美國
證券和交易委員會
華盛頓特區 20549
表格
（標記一）
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| 根據1934年證券交易法第13或15（d）條款的年度報告 | |
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| 截至財政年度結束的
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| 根據1934年證券交易法第13或15(d)節的轉型報告書 | |
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| 從___________________ 到___________________的過渡期內，您應遵守以下所有規則。 |
委託文件編號：001-39866
(根據其章程規定的註冊人準確名稱)
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（國家或其他管轄區的 |
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公司成立或組織） |
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依據該法第12（b）條註冊的證券：無
根據《法案》第12（g）條註冊的證券：
類別名稱
普通股，面值$0.00001
在制度405規則定義的情況下，標誌性的勾選符號表示發行人是一個知名老練的發行人。
是 o
根據交易所法案第13或15(d)節的規定，如無需註冊人提交報告，請打勾
是 o
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請打勾以指示註冊人（1）在過去12個月內（或者註冊人需要提交這些報告的更短期間內）已提交交易所法案1934年第13或15(d)節規定的所有報告，且（2）過去90天一直受到這些報告要求的限制
根據通信-半導體第405條規定，在過去的12個月中（或註冊申請者被要求提交和發佈此類文件的較短期限），請勾選表示註冊申請者是否已電子提交併在其公司網站上發佈了所有交互式數據文件。
根據交易所法第120億2條的規定，請勾選表示註冊申請者是否爲大型加速報告人、加速報告人、非加速報告人、較小的報告公司或新興增長型公司。請參閱「大型加速報告人」、「加速報告人」、「非加速報告人」、「較小的報告公司」和「新興增長型公司」的定義。
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Emerging-growth company |
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如果是新興成長型企業，請勾選此項，表示註冊者已選擇不使用根據《交易所法》第13(a)條提供的任何新的或修訂後的財務會計準則的延長過渡期進行遵守。o
請勾選標記，以指示註冊人是否已提交了《Sarbanes-Oxley法案》(15 U.S.C. 7262(b))下其內部控制的有效性的管理評估報告和證明報告，由準備或發佈其審計報告的註冊公共會計師事務所編制。
如果根據該法第12(b)條註冊證券，則請在複選框內表示，報告人在文件中包含的財務報表反映了先前發佈的財務報表的更正。
請通過勾選表示，其中任何錯誤更正是否屬於根據240.10D-1(b)進行的相關恢復期內收到的激勵補償需進行復查的重述。o
請勾選以下項目，指示註冊人是否爲殼公司（在證券交易法案規則12b-2中定義）。
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非關聯方持有的普通股的總市值是根據普通股最後成交價格或普通股的平均買入和賣出價格計算的，截至申報人完成第二季度的最後一個工作日（2023年6月30日），金額爲 $
截至2024年3月27日，
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FULLNEt 通信-半導體，INC。
10-K表格
截至2023年12月31日的財政年度
目錄
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Marketable Securities |
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在本報告中，第一人稱複數主格代詞「我們」和賓格代詞「我們」、所有格和強調形式「我們的」以及反身形式「我們自己」 collectively 指代 FullNet 通信公司及其子公司、及其和他們的高級執行官和董事。
關於前瞻性信息的警告聲明
本年度報告（表格 10-K）及引用的信息可能包括根據 1933 年證券法第 27A 節（經修訂）及 1934 年證券交易法第 21E 節（經修訂）所指的「前瞻性陳述」。特別是，我們請您關注項目 1. 業務，項目 1A. 風險因素，項目 2. 物業，項目 3. 法律程序，項目 7. 管理層的財務狀況和運營結果的討論與分析，以及項目 8. 基本報表和補充數據。我們希望這些前瞻性陳述能夠涵蓋這些部分中的前瞻性陳述安全港條款。所有關於我們預計的財務狀況和運營結果、我們的商業策略、我們的融資計劃以及任何不確定性結果的陳述均爲前瞻性陳述。這些陳述有時可以通過我們使用的前瞻性詞語識別，例如「可能」、「相信」、「計劃」、「將要」、「預期」、「估計」、「期待」、「打算」及其他類似含義的短語。已知和未知的風險、不確定性和其他因素可能導致實際結果與這些陳述中考慮的結果存在重大差異。前瞻性信息是基於各種因素，並使用大量假設得出的。
儘管我們相信我們在這些前瞻性陳述中表達的預期是合理的，但沒有保證我們的預期會被證明是正確的。我們的實際結果可能與我們的預期存在重大差異，包括以下內容：
•我們可能會失去客戶或未能擴大我們的用戶數；
•如果有的話，我們可能無法成功整合通過收購獲得的新用戶或資產；
•我們可能無法與現有和新競爭對手競爭；
•我們可能無法充分應對影響互聯網的技術發展；
•我們可能無法成功應對適用於我們業務的新行業標準、法律和法規；
•我們可能會受到經濟不利變化的顯著影響；
•我們可能會經歷一次重大系統故障；
•我們可能無法獲得所需的資本資源。
本列表旨在識別一些主要因素，這些因素可能導致實際結果與本報告中所述的前瞻性聲明存在實質性差異。這些因素並不旨在代表我們業務中所有風險和不確定性的完整列表，應與本報告中「項目1A. 風險因素」標題下所包含的更多詳細警示聲明，以及我們其他證券交易委員會（「SEC」）的備案文件和新聞稿共同閱讀。
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第一部分
第1項. 業務
一般
我們是一個綜合通信提供商。通過我們的子公司，我們歷史上提供高質量、可靠且可擴展的互聯網接入、網站託管、本地電話服務、設備託管、定製的實時幫助台外包服務、高級通知服務（使用文本消息和自動撥打電話），以及先進的語音和數據解決方案。如下面所述，我們未來的主要關注點是來自三種主要服務類型的營收和用戶數：1）使用文本消息和自動電話撥打的高頻通知服務，2）設備託管及相關服務，3）定製的實時幫助台外包服務。
本報告中對我們的引用包括我們的子公司：FullNet, Inc.（「FullNet」），FullTel, Inc.（「FullTel」），FullWeb, Inc.（「FullWeb」），以及CallMultiplier, Inc.（「CallMultiplier」）。我們的主要執行辦公室位於俄克拉荷馬州俄克拉荷馬城羅伯特S.凱爾大道201號，套房210，郵政編碼73102，我們的電話號碼是（405）236-8200。我們還在萬維網上（「WWW」）維護互聯網網站，地址是 www.fullnet.net 和 www.callmultiplier.com我們網站上的信息不應被視爲本報告的一部分。
公司歷史
我們成立於1995年，名爲Oklahoma的CEN-COm 公司，是一家俄克拉荷馬州的公司，旨在爲未能獲得撥號互聯網接入的俄克拉荷馬州農村地區提供撥號互聯網接入和教育。我們在1995年12月將公司名稱更改爲FullNet Communications, Inc. 通過全資子公司，我們於2003年開始了競爭性本地交換運營商（「CLEC」），並在2018年初退出了零售電話服務業務。爲了應對快速發展的互聯網基礎電信服務環境，我們持續擴展和改進我們的服務。
今天，我們是一家綜合通信提供商，主要專注於通過文本消息和自動電話撥打提供大規模通知服務、設備託管及相關服務，以及定製的現場幫助台外包服務。
通過我們的全資子公司CallMultiplier, Inc.，我們爲消費者和企業提供全面的基於雲的解決方案，用於自動大規模文本和語音消息傳遞。我們服務於來自不同行業的群體，包括宗教團體、非營利公司、學校和高校、企業、體育團體、招聘公司、物業管理集團、政府實體等，遍佈美國和加拿大。這些客戶使用CallMultiplier迅速向規模從五人到超過250,000人的團體發送重要和信息性消息。我們專注於收件人要求或希望接收的消息。通過CallMultiplier發送未經過請求的營銷或任何非法消息違反我們的服務條款。
我們在我們的idc概念中向競爭性的本地交換運營商、互聯網服務提供商以及需要在俄克拉荷馬城市場上存在的企業推廣我們的運營商中立託管解決方案。我們的託管設施是中立於運營商的，允許客戶選擇競爭性服務，而不是限制於一個運營商。我們的idc概念是電信級別的，爲客戶提供高水平的操作可靠性和安全性。我們爲客戶提供靈活的空間安排，並提供24小時現場支持，以及電池和發電機備份。
我們的定製化直播幫助台外包服務被希望24小時有人接聽電話和回覆電子郵件的公司所使用，而無需承擔維護必要員工成本的負擔。此服務補充我們現有員工的工作，並利用我們全天候提供的資源。
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我們的普通股在場外交易市場集團的「粉單」上以標的FULO交易。儘管我們的普通股在場外交易市場的「粉單」交易，但流通性很差，因此無法保證我們的股東在希望時能夠賣出他們的股份。我們普通股可能會發展的任何市場，很可能都是有限的，並且如果這樣的市場確實發展，市場價格可能會波動。
我們的業務策略
作爲一家綜合通信提供商，我們打算通過持續的內部增長和收購來增加股東價值，並利用在固定成本基礎上增加的收入。我們的策略是滿足零售、商業、教育和政府先進語音及數據解決方案用戶在目標市場的客戶服務需求，同時從現有基礎設施的規模優勢中受益。我們針對主要業務運營的整體策略的關鍵要素如下所述。
產生內部銷售增長
我們打算通過增加市場營銷工作來擴大客戶基礎。截至2023年12月31日，我們的銷售工作主要由技術工程師和高級管理人員負責。我們現有的廣告工作大部分由多個互聯網搜索引擎上的按點擊付費（PPC）廣告組成。我們還有一個強大的推薦獎勵計劃，鼓勵客戶通過口碑推薦我們的服務。
目標戰略收購
我們收購策略的目標是通過收購先進語音和數據解決方案市場的競爭對手來加速市場滲透。我們的收購策略旨在利用我們現有的基礎設施和內部運營，使我們能夠進入新市場，並擴大在現有市場的存在，同時受益於規模經濟。我們根據收購候選人與我們整體商業計劃的兼容性來評估收購候選人。在評估收購候選人時，我們關注以下標準：
•潛在的營業收入和客戶增長；
•客戶流失率低；
•有利的競爭環境；以及
•有利的整合節約。
先進的語音和數據解決方案
我們的主要先進語音和數據解決方案以CallMultiplier品牌名稱進行市場營銷。CallMultiplier是一個全面的基於雲的解決方案，爲消費者和企業提供大規模通知服務，使用文本消息和自動電話撥打。CallMultiplier簡化並自動化時間敏感的語音和文本消息的向群體發送。我們的客戶包括美國和加拿大的體育團隊、企業、宗教團體、學校、招聘公司、政府機構、物業管理集團、非營利公司、俱樂部和公民團體。
互聯網接入服務
我們向位於俄克拉荷馬州的個人和小型企業客戶提供互聯網接入服務，以零售方式。以FullNet品牌名下，我們爲客戶提供互聯網連接以及直接訪問廣泛的互聯網應用程序和資源，包括電子郵件。隨着客戶轉向其他寬帶解決方案，該業務線因自然流失而變得微不足道，未來我們將不再關注此業務。
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競爭
基於互聯網的服務市場競爭非常激烈。大規模信息傳播市場的巨大增長和潛在市場規模吸引了許多新的初創公司以及來自各個行業的現有企業。我們認爲，廣泛的易用功能、可靠的網絡、知識淵博的銷售人員和目前技術支持的質量是我們目標市場的主要競爭因素，而價格通常是次要的。
大規模通知服務提供商
大規模文本和語音消息傳遞服務解決方案市場高度分散，競爭激烈，並且不斷髮展壯大。我們與衆多成熟企業和新興公司競爭。值得注意的競爭對手包括twilio、Everbridge、OnSolve、Call-Em-All、Callfire、OnTimeTelecom和EZ Texting。
我們認爲，吸引客戶和營銷增值服務是我們未來成功和盈利的關鍵。然而，無法保證我們的競爭對手不會在未來推出相似或更具吸引力的服務或產品，或者我們不會被迫降低價格以匹配競爭。我們想強調的是，我們的大多數競爭對手，無論如何，都擁有比我們更強的市場存在感、品牌認知度、財務、技術和人力資源。
無法保證我們能夠抵消任何此類競爭或隨之而來的價格下降的影響。競爭加劇可能導致我們市場份額的侵蝕，並可能對我們的業務、財務狀況和運營結果產生重大不利影響。
員工
截至2023年12月31日，我們在工程、銷售、市場營銷、客戶支持及相關活動和一般管理職能方面共有15名員工。我們的員工沒有受到工會代表，我們認爲與員工的關係良好。我們還時不時地聘請顧問，涉及我們業務的各個方面。
Item 1A. Risk Factors
本報告包括《證券法》第27A條和《交易法》第21E條所定義的「前瞻性聲明」。2014年8月27日，FASB發佈了ASU 2014-15，關於實體持續作爲持續經營能力的不確定性披露，這要求管理層在財務報表發佈後的一年內，評估公司的持續經營能力，並在特定情況下提供相關的腳註披露。
歷史損失：轉變不確定
我們過去經歷了巨大的經營損失，自成立以來的累計損失約爲800萬。然而，自2018年以來，我們一直盈利，並在2023年12月31日達到了約1,386,000的正流動資金狀態，其中約169,000的當前負債欠我們官員和董事，約1,097,000的當前負債爲遞延收入。我們的官員和董事，作爲主要股東，已經非正式同意在這樣的付款可能危及我們作爲持續經營能力的情況下不要求支付任何欠款。遞延收入代表客戶爲服務提前支付的款項，這將在正常的業務過程中通過我們的服務交付來滿足，而不需要以現金結算。
截至2023年和2022年12月31日的十二個月內，我們從經營活動中產生了約690,000和774,000的正現金流。此外，我們還在2023年和2022年12月31日的十二個月內分別產生了約532,000和672,000的淨利潤。
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由於收入增強舉措、成本節約舉措、資產出售過剩及成功退出CLEC業務，我們已能夠顯著改善我們的流動資金狀況，消除根據ASU 2014-15定義的關於我們將作爲持續經營能力繼續存在的任何實質性懷疑。我們相信，上述討論的措施減輕了我們以前經營損失所引發的重大懷疑，並滿足我們在財務報表發佈後12個月的流動性需求。然而，我們不能確定地預測我們保持盈利和產生額外流動性的行動結果，包括額外債務融資的可用性，或此類行動是否會產生按當前計劃預期的流動性。此外，未能產生更多流動性可能會對我們有效執行業務計劃的能力產生負面影響。
有限的市場營銷經驗
我們在開發和商業化基於創新技術的新服務方面經驗有限，並且關於我們硬件的潛在性能或我們擬提供的服務的市場接受程度的信息非常有限。無法保證不會發生意想不到的費用、問題或技術困難，這將導致產品商業化的重大延誤，或者我們的努力不會導致成功的產品商業化。因此，我們有限的市場營銷經驗可能對我們的業務前景、財務狀況和運營結果產生重大不利影響。
產品/服務開發的不確定性
儘管我們在服務和產品開發上投入了大量的時間和財力，但絕對無法保證不會出現問題，這將對我們產生重大不利影響。我們將需要投入大量的時間、精力和資源來完成我們的產品/服務開發，並調整我們的產品和服務以滿足潛在客戶的具體要求。持續的系統優化、增強和開發工作面臨着新產品/服務和技術開發所固有的所有風險，包括意外的延遲、費用、技術問題或困難，以及資金不足以令人滿意地完成開發，這可能導致放棄或大幅改變商業化。無法保證開發工作能按時成功完成，或完全完成；我們是否能夠成功調整我們的硬件或軟件以滿足潛在客戶的具體要求，或不可預見的事件不會導致開發或商業化的成本增加或重大延遲。此外，計劃納入我們產品和服務的複雜技術可能包含在商業使用開始後才顯現的錯誤。修正這些錯誤可能延遲我們的計劃並使我們承擔 substantial additional costs。因此，產品/服務開發的不確定性可能對我們的業務前景、財務狀況和運營結果產生重大不利影響。
競爭；技術過時
我們的產品和服務市場競爭激烈，並且潛在的新市場參與者數量不斷增加，他們已經開發或正在開發潛在的競爭產品和服務。我們將面臨來自多個來源的競爭，其中一些公司在財務、技術、營銷、分銷、人員和其他資源方面比我們有顯著優勢，這使得這些公司能夠實施廣泛的營銷活動，無論是一般性的還是針對其他競爭者進入新市場和推廣新產品與服務的努力。此外，我們的產品和服務市場特徵是快速變化的技術和不斷演變的行業標準，這可能導致產品過時和短暫的產品生命週期。因此，我們的競爭能力將依賴於我們能夠及時完成產品的開發，並將我們的產品和/或服務推向市場，不斷增強和改進我們的軟件，以及成功開發和營銷新產品。我們無法確保能夠成功競爭，競爭者不會開發出使我們的產品和/或服務過時或市場表現不佳的技術或產品，或者我們能夠成功增強我們的產品或開發新的產品和/或服務。因此，未能成功應對競爭和技術過時的需求可能對我們的業務前景、財務狀況和經營結果產生重大不利影響。
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與互聯網相關的風險
依賴互聯網的企業可能面臨風險，因爲所需基礎設施的發展不足，包括可靠的網絡主幹或補充服務、高速調制解調器和安全程序。互聯網經歷了顯著的用戶和流量增長，並預計將繼續增長。無法保證互聯網基礎設施將繼續支持持續增長所帶來的需求。此外，可能會由於新標準和協議的開發和採用延遲、無法處理增加的互聯網活動水平或由於政府監管的增加而導致問題。如果必要的互聯網基礎設施或補充服務未能有效支持可能發生的增長，我們的業務、經營結果和財務狀況將受到重大不利影響。
網絡安全漏洞或我們的大規模通知服務運營失敗可能會擾亂我們的業務
我們依賴信息技術系統和網絡產品及這些系統和產品的安全運行。儘管採取了安全措施，這些系統和產品仍然可能會受到物理損壞、黑客攻擊、計算機病毒或因員工、供應商或客戶的錯誤或不當行爲而造成的漏洞的影響。我們的客戶通過我們的網站與我們互動並進行購買。因此，我們面臨與網絡銷售相關的額外風險和不確定性，包括技術的快速變化、網站停機及其他技術故障、安全漏洞、網絡攻擊、消費者隱私擔憂、州稅收制度的變化以及政府對互聯網活動的監管。我們未能成功應對這些風險和不確定性可能會減少我們的大規模通知服務銷售並增加我們的成本，從而對我們的運營結果產生負面影響。
與經濟不利變化相關的風險
我們的業務可能受到經濟普遍不利變化的影響，包括這對客戶支出的任何結果影響。雖然我們的一些客戶可能會認爲我們的服務是成本效益高的替代方案，但在經濟低迷期間，其他客戶可能會轉向我們的競爭對手。在經濟低迷期間，我們可能會經歷需求減少和客戶流失，尤其是在長期衰退期間。
與政府監管相關的風險
我們的業務受到多項聯邦和州法律法規的約束。這些法律法規可能涉及隱私、數據保護、知識產權、競爭、消費者保護、公司治理或其他主題。我們所受到約束的許多法律法規仍在演變和在法院進行審查，可能會以對我們的業務產生危害的方式進行解釋。此外，這些法律法規的適用及其解釋常常是不確定的，特別是在我們運營的快速發展的自動化大規模通知行業。未來的立法或監管行動可能會對我們的業務、運營結果和財務狀況產生不利影響。
例如，1991年的電話消費者保護法案（TCPA）限制沒有適當同意的電話營銷和自動發送文本和/或語音消息，並限制自動撥號系統、人工或預錄音語音消息、短信和傳真機的使用。適用於自動發送語音和文本消息的法律範圍和解釋正在不斷髮展。如果我們不遵守這些法律或法規，或者因爲我們的客戶未能通過獲得適當同意而違反這些法律或法規而使我們承擔責任，我們可能面臨直接責任。
我們面臨因客戶對我們的大規模通知服務的誤用而引發訴訟的風險，這違反了我們公佈的服務條款，未經授權發送文本和/或語音消息，違反聯邦和州法律和/或法規。實際或可能的錯誤發送自動文本和/或語音消息可能使我們面臨潛在風險，包括與消費者保護法相關的責任或索賠。這已導致一些前客戶提出民事索賠和通過第三方傳票請求信息。
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適用於自動發送文本和語音消息的法律範圍和解釋正在不斷髮展。如果我們不遵守這些法律或法規，或者因爲我們的客戶未能通過獲得適當同意而違反這些法律或法規而使我們承擔責任，我們可能面臨直接責任。
此外，國會和聯邦通信委員會正在努力通過要求參與新技術標準來減輕機器人電話的猖獗，包括基於簽名的信息處理使用令牌（「SHAKEN」）和安全電話身份重審（「STIR」）標準（統稱爲「STIR/SHAKEN」）以及其他防止機器人電話和反垃圾郵件標準。這些標準的實施可能會增加我們的成本或限制我們的增長能力。如果我們不遵守適用於我們業務的當前或未來的規則或法規，我們可能會面臨巨額罰款和處罰，我們可能需要重組我們的產品，退出某些市場或提高我們的產品價格。此外，關於特定法規是否適用於我們業務以及如何適用的任何不確定性，可能會增加我們的成本或限制我們的增長能力。
不遵守適用的法規或要求可能會使我們面臨調查、制裁、執法行動、利潤返還、罰款、損害賠償、民事和刑事處罰、禁令或其他附帶後果。如果任何政府制裁被施加，或者如果我們在任何可能的民事或刑事訴訟中沒有勝訴，我們的業務、運營結果和財務狀況可能會受到重大不利影響。此外，回應任何行動可能會導致管理層的注意力和資源顯著轉移，並增加專業費用。執行行動和制裁可能會損害我們的業務、聲譽、運營結果和財務狀況。
與快速變化的科技、不斷演變的行業標準和變化的法規相關的風險
使用短信和自動電話進行大規模通知服務的市場受到快速技術變化、不斷演變的行業標準、變化的法規以及變化的客戶需求、要求和偏好的影響。我們的成功在很大程度上將依賴於我們能否及時適應並有效應對這些變化。如果我們無法開發出滿足客戶需求的新產品，併爲現有產品提供跟上快速技術和行業變化的增強功能和新特性，包括但不限於STIR/SHAKEN，我們的業務、運營結果和財務狀況可能會受到不利影響。如果出現能夠以更低價格、更高效率、更便捷或更安全地提供競爭性產品和服務的新技術，這些技術可能會對我們的競爭能力產生不利影響。
我們的大規模通知服務必須與各種網絡、硬件、移動和軟件平台以及技術集成，並且我們需要不斷修改和增強它以適應這些技術的變化和創新。例如，蘋果、谷歌和其他手機操作系統提供商或郵箱服務提供商已經開發了，未來可能會開發新應用或功能，旨在過濾垃圾信息和不希望的電話、短信或電子郵件。同樣，我們的網絡服務提供商可能會採用新的過濾技術，以應對垃圾信息或機器人電話。這些技術可能會無意中過濾掉我們客戶的期望短信或電話。如果手機操作系統提供商、網絡服務提供商、我們的客戶或他們的最終用戶採用新的軟件平台或基礎設施，我們可能需要開發新版本的解決方案以與這些新平台或基礎設施兼容。這種開發工作可能需要大量資源，這將對我們的業務、運營結果和財務狀況產生不利影響。我們的解決方案未能有效與不斷演變或新平台及技術配合的任何失敗都可能減少對我們解決方案的需求。如果我們無法以成本效益高的方式應對這些變化，我們的解決方案可能會變得市場競爭力下降或過時，從而對我們的業務、運營結果和財務狀況產生不利影響。
對關鍵人員的依賴
我們的成功在很大程度上依賴於我們的當前高管和關鍵員工的持續成功表現，Timothy J. Kilkenny、Roger P. Baresel 和 Jason C. Ayers，以便我們繼續進行研究、開發、營銷和運營。儘管我們已經僱用了，並將在未來僱傭其他合格員工，同時保留擁有豐富經驗的顧問，但如果Kilkenny、Baresel或Ayers因任何原因未能履行其職責，我們的產品/服務的市場營銷、運營和支持能力將受到不利影響。雖然我們位於可用人員數量相當充足的地區，但對於合格人員的競爭也相當激烈。因此，我們對這些關鍵人員的依賴可能對我們的業務前景、財務狀況和運營結果產生實質性的負面影響。
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或Ayers因任何原因未能履行其職責，我們的產品/服務的市場營銷、運營和支持能力將受到不利影響。雖然我們位於可用人員數量相當充足的地區，但對於合格人員的競爭也相當激烈。因此，我們對這些關鍵人員的依賴可能對我們的業務前景、財務狀況和運營結果產生實質性的負面影響。
有限的公開市場
在2000年2月，我們的普通股開始在OTC公告板上交易，標的爲FULO。雖然我們的普通股目前在OTC市場集團的「粉色單」上交易，但不能保證我們的股東如有需要能夠出售其股份。任何可能發展的普通股市場極有可能是有限的，如果真的發展出這樣一個市場，市場價格可能會波動。因此，普通股有限的公開市場可能對我們的業務前景、財務狀況和運營結果產生實質性的負面影響。
公衆公司法規
作爲一家公衆公司，我們需遵守交易法的報告要求，以及 OTC市場集團， 以及其他適用的證券規則和法規。遵守這些規則和法規增加了並將增加我們的法律和財務合規成本，使某些活動變得更困難、耗時或成本更高，並增加了我們系統和資源的需求。此外，與公司治理和公開披露相關的法律、法規和標準的變化正在給上市公司帶來不確定性，增加法律和財務合規成本，並使某些活動變得更加耗時。
低價股票監管
與「便士股票」交易相關的經紀交易商實踐受到美國證券交易委員會（SEC）通過的某些便士股票規則的監管。便士股票通常是價格低於$5.00的股權證券，通常在場外交易，例如在 OTC Bulletin Board （這是FINRA的一個設施）或 場外交易鏈接有限責任公司（OTC Link LLC）（這是場外市場集團的一個設施）。便士股票規則要求經紀交易商在進行未豁免於規則的便士股票交易之前，必須提供一份標準化風險披露文件，該文件提供有關便士股票及其在便士股票市場中的風險性質和程度的信息。經紀交易商還必須向客戶提供當前的買盤和賣盤報價、經紀交易商及其銷售人員在交易中的補償，以及如果經紀交易商是唯一的市場做市商，必須披露這個事實以及市場做市商對市場的假定控制權，此外，還需提供每月帳戶結單，顯示客戶帳戶中持有的每個便士股票的市場價值。此外，向非既有客戶及認可投資者（一般是指淨資產（不包括其主要居所）超過$1,000,000或年收入超過$200,000或$300,000（與配偶共同計算）的人士出售這些證券的經紀交易商，必須作出特別書面判斷，確認便士股票對購買者是適合的投資，並獲得購買者對交易的書面同意。因此，這些要求可能會導致在二級市場上交易活動的水平降低（如果有），而某項證券正是或成爲便士股票規則的對象。我們截至目前的普通股受便士股票規則的限制，因此我們的股東將會發現更難出售他們的股票。因此，便士股票的監管可能對我們的商業前景、財務狀況和經營結果產生重大不利影響。
項目1C。網絡安全概念
風險管理和策略
來自網絡安全威脅的風險。與網絡安全威脅相關的風險信息包含在本報告的第1A項下，標題爲“網絡安全漏洞或我們的重大通知服務操作失敗可能會干擾我們的業務.”
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我們管理和監督一個網絡安全風險計劃，旨在評估潛在威脅、漏洞以及對我們運營、數據和股東的潛在影響。該計劃定期進行審查和更新，以應對新出現的風險。
我們採用三步過程來有效管理網絡安全風險：
識別。 我們建立對關鍵運營資產的理解，以及那些可能吸引潛在威脅行爲者的資產。我們考慮任何可能降低資產價值、妨礙我們使用或訪問資產的網絡活動，或者偷偷允許威脅行爲者訪問資產的活動作爲潛在風險。
評估。 我們評估我們資產面臨的網絡風險暴露，以及如果無法訪問或利用資產或實現其價值，或如果威脅行爲者獲得訪問資產或其價值的權限，這對我們的運營或聲譽可能產生的影響。我們還根據這些風險對我們的運營或聲譽可能產生的影響評估其潛在重要性。
管理。 我們採用多層防禦策略來維護我們訪問或利用資產或其價值的能力，並防止威脅行爲者獲得或增加對資產或其價值的訪問權限。我們根據成本效益及其降低風險的能力優先考慮我們的防禦機制，包括行政、程序和技術控制。
我們維護政策和程序，以監督和識別與我們第三方服務提供商相關的網絡安全風險，尤其是那些可以訪問客戶和員工數據的提供商。我們對這些提供商的選擇和監督納入網絡安全考慮，包括合同和其他機制，以減輕和持續監測風險。
我們採取主動措施來預防、檢測和最小化網絡安全事件的影響。我們維護應急響應計劃以迅速應對安全漏洞並減少對我們運營的干擾。爲了增強事件響應過程，我們制定了業務連續性、應急和恢復計劃，以確保在網絡安全事件期間的運營彈性。
網絡安全威脅和風險未對我們的業務戰略、運營結果或財務狀況造成重大影響，也不太可能對其造成重大影響。截至本報告提交之日，我們尚未經歷對我們的業務或財務狀況產生重大影響的網絡安全漏洞。然而，由於我們的業務涉及某些客戶和員工數據的收集、傳輸和存儲，因此我們可能會面臨各種網絡安全威脅，包括網絡攻擊、未經授權訪問和類似事件。
我們致力於持續識別和管理網絡安全風險，作爲我們業務策略、財務規劃和資本配置的一部分。我們努力將網絡安全考慮因素融入我們運營的各個方面。隨着網絡安全形勢的發展，我們的策略也在不斷調整，以識別和緩解這些風險。我們不斷努力增強我們的流程，以確保有效的網絡安全姿態。
董事會和管理層治理
董事會監督。我們認識到網絡安全和數據保護的重要性，並理解網絡安全事件對我們業務的潛在危害。因此，我們高度重視緩解與網絡安全威脅及任何網絡安全事件相關的風險。
我們的管理層對我們的風險管理，包括網絡安全風險，負主要責任。我們的董事會負責監督與網絡安全威脅相關的風險。我們的董事會負責審查管理層對我們信息技術流程框架和實踐的評估，以及用於監控和緩解信息技術風險的控制措施。此外，作爲我們董事會定期會議的一部分，董事會還收到了來自我們網絡安全團隊的報告和簡報。這些報告和簡報包括管理層對新興網絡安全發展和威脅的審查、與網絡安全相關的風險，以及我們緩解數據保護和網絡安全風險的策略。
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我們的董事會有權從外部網絡安全資源獲取建議和反饋，幫助其監督職能。
管理層的角色。我們的管理團隊積極參與評估和管理來自網絡安全威脅的重大風險。我們已建立了一個強大的框架，以識別、評估和緩解這些風險。
網絡安全風險責任我們的網絡安全團隊在網絡安全、合規、企業架構與設計、數據分析、數字轉型和客戶服務方面積累了豐富的經驗。這個跨職能的網絡安全團隊包括信息安全各個方面的專家。這些人員負責我們網絡安全程序的日常實施。
此外，網絡安全管理團隊定期諮詢額外資源，包括律師、會計師、人力資源人員和其他信息技術專家，以判斷與網絡安全相關的風險和事件的重要性。已經建立的事件響應計劃明確識別了基於對我們組織影響的升級措施。
監控和減輕風險和事件的流程。 我們採取了一整套綜合流程來監控和減輕網絡安全風險。這些流程包括：
·持續監控網絡流量和系統，以查找潛在威脅的跡象。
·實施網絡安全措施，如防火牆、入侵檢測系統和數據加密。
·員工培訓和意識提升項目，教育員工關於網絡安全最佳實踐。
·事件響應計劃，以確保對網絡安全事件的迅速和有效響應。
·軟件和供應商風險評估。
·漏洞管理解決方案根據風險優先處理補丁。
·特權帳戶管理解決方案用於管理訪問權限。
這些過程旨在防止網絡安全事件，但它們也使我們能夠迅速檢測和響應發生的事件。它們定期進行審查和更新，以適應不斷演變的網絡安全威脅。
向董事會報告。 正如上述所述，我們的網絡安全團隊定期向我們的董事會提供關於網絡安全風險的更新和報告，並審查上述過程。
項目2。控件
我們在俄克拉荷馬城201 Robert S. Kerr Avenue, Suite 210的執行辦公室佔地約8,699平方英尺，年租金有效率爲每平方英尺17.50美元。該地點根據於2024年12月31日到期的租賃合同佔用。
項目3。法律訴訟
我們不是任何重大法律程序的參與方。
項目4.礦山安全披露
不適用。
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第二部分
項目5. 註冊方普通股的市場、相關股東事項和發行方股份回購
我們的普通股在場外市場交易，並在OTC市場集團的「粉單」上以符號FULO報價。收盤價格反映了經銷商之間的價格，沒有考慮零售加價、折扣或佣金，可能不反映實際交易。以下表格列出了我們的普通股在所示日曆季度期間的最高和最低收盤價格，這是OTC市場集團「粉單」報告的。
|
| 普通股 | ||
|
| 收盤價格 | ||
|
| 高 |
| 低 |
2022 – 日曆季度結束 |
|
|
|
|
3月31日 |
| $.750 |
| $.420 |
6月30日 |
| .650 |
| .360 |
9月30日 |
| .610 |
| .330 |
12月31日 |
| .530 |
| .280 |
2023 – 日曆季度結束 |
|
|
|
|
3月31日 |
| $.500 |
| $.375 |
6月30日 |
| .500 |
| .163 |
9月30日 |
| .350 |
| .150 |
12月31日 |
| .250 |
| .100 |
股東人數
截至2024年3月27日營業結束時，我們普通股的實益持有記錄的持有者大約爲126人。
股息政策
由於我們改善的經營和財務狀況，我們積累了顯著的超額現金儲備，我們認爲目前不需要用於業務運營和持續擴展。因此，在2022年5月13日，我們實施了一個普通股的季度現金分紅計劃，目的是支付董事會認爲合適的定期現金分紅。然而，未來分紅的支付將由我們的董事會自行決定，並將取決於其他一些因素，包括我們的未來盈利、財務狀況、現金流、資本需求、債務水平、當前的商業條件以及其他董事會認爲相關的因素。
發行股票期權的證券
以下表格列出了截至2023年12月31日，已獲得或未獲得我們股東批准的每類股權補償計劃的信息，包括與我們的非員工董事之間的個人補償安排。我們沒有任何獲得股東批准的股權補償計劃。我們目前所有的股票期權和warrants均根據個人補償安排授予，並可用於購買我們的普通股。
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Plan Category | Number of Shares Underlying Unexercised Options and Warrants | Weighted-Average Exercise Price of Outstanding Options and Warrants | Number of Securities Remaining Available for Future Issuance under Equity Compensation 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 | 185,997 | $0.010 | - |
Warrants and certain stock options issued to non-employees | - | $- | - |
Total | 185,997 | $0.010 | - |
Unregistered Sales and Issuer Purchases of Equity Securities
In December 2022, we issued 50,000 shares of our Series A convertible preferred stock to settle a related party liability of $50,000.
In the year ended December 31, 2023, employee stock options for 382,333 shares of our common stock were exercised for $5,383. During the year ended December 31, 2022, employee stock options for 1,746,633 shares of our common stock were exercised $26,174.
In the issuances of our common stock, we relied on private offering exemptions from registration under Federal and state securities laws.
Item 6. [Reserved]
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 in which we are active 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,
15
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 telecommunication 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, 2023 and 2022:
|
| For the Years Ended December 31 | ||||||
|
| 2023 |
| 2022 | ||||
|
|
|
| Percentage |
|
|
| Percentage |
|
| Amount |
| of revenue |
| Amount |
| of revenue |
REVENUE |
| $4,191,084 |
| 100.0 |
| $4,268,263 |
| 100.0 |
COST OF REVENUE |
| 1,052,930 |
| 25.1 |
| 907,222 |
| 21.3 |
Gross Profit |
| 3,138,154 |
| 74.9 |
| 3,361,041 |
| 78.7 |
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
Sales and marketing |
| 714,385 |
| 17.1 |
| 628,716 |
| 14.7 |
General and administrative |
| 1,894,997 |
| 45.2 |
| 1,886,431 |
| 44.2 |
Depreciation and amortization |
| 16,597 |
| 0.4 |
| 15,741 |
| 0.4 |
|
|
|
|
|
|
|
|
|
Total operating expenses |
| 2,625,979 |
| 62.7 |
| 2,530,888 |
| 59.3 |
|
|
|
|
|
|
|
|
|
Income from operations |
| 512,175 |
| 12.2 |
| 830,153 |
| 19.4 |
Other Income |
| 147,658 |
| 3.5 |
| 72,605 |
| 1.7 |
|
|
|
|
|
|
|
|
|
Income tax benefit (expense) |
| (127,694) |
| (3.0) |
| (230,522) |
| (5.4) |
Net income from operations |
| $532,139 |
| 12.7 |
| $672,236 |
| 15.7 |
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
Revenue
Revenue decreased $77,179 or 1.8% to $4,191,084 for the year 2023 from $4,268,263 for the year 2022. This decrease was primarily attributable to the loss of a customized live help-desk outsourcing service customer.
In 2023, we had other income of $147,658, consisting of interest income of $141,233 and income from debt extinguishment of $6,425. In 2022, we had other income of $72,605, which consisted of interest income of $40,833 and income from debt extinguishment of $31,772.
Cost of Revenue
Cost of revenue increased $145,708 or 16.1% to $1,052,930 for the year 2023 from $907,222 for the year 2022. This increase was primarily related to price increases from our vendors and increases in costs of servicing new customers added through growth of business.
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Gross Profit
Gross profit as a percentage of revenue decreased 3.8% to 74.9% for the year 2023 from 78.7% for the year 2022. This decrease was primarily related to price increases from our vendors combined with increased utilization of higher cost components of our service offerings.
Operating Expenses
Sales and marketing expenses increased $85,669 or 13.6% to $714,385 for the year 2023 from $628,716 for the year 2022. This increase was primarily a result of increases in advertising of $85,669. Sales and marketing expense as a percentage of total revenues increased to 17.1% for the year 2023 compared to 14.7% for the year 2022.
General and administrative expenses increased $8,566 or 0.5% to $1,894,997 for the year 2023 from $1,886,431 for the year 2022. This increase was primarily a result of increases in employee costs. General and administrative expenses as a percentage of total revenues increased to 45.2% for the year 2023 compared to 44.2% for the year 2022.
Depreciation and amortization expense increased $856 or 5.4% to $16,597 for the year 2023 from $15,741 for the year 2022, primarily related to the purchase of leasehold improvements in the second quarter of 2022.
Income Taxes
Income tax expense for the year ending December 31, 2023 was $127,694. Our deferred tax asset balance of $38,359 at December 31, 2021, related primarily to net operating loss carryforwards for income tax purposes and were fully utilized in the 1st quarter of 2022. Income tax expense for the year ending December 31, 2022 was $230,522.
Liquidity and Capital Resources
As of December 31, 2023, we had $3,130,331 in cash and $1,780,592 in current liabilities. Current liabilities consist primarily of $524,312 in accrued and other liabilities, of which $169,020 is owed to our officers and directors, and $1,097,163 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, 2023, we had positive working capital of $1,386,252. At December 31, 2022, we had positive working capital of $1,162,469. 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, 2023, of the $13,668 we owed to our trade creditors, $7,019 was past due. At December 31, 2023, no amounts were owed to related parties.
Cash flows for the years ended December 31, 2023 and 2022, consist of the following:
| For the Years Ended December 31 | ||
| 2023 |
| 2022 |
Net cash flow provided by operating activities | $690,293 |
| $774,364 |
Net cash flow used in investing activities | - |
| (49,519) |
Net cash flow provided by (used in) financing activities | (313,513) |
| (626,406) |
No property and equipment were purchased in the year ended December 31, 2023. Cash used for the purchase of property and equipment was $49,519 for the year ended December 31, 2022.
17
No intangible assets were purchased in 2023 and 2022.
During the year ended December 31, 2023, we paid $61,826 in dividends on our Series A convertible preferred stock and $257,070 in dividends on our common stock. During the year ended December 31, 2022, we paid $51,143 in dividends on our Series A convertible preferred stock and $652,587 in dividends on our common stock.
In December 2022, we issued 50,000 shares of our Series A convertible preferred stock to settle a related party liability of $50,000.
During the year ended December 31, 2023, employee stock options for 382,333 shares of our common stock were exercised for $5,383. During the year ended December 31, 2022, employee stock options for 1,746,633 shares of our common stock were exercised for $26,174.
Growth of our business and the anticipated continued payment of common stock dividends may require additional capital to fund capital expenditures. These additional capital expenditure requirements could 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 could increase our future capital requirements.
Our ability to fund these potential capital expenditures and other potential costs 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 if necessary. 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, 2023, 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 | $152,234 | $152,234 | $- | $- | $- |
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
18
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 change 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 of 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.
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 [31].
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
None that have not been previously reported.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures as defined in Rules 13a-15© 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, 2023, 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.
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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, 2023. 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, 2023, 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 2, 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.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.
20
PART III
Item 10. Directors, Executive Officers, and Corporate Governance
The following information is furnished as of March 20, 2024, 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 | 65 | Chairman of the Board of Directors |
Roger P. Baresel | 68 | Chief Executive Officer, Chief Financial Officer and Secretary and Director |
Jason C. Ayers | 49 | 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 served as 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
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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 the 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 2023, 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 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.
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 2023.
| Annual Compensation |
| Long-Term Compensation | |||
Name and Principal Position | Fiscal Year | Salary |
| Other Compensation |
| Securities Underlying Options and Warrants (#) (1) |
Timothy J. Kilkenny | 2023 | $ | (2) | $ | (3) | |
Chairman | 2022 | $ | (4) | $ | (5) | |
2021 | $ | (6) | $ | (7) | ||
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Roger P. Baresel | 2023 | $ | (8) | $ | (9) | |
CEO and CFO | 2022 | $ | (10) | $ | (11) | |
2021 | $ | (12) | $ | (13) | ||
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Jason C. Ayers | 2023 | $ | (14) | $ | (15) | |
President | 2022 | $ | (16) | $ | (17) | |
2021 | $ | (18) | $ | (19) | ||
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(19) |
Pay Versus Performance
Year | Summary Compensation Table Total for PEO | Compensation Actually Paid to PEO(1) | Average Summary Compensation Table Total for Non-PEO NEOs | Average Compensation Actually Paid to Non-PEO NEOs(1) | Value of Initial Fixed $100 Investment Based on Total Shareholder Return | Net Income |
2023 | $ | $ | $ | $ | $77 | $ |
2022 | $ | $ | $ | $ | $48 | $ |
2021 | $ | $ | $ | $ | $550 | $ |
(1)
The compensation of our PEO and other NEOs is determined by a subjective blend of our financial performance, the compensation received by similarly situated executives, and the individual’s contribution to our success. The level of compensation is influenced by the fact that the NEOs, who also compose the Board of Directors, hold 55.2% of our outstanding stock and are our largest shareholders. The Board believes the stock ownership of the Board and NEOs creates a structural bias toward payment for performance. The Board does not have formal processes for fixing the levels or types of executive compensation and has not set performance benchmarks for the levels of compensation.
Stock Options Granted
All options granted during 2023 were nonqualified stock options. During 2023, 45,000 stock options were granted to one employee. No stock options were granted to Mr. Kilkenny, Mr. Baresel, and Mr. Ayers during 2023 or 2022. All options granted during 2022 were nonqualified stock options. During 2022, 4,500 stock options were granted to one employee.
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.
2023 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) held no outstanding options at December 31, 2023.
Director Compensation
During the fiscal year ended December 31, 2023, our directors did not receive any compensation for serving in such capacities.
Employment Agreement and Lack of Keyman Insurance
On July 6, 2011, we entered into employment agreements with Timothy J. Kilkenny, Roger P. Baresel and Jason C. 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)
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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, 2023, we owed, including deferred compensation, $19,330, $96,860 and $52,830 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.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
The following table sets forth information as of March 20, 2024, 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 | |
Beneficial Owner (1) | Number of Shares | Percent of Class (1) |
Timothy J. Kilkenny (2)(3) | 4,254,917 | 21.5% |
Roger P. Baresel (2)(4) | 3,729,762 | 18.8% |
Jason C. Ayers (2)(5) | 3,143,424 | 16.0% |
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All executive officers and directors as a group (3 individuals) | 11,128,103 | 55.0% |
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High Capital Funding, LLC (6) | 1,678,250 | 8.6% |
(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 19,623,917 shares being outstanding at March 20, 2024. |
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(2) | Address is c/o 201 Robert S. Kerr Avenue, Suite 210, Oklahoma City, Oklahoma 73102. |
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(3) | Timothy J. Kilkenny and Barbara J. Kilkenny, husband and wife, hold 3,939,917 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. |
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(4) | Roger P. Baresel and Judith A. Baresel, husband and wife, hold 5,600 and 3,724,162 shares of our common stock, respectively. The number of shares held by Mrs. Baresel includes 300,000 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. Mr. Baresel disclaims any beneficial interest in the common stock and preferred stock held by Mrs. Baresel. |
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(5) | Jason C Ayers holds 3,143,424 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. |
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(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. |
Item 13. Certain Relationships and Related Transactions, and Director Independence
As of December 31, 2023, we had no outstanding notes payable.
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, 2023 and 2022, by our principal accountant.
| 2023 | 2022 |
BF Borgers, CPA PC | $38,500 | $36,400 |
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 Regulations S-X.
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PART IV
Item 15. Exhibits, Financial Statement Schedules
(10) The following exhibits are filed as part of this Report:
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101.INS | XBRL Instance Document |
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101.SCH | XBRL Taxonomy Extension Schema Document |
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101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
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104 | 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
Item 16. Form 10-K Summary
Not applicable.
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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 1, 2024By: /s/ ROGER P. BARESEL
Roger P. Baresel
Chief Executive Officer and Chief Financial
and Accounting Officer
Date: April 1, 2024By: /s/ JASON C. AYERS
Jason C. Ayers
President
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 1, 2024By: /s/ TIMOTHY J. KILKENNY
Timothy J. Kilkenny
Chairman of the Board and Director
Date: April 1, 2024By: /s/ ROGER P. BARESEL
Roger P. Baresel
Director
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Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of FullNet Communications, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of FullNet Communications, Inc. as of December 31, 2023 and 2022, the related statements of operations, stockholders' equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matter
Critical audit matters are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
We determined that there are no critical audit matters.
/S/
We have served as the Company's auditor since 2021
April 1, 2024
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FullNet Communications, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
| DECEMBER 31, | ||
2023 |
| 2022 | |
ASSETS |
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CURRENT ASSETS |
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Cash and cash equivalents | $ |
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Accounts receivable, net |
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Prepaid expenses and other current assets |
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Total current assets |
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PROPERTY AND EQUIPMENT, net |
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OTHER ASSETS AND INTANGIBLE ASSETS |
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RIGHT OF USE LEASED ASSET |
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TOTAL ASSETS | $ |
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LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) |
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CURRENT LIABILITIES |
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Accounts payable | $ |
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Accrued and other liabilities |
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Operating lease liability – current portion |
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Deferred revenue |
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Total current liabilities |
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OPERATING LEASE LIABILITY – less current portion |
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Total liabilities |
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SHAREHOLDERS’ EQUITY (DEFICIT) |
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Preferred stock - $ |
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Common stock - $ |
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Additional paid-in capital |
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Accumulated deficit | ( |
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Total shareholders’ equity |
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ |
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See accompanying notes to consolidated financial statements
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FullNet Communications, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
| Years ended December 31, | ||
2023 |
| 2022 | |
REVENUE | $ |
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COST OF REVENUE |
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Gross profit |
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OPERATING EXPENSES |
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Total operating costs and expenses |
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INCOME FROM OPERATIONS |
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Other income |
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NET INCOME BEFORE INCOME TAX |
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Income tax expense | ( |
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NET INCOME | $ |
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Preferred stock dividends | ( |
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Net income available to common shareholders | $ |
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Net income per share: |
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Basic | $ |
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Diluted | $ |
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FullNet Communications, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)
Years Ended December 31,2023 and 2022
| Common stock | Preferred stock | Additional |
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Shares | Amount | Shares | Amount | Paid-in capital | Accumulated deficit | Total | |
Balance at January 1, 2022 | $ | $ | $ | $ ( | $ | ||
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Common stock dividends paid | ( | ( | |||||
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Amortization of increasing dividend rate preferred stock discount | ( | ||||||
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Balance at December 31, 2022 | ( | ||||||
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Balance at December 31, 2023 | $ | $ | $ | $ ( | $ | ||
See accompanying notes to consolidated financial statements
33
FullNet Communications, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Years ended December 31, | ||
2023 |
| 2022 | |
CASH FLOWS FROM OPERTING ACTIVITIES |
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Net income | $ |
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Adjustments to reconcile net income to net cash provided by operating activities |
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Depreciation and amortization |
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Loss on disposal of assets |
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Noncash lease expense |
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Deferred tax expense |
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Stock options expense |
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Provision for uncollectible accounts receivable |
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Changes in operating assets and liabilities |
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Accounts receivable | ( |
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Prepaid expenses and other assets | ( |
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Accounts payable | ( |
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Accrued and other liabilities |
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Deferred revenue |
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Operating lease liability | ( |
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Net cash provided by operating activities |
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Proceeds from issuance of preferred stock for company liability |
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Payment of dividends payable – Preferred Stock | ( |
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Payment of dividends payable – Common Stock | ( |
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Net cash used in financing activities | ( |
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NET INCREASE IN CASH AND CASH EQUIVALENTS |
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Cash and cash equivalents at end of period | $ |
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Preferred stock issued to settle related party liability | $ |
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Amortization of increasing dividend rate preferred stock discount | $ |
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Preferred stock dividend declared | $ |
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See accompanying notes to consolidated financial statements
34
FullNet Communications, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023 and 2022
NOTE A – SUMMARY OF ACCOUNTING POLICIES AND NATURE OF OPERATIONS
A summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows.
Nature of Operations
FullNet Communications, Inc. and Subsidiaries (“we”) is 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 services to individuals, businesses, organizations, educational institutions and governmental agencies. Through our subsidiaries, FullNet, Inc., FullTel, Inc., FullWeb, Inc. and CallMultiplier, Inc., we provide high quality, reliable and scalable Internet based advanced voice and data solutions designed to meet customer needs. Services offered include:
•Mass notification services using text messages and automated telephone calls;
•Carrier-neutral equipment colocation, web hosting and related services; and
•Customized live help desk outsourcing services.
Consolidation
The consolidated financial statements include the accounts of FullNet Communications, Inc. and its wholly owned subsidiaries FullNet, Inc., FullTel, Inc., FullWeb, Inc. and CallMultiplier, Inc. All material inter-company accounts and transactions have been eliminated.
Use of Estimates
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.
Cash Equivalents
Cash equivalents are represented by operating accounts or money market accounts maintained with insured financial institutions which consist of highly liquid investments that mature in three months or less from date of purchase.
We have not experienced any losses in such accounts. We do not believe there is significant credit risk related to our cash and cash equivalents.
Accounts Receivable
We operate and grant credit, on an uncollateralized basis. Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers comprising our customer base and their dispersion across different industries as well as our emphasis on obtaining deposits and/or payment in advance for services from the majority of our customers. During the year ended December 31, 2023, we had no customers that comprised 10% or more of total revenues. During the year ended December 31, 2022, we had one customer that comprised approximately 10% of total revenues.
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Accounts receivable, other than certain large customer accounts which are evaluated individually, are considered past due for purposes of determining the allowances for doubtful accounts based on past experience of collectability as follows:
1 - 29 days | |
30 - 59 days | |
60 – 89 days | |
>90 days |
In addition, if we become aware of a specific customer’s inability to meet our financial obligations, a specific reserve is recorded against amounts due to reduce the net recognized receivable to the amount reasonably expected to be collected. Total bad debt expense and direct write-off for the year ended December 31, 2023 was $1,111. Total bad debt expense and direct write-off recovery for the year ended December 31, 2022 was $453.
Accounts receivable consist of the following at December 31:
Schedule of Accounts Receivable | ||
2023 | 2022 | |
Accounts receivable | $ | $ |
Less allowance for doubtful accounts | ( | ( |
$ | $ | |
Property and Equipment
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 follow:
Software | |
Computers and equipment | |
Furniture and fixtures | |
Leasehold improvements | Shorter of estimated life of improvement or the lease term |
Property and equipment consist of the following at December 31:
2023 | 2022 | |
Computers and equipment | $ | $ |
Leasehold improvements | ||
Furniture and fixtures | ||
Less accumulated depreciation | ( | ( |
$ | $ |
Depreciation expense for the years ended December 31, 2023 and 2022, was $
Long-Lived Assets
All long-lived assets held and used by us, 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. In accordance with ASC 360-10-35 “Impairment or Disposal of Long-lived Assets”, we base our 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, we determine whether impairment has occurred through the use of an undiscounted cash flows
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analysis of the asset. If impairment has occurred, we recognize a loss for the difference between the carrying amount and the estimated value of the asset. No intangible assets were purchased in 2023 or 2022. We incurred
Revenue Recognition
Revenue is recognized when control of the services sold by us is transferred to customers in an amount that reflects the consideration we expect to receive in exchange for those services. 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. Revenues are presented net of taxes and fees billed to customers and remitted to governmental authorities.
We determine revenue recognition through the following steps:
·Identification of the contract, or contracts, with a customer;
·Identification of the performance obligations in the contract;
·Determination of the transaction price;
·Allocation of the transaction price to the performance obligations in the contract; and
·Recognition of revenue when, or as, we satisfy a performance obligation.
Our revenue is derived from fees earned from customers utilizing our services. We have four streams of revenue as shown in the following table:
Revenue Description | For Year Ended December 31, 2023 | % of Total Revenue | For Year Ended December 31, 2022 | % of Total Revenue |
Mass notification services using text messages and automated telephone calls | $ | $ | ||
Colocation and web hosting services | ||||
Live help desk support services | ||||
Internet access service | ||||
Total revenue | $ | $ |
Revenue from our mass notification service and our access service is recognized as the services are provided pursuant to unwritten contracts created when our customers create an account on our website agreeing to be bound by our published Terms of Service when they purchase our service.
Revenue from our colocation and web hosting services, its live help desk support services, and our internet access services is recognized as the services are provided pursuant to written contracts executed by us and our customers.
Each of our services represent a single performance obligation consisting of a distinct service. All of our revenues are recognized as the services are provided over the life of the contract. Revenue that is received in advance of the services provided is deferred until the services are provided.
None of our services have a transaction price which includes variable consideration, a significant financing component, any noncash consideration or consideration payable to a customer. The transaction price is the amount of consideration to which we expect to be entitled to in exchange for the service transferred to each customer.
Each of our services represent a single performance obligation and the “stand-alone selling price” is the same as the contract selling price.
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All of our services are sold pursuant to written and unwritten contracts which require payment in advance for the services.
Advertising
We expense advertising production costs as they are incurred and advertising communication costs for the first time the advertisement takes place. Advertising expense for the years ended December 31, 2023 and 2022, was $
Income Taxes
We account for income taxes utilizing the liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes, using enacted statutory tax rates in effect for the year in which the differences are expected to reverse. The effects of future changes in tax laws or rates are not included in the measurement.
We file income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions.
Income Per Share
Income 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 from options and warrants calculated using the treasury stock method and the if-converted method for preferred stock.
Reconciliation of basic and diluted income per share (“EPS”) are as follows:
| December 31, 2023 | December 31, 2022 |
Net income: |
|
|
Net income | $ | $ |
Preferred stock dividends | ( | ( |
Net income available to common shareholders | ||
|
|
|
Basic income per share: |
|
|
Weighted-average common shares outstanding used in income per share computations | ||
Basic income per share | ||
|
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|
Diluted income per share: |
|
|
Shares used in diluted income per share computations | ||
Diluted income per share | ||
|
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|
Computation of shares used in income per share: |
|
|
Weighted average shares and share equivalents outstanding - basic | ||
Effect of dilutive stock options | ||
Weighted average shares and share equivalents outstanding – assuming dilution |
Schedule of Anti-dilutive Securities Excluded: |
| December 31, 2023 |
| December 31, 2022 |
Convertible preferred stock |
|
| ||
Total anti-dilutive securities excluded |
|
|
Stock-Based Compensation
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We do not have a written employee stock option plan. We have historically generally granted employee stock options with an exercise price equal to the market price of our 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 2023 and 2022 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).
Beneficial Conversion Features
The intrinsic value of a beneficial conversion feature inherent to a convertible note payable, which is not bifurcated and accounted for separately from the convertible note payable and may not be settled in cash upon conversion, is treated as a discount to the convertible note payable. This discount is amortized over the period from the date of issuance to the date the note is due using the effective interest method. If the note payable is retired prior to the end of its contractual term, the unamortized discount is expensed in the period of retirement to interest expense. In general, the beneficial conversion feature is measured by comparing the effective conversion price, after considering the relative fair value of detachable instruments included in the financing transaction, if any, to the fair value of the common shares at the commitment date to be received upon conversion.
Related Parties
A party is considered to be related to us if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with us. Related parties also include principal owners of us, our management, members of the immediate families of principal owners of us and our management and other parties with which we may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing our own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing our own separate interests is also a related party.
At December 31, 2023 and 2022, we had no related party accounts payable to officers and directors for unpaid expense reimbursements.
Fair Value Measurements
We measure our financial assets and liabilities in accordance with the requirements of FASB ASC 820, “Fair Value Measurements and Disclosures”. ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.
Level 2 – Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date and includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in
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the marketplace. Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.
Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.
The recorded value of other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, other current assets, and accounts payable and accrued expenses approximate the fair value of the respective assets and liabilities as of December 31, 2023 and 2022, are based upon the short-term nature of the assets and liabilities.
Recent Accounting Pronouncements
In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. (“ASU”) 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,” which requires that an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, “Revenue from Contracts with Customers.” At the acquisition date, an acquirer should account for the related revenue contracts as if it had originated the contracts. Generally, this should result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree's financial statements, assuming the acquirer is able to assess and rely on how the acquiree applied ASC 606. ASU 2021-08 is effective for interim and annual periods beginning after December 15, 2022, with early adoption permitted. We adopted ASU 2021-08 in the first quarter of 2022 with no material impact to our consolidated financial statements.
In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurements (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions,” which clarifies and amends the guidance of measuring the fair value of equity securities subject to contractual restrictions that prohibit the sale of the equity securities. ASU 2022-03 is effective for interim and annual periods beginning after December 15, 2023, with early adoption permitted. We are evaluating the impact of the adoption of this guidance to our consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax related disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, and may be applied on a prospective basis. Early adoption is permitted. We are evaluating the impact of the adoption of this guidance on our consolidated financial statements.
NOTE B – COMMITMENTS
Operating Leases
Under the new lease guidance (Topic 842), we recorded a ROU Lease Asset and associated Lease Liability for the Original Lease which as of December 31, 2019, had balances of $930,588 and $946,895, respectively. In recording the initial ROU Lease Asset and associated Lease Liability, we assumed that it would extend the lease for an additional five-year term at a rate per square foot which increased annually during the term. This lease was for 13,046 square feet at $17.00 per square foot and we assumed that the square footage would remain the same and the rate would increase by $.50 per square foot per year during the 5-year renewal period for purposes of calculating the ROU Lease Asset and associated Lease Liability.
We leased our offices and data center in the BOK Plaza Building on a lease originally executed on December 2, 1999 and expiring on December 31, 2019, with all additional options to renew having been previously exercised (the “Original Lease”). We subsequently negotiated and executed two new leases on November 22, 2019,
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covering our offices and data center which are effective January 1, 2020. One lease is an addendum to the Original Lease and covers only the office space (the “FN Lease”) and the other lease covers our data center and is with FullWeb, Inc., a wholly owned subsidiary (the “FW Lease”).
The combined square footage for the FN & FW Leases is 8,699 square feet, a reduction from the Original Lease of 4,347 square feet or approximately 33%. This reduction occurred in the office space with the data center space remaining the same. In addition, both leases are at the rate of $17.50 per square foot for 5 years and both contain two 5-year options to renew at the then fair market rate per square foot. Of not, the FW Lease contains the right for us to opt-out of the FW Lease without penalty at each annual anniversary.
We consider the execution of the two new leases to be a lease modification and have re-evaluated the effect of the lease modification on our conclusions under ASC 842 and determined that the leases should still be classified as operating leases.
As a result of the lease modification and the associated remeasurement of the lease liability, we used the same incremental borrowing rate of 8.5% as it used for the original lease calculations based on the fact that the nature of the underlying asset and our financial condition had not materially changed since the original lease calculation.
Amortization of the ROU Asset and payments of the associated Lease Liability for the year-ended December 31, 2023 was $
Future minimum lease payments required at December 31, 2023, under non-cancelable operating leases that have initial lease terms exceeding one year are presented in the following table:
Year ending December 31 |
| |
2024 |
| |
Total |
| |
Present value of discount |
| ( |
Current portion lease liability |
| ( |
Long-term lease liability |
| $ |
Rental expense for all operating leases for the years ended December 31, 2023 and 2022, was approximately $
NOTE C – INCOME TAXES
We use the liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes.
On a regular basis, management evaluates 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 management 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, 2021, of approximately $38,000 which was fully utilized in the 1st quarter of 2022.
The Tax Cuts and Jobs Act (“TCJA”) was signed by the President of the United States and enacted into law on December 22, 2017. The TCJA significantly changed U.S. tax law by reducing the U.S. corporate income tax rate to 21.0% from 35.0%, adopting a territorial tax regime, creating new taxes on certain foreign sourced earnings and imposing a one-time transition tax on the undistributed earnings of certain non-U.S. subsidiaries.
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NOTE D – COMMON STOCK AND STOCK-BASED COMPENSATION
COMMON STOCK
On
DIVIDEND PAYMENTS
The following table summarizes the dividends paid by the Company on its outstanding common stock for the year ended December 31, 2023:
Amount |
| Dividend per share | |
Year Ended December 31, 2022 |
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|
Second quarter | $ |
| $ |
Third quarter |
| ||
Fourth quarter |
| ||
Total | $ |
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Year Ended December 31, 2023 |
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|
First quarter | $ |
| $ |
Second quarter |
| ||
Third quarter |
| ||
Fourth quarter |
| ||
Total | $ |
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STOCK-BASED COMPENSATION
We do not have a written employee stock option plan. We have historically generally granted employee stock options with an exercise price equal to the market price of our 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 2023 and 2022 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).
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The following table summarizes our employee stock option activity for the years ended December 31, 2023 and 2022:
Schedule of Employee Stock Option Activity | ||||
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Options | Weighted average exercise price | Weighted average remaining contractual life (years) | Aggregate intrinsic value | |
Options outstanding, December 31, 2021 | $ |
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Options granted during the year |
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Options exercised during the year | ( |
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Options expired during the year | ( |
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Options cancelled during the year | ( |
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Options outstanding, December 31, 2022 | $ |
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Options granted during the year |
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Options exercised during the year | ( |
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Options forfeited during the year | ( |
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Options outstanding, December 31, 2023 | $ | $16,773 | ||
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Options exercisable, December 31, 2023 | $ | $ | ||
The following table summarizes our non-vested employee stock option activity for years ended December 31, 2023 and 2022:
2023 | 2022 | |
Non-vested options outstanding, beginning of year | ||
Options granted during the year | ||
Options vested during the year | ( | ( |
Non-vested options forfeited during the year | ( | |
Non-vested options outstanding, end of year |
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:
2023 | 2022 | |
Risk free interest rate | ||
Expected lives (in years) | ||
Expected volatility | ||
Dividend yield |
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The following table shows total stock options 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:
2023 | 2022 | |
Stock options compensation | $ | $ |
Impact on income per share: |
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|
Basic and diluted | $ | $ |
During the year 2023,
Common Stock Purchase Warrants – A summary of common stock purchase warrant activity for the years ended December 31, 2023 and 2022 follows:
| 2023 | Weighted Average Exercise Price | 2022 | Weighted Average Exercise Price |
Warrants outstanding, beginning of year | $ | $0.004 | ||
Warrants granted during the year | ||||
Warrants exercised during the year | ||||
Warrants outstanding, end of year | $ | $ |
On May 25, 2022, the
NOTE E – SERIES A CONVERTIBLE PREFERRED STOCK
The holders of shares of the Series A convertible preferred stock (the “Series A Preferred”) are entitled to receive, when and as declared by our board of directors, dividends in cash in the amount of
Due to the unstated dividend cost arising from the gradually increasing dividends on the Series A Preferred, we calculated a discount on the Series A Preferred at the time of issuance as the present value of the difference between (i) the dividends that are payable in the periods preceding commencement of the perpetual twelve cents per share per annum dividend; and (ii) the perpetual twelve cents per share per annum dividend for a corresponding number of periods; discounted at the market rate of 12% totaling $309,337. The Series A Preferred was valued at the market price on the respective date of issuance for a total value of $672,472. The discount was amortized over the periods preceding commencement of the perpetual dividend, by charging imputed dividend cost against retained earnings and increasing the carrying amount of the Series A Preferred by a corresponding amount. The discount was fully amortized in 2022 with amortization of $
The Series A Preferred was originally issued as non-voting and provided that in the event that we failed, for any reason, to make a dividend payment as set forth above, then each share of the Series A Preferred shall thereafter be entitled to two votes upon any matter that the holders of our common stock are entitled to vote upon.
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The Series A Preferred may be redeemed at the option of our board of directors for one dollar per share plus all accrued and unpaid dividends thereon at the date of redemption. In addition, at any time after a change of our control, the holders of the Series A Preferred shall have the right, at the election of a majority of the holders, to require us to redeem all of the Series A Preferred for one dollar per share plus all accrued and unpaid dividends thereon at the date of redemption.
The Series A Preferred has a liquidation preference of one dollar per share plus all accrued and unpaid dividends thereon in the event of our liquidation, dissolution or winding up.
We analyzed the embedded conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the conversion option should be classified as equity.
We analyzed the conversion option for beneficial conversion features consideration under ASC 470-20 “Convertible Securities with Beneficial Conversion Features” and noted none.
On December 27, 2023, our board of directors declared a dividend on the Series A Preferred after making the determination that, among other things, on a consolidated basis that (a) our net income for the year ended December 31, 2022 and net income projected for the year ended December 31, 2023, was legally sufficient to pay the dividends declared below on our Series A Preferred, and (b) the declaration of the dividend was not likely to render us unable to meet, as they mature, those liabilities for which payment has not been otherwise adequately provided.
These dividends were paid on January 3, 2024, out of our net income for the year ended December 31, 2022, to the holders of record of the issued and outstanding shares of our Series A Preferred at the close of business on December 30, 2023. The dividend consisted of $0.11 per share, representing the cumulative unpaid dividends on the Series A Preferred through the year ended December 31, 2023, for a total dividend payment of $68,008.
On December 23, 2022, our board of directors declared a dividend on the Series A Preferred after making the determination that, among other things, on a consolidated basis that (a) our net income for the year ended December 31, 2021 and net income projected for the year ended December 31, 2022, was legally sufficient to pay the dividends declared below on our Series A Preferred, and (b) the declaration of the dividend was not likely to render us unable to meet, as they mature, those liabilities for which payment has not been otherwise adequately provided.
These dividends were paid on January 3, 2023, out of our net income for the years ended December 31, 2021, to the holders of record of the issued and outstanding shares of our Series A Preferred at the close of business on December 21, 2022. The dividend consisted of $0.10 per share, representing the cumulative unpaid dividends on the Series A Preferred through the year ended December 31, 2022, for a total dividend payment of $61,826.
As of December 31, 2023, there were 618,257 shares of Series A Preferred outstanding with voting power representing 5.9% of the total voting power of our outstanding stock.
NOTE F – SUBSEQUENT EVENTS
On
On
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