EDGAR 10-K Filing

Company CIK: 1092570
Filing Year: 2022
Filename: 1092570_10-K_2022_0001376474-22-000177.json

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ITEM 1. BUSINESS
Item 1. Business
General
We are an integrated communications provider. Through our subsidiaries, we have historically provided high quality, reliable and scalable Internet access, web hosting, local telephone service, equipment colocation, customized live help desk outsourcing services, mass notification services using text messages and automated telephone calls, as well as advanced voice and data solutions. As explained below, the majority of our focus going forward is on our revenue and customers coming from three primary types of service: 1) Mass notification services using text messages and automated telephone calls, 2) Equipment colocation and related services, and 3) Customized live help desk outsourcing service.
References to us in this Report include our subsidiaries: FullNet, Inc. (“FullNet”), FullTel, Inc. (“FullTel”), FullWeb, Inc. (“FullWeb”), and CallMultiplier, Inc. (“CallMultiplier”). 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 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. Through a wholly owned subsidiary, we started a competitive local exchange carrier (“CLEC”) in 2003 and later exited the retail telephone service business in early 2018. In response to the rapidly evolving Internet based telecommunications services environment, we have continued to expand and improve our service offerings.
Today we are an integrated communications provider primarily focused on providing mass notification services using text messages and automated telephone calls, equipment colocation and related services, and customized live help desk outsourcing service.
Through CallMultiplier Inc., our wholly owned subsidiary, we offer a comprehensive cloud-based solution to consumers and businesses for automated mass texting and voice message delivery. We serve groups throughout the United States and Canada that come from a wide range of industries including religious groups, non-profit companies, schools and universities, businesses, sports groups, staffing companies, property management groups, government entities, and more. These customers use CallMultiplier to quickly send important and informational messages to groups ranging in size from five to more than 250,000 people. We exclusively focus on messages that recipients have asked for or otherwise desire to receive. Sending unsolicited marketing or any unlawful messages through CallMultiplier is a violation of our Terms of Service.
We market our carrier neutral colocation solutions in our data center to competitive local exchange carriers, Internet service providers and businesses that need a physical presence in the Oklahoma City market. Our colocation 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.
Our customized live help desk outsourcing service is used by companies that want the benefit of having someone answer the telephone and respond to email 24 hours a day, without wanting to incur the costs to maintain the necessary staff to do so themselves. This service complements our existing staff and leverages the resources we have in place 24 hours a day.
Our common stock trades on the OTC “Pink Sheets” under the symbol FULO. While our common stock trades on the OTC “Pink Sheets”, it is very thinly traded, and there can be no assurance that our shareholders
will be able to sell their shares should they so desire. Any market for our 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.
Our Business Strategy
As an integrated communications provider, we intend to increase shareholder value by continuing to build scale through both internal growth and acquisitions 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 advanced voice and data solutions users in our target markets, while benefiting from the scale advantages of our existing infrastructure. The key elements of our overall strategy with respect to our principal business operations are described below.
Generate Internal Sales Growth
We intend to expand our customer base by increasing our marketing efforts. At December 31, 2021, our sales efforts are carried out primarily by our technical engineers and senior management. The majority of our existing advertising efforts consist of Pay-Per-Click (PPC) advertisements on multiple Internet search engines. We also have a robust Referral Rewards Program that encourages word-of-mouth referrals to our service.
Target Strategic Acquisitions
The goal of our acquisition strategy is to accelerate market penetration by acquiring competitors in the advanced voice and data solutions market. Our acquisition strategy is designed to leverage our existing infrastructure and internal operations to enable us to enter new markets, as well as to expand our presence in existing markets, and to benefit from economies of scale. We evaluate acquisition candidates based on their compatibility with our overall business plan. When assessing an acquisition candidate, we focus on the following criteria:
·Potential revenue and customer growth;
·Low customer turnover or churn rates;
·Favorable competitive environment; and
·Favorable consolidation savings.
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 mass notification services using text messages and automated telephone calls. CallMultiplier streamlines and automates delivery of time sensitive voice and text messages to groups. Our customers include sports teams, businesses, religious groups, schools, staffing companies, government entities, property management groups, non-profit companies, clubs and civic groups throughout the United States and Canada.
Internet Access Services
We provide Internet access services to individual and small business customers located in Oklahoma on a retail basis. Under the FullNet brand, we provide our customers with Internet connectivity as well as direct access to a wide range of Internet applications and resources, including electronic mail. Through natural atrophy as customers move to other broadband solutions, this business line has become immaterial and will not be a focus for us going forward.
Competition
The market for Internet based services is extremely competitive. The tremendous growth and potential market size of the mass messaging market has attracted many new start-ups as well as existing businesses from a variety of industries. We believe extensive easy-to-use features, 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.
Mass Notification Service Providers
The market for mass text and voice message delivery service solutions is highly fragmented, intensely competitive and constantly evolving. We compete with a wide array of established and emerging companies. Notable competitors include Twilio, Inc., Everbridge, Inc., OnSolve, LLC, Call-Em-All, LLC, CallFire, Inc., OnTimeTelecom, Inc., and EZ Texting.
We believe that our ability to attract 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. We want to emphasize that most, if not all, of our competitors have significantly greater market presence, brand recognition, financial, technical and personnel resources than 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.
Employees
As of December 31, 2021, we had 16 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.

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ITEM 1A. RISK FACTORS
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. On August 27, 2014, FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s ability to Continue as a Going Concern, which requires management to assess a company’s ability to continue as a going concern within one year from financial statement issuance and to provide related footnote disclosures in certain circumstances.
Historical Losses: Turn-around Uncertain.
We have historically experienced significant operating losses with cumulative losses from inception of approximately $8 million. These losses have been reduced by a positive working capital position of approximately $1,114,000 at December 31, 2021, of which approximately $269,000 of our current liabilities is owed to our officers and directors, and approximately $905,000 of our current liabilities is deferred revenue. Our officers and directors, who are also major shareholders, have informally agreed to not seek payment of any of the amounts owed to them if such payment would jeopardize our ability to continue as a going concern. The deferred revenue represents advance payments for services from our customers which will be satisfied by our delivery of services in the normal course of business and will not require settlement in cash.
We started a number of initiatives in 2017 which included revenue enhancement initiatives, cost saving initiatives, the sale of excess assets and an orderly exit from the CLEC business. We were successful with our revenue enhancement and cost saving initiatives and in selling certain excess assets in the third quarter of 2018 and the first quarter of 2019, as well as effecting an orderly exit from the CLEC business through the sale of substantially all of our wholly owned subsidiary’s CLEC operating assets effective February 1, 2018.
As a result of these initiatives, we generated positive cash flow from our operating activities of approximately $1,419,000 and $988,000, for the twelve months ended December 31, 2021 and 2020, respectively. In addition, we were able to generate net income of approximately $893,000 and $1,072,000, for the twelve months ended December 31, 2021 and 2020, respectively.
We expect that the success of these initiatives will provide us with sufficient liquidity to operate for the next 12 months.
As a result of the revenue enhancement initiatives, the cost saving initiatives, the excess asset sales and the successful exit from the CLEC business, we have been able to significantly improve our working capital
position and alleviate any substantial doubt about our ability to continue as a going concern as defined by ASU 2014-15. We believe that the actions discussed above mitigate the substantial doubt raised by our prior operating losses and satisfy our estimated liquidity needs 12 months from the issuance of the financial statements. However, we cannot predict, with certainty, the outcome of our actions to generate additional liquidity, including the availability of additional debt financing, or whether such actions would generate the expected liquidity as currently planned. Additionally, a failure to generate additional liquidity could negatively impact our ability to effectively execute our business plan.
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.
Risks Relating to Adverse Changes in the Economy.
Our business may be affected by adverse changes in the economy generally, including any resulting effect on spending by our customers. While some of our customers may consider our services to be a cost-effective alternative, others may turn to our competitors during an economic downturn. During an economic downturn, we may experience such a reduction in demand and loss of customers, especially in the event of a prolonged recessionary period.
Risks Relating to COVID-19.
The global outbreak of the coronavirus disease (COVID-19) continues to rapidly evolve, and it presents material uncertainty and risk with respect to our business, financial condition, and results of operations. The pandemic, and its attendant economic damage, has impacted market segments in different ways, with industries experiencing significant losses while others actually gained. We believe that the COVID-19 pandemic, with its shifts in human interactions and communications, resulted for us in a net addition of new customers and the sale of additional services to existing customers and increased interest in our automated group text and voice message delivery services. As the COVID-19 pandemic subsides, it is possible that the increases we have experienced may slow, resulting in adverse effects on our business, results of operations and financial condition. The ultimate extent of its impact on us will depend on future developments, which are highly uncertain and cannot be predicted, including the extent to which people return to preexisting patterns of behavior when the COVID-19 pandemic subsides.
Risks Relating to Government Regulation.
Our business is subject to a number of Federal and state laws and regulations. These laws and regulations may involve privacy, data protection, intellectual property, competition, consumer protection, corporate governance or other subjects. Many of the laws and regulations to which we are subject are still evolving and being tested in courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often are uncertain, particularly in the rapidly evolving automated mass notification industry in which we operate. Future legislative or regulatory actions could adversely affect our business, results of operations and financial condition.
For example, the Telephone Consumer Protection Act of 1991, or TCPA, restricts telemarketing and the use of automated text and/or voice messages without proper consent and limits the use of automatic dialing systems, artificial or prerecorded voice messages, SMS text messages and fax machines. The scope and interpretation of the laws that are or may be applicable to the automated delivery of voice and text messages are continuously evolving and developing. If we do not comply with these laws or regulations or if we become liable under these laws or regulations due to the failure of our customers to comply with these laws by obtaining proper consent, we could face direct liability.
We face a risk of litigation resulting from customer misuse of our mass notification services, in violation of our published Terms of Service, to send unauthorized text and/or voice messages in violation of Federal and state laws and/or regulations. The actual or perceived improper sending of automated text and/or voice messages may subject us to potential risks, including liabilities or claims relating to consumer protection laws. This has resulted in civil claims against some of our former customers and requests for information through third-party subpoenas. The scope and interpretation of the laws that are or may be applicable to the delivery of automated text and voice messages are continuously evolving and developing. If we do not comply with these laws or regulations or if we become liable under these laws or regulations due to the failure of our customers to comply with these laws by obtaining proper consent, we could face direct liability.
In addition, Congress and the Federal Communications Commission are attempting to mitigate the scourge of robocalls by requiring participation in new technical standards including the Signature-based Handling of Asserted Information Using toKENs ("SHAKEN") and Secure Telephone Identity Revisited ("STIR") standards (together, "STIR/SHAKEN") and other robocalling prevention and anti-spam standards. The implementation of
these standards could increase our costs or limit our ability to grow. If we do not comply with any current or future rules or regulations that apply to our business, we could be subject to substantial fines and penalties, and we may have to restructure our offerings, exit certain markets or raise the price of our products. In addition, any uncertainty regarding whether particular regulations apply to our business, and how they apply, could increase our costs or limit our ability to grow.
Noncompliance with applicable regulations or requirements could subject us to investigations, sanctions, enforcement actions, disgorgement of profits, fines, damages, civil and criminal penalties, injunctions or other collateral consequences. If any governmental sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations, and financial condition could be materially adversely affected. In addition, responding to any action will likely result in a significant diversion of management’s attention and resources and an increase in professional fees. Enforcement actions and sanctions could harm our business, reputation, results of operations and financial condition.
Risks Relating to rapidly changing technology, evolving industry standards, and changing regulations.
The market for mass notification services using text messages and automated telephone calls is subject to rapid technological change, evolving industry standards, changing regulations, as well as changing customer needs, requirements and preferences. Our success will depend, to a significant degree, on our ability to adapt and respond effectively to these changes on a timely basis. If we are unable to develop new products that satisfy our customers and provide enhancements and new features for our existing products that keep pace with rapid technological and industry change, including but not limited to STIR/SHAKEN, our business, results of operations and financial condition could be adversely affected. If new technologies emerge that are able to deliver competitive products and services at lower prices, more efficiently, more conveniently or more securely, such technologies could adversely impact our ability to compete effectively.
Our mass notification services must integrate with a variety of network, hardware, mobile and software platforms and technologies, and we need to continuously modify and enhance it to adapt to changes and innovation in these technologies. For example, Apple, Google and other cell-phone operating system providers or inbox service providers have developed and, may in the future develop, new applications or functions intended to filter spam and unwanted telephone calls, text messages or emails. Similarly, our network service providers may adopt new filtering technologies in an effort to combat spam or robocalling. Such technologies may inadvertently filter desired text messages or telephone calls to or from our customers. If cell-phone operating system providers, network service providers, our customers or their end users adopt new software platforms or infrastructure, we may be required to develop new versions of our solution to work with those new platforms or infrastructure. This development effort may require significant resources, which would adversely affect our business, results of operations and financial condition. Any failure of our solution to operate effectively with evolving or new platforms and technologies could reduce the demand for our solution. If we are unable to respond to these changes in a cost-effective manner, our solution may become less marketable and less competitive or obsolete, and our business, results of operations and financial condition could be adversely affected.
Dependence on Key Personnel.
Our success depends in large part upon the continued successful performance of our current executive officers and key employees, 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 currently trades on the OTC “Pink Sheets”, there can be no assurance that our shareholders will be able to sell their shares should they so desire. Any market for our 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.
Public Company Regulation.
As a public company, we are subject to the reporting requirements of the Exchange Act, the listing requirements of OTC Bulletin Board, and other applicable securities rules and regulations. Complying with these rules and regulations has increased and will increase our legal and financial compliance costs, make some activities more difficult, time-consuming, or costly, and increase demand on our systems and resources. In addition, changing laws, regulations, and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs, and making some activities more time-consuming.
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 that are generally quoted over-the-counter, such as on the OTC Bulletin Board (which is a facility of FINRA) or OTC Link LLC. 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 net assets, excluding their primary residence, 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 shareholders 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.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

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ITEM 2. PROPERTIES
Item 2. Properties
We maintain our executive office in approximately 8,699 square feet at 201 Robert S. Kerr Avenue, Suite 210 in Oklahoma City, at an effective annual rental rate of $17.50 per square foot. These premises are occupied pursuant to leases that expire on December 31, 2024.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
We are not a party to any material legal proceedings.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities.
Our common stock is traded in the over-the-counter market and is quoted on the OTC “Pink Sheets” 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 “Pink Sheets”.
Common Stock
Closing Sale Prices
High
Low
2020 -Calendar Quarter Ended:
March 31
$.030
$.005
June 30
.100
.005
September 30
.148
.040
December 31
.169
.035
2021 -Calendar Quarter Ended:
March 31
$.400
$.110
June 30
.550
.210
September 30
.860
.250
December 31
1.600
.570
Number of Shareholders
The number of beneficial holders of record of our common stock as of the close of business on March 30, 2022, was approximately 126.
Dividend Policy
To date, we have declared no cash dividends on our common stock, and historically have retained our earnings to provide funds for operations and the continued expansion of our business. However, due to our improved financial results of operations and financial condition, we have accumulated significant excess cash reserves which we believe are not currently needed to provide funds for operations and the continued expansion of our business. Consequently, we are evaluating the advisability of implementing a cash dividend program on our common stock. Although there can be no guarantee that such a program will be adopted.
Securities Authorized for Issuance under Equity Compensation Plans
The following table sets forth, as of December 31, 2021, 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 of
Securities
Weighted-
Remaining
Number of
Average
Available for
Shares
Exercise Price
Future
Underlying
of
Issuance under
Unexercised
Outstanding
Equity
Options
Options and
Compensation
Plan Category
and Warrants
Warrants
Plans
Equity compensation plans approved by our shareholders:
None
Not Applicable
Not Applicable
Not Applicable
Equity compensation plans not approved by our shareholders:
Stock option grants to non-employee directors
-
$-
-
Stock options granted to employees
2,342,629
$0.023
-
Warrants and certain stock options issued to non-employees
290,000
$0.004
-
Total
2,632,629
$0.027
-
Unregistered Sales and Issuer Purchases of Equity Securities.
In June 2020, we repurchased 356,797 shares of our Series A convertible preferred stock in return for the issuance of 392,477 shares of our common stock with a fair value of $19,624 and a payment of $178,400. We assigned 50,000 shares of the repurchased Series A convertible preferred stock to settle a related party liability of $53,825, and the remaining 306,797 shares were cancelled. Also in June 2020, we issued an additional 65,597 shares of common stock with a fair value of $3,280 and paid $9,541 to a former preferred shareholder to equitably adjust the repurchase price of the Series A convertible preferred shares at the end of 2019 to those made in the second quarter of 2020.
On August 27, 2020, we issued 100,000 restricted shares of common stock upon exercise of warrants with an exercise price of $.004 per share.
In the year ended December 31, 2021, employee stock options for 689,000 shares of our common stock were exercised for $2,067. During the year ended December 31, 2020, employee stock options for 1,359,372 shares of our common stock were exercised by reducing deferred compensation payable by $18,687.
In the issuances of our common stock, we relied on private offering exemptions from registration under Federal and state securities laws.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Selected Financial Data.
Part II, Item 6 is no longer required under amendments that eliminated Item 301 of Regulation S-K.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
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 SEC.
Overview
We are an integrated communications provider. Through our subsidiaries, we provide high quality, reliable and scalable Internet access, web hosting, equipment colocation, customized live help desk outsourcing services, mass notification services using text messages and automated telephone calls, as well as advanced voice and data solutions.
All of the markets that we are active in are extremely competitive. We anticipate that competition will continue to intensify. The tremendous growth and potential market size of these markets has attracted many new start-ups as well as existing businesses from a variety of industries. We believe that extensive easy-to-use features, a reliable network, knowledgeable salespeople and the quality of technical support are currently the primary competitive factors in our targeted market and that price is usually secondary to these factors.
As long as we are a provider of telecommunications related services, 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.
Results of Operations
The following table sets forth certain statement of operations data as a percentage of revenues for the years ended December 31, 2021 and 2020:
For the Years Ended December 31,
Percentage
Percentage
Amount
of revenue
Amount
of revenue
REVENUE
4,135,516
100.0
3,502,499
100.0
COST OF REVENUE
741,127
17.9
502,504
14.3
Gross Profit
3,394,389
82.1
2,999,995
85.7
OPERATING EXPENSES
Sales and marketing
488,065
11.8
678,185
19.4
General and administrative
1,723,131
41.7
1,582,706
45.2
Depreciation and amortization
10,213
0.2
8,969
0.3
Total operating expenses
2,221,409
53.7
2,269,860
64.9
Income from operations
1,172,980
28.4
730,135
20.8
Other Income
20,835
0.5
3,154
0.1
Income tax benefit (expense)
(300,838)
(7.3)
339,197
9.7
Net income from operations
$892,977
21.6%
$1,072,486
30.6%
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020
Revenue
Revenue increased $633,017 or 18.1% to $4,135,516 for the year 2021 from $3,502,499 for the year 2020. This increase was primarily attributable to the net addition of new customers and the sale of additional services to existing customers and reflects an increased interest in our automated group text and voice message delivery
service, some of which may be attributable to changes in human interactions and communications during the COVID-19 pandemic. If so, this rate of increase may not continue once the COVID-19 pandemic subsides.
In 2021, we had other income of $20,835, which included $728 from interest on investment bank accounts and $107 from interest received from employee notes receivable. In 2020, we had other income of $3,154, which included $2,062 from interest on investment bank accounts and $92 from interest received from employee notes receivable.
Cost of Revenue
Cost of revenue increased $238,623 or 47.5% to $741,127 for the year 2021 from $502,504 for the year 2020. This increase was primarily related to increases in costs of servicing new customers added through growth of business and price increases from our vendors.
Gross Profit
Gross profit as a percentage of revenue decreased 3.6% to 82.1% for the year 2021 from 85.7% for the year 2020. This decrease was primarily related to increased utilization of higher cost components of our service offerings combined with price increases from our vendors.
Operating Expenses
Sales and marketing expenses decreased $190,120 or 28% to $488,065 for the year 2021 from $678,185 for the year 2020. This decrease was primarily a result of decreases in advertising, professional consulting services, and agent commissions of $157,950, $31,500, and $670, respectively. Sales and marketing expense as a percentage of total revenues decreased to 11.8% for the year 2021 compared to 19.4% for the year 2020.
General and administrative expenses increased $140,425 or 8.9% to $1,723,131 for the year 2021 from $1,582,706 for the year 2020. This increase was primarily a result of increases in employee costs, bank and credit card fees, rent, transfer agent fees, business insurance, and legal fees of $129,566, $20,400, $7,417, $4,915, $3,756, $3,655, respectively. These increases were offset by decreases in miscellaneous expenses, utilities, supplies, and property taxes of $17,188, $6,643, $3,745, and $1,445, respectively. General and administrative expenses as a percentage of total revenues decreased to 41.7% for the year 2021 compared to 45.2% for the year 2020.
Depreciation and amortization expense increased $1,244 or 13.9% to $10,213 for the year 2021 from $8,969 for the year 2020 primarily related to the purchase of computer equipment in the first quarter of 2021.
Income Taxes
Our deferred tax assets relate primarily to net operating loss carryforwards for income tax purposes at December 31, 2021, totaling approximately $1,194,000 which will begin to expire in 2023. On a regular basis, we evaluate all available evidence, both positive and negative, regarding the ultimate realization of the tax benefits of our deferred tax assets. Based upon the historical trend of increasing earnings we concluded that it is more likely than not that a tax benefit will be realized from our deferred tax assets and therefore eliminated the previously recorded valuation allowance for our deferred tax assets in the fourth quarter of 2020. Elimination of the valuation allowance resulted in a deferred tax asset at December 31, 2020, of approximately $339,197 and a corresponding tax benefit for the fiscal year ended December 31, 2020. For the year ending December 31, 2021, income tax expense was $300,838, and the deferred tax asset balance was $38,359.
Liquidity and Capital Resources
As of December 31, 2021, we had $2,655,112 in cash and $1,595,593 in current liabilities. Current liabilities consist primarily of $514,165 in accrued and other liabilities, of which $269,238 is owed to our officers and directors, and $905,496 represents deferred revenue. Our officers and directors, who are also major shareholders, have informally agreed to not seek payment of any of the amounts owed to them if such payment would jeopardize our ability to continue as a going concern. The deferred revenue represents advance payments for services from our customers which will be satisfied by our delivery of services in the normal course of business and will not require settlement in cash.
At December 31, 2021, we had positive working capital of $1,114,566. At December 31, 2020, we had a working capital deficit of $38,870. 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, 2021, of the $53,148 we owed to our trade creditors, $46,763 was past due. At December 31, 2021, no amounts were owed to related parties.
Cash flows for the years ended December 31, 2021 and 2020, consist of the following:
For the Years Ended
December 31
Net cash flow provided by operating activities
$1,419,055
$988,097
Net cash flow used in investing activities
(5,847)
(14,185)
Net cash flow provided by (used in) financing activities
(166,013)
(178,000)
Cash used for the purchases of equipment was $5,847 and $14,185, respectively, for the years ended December 31, 2021 and 2020.
No intangible assets were purchased in 2021 and 2020.
On January 4, 2021, we paid the December 7, 2020 dividends declared on our Series A convertible preferred stock of $168,079.
During June 2020, we repurchased 356,797 shares of our Series A convertible preferred stock in return for the issuance of 392,477 shares of our common stock with a fair value of $19,624 and a payment of $178,400. We assigned 50,000 shares of the repurchased Series A convertible preferred stock to settle a related party liability of $53,825, and the remaining 306,797 shares were cancelled. Also during June 2020, an additional 65,597 shares of common stock with a fair value of $3,280 were issued and $9,541 was paid to a former preferred shareholder to equitably adjust the repurchase price of the Series A convertible preferred shares at the end of 2019 to those made in the second quarter of 2020.
On August 27, 2020, 100,000 warrants with an exercise price of $.004 per share were exercised for 100,000 restricted shares of common stock, par value $.0001 per share. Proceeds from the exercise of the warrants were $400.
During the year ended December 31, 2021, employee stock options for 689,000 shares of our common stock were exercised for $2,067. During the year ended December 31, 2020, employee stock options for 1,359,372 shares of our common stock were exercised by reducing deferred compensation payable by $18,687.
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;
•improvement of existing services, development of new services; 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 variations are likely to increase our future capital requirements.
Our ability to fund the capital expenditures and other costs contemplated by our business plan in the near term will depend upon, among other things, our ability to generate consistent net income and positive cash flow from operations as well as our ability to seek and obtain additional financing. 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.
As of December 31, 2021, 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
Operating leases
$456,696
$152,232
$304,464
$-
$-
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 the 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.
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.
All of our revenues are recognized 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. 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.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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 [27].

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.
None that have not been previously reported.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act that are designed to ensure that information required to be disclosed in our reports filed or submitted to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that information is accumulated and communicated to our management, including our principal executive and financial officer as appropriate, to allow timely decisions regarding required disclosures.
Our principal executive officer, who is also our principal financial officer, evaluated the effectiveness of disclosure controls and procedures as of December 31, 2021, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our CEO/CFO concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO/CFO, as appropriate, to allow timely decisions regarding required disclosure.
A system of controls, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
Report of Management on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Our internal control system was designed to, in general, provide reasonable assurance to our management and board regarding the preparation and fair presentation of published financial statements, but because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. The framework used by our management in making that assessment was the criteria set forth in the document entitled “Internal Control - Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on our assessment using those criteria, our management concluded that our internal control over financial reporting as of December 31, 2021, was effective.
This annual report does not include an attestation report of our public accounting firm regarding internal control over financial reporting. Our management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC adopted as of September 21, 2010, that permit us to provide only our management’s report in this annual report.
Changes in Internal Control over Financial Reporting
No change in our system of internal control over financial reporting occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information.
Exhibit 16.1 is a letter from MaloneBailey, LLP, our former auditors, stating whether or not they agree with us, attached to the 8-K filed.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers, and Corporate Governance.
The following information is furnished as of March 31, 2022, 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 three 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.
Name
Age
Position
Timothy J. Kilkenny
Chairman of the Board of Directors
Roger P. Baresel
Chief Executive Officer, Chief Financial Officer and Secretary and Director
Jason C. Ayers
President and Director
Timothy J. Kilkenny has served as our Chairman of the Board of Directors since our inception in May 1995. He served as our Chief Executive Officer from May 1995 until June 6, 2016. 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 our Chief Executive Officer on June 6, 2016. He has been one of our directors and our Chief Financial Officer since November 2000, and our President from October 2003 until June 2016. Mr. Baresel is an experienced senior executive and consultant who has served at a variety of companies in a number of different industries. Mr. Baresel has the following degrees from the University of Central Oklahoma 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 became our President on June 6, 2016. He has been one of our directors since May 2013 and served as our Vice President of Operations from December 2000 until June 2016. Prior to that he served as President of Animus, a privately-held web hosting company which we acquired in April 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.
Audit Committee Financial Expert
Because our board of directors only consists of three 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 Chief Executive Officer 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 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% shareholders 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 2021 all filing requirements applicable to our officers, directors and greater than 10% beneficial owners were met.
Code of Ethics
Our board of directors has 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.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
The following table sets forth, for the last two fiscal years, the cash compensation paid by us to our Chairman, Chief Executive Officer and Chief Financial Officer and President (the “Named Executive Officers”). None of our executive officers other than the named executive officers earned annual compensation in excess of $100,000 during 2021.
Long-Term
Annual Compensation
Compensation
Securities
Underlying
Options and
Fiscal
Other
Warrants
Name and Principal Position
Year
Salary
Compensation
(#) (1)
Timothy J. Kilkenny
$74,700
(2)
$15,930
(3)
410,528
Chairman
$80,260
(4)
$23,631
(5)
606,000
Roger P. Baresel
$94,127
(6)
$51,826
(7)
436,254
CEO and CFO
$86,562
(8)
$58,809
(9)
602,000
Jason C. Ayers
$197,450
(10)
$24,989
(11)
421,846
President
$164,424
(12)
$35,493
(13)
570,000
(1)
Options are generally 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 no deferred compensation.
(3)
Represents $2,100 of expense for business parking for Mr. Kilkenny, $10,322 of insurance premiums, and $3,508 of post-retirement benefits paid by us for the benefit of Mr. Kilkenny.
(4)
Includes no deferred compensation.
(5)
Represents $2,100 of expense for business parking for Mr. Kilkenny, $9,335 of insurance premiums, $2,576 of post-retirement benefits paid by us for the benefit of Mr. Kilkenny, and $9,620 of stock options issued to Mr. Kilkenny.
(6)
Includes $59,616 of deferred compensation.
(7)
Represents $9,600 of expense reimbursement for business use of Mr. Baresel’s automobile and parking, $5,535 of expense reimbursement for Mr. Baresel’s home office and cell phone, $35,288 of insurance premiums, and $1,403 of post-retirement benefits paid by us for the benefit of Mr. Baresel.
(8)
Includes $53,366 of deferred compensation.
(9)
Represents $9,600 of expense reimbursement for business use of Mr. Baresel’s automobile and parking, $5,486 of expense reimbursement for Mr. Baresel’s home office and cell phone, $33,265 of insurance premiums, $1,418 of post-retirement benefits paid by us for the benefit of Mr. Baresel, and $9,040 of stock options issued to Mr. Baresel.
(10)
Includes no deferred compensation.
(11)
Represents $2,100 of expense reimbursement for Mr. Ayer’s parking, $1,500 of expense reimbursement for Mr. Ayer’s Internet connection and cell phone, $15,277 of insurance premiums, and $6,112 of post-retirement benefits paid by us for the benefit of Mr. Ayers.
(12)
Includes $3,500 of deferred compensation.
(13)
Represents $2,100 of expense reimbursement for Mr. Ayer’s parking, $1,500 of expense reimbursement for Mr. Ayer’s Internet connection and cell phone, $17,538 of insurance premiums, $5,955 of post-retirement benefits paid by us for the benefit of Mr. Ayers, and $8,400 of stock options issued to Mr. Ayers.
Stock Options Granted
All options granted during 2021 were nonqualified stock options. During 2021, 90,000 stock options were granted to one employee. No stock options were granted to Mr. Kilkenny, Mr. Baresel, and Mr. Ayers during 2021. All options granted during 2020 were nonqualified stock options.
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.
2021 Year End Option Values
Our executive officers (Timothy J. Kilkenny, Chairman of the Board, Roger P. Baresel, Chief Executive Officer and Chief Financial Officer and Jason C. Ayers, President) each held 410,528, 436,254, and 421,846, respectively, of outstanding options at December 31, 2021, of which 243,862, 236,254, and 221,846, respectively, were exercisable. At December 31, 2021, the exercisable options had an aggregate value of $4,044, $3,725, and $3,437, respectively, based on an exercise price of $.02 per share and an average bid/ask price of $.01 per share.
Director Compensation
During the fiscal year ended December 31, 2021, 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 continued through an initial term ended
December 31, 2018; however, the term was automatically extended for additional three-year terms, since neither we nor the employee gave 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. At December 31, 2021, we owed, including deferred compensation, $122,643, $91,202 and $55,393 to Mr. Kilkenny, Mr. Baresel and Mr. Ayers, respectively.
We do not maintain any keyman insurance covering the death or disability of our executive officers.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.
The following table sets forth information as of March 31, 2022, 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 SEC 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 Stock
Beneficially Owned
Number of
Percent of
Beneficial Owner (1)
Shares
Class (1)
Timothy J. Kilkenny (2)(3)
4,202,017
23.8%
Roger P. Baresel (2)(4)
3,579,762
20.2%
Jason C. Ayers (2)(5)
3,043,424
17.4%
All executive officers and directors as a group (3 individuals)
10,825,203
57.9%
High Capital Funding, LLC (6)
1,678,250
9.7%
(1)
Percent of class for any shareholder listed is calculated without regard to shares of common stock issuable to others upon exercise of outstanding stock options. Any shares a shareholder 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 shareholder’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 17,146,121 shares being outstanding at March 31, 2022.
(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 3,887,017 and 315,000 shares of our common stock, respectively. The number of shares includes 240,628 shares of our Series A convertible preferred stock held by Mr. Kilkenny that are currently convertible into common stock at the rate of one share of common stock per one share of Series A convertible preferred stock and 160,528 shares of our common stock that are subject to currently exercisable stock options at $.02 per share beginning June 30, 2020. Amounts shown do not include options held by Mr. Kilkenny to purchase 83,333 shares of our common stock exercisable at $.01 per share beginning February 28, 2021.
(4)
Roger P. Baresel and Judith A. Baresel, husband and wife, hold 5,600 and 3,574,162 shares of our common stock, respectively. The number of shares held by Mrs. Baresel includes 250,000 shares of our Series A convertible preferred stock that are currently convertible into common stock at the rate of one share of common stock per one share of Series A convertible preferred stock and 136,254 shares of our common stock that are subject to currently exercisable stock options at $.02 per share beginning June 30, 2020. Amounts shown do not include options held by Mrs. Baresel to purchase 100,000 shares of our common stock exercisable at $.01 per share beginning February 28, 2021. Mr. Baresel disclaims any beneficial interest in the common stock, preferred stock and options held by Mrs. Baresel.
(5)
Jason C. Ayers holds 3,043,424 shares of our common stock. The number of shares includes 77,629 shares of our Series A convertible preferred stock that are currently convertible into common stock at the rate of one share of common stock per one share of Series A convertible preferred stock and 121,846 shares of our common stock that are subject to currently exercisable stock options at $.02 per share beginning June 30, 2020. Amounts shown do not include options held by Mr. Ayers to purchase 100,000 shares of our common stock exercisable at $.01 per share beginning February 28, 2021.
(6)
High Capital Funding, LLC, 333 Sandy Springs Circle, Suite 230, Atlanta, Georgia 30328, the parent company of Generation Capital Associates, holds 940,642 shares of our common stock. Generation Capital Associates holds 737,608 shares of our common stock.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence
As of December 31, 2021, we had no outstanding notes payable.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
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, 2021 and 2020, by our principal accountant.
BF Borgers, CPA PC
$ 21,600
-
Audit Fees - MaloneBailey, LLP
$ 21,000
$ 33,500
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 three directors, none of whom qualifies 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.
PART IV.

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules.
(10) The following exhibits are filed as part of this Report:
Exhibit
Number
Exhibit
3.2
Bylaws (filed as Exhibit 2.2 to Registrant’s Registration Statement on Form 10-SB, file number 000-27031 filed on August 13, 1999, and incorporated herein by reference)
#
3.3
Amended and Restated Certificate of Incorporation of FullNet Communications, Inc. (filed as Exhibit 3.3 to Registrant’s Form 8-K, file number 000-27031 filed on June 7, 2013, and incorporated herein by reference)
#
4.1
Specimen Certificate of Registrant’s Common Stock (filed as Exhibit 4.1 to our Form 10-KSB for the fiscal year ended December 31, 1999, filed on March 30, 2000, and incorporated herein by reference).
#
4.3
Certificate 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 filed on August 13, 1999, and incorporated herein by reference).
#
4.4
Certificate of Designation, Preferences, and Rights of Series A Convertible Preferred Stock of FullNet Communications, Inc. (filed as Exhibit 4.18 to Registrant’s Form 8K, file number 000-27031 filed on June 7, 2013, and incorporated herein by reference)
#
10.11
Employment Agreement with Timothy J. Kilkenny dated July 6, 2011 (filed as Exhibit 10.47 to Form 10Q filed on November 15, 2011)
#
10.12
Employment Agreement with Roger P. Baresel dated July 6, 2011 (filed as Exhibit 10.48 to Form 10Q filed on November 15, 2011)
#
10.13
Employment Agreement with Jason Ayers dated July 6, 2011 (filed as Exhibit 10.49 to Form 10Q filed on November 15, 2011)
#
10.14
Lease Agreements between us and BOKP Tower, LLC, dated November 22, 2019 (filed as Exhibit 10.24 to Form 10K filed on April 10, 2020)
#
10.15
Announcement that the Depository Trust Company has approved FullNet Communications, Inc.’s common stock for DWAC & DRS FAST transfers (filed as Exhibit 99.1 to Form 8-K filed on September 14, 2021)
#
10.16
Unregistered Sale of Equity Securities (filed as Item 3.02 on Form 8-K filed on October 28, 2021)
#
10.17
Change in Registrant’s Certifying Accountant (filed as Item 4.01 on Form 8-K filed on December 17, 2021)
#
16.1
MaloneBailey, LLP letter dated December 22, 2021
#
Subsidiaries of the Registrant
*
31.1
Certification pursuant to Rules 13a-14(a) and 15d-14(a) of Roger P. Baresel
*
31.2
Certification pursuant to Rules 13a-14(a) and 15d-14(a) of Roger P. Baresel
*
Certification 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
*
101.INS
XBRL Instance Document
**
101.SCH
XBRL Taxonomy Extension Schema Document
**
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
**
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
**
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
**
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
**
Cover Page Interactive Data File (embedded within the Inline XBRL document)
*
____________________
#Incorporated by reference.
*Filed herewith.
**In accordance with Rule 406T of Regulation S-T, the XBRL (Extensible Business Reporting Language) related information in Exhibit 101 to this Annual Report on Form 10-K shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act or the Exchange Act, except to the extent expressly set forth by specific reference in such filing.