVERAGEEXERCISEPRICE1|LABEL=*|ROLE=ST»
$
.023«GJJFFZNJ»]Warrants and non-employee stock options expired during the year[«GLJF2WYD|TAG=US-GAAP:SHAREBASEDCOMPENSATIONARRANGEMENTBYSHAREBASEDPAYMENTAWARDNONOPTIONEQUITYINSTRUMENTSEXPIRATIONS|LABEL=*»
(26,000)«GLJF2WYD»][«GJJA9AT7|TAG=US-GAAP:SHAREBASEDCOMPENSATIONARRANGEMENTSBYSHAREBASEDPAYMENTAWARDOPTIONSOTHERSHAREINCREASEDECREASEINPERIODWEIGHTEDAVERAGEEXERCISEPRICE|LABEL=*»
.091«GJJA9AT7»]Warrants and non-employee stock options outstanding, end of year[«GLJF2YYD|TAG=US-GAAP:SHAREBASEDCOMPENSATIONARRANGEMENTBYSHAREBASEDPAYMENTAWARDNONOPTIONEQUITYINSTRUMENTSOUTSTANDINGNUMBER|LABEL=*|ROLE=EN»
565,000«GLJF2YYD»][«GLJAFWUF|TAG=US-GAAP:SHAREBASEDCOMPENSATIONSHARESAUTHORIZEDUNDERSTOCKOPTIONPLANSEXERCISEPRICERANGEEXERCISABLEOPTIONSWEIGHTEDAVERAGEEXERCISEPRICE1|LABEL=*|ROLE=EN»
$
.005«GLJAFWUF»] «23JE5D3J»]  10.     Advertising  [«21JA5U70|LEVEL=2|LABEL=ADVERTISING COST, POLICY, EXPENSES ADVERTISING COST|ABSTRACT=US-GAAP:POLICYTEXTBLOCKABSTRACT|TAG=US-GAAP:ADVERTISINGCOSTPOLICYEXPENSEDADVERTISINGCOST» The Company expenses advertising production costs as they are incurred and advertising communication costs the first time the advertising takes place. «21JA5U70»] Advertising expense for the years ended December 31, 2012 and 2011 was [«GLJGFD4K|TAG=US-GAAP:ADVERTISINGEXPENSE|LABEL=*|TIME=2012-01-01~2012-12-31|UNIT=USD|PRECISION=INF»$51,632 «GLJGFD4K»]and [«GLJCFGVN|TAG=US-GAAP:ADVERTISINGEXPENSE|LABEL=*|TIME=2011-01-01~2011-12-31|UNIT=USD|PRECISION=INF»$21,904«GLJCFGVN»], respectively.  11.     Use of Estimates  [«23JA4EZM|LEVEL=2|LABEL=USE OF ESTIMATES, POLICY|ABSTRACT=US-GAAP:POLICYTEXTBLOCKABSTRACT|TAG=US-GAAP:USEOFESTIMATES» The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures; accordingly, actual results could differ from those estimates. «23JA4EZM»]  12.     Recently Issued Accounting Standards  [«23JA4DT2|LEVEL=2|LABEL=NEW ACCOUNTING PRONOUNCEMENTS, POLICY|ABSTRACT=US-GAAP:POLICYTEXTBLOCKABSTRACT|TAG=US-GAAP:NEWACCOUNTINGPRONOUNCEMENTSPOLICYPOLICYTEXTBLOCK»
Fair Value Measurements


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|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The FASB issued updated authoritative guidance in May 2011 to amend fair value measurements and related disclosures; the guidance became effective for the Company at the beginning of its 2012 fiscal year. This guidance relates to a major convergence project of the FASB and the International Accounting Standards Board to improve International Financial Reporting Standards (“IFRS”) and U.S. GAAP. This guidance resulted in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between IFRS and U.S. GAAP. The guidance also changed some fair value measurement principles and enhanced disclosure requirements related to activities in Level 3 of the fair value hierarchy. The adoption of this updated authoritative guidance had no impact on the Company’s Consolidated Financial Statements.

«23JA4DT2»] «31J97UC3»]         [«33J96ECG|LEVEL=1|LABEL=NOTE C — PROPERTY AND EQUIPMENT|ABSTRACT=US-GAAP:DISCLOSURETEXTBLOCKABSTRACT|TAG=US-GAAP:PROPERTYPLANTANDEQUIPMENTDISCLOSURETEXTBLOCK» NOTE C — PROPERTY AND EQUIPMENT Property and equipment consist of the following at December 31: [«E1JA0C5L|LEVEL=3|LABEL=SCHEDULE OF PROPERTY AND EQUIPMENT|TAG=US-GAAP:PROPERTYPLANTANDEQUIPMENTTEXTBLOCK»  Schedule of Property and Equipment[«E1JCXGE3|TIME=2012-12-31»2012«E1JCXGE3»][«E3JGXFXN|TIME=2011-12-31»2011«E3JGXFXN»][«GLJA6DC5|TAG=US-GAAP:FIXTURESANDEQUIPMENTGROSS|LABEL=*|FTNT=ESTIMATED USEFUL LIFE 5 YEARS»Computers and equipment«GLJA6DC5»]$
1,527,170$
1,516,280[«GLJA7V3J|TAG=US-GAAP:LEASEHOLDIMPROVEMENTSGROSS|LABEL=*|FTNT=ESTIMATED USEFUL LIFE LEASE TERM»Leasehold improvements«GLJA7V3J»]991,749991,749[«GLJA7WGN|TAG=US-GAAP:CAPITALIZEDCOMPUTERSOFTWAREGROSS|LABEL=*|FTNT=ESTIMATED USEFUL LIFE 3 YEARS»Software«GLJA7WGN»]57,33757,337[«GJJF7TVV|TAG=US-GAAP:FURNITUREANDFIXTURESGROSS|LABEL=*|FTNT=ESTIMATED USEFUL LIFE 7 YEARS»Furniture and fixtures«GJJF7TVV»]31,82128,521[«E1JCW9W8|TAG=US-GAAP:PROPERTYPLANTANDEQUIPMENTGROSS|LABEL=*»«E1JCW9W8»]2,608,0772,593,887[«E3JCW86P|TAG=US-GAAP:ACCUMULATEDDEPRECIATIONDEPLETIONANDAMORTIZATIONPROPERTYPLANTANDEQUIPMENT|LABEL=*»Less accumulated depreciation«E3JCW86P»](2,546,778)(2,515,746)[«E3JCWCV5|TAG=US-GAAP:PROPERTYPLANTANDEQUIPMENTNET|LABEL=*»«E3JCWCV5»]$
61,299$
78,141 «E1JA0C5L»]   Depreciation expense for the years ended December 31, 2012 and 2011 was [«DTJDXCNM|TAG=US-GAAP:DEPRECIATION|LABEL=*|TIME=2012-01-01~2012-12-31»$31,032«DTJDXCNM»] and [«DVJDXWYV|TAG=US-GAAP:DEPRECIATION|LABEL=*|TIME=2011-01-01~2011-12-31»$44,835«DVJDXWYV»], respectively. «33J96ECG»]  [«31JE6D9C|LEVEL=1|LABEL=NOTE D — NOTES PAYABLE|ABSTRACT=US-GAAP:DISCLOSURETEXTBLOCKABSTRACT|TAG=US-GAAP:DEBTDISCLOSURETEXTBLOCK» NOTE D — NOTES PAYABLE [«E3JA1XKY|LEVEL=3|LABEL=SCHEDULE OF NOTES PAYABLE|TAG=US-GAAP:SCHEDULEOFDEBTTABLETEXTBLOCK»  Notes payable consist of the following:Schedule of Notes Payable[«E3JGYFUM|TIME=2012-12-31»December 31,2012«E3JGYFUM»][«E1JGYF5N|TIME=2011-12-31»December 31, 2011«E1JGYF5N»][«GJJATUAP|TAG=US-GAAP:CONVERTIBLENOTESPAYABLE|LABEL=*|DIM=US-GAAP:LONGTERMDEBTTYPEAXIS~US-GAAP:CONVERTIBLEDEBTMEMBER|UNIT=USD|PRECISION=INF|FTNT=INTEREST RATE 12.5%»Convertible promissory note; interest at[«GLJFTZF4|TAG=US-GAAP:DEBTINSTRUMENTINTERESTRATESTATEDPERCENTAGE|LABEL=*|TIME=2012-12-31|UNIT=PURE»12.5%«GLJFTZF4»]of face amount, payable quarterly; thisnoteisunsecured and maturedin November 2003(convertible into approximately 107,843 shares at December 31, 2012and 2011) (1)«GJJATUAP»]$
55,000$
55,000[«GJJFSDV7|TAG=US-GAAP:OTHERNOTESPAYABLE|LABEL=*|DIM=US-GAAP:LONGTERMDEBTTYPEAXIS~US-GAAP:SECUREDDEBTMEMBER|UNIT=USD|PRECISION=INF|FTNT=INTEREST RATE 6%»Secured promissory note from a shareholder; interest at[«GJJFTYVC|TAG=US-GAAP:DEBTINSTRUMENTINTERESTRATESTATEDPERCENTAGE|LABEL=*|TIME=2012-12-31|DIM=US-GAAP:LONGTERMDEBTTYPEAXIS~US-GAAP:SECUREDDEBTMEMBER|UNIT=PURE»6%«GJJFTYVC»], requiredmonthly installments of interest onlythroughDecember 30, 2010, thenrequiredmonthly installments of $3,301 including principal and interest; maturedDecember 30, 2011; secured by all tangible and intangible assets of the Company (2)«GJJFSDV7»]249,206273,078[«GXJFHDHP|TAG=US-GAAP:NOTESPAYABLECURRENT|LABEL=*|UNIT=USD|PRECISION=INF»«GXJFHDHP»]304,206328,078Less current portion304,206328,078$
-$
- —————————— (1) This convertible promissory note matured in November 2003.  The Company has been unable to pay this note and has been making quarterly interest payments.  The Company has not negotiated an extension of this note and the lender has not made any demands for payment of the principal amount of this note. The Company is currently developing a plan to satisfy this note.  At December 31, 2012, the outstanding principal and accrued interest of the convertible promissory note was [«GLJAWSAF|TAG=US-GAAP:DEBTINSTRUMENTINCREASEACCRUEDINTEREST|LABEL=*|TIME=2012-01-01~2012-12-31|DIM=US-GAAP:LONGTERMDEBTTYPEAXIS~US-GAAP:CONVERTIBLEDEBTMEMBER»$58,466«GLJAWSAF»].  (2) The Company agreed to issue additional shares of stock to this note holder in the event that any additional shares are issued at less than $.50 per share, excluding employee stock options, prior to the payment in full of the secured promissory note.  In December 2011, the Company agreed to extend the expiration date on 150,000 and 275,000 common stock purchase warrants with exercise prices of $.01 and $1.00, respectively, from January 2, 2012 to January 2, 2015 and adjusted the exercise prices to $.003 in return for a credit of $1,113 on the outstanding principal balance of the secured promissory note.  This secured promissory note matured on December 30, 2011.  The Company continues to make monthly principal and interest payments.  The note holder has not made any demands for payment of the outstanding principal balance of this note.  At December 31, 2012, the outstanding principal and accrued interest of the secured promissory note was [«GLJAZGLN|TAG=US-GAAP:DEBTINSTRUMENTINCREASEACCRUEDINTEREST|LABEL=*|TIME=2012-01-01~2012-12-31|DIM=US-GAAP:LONGTERMDEBTTYPEAXIS~US-GAAP:SECUREDDEBTMEMBER»$249,861«GLJAZGLN»].  Aggregate future maturities of notes payable at December 31, 2012 are as follows:  2013[«GLJA4CTZ|TAG=US-GAAP:LONGTERMDEBTMATURITIESREPAYMENTSOFPRINCIPALINNEXTROLLINGTWELVEMONTHS|LABEL=*|TIME=2012-01-01~2012-12-31|UNIT=USD|PRECISION=INF»$
304,206«GLJA4CTZ»]  «E3JA1XKY»] [«33JE6FPK|LEVEL=1|LABEL=NOTE E – COMMITMENTS AND CONTINGENCIES|ABSTRACT=US-GAAP:DISCLOSURETEXTBLOCKABSTRACT|TAG=US-GAAP:COMMITMENTSANDCONTINGENCIESDISCLOSURETEXTBLOCK» NOTE E – COMMITMENTS AND CONTINGENCIES  COMMITMENTS  Operating Leases   The Company leases certain office facilities used in its operations under non-cancelable operating leases which will expire in 2019. Future minimum lease payments required at December 31, 2012 under non-cancelable operating leases that have initial lease terms    Table of Contents exceeding one year are presented in the following table: [«21JE5AM4|LEVEL=3|LABEL=SCHEDULE OF FUTURE MINIMUM PAYMENTS UNDER OPERATING LEASE|ABSTRACT=US-GAAP:TABLETEXTBLOCK|TAG=US-GAAP:SCHEDULEOFFUTUREMINIMUMRENTALPAYMENTSFOROPERATINGLEASESTABLETEXTBLOCK»  Year ending December 31[«GRJDLE54|TIME=2012-12-31»«GRJDLE54»][«GRJ8RT3S|TAG=US-GAAP:OPERATINGLEASESFUTUREMINIMUMPAYMENTSDUECURRENT|LABEL=*|TIME=2012-12-31|UNIT=USD|PRECISION=INF»2013«GRJ8RT3S»]$
208,698[«GRJG4UGZ|TAG=US-GAAP:OPERATINGLEASESFUTUREMINIMUMPAYMENTSDUEINTWOYEARS|LABEL=*|TIME=2012-12-31|UNIT=USD|PRECISION=INF»2014«GRJG4UGZ»]230,002[«GRJG7ES6|TAG=US-GAAP:OPERATINGLEASESFUTUREMINIMUMPAYMENTSDUEINTHREEYEARS|LABEL=*|TIME=2012-12-31|UNIT=USD|PRECISION=INF»2015«GRJG7ES6»]249,571[«GRJC7ECX|TAG=US-GAAP:OPERATINGLEASESFUTUREMINIMUMPAYMENTSDUEINFOURYEARS|LABEL=*|TIME=2012-12-31|UNIT=USD|PRECISION=INF»2016«GRJC7ECX»]224,098[«GNJC58ZT|TAG=US-GAAP:OPERATINGLEASESFUTUREMINIMUMPAYMENTSDUEINFIVEYEARS|LABEL=*|UNIT=USD|PRECISION=INF»[«GRJG7DX5|TAG=US-GAAP:OPERATINGLEASESFUTUREMINIMUMPAYMENTSDUEINFIVEYEARS|LABEL=*|TIME=2012-12-31|UNIT=USD|PRECISION=INF»2017«GRJG7DX5»]«GNJC58ZT»]221,782[«GRJG58FS|TAG=US-GAAP:OPERATINGLEASESFUTUREMINIMUMPAYMENTSDUETHEREAFTER|LABEL=*|UNIT=USD|PRECISION=INF»Thereafter«GRJG58FS»]443[«GRJC7DG9|TIME=2012-12-31»«GRJC7DG9»],564[«GNJG5AUD|TAG=US-GAAP:OPERATINGLEASESFUTUREMINIMUMPAYMENTSDUE|LABEL=*|UNIT=USD|PRECISION=INF»«GNJG5AUD»]$
1,577,[«GNJG7G60|TIME=2012-12-31»«GNJG7G60»]715 «21JE5AM4»]  Rental expense for all operating leases for the years ended December 31, 2012 and 2011 was approximately [«GRJG5XYM|TAG=US-GAAP:LEASEANDRENTALEXPENSE|LABEL=*|TIME=2012-01-01~2012-12-31|UNIT=USD|PRECISION=INF»$237,114«GRJG5XYM»] and [«GNJC5XDW|TAG=US-GAAP:LEASEANDRENTALEXPENSE|LABEL=*|TIME=2011-01-01~2011-12-31|UNIT=USD|PRECISION=INF»$247,942«GNJC5XDW»][«DVJ8KG6E|TAG=US-GAAP:OPERATINGLEASESRENTEXPENSE|LABEL=*|TIME=2011-01-01~2011-12-31»«DVJ8KG6E»], respectively.  [«23JA4G1U|LEVEL=2|LABEL=LEASE, POLICY|ABSTRACT=US-GAAP:POLICYTEXTBLOCKABSTRACT|TAG=US-GAAP:LEASEPOLICYTEXTBLOCK» The Company’s long-term non-cancelable operating lease includes scheduled base rental increases over the term of the lease. The total amount of the base rental payments is charged to expense on the straight-line method over the term of the lease. «23JA4G1U»] The Company had recorded a deferred credit of [«GLJFJCJJ|TAG=US-GAAP:DEFERREDRENTCREDIT|LABEL=*|TIME=2012-12-31»$22,179 «GLJFJCJJ»]at December 31, 2012, which is reflected in Other Long-term Liabilities on the Balance Sheet to reflect the net excess of rental expense over cash payments since inception of the lease. In addition to the base rent payments the Company pays a monthly allocation of the building’s operating expenses.  CONTINGENCIES  As a provider of telecommunications, the Company is affected by regulatory proceedings in the ordinary course of its 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 its operations the Company relies on obtaining many of its 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, the Company concluded a regulatory proceeding pursuant to the Federal Telecommunications Act of 1996 before the OCC relating to the terms of its 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 the Company.  The Company is unable to accurately predict the outcomes of such regulatory proceedings at this time, but an unfavorable outcome could have a material adverse effect on the Company’s business, financial condition or results of operations. «33JE6FPK»]  [«33JE6F88|LEVEL=1|LABEL=NOTE F — INCOME TAXES|ABSTRACT=US-GAAP:DISCLOSURETEXTBLOCKABSTRACT|TAG=US-GAAP:INCOMETAXDISCLOSURETEXTBLOCK» NOTE F — INCOME TAXES  The Company’s effective income tax rate on net loss differed from the federal statutory rate of 34% as follows at December 31: [«21J95X9E|LEVEL=3|LABEL=RECONCILIATION OF STATUTORY FEDERAL INCOME TAX RATE|ABSTRACT=US-GAAP:TABLETEXTBLOCK|TAG=US-GAAP:SCHEDULEOFEFFECTIVEINCOMETAXRATERECONCILIATIONTABLETEXTBLOCK»  [«GLJF8YUH|TIME=2012-01-01~2012-12-31»2012«GLJF8YUH»][«GLJA8TPK|TIME=2011-01-01~2011-12-31»2011«GLJA8TPK»][«GJJF9UNT|TAG=US-GAAP:INCOMETAXRECONCILIATIONINCOMETAXEXPENSEBENEFITATFEDERALSTATUTORYINCOMETAXRATE|LABEL=*|UNIT=USD|PRECISION=INF»Income taxes benefit at federal statutory rate«GJJF9UNT»]$
(64,000)$
22,000[«GLJA8W7N|TAG=US-GAAP:INCOMETAXRECONCILIATIONSTATEANDLOCALINCOMETAXES|LABEL=*|UNIT=USD|PRECISION=INF»Tax effect of state income taxes benefit«GLJA8W7N»](8,000)3,000[«GLJA8EV5|TAG=US-GAAP:INCOMETAXRECONCILIATIONCHANGEINDEFERREDTAXASSETSVALUATIONALLOWANCE|LABEL=*|UNIT=USD|PRECISION=INF»Change in valuation allowance«GLJA8EV5»]56,000(378,000)[«GLJA8D6P|TAG=US-GAAP:INCOMETAXRECONCILIATIONNONDEDUCTIBLEEXPENSE|LABEL=*|UNIT=USD|PRECISION=INF»Nondeductible expenses«GLJA8D6P»]1,0002,000[«GLJF8G5N|TAG=US-GAAP:INCOMETAXRECONCILIATIONOTHERRECONCILINGITEMS|LABEL=*|UNIT=USD|PRECISION=INF»Other«GLJF8G5N»]15,000351,000[«GLJF8C7V|TAG=US-GAAP:INCOMETAXEXPENSEBENEFIT|LABEL=*|UNIT=USD|PRECISION=INF»Total tax expense«GLJF8C7V»]$
-$
- «21J95X9E»]  The components of deferred income tax assets were as follows at December 31: [«21JE5W9Z|LEVEL=3|LABEL=SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES|ABSTRACT=US-GAAP:TABLETEXTBLOCK|TAG=US-GAAP:SCHEDULEOFDEFERREDTAXASSETSANDLIABILITIESTABLETEXTBLOCK»  [«GJJACXA6|TIME=2012-12-31»2012«GJJACXA6»][«GJJACWHS|TIME=2011-12-31»2011«GJJACWHS»][«GJJFCA0F|TAG=US-GAAP:DEFERREDTAXASSETSDEFERREDINCOME|LABEL=*»Deferred income tax assets«GJJFCA0F»][«GLJFNDT9|TAG=US-GAAP:DEFERREDTAXASSETSPROPERTYPLANTANDEQUIPMENT|LABEL=*|UNIT=USD|PRECISION=INF»Basis difference in property and equipment and intangible assets«GLJFNDT9»]$
281,000$
311,000[«GLJAAUHH|TAG=US-GAAP:DEFERREDTAXASSETSDEFERREDINCOME|LABEL=*|UNIT=USD|PRECISION=INF»Deferred revenue«GLJAAUHH»]76,00067,000[«GJJFMDSF|TAG=US-GAAP:DEFERREDTAXASSETSOPERATINGLOSSCARRYFORWARDS|LABEL=*|TIME=2011-12-31»Net operating loss«GJJFMDSF»]999,000945,000[«GJJAAZ9V|TAG=US-GAAP:DEFERREDTAXASSETSTAXDEFERREDEXPENSECOMPENSATIONANDBENEFITS|LABEL=*|UNIT=USD|PRECISION=INF»Deferred compensation and other«GJJAAZ9V»]14,000(9,000)[«GJJAAELE|TAG=US-GAAP:DEFERREDTAXASSETSVALUATIONALLOWANCE|LABEL=*|UNIT=USD|PRECISION=INF»Valuation allowance«GJJAAELE»](1,370,000)(1,314,000)[«GJJFCUJX|TAG=US-GAAP:DEFERREDTAXASSETSLIABILITIESNET|LABEL=*|UNIT=USD|PRECISION=INF»Net deferred income tax asset«GJJFCUJX»]--Change in valuation allowance$
56,000$
(378,000) «21JE5W9Z»]  A valuation allowance is provided for deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. At December 31, 2012, the Company has a net operating loss carry forward of approximately $999,000    Table of Contents that will expire at various dates through [«GJJFMCFH|TAG=US-GAAP:OPERATINGLOSSCARRYFORWARDSEXPIRATIONDATES|LABEL=*|TIME=2012-01-01~2012-12-31»2032«GJJFMCFH»]. Because this carry forward can only be used to offset future taxable income of the Company, management has provided a valuation allowance until it is more likely than not that taxable income will be generated.  The Company has adopted the provisions of FASB Accounting Standards Codification Topic ASC 740-10 (previously Financial Interpretation No. 48, Accounting for Uncertainty in Income Taxes), on January 1, 2007. The implementation of this standard had no impact on the financial statements. As of the date of adoption and as of December 31, 2012 and 2011, the unrecognized tax benefit accrual was zero.  The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense and does not believe it has any material unrealized tax benefits at December 31, 2012.  The Company files income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions and is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years prior to 2006. «33JE6F88»]  [«33J9685X|LEVEL=1|LABEL=NOTE G — COMMON STOCK|ABSTRACT=US-GAAP:DISCLOSURETEXTBLOCKABSTRACT|TAG=US-GAAP:STOCKHOLDERSEQUITYNOTEDISCLOSURETEXTBLOCK» NOTE G — COMMON STOCK  Employee stock options for [«GJJA5CT7|TAG=US-GAAP:STOCKISSUEDDURINGPERIODSHARESSTOCKOPTIONSEXERCISED|LABEL=*|TIME=2012-03-01~2012-03-31|UNIT=SHARES|PRECISION=INF»140,000 «GJJA5CT7»]shares of the Company’s common stock were exercised in March 2012 for [«GLJCUV3T|TAG=US-GAAP:PROCEEDSFROMSTOCKOPTIONSEXERCISED|LABEL=*|TIME=2012-03-01~2012-03-31|UNIT=USD|PRECISION=INF»$420«GLJCUV3T»].  Employee stock options for [«GJJA5X1C|TAG=US-GAAP:STOCKISSUEDDURINGPERIODSHARESSTOCKOPTIONSEXERCISED|LABEL=*|TIME=2011-05-01~2011-05-31|UNIT=SHARES|PRECISION=INF»725,697 «GJJA5X1C»]and [«GLJA5ZM4|TAG=US-GAAP:STOCKISSUEDDURINGPERIODSHARESSTOCKOPTIONSEXERCISED|LABEL=*|TIME=2011-12-01~2011-12-31|UNIT=SHARES|PRECISION=INF»400,000 «GLJA5ZM4»]shares of the Company’s common stock were exercised in May 2011 for [«GLJGUS5J|TAG=US-GAAP:PROCEEDSFROMSTOCKOPTIONSEXERCISED|LABEL=*|TIME=2011-05-01~2011-05-31»$7,256 «GLJGUS5J»][«GJJCUVR5|TAG=US-GAAP:PROCEEDSFROMSTOCKOPTIONSEXERCISED|LABEL=*|TIME=2011-05-01~2011-05-31|UNIT=USD|PRECISION=INF»«GJJCUVR5»]and December 2011 for [«GJJCUUC1|TAG=US-GAAP:PROCEEDSFROMSTOCKOPTIONSEXERCISED|LABEL=*|TIME=2011-12-01~2011-12-31|UNIT=USD|PRECISION=INF»$1,200«GJJCUUC1»], respectively.  On December 29, 2009 the Company converted $248,578 of accrued interest on an interim loan from a shareholder into 497,156 restricted shares of the Company’s common stock valued at $.50 per share.  These shares were equal to approximately 6.8% of the total number of shares outstanding and were issued on January 20, 2010.  During the fourth quarter of 2009 this transaction was accounted for as a troubled debt restructuring and a gain on debt forgiveness of $235,663 was recorded.  In connection with the conversion, the Company also agreed to issue additional shares of stock to the holder of a secured promissory note in the event that any additional shares are issued at less than $.50 per share, excluding employee stock options, prior to the payment in full of the secured promissory note (see Note D — Notes Payable).  No shares other than employee stock options shares were issued by the Company at less than $.50 per share during 2012 and 2011. «33J9685X»]  [«31JE6CHH|LEVEL=1|LABEL=NOTE H – FAIR VALUE OF FINANCIAL INSTRUMENTS|ABSTRACT=US-GAAP:DISCLOSURETEXTBLOCKABSTRACT|TAG=US-GAAP:FAIRVALUEDISCLOSURESTEXTBLOCK» NOTE H – FAIR VALUE OF FINANCIAL INSTRUMENTS  [«21JF4F1W|LEVEL=2|LABEL=FAIR VALUE OF FINANCIAL INSTRUMENTS, POLICY|ABSTRACT=US-GAAP:POLICYTEXTBLOCKABSTRACT|TAG=US-GAAP:FAIRVALUEOFFINANCIALINSTRUMENTSPOLICY» ASC 820-10 requires that an entity disclose the fair value of financial instruments for which it is practicable to estimate the value. The Company considers the carrying value of certain financial instruments on the balance sheets, including cash, accounts receivable, and other assets to be reasonable estimates of fair value.  At December 31, 2012 and 2011, the carrying amount of the Company’s liabilities for corporate borrowings and other obligations was [«GLJCU8R9|TAG=US-GAAP:LIABILITIES|LABEL=*|TIME=2012-12-31|UNIT=USD|PRECISION=INF»$2,051,362 «GLJCU8R9»]and [«GLJCU840|TAG=US-GAAP:LIABILITIES|LABEL=*|TIME=2011-12-31|UNIT=USD|PRECISION=INF»$1,929,616«GLJCU840»], respectively, and the fair value was estimated to be approximately [«GNJDZVD5|TAG=US-GAAP:LONGTERMDEBTFAIRVALUE|LABEL=*|TIME=2012-12-31|UNIT=USD|PRECISION=INF»$128,000 «GNJDZVD5»]and [«GRJDZUW5|TAG=US-GAAP:LONGTERMDEBTFAIRVALUE|LABEL=*|TIME=2011-12-31|UNIT=USD|PRECISION=INF»$189,000«GRJDZUW5»], respectively.  These amounts are based on the present value of estimated future cash outflows which is discounted based on the risk of nonperformance due to the uncertainty of the Company’s ability to continue as a going concern. «21JF4F1W»] «31JE6CHH»]  [«33J96AS6|LEVEL=1|LABEL=NOTE I – CERTAIN RELATIONSHIPS|ABSTRACT=US-GAAP:DISCLOSURETEXTBLOCKABSTRACT|TAG=US-GAAP:RELATEDPARTYTRANSACTIONSDISCLOSURETEXTBLOCK» NOTE I – CERTAIN RELATIONSHIPS  The Company has an operating lease for certain equipment which is leased from one of its shareholders whose parent company holds a $249,206 secured promissory note (see Note D — Notes Payable). The original lease was dated November 21, 2001 and the terms were $6,088 per month for 12 months with a fair market purchase option at the end of the lease. Upon default on the lease, the Company was allowed to continue leasing the equipment on a month-to-month basis at the same monthly rate as the original lease. The Company has been unable to make the month-to-month payments.  In January and November 2006, the Company agreed to extend the expiration date on common stock purchase warrants exercisable for the purchase of 425,000 and 140,000common stock shares, respectively, for the lessor in return for a credit of $17,960 and $3,940, respectively, on the operating lease.  In September 2007, the lessor agreed to cease the monthly lease payments effective January 1, 2007 which generated a total of $54,795 of forgiveness of debt income.  The lessor also agreed to accept payments of $499 per month on the balance owed.  In January 2009,   December 2009 and December 2012, the Company agreed to extend the expiration date on common stock purchase warrants exercisable for the purchase of 425,000, 140,000 and 140,000 common stock shares, respectively, for the lessor in return for a credit of $3,445, $773 and $3,274, respectively, on the operating lease.  At December 31, 2012 and 2011 the Company had recorded $253,169 and $256,443, respectively, in unpaid lease payments.  The loss of this equipment would have a material adverse effect on the Company’s business, financial condition and results of operations. The Company has been unable to make all of the required payments pursuant to the terms of the September 2007 agreement.  The lessor has not made any formal demands for payment or instituted collection action; however the Company is in discussions with the lessor to restructure this liability. «33J96AS6»]  [«33J96XK0|LEVEL=1|LABEL=NOTE J – CONCENTRATIONS|ABSTRACT=US-GAAP:DISCLOSURETEXTBLOCKABSTRACT|TAG=US-GAAP:CONCENTRATIONRISKDISCLOSURETEXTBLOCK» NOTE J – CONCENTRATIONS   During the year ended December 31, 2012, the Company had two customers that each comprised approximately [«GNJDVCSX|TAG=US-GAAP:CONCENTRATIONRISKCUSTOMER|LABEL=*|TIME=2012-01-01~2012-12-31|DIM=US-GAAP:CONCENTRATIONRISKBYTYPEAXIS~FIL:CUSTOMER1MEMBER»11%«GNJDVCSX»] and [«GNJDVZV2|TAG=US-GAAP:CONCENTRATIONRISKCUSTOMER|LABEL=*|TIME=2012-01-01~2012-12-31|DIM=US-GAAP:CONCENTRATIONRISKBYTYPEAXIS~FIL:CUSTOMER2MEMBER»9%«GNJDVZV2»] of total revenues, respectively.  During the year ended December 31, 2011these two customers each comprised approximately [«GNJDVXLA|TAG=US-GAAP:CONCENTRATIONRISKCUSTOMER|LABEL=*|TIME=2011-01-01~2011-12-31|DIM=US-GAAP:CONCENTRATIONRISKBYTYPEAXIS~FIL:CUSTOMER1MEMBER»9%«GNJDVXLA»] and    Table of Contents [«GNJDVWHJ|TAG=US-GAAP:CONCENTRATIONRISKCUSTOMER|LABEL=*|TIME=2011-01-01~2011-12-31|DIM=US-GAAP:CONCENTRATIONRISKBYTYPEAXIS~FIL:CUSTOMER2MEMBER»17%«GNJDVWHJ»]of total revenues, respectively. «33J96XK0»]  [«33JE6WMS|LEVEL=1|LABEL=NOTE K – OTHER INCOME|ABSTRACT=US-GAAP:DISCLOSURETEXTBLOCKABSTRACT|TAG=US-GAAP:OTHERINCOMEANDOTHEREXPENSEDISCLOSURETEXTBLOCK» NOTE K – OTHER INCOME  The year 2011 includes [«GRJDUD85|TAG=US-GAAP:OTHERINCOME|LABEL=*|TIME=2011-01-01~2011-12-31|UNIT=USD|PRECISION=INF»$37,268«GRJDUD85»], representing certain excess telecommunication taxes and fees for which the Company filed refund requests with the appropriate state agencies.  These refunds were received in 2012. «33JE6WMS»]  [«33J96W9N|LEVEL=1|LABEL=NOTE L – EMPLOYEE BENEFIT PLANS|ABSTRACT=US-GAAP:DISCLOSURETEXTBLOCKABSTRACT|TAG=US-GAAP:COMPENSATIONANDEMPLOYEEBENEFITPLANSTEXTBLOCK» NOTE L – EMPLOYEE BENEFIT PLANS  [«21JF48RY|LEVEL=2|LABEL=COMPENSATION RELATED COSTS, POLICY|ABSTRACT=US-GAAP:POLICYTEXTBLOCKABSTRACT|TAG=US-GAAP:COMPENSATIONRELATEDCOSTSPOLICYTEXTBLOCK» The Company offers a SIMPLE IRA plan for all eligible employees.  Employees meeting certain eligibility requirements can participate in the plan.  Under the plan, the Company matches employee contributions to the plan up to 3% of the employee’s salary.  «21JF48RY»] The Company made matching contributions of 1% totaling $3,513 and $3,374, respectively, during the years ended December 31, 2012 and 2011.  STOCK BASED COMPENSATION  The Company does not have a written employee stock option plan.  The Company has historically granted only employee stock options with an exercise price equal to the market price of the Company’s stock at the date of grant, a contractual term of ten years, and a vesting period of three years ratably on the first, second and third anniversaries of the date of grant (with limited exceptions).  All employee stock options granted during 2012 and 2011 were nonqualified stock options.  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 fair values of the granted options are estimated at the date of grant using the Black-Scholes option pricing model.  In addition to the exercise and grant date prices of the options, certain weighted average assumptions that were used to estimate the fair value of stock option grants in the respective periods are listed in the table below: [«21J95S4F|LEVEL=3|LABEL=SUMMARY OF WEIGHTED-AVERAGE ASSUMPTIONS OF FAIR VALUE GRANTED USING BLACK-SCHOLES VALUATION METHOD|ABSTRACT=US-GAAP:TABLETEXTBLOCK|TAG=US-GAAP:SCHEDULEOFSHAREBASEDPAYMENTAWARDEMPLOYEESTOCKPURCHASEPLANVALUATIONASSUMPTIONSTABLETEXTBLOCK»  [«EZJ9AZ4L|DIM=US-GAAP:AWARDTYPEAXIS~US-GAAP:STOCKOPTIONSMEMBER»«EZJ9AZ4L»][«EXJEASUR|TIME=2012-01-01~2012-12-31»2012«EXJEASUR»][«EZJEAUU7|TIME=2011-01-01~2011-12-31»2011«EZJEAUU7»][«EZJ9N81P|TAG=US-GAAP:FAIRVALUEASSUMPTIONSRISKFREEINTERESTRATE|LABEL=*»Risk free interest rate«EZJ9N81P»]2.04%.71%[«EXJENAHN|TAG=US-GAAP:FAIRVALUEASSUMPTIONSEXPECTEDTERM|LABEL=*»Expected lives (in years)«EXJENAHN»]55[«EXJEN8HN|TAG=US-GAAP:FAIRVALUEASSUMPTIONSEXPECTEDVOLATILITYRATE|LABEL=*»Expected volatility«EXJEN8HN»]187%163%[«EXJ9N9W7|TAG=US-GAAP:FAIRVALUEASSUMPTIONSEXPECTEDDIVIDENDRATE|LABEL=*»Dividend yield«EXJ9N9W7»]0%0% «21J95S4F»]  The following table shows total stock-based compensation expense included in the Consolidated Statements of Operations and the effect on basic and diluted earnings per share for the years ended December 31:  [«DVJ8EECM|TIME=2012-01-01~2012-12-31»2012«DVJ8EECM»][«DVJ8EDJ6|TIME=2011-01-01~2011-12-31»2011«DVJ8EDJ6»][«DJJFYG0P|TAG=US-GAAP:ALLOCATEDSHAREBASEDCOMPENSATIONEXPENSE|LABEL=*|DIM=US-GAAP:AWARDTYPEAXIS~US-GAAP:STOCKOPTIONSMEMBER»Stock-based compensation expense«DJJFYG0P»]$
3,411$
2,558Impact on income per share:Basic$
-$
-Assuming dilution$
-$
-  At December 31, 2012 there was [«DJJFYWKS|TAG=US-GAAP:EMPLOYEESERVICESHAREBASEDCOMPENSATIONNONVESTEDAWARDSTOTALCOMPENSATIONCOSTNOTYETRECOGNIZED|LABEL=*|TIME=2012-12-31|DIM=US-GAAP:AWARDTYPEAXIS~US-GAAP:STOCKOPTIONSMEMBER»$4,863«DJJFYWKS»] of unrecognized stock-based compensation that is expected to be recognized as an expense over a weighted-average period of [«DLJFTU6D|TAG=US-GAAP:EMPLOYEESERVICESHAREBASEDCOMPENSATIONNONVESTEDAWARDSTOTALCOMPENSATIONCOSTNOTYETRECOGNIZEDPERIODFORRECOGNITION|LABEL=*|TIME=2012-01-01~2012-12-31|DIM=US-GAAP:AWARDTYPEAXIS~US-GAAP:STOCKOPTIONSMEMBER»5.6 «DLJFTU6D»]years. «33J96W9N»]  [«31J999F0|LEVEL=1|LABEL=NOTE M – SUBSEQUENT EVENTS|ABSTRACT=US-GAAP:DISCLOSURETEXTBLOCKABSTRACT|TAG=US-GAAP:SUBSEQUENTEVENTSTEXTBLOCK» NOTE M – SUBSEQUENT EVENTS  The Company has evaluated subsequent events through the time of filing these financial statements with the Securities and Exchange Commission.  Subsequent to year-end, the Company entered into discussions with certain creditors pursuant to which the Company anticipates exchanging between $900,000 and $1.0 million of liabilities for preferred stock.  The Company is in the process of finalizing the details and preparing the required documents to effect the exchange and anticipates that the exchange will be completed by May 31, 2013.  «31J999F0»]      Table of Contents EXHIBIT 31.1  CERTIFICATIONS   I, Timothy J. Kilkenny, certify that:  1.I have reviewed this annual report on Form 10-K for the year ended December 31, 2012 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 year 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 years 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:


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| | (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 year in which this report is being prepared;
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| | (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;     
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| | (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 year covered by this report based on such evaluation; and                                                                                           
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| | (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):


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| | (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
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| | (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: April 15, 2013  /s/ Timothy J. Kilkenny Timothy J. Kilkenny Chief Executive Officer         Table of Contents EXHIBIT 31.2  CERTIFICATIONS  I, Roger P. Baresel, certify that:  1.I have reviewed this annual report on Form 10-K for the year ended December 31, 2012 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 year 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 years 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 year 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 year 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: April 15, 2013  /s/ Roger P. Baresel Roger P. Baresel President and Chief Financial Officer          Table of Contents 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 Officer of FullNet Communications, Inc. (the “Company”), hereby certify that, to the best of my knowledge, the Annual Report on Form 10-K of the Company for the year ended December 31, 2012 (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: April 15, 2013/s/ Timothy J. KilkennyTimothy J. KilkennyChief Executive Officer                                                 Table of Contents EXHIBIT 32.2  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 President and Chief Financial and Accounting Officer of FullNet Communications, Inc. (the “Company”), hereby certify that, to the best of my knowledge, the Annual Report on Form 10-K of the Company for the year ended December 31, 2012 (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: April 15, 2013/s/ Roger P. BareselRoger P. BareselPresident and Chief Financial andAccounting Officer