UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
(AMENDMENT NO. 1)
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _________________
Commission File Number: 000-27031
FULLNET COMMUNICATIONS, INC.
----------------------------
(Exact Name of Registrant as Specified in its Charter)
OKLAHOMA 73-1473361
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 North Harvey, Suite 1704
Oklahoma City, Oklahoma 73102
-----------------------------
(Address of principal executive offices)
(405) 232-0958
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(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
Common Stock, $0.00001 Par Value None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if there is no disclosure contained herein of delinquent
filers in response to Item 405 of Regulation S-B, and will not be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
The Registrant's revenues for its most recent fiscal year were $1,122,000.
The aggregate market value of the registrant's common stock, $0.00001 par value,
held by non-affiliates of the Registrant as of March 24, 2000 was $3,339,654
based on the closing bid price of $3.00 per share on that date as reported by
the OTC Bulletin Board. As of March 24, 2000, 3,134,578 shares of the
registrant's common stock, $0.00001 par value, were outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
FULLNET COMMUNICATIONS, INC.
FORM 10-KSB/A
(AMENDMENT NO. 1)
For the Fiscal Year Ended December 31, 1999
TABLE OF CONTENTS
Part III.
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act................ 2
Item 10. Executive Compensation........................................... 4
Item 11. Security Ownership of Certain Beneficial Owners and Management... 6
Item 12. Certain Relationships and Related Transactions................... 6
Signatures ................................................................. 8
Note: The purpose of this Amendment No. 1 is to include the information required
by Items 9, 10, 11 and 12 of FullNet Communications, Inc. Annual Report on Form
10-KSB for the year ended December 31, 1999.
PART III.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The following information is furnished for each person who serves as an
executive officer or director of FullNet Communications, Inc. (the "Company").
The Board of Directors currently consists of two members, although the Company
intends to increase the size of the Board in the near future. The directors
serve one-year terms until their successors are elected. The executive officers
of the Company are elected annually by the Board of Directors. The executive
officers serve terms of one year or until their death, resignation or removal by
the Board of Directors. There are no family relationships between any of the
directors and executive officers, other than between Timothy J. Kilkenny and
Laura L. Kilkenny, who are husband and wife. 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....... 40 Chairman of the Board of Directors, President
and CEO
Laura L. Kilkenny......... 42 Director
Travis Lane............... 30 Vice President and Chief Financial Officer
Wallace L. Walcher........ 39 Chief Operating Officer
Roger S. Laubhan.......... 48 Vice President and Chief of Network Operations
Jason C. Ayers............ 25 Vice President and President of FullWeb, Inc.
2
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Timothy J. Kilkenny has been President, Chief Executive Officer and
Chairman of the Board of Directors of the Company since its inception in May
1995. Prior to this 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.
Laura L. Kilkenny, D.O., has been a director of the Company since May
1995. Dr. Kilkenny was Corporate Secretary from May 1995 until February 2000,
when she resigned from that office. Dr. Kilkenny received her Doctorate of
Osteopathic Medicine in May 1997. Prior to the commencement of her medical
studies in 1990, Dr. Kilkenny worked in banking.
Travis Lane, CPA, has been Vice President and Chief Financial Officer
of the Company since October 1999. Prior to joining the Company, Mr. Lane served
as a certified public accountant with Deloitte & Touche, LLP from January 1994
to October 1999, most recently as an audit manager. Throughout his experience
with Deloitte & Touche, Mr. Lane served clients in a variety of industries,
including insurance, wholesale, retail, manufacturing and government. Mr. Lane
received his BBA in accounting from the University of Oklahoma.
Wallace L. Walcher, CPA, has been with the Company since March 2000 as
Chief Operating Officer. Previously, Mr. Walcher was President and CEO of
Harvest Communications of Enid, Oklahoma, which he founded in December 1995, and
was purchased by the Company on February 29, 2000. Mr. Walcher began his
accounting career with Price Waterhouse attaining senior audit status before
becoming a controller with InfoView, Inc., a high-tech startup, which became a
public company in 1984. InfoView was a provider of public access videotex
systems, a precursor of the Internet. In 1985, he joined National Foundation
Life Insurance Company as their assistant treasurer. From 1988 until the
founding of Harvest Communications, Mr. Walcher worked for various companies
that are now part of CitiGroup. He holds a Bachelors degree in accounting from
Oklahoma State University.
Roger S. Laubhan has been Vice President and Chief of Network
Operations at the Company since December 1995, and is a retired Major from the
US Air Force. Mr. Laubhan designed and installed the Company's backbone and is
responsible for the design, purchase, configuration and maintenance of the Cisco
equipment used by the Company. He also designed, purchased, built and installed
the server farm that supports the Company's dial-up clients. Mr. Laubhan has had
formal training with Cisco, US Robotics, 3Com Total Control System and has 15
years of experience with personal computers. He has a BS degree in aeronautical
technology from Oklahoma State University and an MBA from Webster University of
St. Louis, Illinois.
Jason C. Ayers has been Vice President of the Company and President of
Animus, Inc ("Animus") since its acquisition by the Company in April 1998. Mr.
Ayers received a BS degree from Southern Nazarene University in May 1996 with a
triple major in Computer Science, Math, and Physics. Mr. Ayers was a co-founder
of Animus, a web hosting company. Under Mr. Ayers' supervision, Animus is
currently hosting several thousand domains in more than 40 countries. On April
1, 1998, Animus was acquired by the Company, and Mr. Ayers assumed the role of
President of the wholly owned subsidiary which was renamed FullWeb, Inc.
Key Employees
Dawn Deckman, 41, has been the Director of Sales and Marketing for
the Company since April 1997. Ms. Deckman has been in sales and management in
the telephony/data/Internet industry for the past five years.
Michael D Tomas, 27, has been IT Manager since June 1999 and an
employee of the Company since July 1996. Mr. Tomas currently is completing his
studies at the University of Oklahoma for a degree in Management Information
Systems. Mr. Tomas has formal training with Cisco, Win 3.1, Win95/98, and
Windows NT 4.0 as well as LAN/WAN setup, including experience with wireless
networking.
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<CAPTION>
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 the Company's directors and executive officers and any persons who own
more than 10% of a registered class of the Company's equity securities to file
with the Securities and Exchange Commission ("SEC") and each exchange on which
the Company's securities are listed reports of ownership and subsequent changes
in ownership of common stock and other securities of the Company. Officers,
directors and greater than 10% stockholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on review of the copies of such reports furnished to the Company or
written representations that no other reports were required, the Company
believes that during 1999 all filing requirements applicable to its officers,
directors and greater than 10% beneficial owners were met, except for the late
filing of Form 3 for Timothy J. Kilkenny, Laura L. Kilkenny, Travis Lane, Roger
S. Laubhan and Jason C. Ayers.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth, for the last three fiscal years, the
cash compensation paid by the Company to the Chief Executive Officer and to the
Vice President and Chief of Network Operations (the "Named Executive Officers").
No other directors or executive officers earned in excess of $100,000 during
fiscal 1999.
Long-Term
Annual Compensation Compensation
--------------------- -------------
Securities
Underlying
Fiscal Options All Other
Name and Principal Position Year Salary Bonus (#)(1) Compensation
------ ------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Timothy J. Kilkenny 1999 $45,900 -- 120,000 $11,338 (2)
President and Chief Executive Officer 1998 31,200 -- -- 7,433 (3)
1997 34,540 -- -- 5,574 (4)
Roger S. Laubhan 1999 38,576 $77,565(5) -- --
Vice President and Chief of Network Operations 1998 36,500 -- -- --
1997 33,949 -- -- --
</TABLE>
- ------------------
(1) Options are granted with an exercise price equal to the fair market value
of the common stock on the date of the grant.
(2) Represents $1,214 of expense reimbursement for business use of Mr.
Kilkenny's automobile and $10,124 of insurance premiums paid by the Company
for the benefit of Mr. Kilkenny.
(3) Represents $1,875 of expense reimbursement for business use of Mr.
Kilkenny's automobile and $5,558 of insurance premiums paid by the Company
for the benefit of Mr. Kilkenny.
(4) Represents $1,414 of expense reimbursement for business use of Mr.
Kilkenny's automobile and $4,160 of insurance premiums paid by the Company
for the benefit of Mr. Kilkenny.
(5) Represents 77,565 shares of common stock with a fair market value of $1.00
per share on the date of grant were issued as a stock bonus.
4
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Stock Options Granted
The Company does not have a written stock option plan. However, a total
of 210,000 options were approved by the Board of Directors for grant to certain
employees during 1999. The following table shows stock options granted to the
Named Executive Officers during the year ended December 31, 1999.
OPTION GRANTS DURING LAST FISCAL YEAR
Individual Grants
--------------------------------------------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise or Base
Options Employees in Price Expiration
Name Granted Fiscal Year ($/Sh) Date
---- ---------- ------------ -------- ------
Timothy J. Kilkenny 120,000 (1) 43.2% (2) $1.15 10/07/03
---------------------
(1) Options were granted outside of a formal plan. The options
become exercisable on October 7, 2000 and expire on October 7,
2003 and have an exercise price of $1.15 per share, which was
equal to the estimated fair value per share price of the
Company's common stock on the grant date.
(2) All options granted during 1999 are nonqualified stock
options. During 1999, an aggregate of 277,634 options were
granted outside of a formal plan to employees. Options granted
subsequent to February 1999 generally become exercisable in
part after one year from the date of grant. Options issued
subsequent to February 1999 generally have a term of ten years
following the date of grant, unless sooner terminated in
accordance with the terms of such plan.
Fiscal Year End Option Values
The following table sets forth certain information regarding outstanding
options granted during 1999 held by the following Named Executive Officers on
December 31, 1999. During 1999, the Named Executive Officer did not exercise any
options, nor did the Company reprice any outstanding options. For the purposes
of this table, the "value" of an option is the difference between the estimated
fair market value at December 31, 1999 of the shares of common stock subject to
the option and the aggregate exercise price of such option.
Number of Value of Unexercised
Unexercised Options at In-the-Money Options at
December 31, 1999 December 31, 1999 (1)
--------------------------- ---------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
Timothy J. Kilkenny,
Chairman, President and
Chief Executive Officer -- 120,000 -0- $222,000
- ----------------------
(1) Based on the December 31, 1999 estimated fair value of the Company's common
stock of $3.00 per share.
Director Compensation
During the fiscal year ended December 31, 1999, the directors of the
Company did not receive any compensation for serving in such capacities.
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<CAPTION>
Employment Agreements
The Company has no employment contracts with any Named Executive
Officer.
Bonus Stock Grant
Pursuant to a stock bonus granted in June 1999 by the Board of
Directors, Mr. Laubhan and Mr. Ayers, among other key employees, were granted
77,595 and 25,865 shares of common stock, equal to 3% and 1%, respectively, of
the fully diluted common stock outstanding at such date. Such shares were issued
in January 2000.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership
The following table sets forth information as of March 24, 2000,
concerning the beneficial ownership of Common Stock by each of the Company's
directors, each executive officer named in the table under the heading "Item 9.
Directors and Executive Officers, Promoters and Control Persons" and all
directors and executive officers of the Company as a group, and by each person
who is known by the Company to own more than 5% of the outstanding shares of
Common Stock. Unless otherwise indicated, the beneficial owner has sole voting
and investment power with respect to such stock.
Common Stock
-----------------------
Number of Percent of
Beneficial Owner Shares Class(1)
- ---------------- --------- ----------
<S> <C> <C>
Timothy J. Kilkenny*(2) (3) 1,380,000 44.03%
Laura L. Kilkenny* (2) (3) 1,380,000 44.03%
Wallace L. Walcher(2)(4) 547,500 17.47%
Kathryn Walcher(2)(4) 547,500 17.47%
Roger S. Laubhan (2) 77,595 2.48%
Jason C. Ayers (2) 25,865 .83%
Travis Lane (2)(5) 400 .01%
--------- ----------
All executive officers and directors as a group (6 persons) 2,031,360 64.80%
--------- ----------
</TABLE>
- --------------------------
* Director
(1) Percent of class for any stockholder listed is calculated without regard to
shares of common stock issuable to others upon exercise of outstanding
stock options. Any shares a stockholder is deemed to own by having the
right to acquire by exercise of an option or warrant are considered to be
outstanding solely for the purpose of calculating that stockholder's
ownership percentage. The Company 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.
(2) Address is c/o 200 N. Harvey, Suite 1706 Oklahoma City, Oklahoma 73102.
(3) Timothy J. Kilkenny and Laura L. Kilkenny each hold, in their respective
names, 690,000 shares. Amounts shown do not include options, held in the
name of Mr. Kilkenny, to purchase 120,000 shares exercisable at $1.15 per
share beginning October 7, 2000.
(4) Wallace L. Walcher and Kathryn Walcher, husband and wife, hold 537,500
shares as joint tenants and Mr. Walcher holds, in his name, warrants to
purchase 10,000 shares which are presently exercisable. Amounts shown do
not include options, held in the name of Mr. Walcher, to purchase 60,400
shares exercisable at $3.00 per share beginning February 28, 2001.
(5) Amounts shown do not include options to purchase 75,000 shares exercisable
at $1.25 per share beginning October 12, 2000.
6
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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 26, 1998 the Company purchased 100% of the outstanding common
stock of Animus (now FullWeb, Inc.), an Oklahoma corporation engaged in the
business of providing web hosting services, selling computer equipment and
providing configuration and maintenance of the equipment. The aggregate purchase
price for the Animus stock was $350,000, of which $175,000 was paid at closing
with the remaining $175,000 paid in two installments subsequent to closing. In
connection with the acquisition, Jason C. Ayers, Vice President of the Company
and President of Animus, was paid approximately $28,542 in 1998 and $29,792 in
1999 for his 1,000 shares of Animus common stock, which represented
approximately 16.67% of the total number of shares of Animus common stock
outstanding. The pro rata price paid to Mr. Ayers by the Company for his 1,000
shares of Animus common stock was the same price paid to other stockholders of
Animus.
In connection with the first installment payment of $50,000 due in
September 1998 to the former Animus stockholders, Mr. Kilkenny advanced $50,000
to the Company. The Company paid monthly payments of principal and interest
until April 1999, when the $50,000 was repaid in full.
Pursuant to a stock bonus approved by the Board of Directors and
granted in June 1999, Roger S. Laubhan and Jason C. Ayers, officers of the
Company, and two other employees were granted 181,055 shares of common stock
equal to 3%, 1%, 2% and 1%, respectively, of the fully diluted common shares
outstanding at such date. Such shares were not issued until January 2000. The
Company recognized $181,055 as compensation expense in 1999 relating to the
grant of restricted common stock to these employees.
7
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
REGISTRANT:
FULLNET COMMUNICATIONS, INC.
Date: April 29, 2000 By: /s/ TIMOTHY J. KILKENNY
-----------------------
Timothy J. Kilkenny
President and Chief Executive Officer
Date: April 29, 2000 By: /s/ TRAVIS LANE
---------------
Travis Lane
Vice President, Chief Financial and
Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
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 29, 2000 By: /s/ TIMOTHY J. KILKENNY
-----------------------
Timothy J. Kilkenny,
Chairman of the Board and Director
Date: April 29, 2000 By: /s/ LAURA L. KILKENNY
---------------------
Laura L. Kilkenny, Director
8
