SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 30, 1999
FULLNET COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Oklahoma 000-27031 73-1473361
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
incorporation) Identification No.)
200 N. Harvey, Suite 1704
Oklahoma City, Oklahoma 73102
(Address of principal executive offices) (Zip Code)
(405) 232-0958
(Registrant's telephone, including area code)
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Item 5. Other Events.
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On November 23, 1999, Registrant mailed a letter (the "Letter") to all
shareholders regarding the quarterly report for the period ending September 30,
1999 and developments of Registrant's business.
A copy of the Letter is attached hereto as Exhibit 99.1 and is hereby
incorporated by reference in its entirety.
Item 7. Financial Statements and Exhibits.
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(c) Exhibits.
The following documents are filed as part of this Report:
99.1. Letter mailed by the Registrant to all shareholders on November
23, 1999.
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FULLNET COMMUNICATIONS, INC.
(Registrant)
Date: November 30, 1999 By: /s/ Timothy J. Kilkenny
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Timothy J. Kilkenny,
President and Chief Executive Officer
3
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INDEX TO EXHIBITS
Appears at
Sequentially
Exhibit Numbered
Number Description Page
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99.1 Letter mailed by the Registrant to all shareholders on
November 23, 1999. 5
4
November 23, 1999
RE: Third Quarter Results and News at FullNet Communications, Inc.
Dear Shareholder:
Certain forward-looking statements contained herein regarding FullNet
Communications, Inc.'s (the "Company") business and prospects are based upon
numerous assumptions about future conditions, which may ultimately prove to be
inaccurate and actual events and results may materially differ from anticipated
results described in such statements. The Company's ability to achieve such
results is subject to certain risks and uncertainties, such as those inherent
generally in the Internet service provider ("ISP") and competitive local
exchange carrier ("CLEC") industries, the impact of competition and pricing,
changing market conditions, and other risks. Any forward-looking statements
contained herein represent the Company's judgment as of the date hereof. The
Company disclaims, however, any intent or obligation to update these
forward-looking statements.
This is the first quarterly financial report published by the Company. In
October of this year, the Company became a reporting public company under the
Securities Exchange Act of 1934. FullNet has just completed its 1999 third
quarter and filed its 1934 Act quarterly report. Like other public companies,
the Company will furnish you with the results of operations and important news
about the Company four times per year.
During the third quarter, revenues for the period were $242,000 which represents
a loss per share of $.05 compared to revenues of $219,000 or a loss per share of
$.04 for the same period of 1998. The third quarter included nonrecurring
expenses of $8,000 for costs related to start up costs of FullTel. Year to date
revenues were $877,000 or a loss per share of $.17 compared to revenues of
$862,000 and loss per share of $.06 for the same period one year ago. Year to
date expenses included nonrecurring expenses of $40,000 or $.02 per share for
costs related to the start up costs of FullTel.
I am pleased to report that the Company has had a number of important
developments during the first nine months of 1999. Major successes were (1) the
completion of the Company's 504 offering of common stock which raised the
Company net $498,000 after expenses, (2) the formation of FullTel and receipt of
FullTel's CLEC authorization. Additionally, the Company retained National
Securities Corporation ("National") for investment banking and financial
advisory purposes to aid the Company in the development of its strategic
business opportunities, merger/acquisition and capital placement services to
fund its acquisitions, digital subscriber line ("DSL") rollout and other needs.
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With the Form 10-SB filing now effective, the Company's stock is now eligible to
be quoted on the OTC Bulletin Board subject to application being made to the
Bulletin Board by a market maker desiring to quote the stock. While there can be
no assurance as to how long this process will take, the Company is working with
National to identify potential market makers to make quotations in the Company's
common stock and make the necessary applications.
Since its inception, the Company has continuously focused on bringing technology
to rural Oklahoma. As such, it has been a local Internet backbone technology
leader. However, I am pleased to share with you the announcement that as the
Company enters the new millennium, it is redesigning the way it does business by
organizing into three separate business units. By focusing the business into
three business units, the Company will become a revenue and customer driven
total Internet solutions company that will draw from technology skills of the
three units.
In implementing its operations, the Company intends to design and implement five
strategies under the new business units: two strategies in retail ISP, two in
the CLEC market, and one in the network colocation business. A sixth and common
strategy to all three divisions and shareholder value is development of the
FullNet brand name throughout Oklahoma. The strategies are as follows:
FULLNET.NET
1. Acquisitions. The Company has begun its merger and acquisition
strategy in the fourth quarter 1999. It is the intention of FullNet to
acquire ISP's in the Oklahoma market segment to increase revenues and
move towards its goal of establishing a dominant rural Oklahoma market
share while taking advantage of routing more subscribers over the
existing backbone infrastructure that it has put in place since 1995.
2. Internal Sales. The Company intends to increase its brand name
presence in up to 25 markets in Oklahoma through its recently unveiled
FullNet brand independent sales agent program to grow ISP access
service revenues. The FullNet sales program will designate a FullNet
sales agent in a local market and pay a commission equal to a
percentage of the monthly recurring revenues for each DSL or dial-up
account sold under the FullNet brand name.
FULLTEL
3. FullTel Communications, Inc., a wholly owned subsidiary, is a licensed
CLEC. First, FullTel will provide its local exchange services to
FullNet customers in Oklahoma communities. FullTel operations are
expected to start in early 2000. FullTel will provide switching access
for its ISP subscribers and reach rural Oklahoma markets with this
significantly decreased cost structure compared to the structure under
which the Company is currently operating.
Concurrent with bringing online the FullTel telephone switch in
Oklahoma City, the Company also intends to begin the roll out of DSL
broadband service. Current plans are to initially implement this in
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six Oklahoma markets, with an eventual expansion to up to 25 markets.
A private placement is currently being considered by FullNet as the
funding vehicle to provide the financing necessary to enable the
Company to implement its business model of providing DSL service and
for future mergers and acquisitions.
4. Additionally, FullNet is currently working on laying its own fiber
connections to the existing regional bell operating company ("RBOC")
tandem in Oklahoma City. This will allow us to cross-connect to any
local or long distance provider in the state, which would eliminate
monthly local loop charges incurred. Additionally, the RBOC will be
required to pay fees to the Company for all traffic over the fiber
connections that terminates at the Company. Hence, completion and
implementation of this process can both reduce costs and increase
revenues.
FULLSOLUTIONS
5. The FullSolutions, Inc. division will focus on providing turnkey
solutions for businesses and individuals for network integration
including Intranet, Internet, e-commerce applications, web page
development, web hosting, backbone services, domain name registration
and broadband access development such as DSL and leased lines.
The short-term mission of the Company is to become a dominant Internet solutions
provider in the Oklahoma marketplace while preparing the Company to enter
adjacent states with a similar strategy. Hence, by implementing the new business
unit operating platform, FullNet Communications, Inc. and its divisions are
deploying its assets to become a total solutions provider from Internet
connectivity, web page development, web page hosting, broadband DSL service, and
e-commerce to local Intranets.
We believe our planned strategy of: (1) acquiring and building new Oklahoma ISP
subscribers, (2) entry into the local telephone access and broadband delivery
market through DSL, and (3) expanding our network solutions division to be able
to service small and medium sized businesses in Oklahoma will serve to increase
shareholder value.
Enthusiastically,
Timothy J Kilkenny
Chief Executive Officer
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FULLNET COMMUNICATIONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
September 30, December 31,
1999 1998
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<S> <C> <C>
Cash 192,573 198
Accounts Receivable 91,548 49,809
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Total current assets 286,461 50,344
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Property and equipment, net 129,962 176,999
Goodwill, net 286,737 302,667
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Total assets 790,190 612,236
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Trade accounts payable 88,064 73,578
Deferred revenues 78,459 97,379
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Total current liabilities 233,048 368,573
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Notes payable 603,080 697,926
Common stock 21 14
Common stock subscribed 186,767 -
Additional paid in capital 537,547 486
Accumulated deficit (770,273) (455,916)
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Total shareholders' deficit (45,938) (455,416)
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Total liabilities and shareholders' deficit 790,190 612,236
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FULLNET COMMUNICATIONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999 and 1998 (Unaudited) (Unaudited)
1999 1998
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Total revenues 877,405 861,857
Selling, general and administrative expenses 691,919 457,180
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Loss from operations (209,599) (23,472)
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Net loss (314,357) (84,433)
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FULLNET COMMUNICATIONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999 and 1998
(Unaudited) (Unaudited)
1999 1998
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Net cash used in operating activities (111,299) (23,596)
Net cash used in investing activities (13,707) (205,393)
Net cash provided by financing activities 317,381 272,707
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Net increase in cash 192,375 43,718
Cash, beginning of period 198 3
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Cash, end of period 192,573 43,721
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