FULLNET COMMUNICATIONS INC (Form: 10-K, Received: 04/10/2020 15:15:27)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)


☑		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the fiscal year ended December 31, 2019


☐		TRANSITION REPORT PURSUANT TO 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 Identification No.)
incorporation or organization)

201 Robert S. Kerr Avenue, Suite 210

Oklahoma City, Oklahoma 73102

(Address of principal executive offices)

(405) 236-8200

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Title of class

Common Stock, $0.00001 Par Value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Exchange Act.

Yes o No þ

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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “non-accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o			Accelerated filer o		Non-accelerated Filer þ		Smaller reporting company ☑
Emerging-growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No þ

The aggregate market value of the Common Stock held by non-affiliates computed by reference to the price at which the Common Stock was last sold, or the average bid and asked price of the Common Stock, as of the last business day (June 30, 2019) of registrant’s completed second quarter was $198,822.

As of April 10, 2020, 14,539,675 shares of the registrant’s common stock, $0.00001 par value, were outstanding.

FULLNET COMMUNICATIONS, INC.

FORM 10-K

For the Fiscal Year Ended December 31, 2019

TABLE OF CONTENTS

PART I.
Item 1. Business	5
Item 1A. Risk Factors	8
Item 2. Properties	12
Item 3 Legal Proceedings	12

PART II.

Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	12
Item 6. Selected Financial Data	14
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	18
Item 8. Financial Statements and Supplemental Data	18
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	18
Item 9A. Controls and Procedures	18

PART III.

Item 10. Directors, Executive Officers and Corporate Governance	19
Item 11. Executive Compensation	21
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	23
Item 13. Certain Relationships and Related Transactions, and Director Independence	24
Item 14. Principal Accounting Fees and Services	24
Item 15. Exhibits, Financial Statement Schedules	25

SIGNATURES	27

Exhibit 31.1 Certification Pursuant to Rules 13a-14(a) and 15d-14(a)
Exhibit 31.2 Certification Pursuant to Rules 13a-14(a) and 15d-14(a)
Exhibit 32 Certification Pursuant to Section 906

Throughout this Report the first personal plural pronoun in the nominative case form “we” and its objective case form “us”, its possessive and the intensive case forms “our” and “ourselves” and its reflexive form “ourselves” refer collectively to FullNet Communications, Inc. and its subsidiaries, and its and their executive officers and directors.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This Annual Report on Form 10-K and the information incorporated by reference may include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In particular, we direct your attention to Item 1. Business, Item 1A. Risk Factors, Item 2. Properties, Item 3. Legal Proceedings, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Item 8. Financial Statements and Supplementary Data. We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. All statements regarding our expected financial position and operating results, our business strategy, our financing plans and the outcome of any contingencies are forward-looking statements. These statements can sometimes be identified by our use of forward-looking words such as “may,” “believe,” “plan,” “will,” “anticipate,” “estimate,” “expect,” “intend” and other phrases of similar meaning. Known and unknown risks, uncertainties and other factors could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on various factors and was derived using numerous assumptions.

Although we believe that our expectations that are expressed in these forward-looking statements are reasonable, there is no assurance that our expectations will prove to be correct. Our actual results could be materially different from our expectations, including the following:

• We may lose customers or fail to grow our customer base;

• We may not successfully integrate new customers or assets obtained through acquisitions, if any;

• We may fail to compete with existing and new competitors;

• We may not adequately respond to technological developments impacting the Internet;

• We may not be successful in responding to new and modified industry standards, laws and regulations applying to our business;

• We may be significantly affected by adverse changes in the economy;

• We may experience a major system failure; and

• We may not be able to obtain needed capital resources.

This list is intended to identify some of the principal factors that could cause actual results to differ materially from those described in the forward-looking statements included elsewhere in this report. These factors are not intended to represent a complete list of all risks and uncertainties inherent in our business, and should be read in conjunction with the more detailed cautionary statements included in this Report under the caption “Item 1A. Risk Factors,” our other Securities and Exchange Commission (“SEC”) filings and our press releases.

PART I

Item 1. Business

General

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, group text and voice message delivery services, as well as advanced voice and data solutions.

References to us in this Report include our subsidiaries: FullNet, Inc. (“FullNet”), FullTel, Inc. (“FullTel”), FullWeb, Inc. (“FullWeb”), and CallMultiplier, Inc. (“CallMultiplier”). Our principal executive offices are located at 201 Robert S. Kerr Avenue, Suite 210, Oklahoma City, Oklahoma 73102, and our telephone number is (405) 236-8200. We also maintain Internet sites on the World Wide Web (“WWW”) at www.fullnet.net, www.fulltel.com and www.callmultiplier.com. Information contained on our Websites is not, and should not be deemed to be, a part of this Report.

Company History

We were founded in 1995 as CEN-COM of Oklahoma, Inc., an Oklahoma corporation, to bring dial-up Internet access and education to rural locations in Oklahoma that did not have dial-up Internet access. We changed our name to FullNet Communications, Inc. in December 1995. Today we are an integrated communications provider.

We market our carrier neutral colocation solutions in our network operations center to other competitive local exchange carriers, Internet service providers and web-hosting companies. Our colocation facility is carrier neutral, allowing customers to choose among competitive offerings rather than being restricted to one carrier. Our data center is Telco-grade and provides customers a high level of operative reliability and security. We offer flexible space arrangements for customers and 24-hour onsite support with both battery and generator backup.

Through FullTel, our wholly owned subsidiary, we were a fully licensed competitive local exchange carrier or CLEC in Oklahoma. However, in response to the changes in the telecommunications market and deterioration in our ability to effectively compete, we made the decision in the fourth quarter of 2017, to affect an orderly exit from the CLEC business. We were in negotiations with a potential buyer at December 31, 2017, which buyer subsequently purchased substantially all of FullTel’s operating assets pursuant to an asset purchase agreement, which was executed and closed on February 1, 2018.

Through CallMultiplier, our wholly owned subsidiary, we offer a comprehensive cloud-based solution to consumers and businesses for automated group texting and voice message delivery.

Our common stock trades on the OTC “Pink Sheets” under the symbol FULO. While our common stock trades on the OTC “Pink Sheets”, it is very thinly traded, and there can be no assurance that our shareholders will be able to sell their shares should they so desire. Any market for the common stock that may develop, in all likelihood, will be a limited one, and if such a market does develop, the market price may be volatile.

Mergers and Acquisitions

Our acquisition strategy is designed to leverage our existing network backbone and internal operations to enable us to enter new markets in Oklahoma, as well as to expand our presence in existing markets, and to benefit from economies of scale.

Our Business Strategy

As an integrated communications provider, we intend to increase shareholder value by continuing to build scale through both acquisitions and internal growth and then leveraging increased revenues over our fixed-costs base. Our strategy is to meet the customer service requirements of retail, business, educational and government advanced voice and data solutions users in our target markets, while benefiting from the scale advantages obtained through being a fully integrated backbone and broadband provider. The key elements of our overall strategy with respect to our principal business operations are described below.

Target Strategic Acquisitions

The goal of our acquisition strategy is to accelerate market penetration by acquiring smaller competitors in the advanced voice and data solutions market. Additionally, we will continue to build upon our core competencies and expand our technical, customer service staff and Internet based marketing efforts. We evaluate acquisition candidates based on their compatibility with our overall business plan. When assessing an acquisition candidate, we focus on the following criteria:

Potential revenue and customer growth;

Low customer turnover or churn rates;

Favorable competitive environment; and

Favorable consolidation savings.

Generate Internal Sales Growth

We intend to expand our customer base by increasing our marketing efforts. At December 31, 2019, our sales efforts are carried out by technical engineers and our senior management. We are exploring other strategies to increase our sales, including other marketing partners and Internet based advertising programs.

Internet Access Services

We provide Internet access services to individual and small business customers located in Oklahoma on both a retail and wholesale basis. Through FullNet, we provide our customers with a variety of dial-up and dedicated connectivity, as well as direct access to a wide range of Internet applications and resources, including electronic mail.

Our branded and private label Internet access services are provided through a third-party vendor’s statewide network with points-of-presence in 232 communities throughout Oklahoma. Points-of-presence are local telephone numbers through which customers can access the Internet. We had approximately 72 and 74 customers at December 31, 2019 and 2018, respectively.

Advanced Voice and Data Solutions

Our primary advanced voice and data solution is marketed under our CallMultiplier brand name. CallMultiplier is a comprehensive cloud-based solution to consumers and businesses for automated calling, texting and voice message delivery. CallMultiplier streamlines and automates call tree management to provide efficient delivery of time sensitive voice and text messages to groups. Our customers include sports teams, businesses, religious groups, schools, staffing companies, clubs and civic groups throughout the United States and Canada.

Sales and Marketing

We focus on marketing our services to two distinct market segments: enterprises (primarily small and medium size businesses) and consumers. We are currently focus the majority of our efforts on Internet based advertising and marketing.

Competition

The market for Internet connectivity and related services is extremely competitive. We anticipate that competition will continue to intensify as the use of the Internet continues to expand and grow. The tremendous growth and potential market size of the Internet access market has attracted many new start-ups as well as existing businesses from a variety of industries. We believe a reliable network, knowledgeable salespeople and the quality of technical support currently are the primary competitive factors in our targeted market and that price is usually secondary to these factors.

Our current and prospective competitors include, in addition to other national, regional and local Internet service providers, long distance and local exchange telecommunications companies, cable television, direct broadcast satellite, wireless communication providers and online service providers. While we believe that our network, products and customer service distinguish us from these competitors, most of these competitors have significantly greater market presence, brand recognition, financial, technical and personnel resources than us.

Internet Service Providers

Our current primary competitors include other Internet service providers with a significant national presence that focuses on business customers, including Cox Communications and AT&T. These competitors have greater market share, brand recognition, financial, technical and personnel resources than us. We also compete with regional and local Internet service providers in our targeted markets.

Telecommunications Carriers

The major long-distance companies, also known as inter-exchange carriers, including AT&T, Verizon, and Sprint, offer Internet access services and compete with us. Reforms in the Federal regulation of the telecommunications industry have created greater opportunities for ILECs, including the Regional Bell Operating Companies or RBOCs, and other competitive local exchange carriers, to enter the Internet connectivity market. In order to address the Internet connectivity requirements of the business customers of long distance and local carriers, we believe that there is a move toward horizontal integration by ILECs and CLECs through acquisitions or joint ventures with, and the wholesale purchase of, connectivity from Internet service providers. The MCI/WorldCom merger (and the prior WorldCom/MFS/UUNet consolidation), GTE’s acquisition of BBN, the acquisition by ICG Communications, Inc. of Netcom, Global Crossing’s acquisition of Frontier Corp. (and Frontier’s prior acquisition of Global Center) and AT&T’s purchase of IBM’s global communications network are indicative of this trend. Accordingly, we expect that we will experience increased competition from the traditional telecommunications carriers. These telecommunication carriers, in addition to their greater network coverage, market presence, financial, technical and personnel resources also have large existing commercial customer bases.

Cable Companies, Direct Broadcast Satellite and Wireless Communications Companies

Many of the major cable companies are offering Internet connectivity, relying on the viability of cable modems and economical upgrades to their networks, including Media One and Time Warner Cablevision, Inc., Cox Communications, Comcast, EarthLink and Tele-Communications, Inc. (“TCI”). We compete to a lesser extent with these service providers, which currently are primarily focused on the consumer marketplace and offer their own content, including chat rooms, news updates, searchable reference databases, special interest groups and shopping.

Automated Group Text and Voice Message Delivery Service Providers

The market for group text and voice message delivery service solutions is highly fragmented, intensely competitive and constantly evolving. We compete with a wide array of established and emerging companies. Notable competitors include Twilio, Inc., Everbridge, Inc., Onsolve, LLC, Call-Em-All, LLC, CallFire, Inc., OnTimeTelecom, Inc., and EZ Texting.

We believe that our ability to attract customers and to market value-added services is a key to our future success and profitability. However, there can be no assurance that our competitors will not introduce

comparable services or products at similar or more attractive prices in the future or that we will not be required to reduce our prices to match competition. We want to emphasize that most if not all of our competitors have significantly greater market presence, brand recognition, financial, technical and personnel resources than us.

There can be no assurance that we will be able to offset the effects of any such competition or resulting price reductions. Increased competition could result in erosion of our market share and could have a material adverse effect on our business, financial condition and results of operations.

Employees

As of December 31, 2019, we had 15 employees employed in engineering, sales, marketing, customer support and related activities and general and administrative functions. None of our employees are represented by a labor union, and we consider our relations with our employees to be good. We also engage consultants from time to time with respect to various aspects of our business.

Item 1A. Risk Factors.

This Report includes “forward looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. On August 27, 2014, FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s ability to Continue as a Going Concern, which requires management to assess a company’s ability to continue as a going concern within one year from financial statement issuance and to provide related footnote disclosures in certain circumstances.

The Company has historically experienced significant operating losses with cumulative losses from inception of approximately $10 million. These losses have resulted in a negative working capital position of approximately $455,000 at December 31, 2019, of which approximately $314,000 of the Company’s current liabilities is owed to its officers and directors, and approximately $509,000 of the Company’s current liabilities is deferred revenue. The Company’s officers and directors, who are also major shareholders, have agreed to not seek payment of any of the amounts owed to them if such payment would jeopardize the Company’s ability to continue as a going concern. The deferred revenue represents advance payments for services from the Company’s customers which will be satisfied by its delivery of services in the normal course of business and will not require settlement in cash.

The Company started a number of initiatives in 2017 which included revenue enhancement initiatives, cost saving initiatives, the sale of excess assets and an orderly exit from the CLEC business. The Company was successful with its revenue enhancement and cost saving initiatives and in selling certain excess assets in the third quarter of 2018 and the first quarter of 2019, as well as effecting an orderly exit from the CLEC business through the sale of substantially all of its wholly owned subsidiary’s CLEC operating assets (see Note I – Discontinued Operations).

As a result of these initiatives, the Company generated positive cash flow from its operating activities of approximately $427,000 and $187,000, for the twelve months ended December 31, 2019 and 2018, respectively. In addition, the Company was able to generate net income of approximately $317,000 and $267,000, for the twelve months ended December 31, 2019 and 2018, respectively.

Management expects that the success of these initiatives will provide the Company with sufficient liquidity for it to operate for the next 12 months.

As a result of the revenue enhancement initiatives, the cost saving initiatives, the excess asset sales and the successful exit from the CLEC business, the Company has been able to significantly improve its working capital position and alleviate any substantial doubt about the Company’s ability to continue as a going concern as defined by ASU 2014-15. We believe that the actions discussed above mitigate the substantial doubt raised by our prior operating losses and satisfy our estimated liquidity needs 12 months from the issuance of the financial statements. However, we cannot predict, with certainty, the outcome of our actions to generate additional liquidity, including the availability of additional debt financing, or whether such actions would generate the expected liquidity as currently planned. Additionally, a failure to generate additional liquidity could negatively impact our ability to effectively execute our business plan.

Limited Marketing Experience.

We have limited experience in developing and commercializing new services based on innovative technologies, and there is limited information available concerning the potential performance of our hardware or market acceptance of our proposed services. There can be no assurance that unanticipated expenses, problems or technical difficulties will not occur which would result in material delays in product commercialization or that our efforts will result in successful product commercialization. Consequently, our limited marketing experience could have a material adverse effect on our business prospects, financial condition and results of operation.

Uncertainty of Products/Services Development.

Although considerable time and financial resources were expended in the development of our services and products, there can be absolutely no assurance that problems will not develop which would have a material adverse effect on us. We will be required to commit considerable time, effort and resources to finalize our product/service development and adapt our products and services to satisfy specific requirements of potential customers. Continued system refinement, enhancement and development efforts are subject to all of the risks inherent in the development of new products/services and technologies, including unanticipated delays, expenses, technical problems or difficulties, as well as the possible insufficiency of funds to satisfactorily complete development, which could result in abandonment or substantial change in commercialization. There can be no assurance that development efforts will be successfully completed on a timely basis, or at all, that we will be able to successfully adapt our hardware or software to satisfy specific requirements of potential customers, or that unanticipated events will not occur which would result in increased costs or material delays in development or commercialization. In addition, the complex technologies planned to be incorporated into our products and services may contain errors that become apparent subsequent to commencement of commercial use. Remedying these errors could delay our plans and cause us to incur substantial additional costs. Consequently, the uncertainty of our products/services development could have a material adverse effect on our business prospects, financial condition and results of operation.

Competition; Technological Obsolescence.

The markets for our products and services are characterized by intense competition and an increasing number of potential new market entrants who have developed or are developing potentially competitive products and services. We will face competition from numerous sources, certain of which may have substantially greater financial, technical, marketing, distribution, personnel and other resources than us, permitting such companies to implement extensive marketing campaigns, both generally and in response to efforts by additional competitors to enter into new markets and market new products and services. In addition, our product and service markets are characterized by rapidly changing technology and evolving industry standards that could result in product obsolescence and short product life cycles. Accordingly, our ability to compete will be dependent upon our ability to complete the development of our products and to introduce our products and/or services into the marketplace in a timely manner, to continually enhance and improve our software and to successfully develop and market new products. There is no assurance that we will be able to compete successfully, that competitors will not develop technologies or products that render our products and/or services obsolete or less marketable or that we will be able to successfully enhance our products or develop new products and/or services. Consequently, our failure to successfully respond to the demands of competition and technological obsolescence could have a material adverse effect on our business prospects, financial condition and results of operation.

Risks Relating to the Internet.

Businesses reliant on the Internet may be at risk due to inadequate development of the necessary infrastructure, including reliable network backbones or complementary services, high-speed modems and security procedures. The Internet has experienced, and is expected to continue to experience, significant growth in the number of users and amount of traffic. There can be no assurance that the Internet infrastructure will continue to be able to support the demands placed on it by sustained growth. In addition, there may be delays in the development and adoption of new standards and protocols, the inability to handle increased levels of Internet activity or due to increased government regulation. If the necessary Internet infrastructure or complementary services are not developed to effectively support growth that may occur, our business, results of operations and financial condition would be materially adversely affected.

Risks Relating to Adverse Changes in the Economy.

Our business may be affected by adverse changes in the economy generally, including any resulting effect on spending by our customers. While some of our customers may consider our services to be a cost-effective alternative, others may turn to our competitors during an economic downturn. During an economic downturn, we may experience such a reduction in demand and loss of customers, especially in the event of a prolonged recessionary period.

Risks Relating to COVID-19.

The global outbreak of the coronavirus disease (COVID-19), which the World Health Organization has characterized as a “pandemic”, has resulted in a crisis affecting economies and financial markets worldwide. The pandemic, and its attendant economic damage, could adversely affect our business, results of operations and financial condition. The ultimate extent of its impact on us will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the pandemic and actions taken to contain or prevent its further spread, among others. These and other potential impacts of COVID-19 could therefore materially and adversely affect our business, financial condition and results of operations.

Risks Relating to Government Regulation.

Our business is subject to a number of Federal and state laws and regulations. These laws and regulations may involve privacy, data protection, intellectual property, competition, consumer protection, or other subjects. Many of the laws and regulations to which we are subject are still evolving and being tested in courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often are uncertain, particularly in the new and rapidly evolving automated group text and voice message delivery industry in which we operate. Future legislative or regulatory actions could adversely affect our business, results of operations and financial condition.

For example, the Telephone Consumer Protection Act of 1991, or TCPA, restricts telemarketing and the use of automated text and/or voice messages without proper consent and limits the use of automatic dialing systems, artificial or prerecorded voice messages, SMS text messages and fax machines. The scope and interpretation of the laws that are or may be applicable to the automated delivery of voice and text messages are continuously evolving and developing. If we do not comply with these laws or regulations or if we become liable under these laws or regulations due to the failure of our customers to comply with these laws by obtaining proper consent, we could face direct liability.

We face a risk of litigation resulting from customer misuse of our automated group text and voice message delivery service, in violation of our published terms of service, to send unauthorized automated text and/or voice messages in violation of Federal and state laws and/or regulations. The actual or perceived improper sending of automated text and/or voice messages may subject us to potential risks, including liabilities or claims relating to consumer protection laws. This has resulted in civil claims against some of our former customers and requests for information through third-party subpoenas. The scope and interpretation of the laws that are or may be applicable to the delivery of automated text and voice messages are continuously evolving and developing. If we do not comply with these laws or regulations or if we become liable under these laws or regulations due to the failure of our customers to comply with these laws by obtaining proper consent, we could face direct liability.

In addition, Congress and the Federal Communications Commission are attempting to mitigate the scourge of robocalls by requiring participation in new technical standards including the Signature-based Handling of Asserted Information Using toKENs ("SHAKEN") and Secure Telephone Identity Revisited ("STIR") standards (together, "SHAKEN/STIR") and other robocalling prevention and anti-spam standards. If we do not comply with any current or future rules or regulations that apply to our business, we could be subject to substantial fines and penalties, and we may have to restructure our offerings, exit certain markets or raise the price of our products. In addition, any uncertainty regarding whether particular regulations apply to our business, and how they apply, could increase our costs or limit our ability to grow.

Noncompliance with applicable regulations or requirements could subject us to investigations, sanctions, enforcement actions, disgorgement of profits, fines, damages, civil and criminal penalties, injunctions or other collateral consequences. If any governmental sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations, and financial condition could be materially adversely

affected. In addition, responding to any action will likely result in a significant diversion of management’s attention and resources and an increase in professional fees. Enforcement actions and sanctions could harm our business, reputation, results of operations and financial condition.

Risks Relating to rapidly changing technology, evolving industry standards, and changing regulations.

The market for automated group text and voice message delivery services is subject to rapid technological change, evolving industry standards, changing regulations, as well as changing customer needs, requirements and preferences. Our success will depend, to a significant degree, on our ability to adapt and respond effectively to these changes on a timely basis. If we are unable to develop new products that satisfy our customers and provide enhancements and new features for our existing products that keep pace with rapid technological and industry change, including but not limited to SHAKEN/STIR, our business, results of operations and financial condition could be adversely affected. If new technologies emerge that are able to deliver competitive products and services at lower prices, more efficiently, more conveniently or more securely, such technologies could adversely impact our ability to compete effectively.

Our automated group text and voice message delivery solution must integrate with a variety of network, hardware, mobile and software platforms and technologies, and we need to continuously modify and enhance it to adapt to changes and innovation in these technologies. For example, Apple, Google and other cell‑phone operating system providers or inbox service providers have developed and, may in the future develop, new applications or functions intended to filter spam and unwanted phone calls, messages or emails. Similarly, our network service providers may adopt new filtering technologies in an effort to combat spam or robocalling. Such technologies may inadvertently filter desired messages or calls to or from our customers. If cell-phone operating system providers, network service providers, our customers or their end users adopt new software platforms or infrastructure, we may be required to develop new versions of our solution to work with those new platforms or infrastructure. This development effort may require significant resources, which would adversely affect our business, results of operations and financial condition. Any failure of our solution to operate effectively with evolving or new platforms and technologies could reduce the demand for our solution. If we are unable to respond to these changes in a cost‑effective manner, our solution may become less marketable and less competitive or obsolete, and our business, results of operations and financial condition could be adversely affected.

Dependence on Key Personnel.

Our success depends in large part upon the continued successful performance of our current executive officers and key employees, Timothy J. Kilkenny, Roger P. Baresel and Jason C. Ayers, for our continued research, development, marketing and operation. Although we have employed, and will employ in the future, additional qualified employees as well as retaining consultants having significant experience, if Messrs. Kilkenny, Baresel or Ayers fail to perform any of their duties for any reason whatsoever, our ability to market, operate and support our products/services will be adversely affected. While we are located in areas where the available pool of people is substantial, there is also significant competition for qualified personnel. Consequently, our dependence on these key personnel could have a material adverse effect on our business prospects, financial condition and results of operation.

Limited Public Market.

During February 2000, our common stock began trading on the OTC Bulletin Board under the symbol FULO. While our common stock currently trades on the OTC “Pink Sheets”, there can be no assurance that our shareholders will be able to sell their shares should they so desire. Any market for the common stock that may develop, in all likelihood, will be a limited one, and if such a market does develop, the market price may be volatile. Consequently, the limited public market for our common stock could have a material adverse effect on our business prospects, financial condition and results of operation.

Penny Stock Regulation.

Broker-dealer practices in connection with transactions in “penny stocks” are regulated by certain penny stock rules adopted by the SEC. Penny stocks generally are equity securities with a price of less than $5.00 that are generally quoted over-the-counter, such as on the OTC Bulletin Board (which is a facility of FINRA) or OTC Link LLC. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and, if the broker dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, broker-dealers who sell these securities to persons other than established customers and accredited investors (generally, those persons with net assets, excluding their primary residence, in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse), must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. Consequently, these requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that is or becomes subject to the penny stock rules. Our common stock is subject to the penny stock rules at the present time, and consequently our shareholders will find it more difficult to sell their shares. Consequently, the Penny Stock regulations could have a material adverse effect on our business prospects, financial condition and results of operation.

Item 2. Properties

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

Item 3. Legal Proceedings

We are not a party to any material legal proceedings.

PART II

Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities.

Our common stock is traded in the over-the-counter market and is quoted on the OTC “Pink Sheets” under the symbol FULO. The closing sale prices reflect inter-dealer prices without adjustment for retail markups, markdowns or commissions and may not reflect actual transactions. The following table sets forth the high and low closing sale prices of our common stock during the calendar quarters presented as reported by the OTC “Pink Sheets”.

	Common Stock
	Closing Sale Prices
	High	Low
2019 –Calendar Quarter Ended:
March 31	`$.097`	`$.036`
June 30	`.097`	`.035`
September 30	`.080`	`.030`
December 31	`.157`	`.020`
2018 –Calendar Quarter Ended:
March 31	`$.046`	`$.030`
June 30	`.030`	`.030`
September 30	`.036`	`.030`
December 31	`.036`	`.036`

Number of Shareholders

The number of beneficial holders of record of our common stock as of the close of business on April 10, 2020, was approximately 121.

Dividend Policy

To date, we have declared no cash dividends on our common stock, and do not expect to pay cash dividends in the near term. We intend to retain future earnings, if any, to provide funds for operations and the continued expansion of our business.

Securities Authorized for Issuance under Equity Compensation Plans

The following table sets forth as of December 31, 2019, information related to each category of equity compensation plan approved or not approved by our shareholders, including individual compensation arrangements with our non-employee directors. We do not have any equity compensation plans that have been approved by our shareholders. All of our outstanding stock option grants and warrants were pursuant to individual compensation arrangements and exercisable for the purchase of our common stock shares.

Number of

Securities

Weighted-

Remaining

Number of

Average

Available for

Shares

Exercise Price

Future

Underlying

Issuance under

Unexercised

Outstanding

Equity

Options

Options and

Compensation

Plan Category

and Warrants

Warrants

Plans

Equity compensation plans approved by our shareholders:

None

Not Applicable

Equity compensation plans not approved by our shareholders:

Stock option grants to non-employee directors

-

$-

-

Stock options granted to employees

2,318,835

$0.010

-

Warrants and certain stock options issued to non-employees

290,000

$0.004

-

Total

2,608,835

$0.009

-

Item 6. Selected Financial Data.

As a smaller reporting company, we are not required and have not elected to report any information under this item (see “Item 8. Financial Statements and Supplementary Data.”).

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with our Consolidated Financial Statements and notes thereto included in Part II, Item 8 of this Report. The results shown herein are not necessarily indicative of the results to be expected in any future periods. This discussion contains forward-looking statements based on current expectations that involve risks and uncertainties. Actual results and the timing of events could differ materially from the forward-looking statements as a result of a number of factors. For a discussion of the factors that could cause actual results to differ materially from the forward-looking statements, see “Item 1A. Risk Factors” and our other periodic reports and documents filed with the SEC.

Overview

All of the markets that we are active in are extremely competitive. We anticipate that competition will continue to intensify. The tremendous growth and potential market size of these markets has attracted many new start-ups as well as existing businesses from a variety of industries. We believe that a reliable network, knowledgeable customer service and technical support personnel combined with live 24/7 support are the primary competitive factors in our targeted markets and that price is usually secondary to these factors.

As long as we are a provider of telecommunications, we are affected by regulatory proceedings in the ordinary course of our business at the state and Federal levels. These include proceedings before both the Federal Communications Commission and the Oklahoma Corporation Commission (“OCC”). In addition, in our operations we rely on obtaining many of our underlying telecommunications services and/or facilities from incumbent local exchange carriers or other carriers pursuant to interconnection or other agreements or arrangements.

Discontinued Operations

In response to the changes in the telecommunications market and deterioration in our ability to effectively compete, we made the decision in the fourth quarter of 2017, to affect an orderly exit from the CLEC business. On October 27, 2017, the Company’s board of directors adopted a plan to exit the CLEC business as soon as possible through the sale of its wholly owned CLEC subsidiary and/or substantially all of its CLEC subsidiary’s operating assets. We were in negotiations with a potential buyer at December 31, 2017, which buyer subsequently purchased substantially all of FullTel’s operating assets pursuant to an asset purchase agreement which was executed and closed on February 1, 2018 (“the Sale”).

The Company determined that the Sale represented a strategic shift that will have a major effect on the Company’s operations and financial results since it represented a complete exit from the CLEC business and, therefore, classified its CLEC subsidiary as held for sale at December 31, 2017.

The Company recognized a gain of $233,277 on the Sale based on total consideration of $264,872 less total basis in the assets sold and transactions costs of $31,595. The assets sold consisted primarily of customers and associated customer premise equipment.

Consideration:
Cash	$	246,500
Assumption of deferred revenue		8,366
Waived service obligation for February 2018		`10,006`
Total consideration	$	`264,872`

Total assets sold:
Customer contracts	$	`-`
Fiber innerduct		`3,248`
Fiber strands		`-`
Customer CPE		`-`
Total assets		`3,248`
Transactional costs		`28,347`
Total basis	$	`31,595`
Net gain	$	`233,277`

Results of Operations

The following table, which includes only continuing operations (see Note I – Discontinued Operations of the financial statements appearing elsewhere in this Report), sets forth certain statement of operations data as a percentage of revenues for the years ended December 31, 2019 and 2018:

	For the Years Ended December 31,
	2019		2018
		Percentage		Percentage
	Amount	of revenue	Amount	of revenue
Revenue:
Total revenues, net	`2,420,924`	`100.0`	`2,070,480`	`100.0`

Operating costs and expenses:
Cost of revenue	`320,609`	`13.2`	`247,679`	`12.0`
Selling, general and administrative expenses	`1,882,443`	`77.8`	`1,820,736`	`87.9`
Depreciation and amortization	`15,788`	`0.7`	`16,836`	`0.8`
Total operating costs and expenses	`2,218,840`	`91.7`	`2,085,251`	`100.7`

Income (Loss) from operations	`202,084`	`8.3`	`(14,771)`	`(0.7)`
Other Income	`116,440`	`4.8`	`116,230`	`5.6`

Interest expense	`(277)`	`(0.0)`	`(1,849)`	`(0.1)`

Net income from continuing operations	`$318,247`	`13.1%`	`$99,610`	`4.8%`

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Revenue

Revenue increased $350,444 or 16.9% to $2,420,924 for the year 2019 from $2,070,480 for the year 2018. This increase was primarily attributable to the net addition of new customers and the sale of additional services to existing customers.

In 2019, we had other income of $116,440, which included $81,919 from the sale of a block of excess IPv4 numbers, $8,679 from the write-off of open accounts payable that have been settled, $1,170 from the adjustment to the estimate of a contingent liability, $8,365 from interest on an investment bank account, and $16,307 from the gain recognized on partial lease termination. In 2018, we had other income of $116,230, which included $6,000 from the sale of an internet access service, $64,491 from the sale of a block of excess IPv4 numbers, $31,760 from the refund of the overpayment of certain property taxes, $1,477 from interest on an investment bank account, and $12,502 from the adjustment to the estimate of a contingent liability.

Operating Costs and Expenses

Cost of revenue increased $72,930 or 29.4% to $320,609 for the year 2019 from $247,679 for the year 2018. This increase was primarily related to increases in costs of servicing new customers added through growth of business.

Selling, general and administrative expenses increased $61,707 or 3.4% to $1,882,443 for the year 2019 from $1,820,736 for the year 2018. This increase was primarily a result of increases in advertising, professional services, rent, and bank and credit card fees of $59,518, $44,007, $3,719, and $3,021, respectively. These increases were offset by decreases in employee costs, travel and entertainment expenses, and utilities of $32,867, $9,882, and $1,183, respectively. In 2018, employee costs included $66,948 of stock-based compensation expense due to the immediate vesting of 1,750,000 employee stock options granted with an exercise price of $.04. Selling, general and administrative expenses as a percentage of total revenues decreased to 77.8% for the year 2019 compared to 87.9% for the year 2018.

Depreciation and amortization expense decreased $1,048 or 6.2% to $15,788 for the year 2019 from $16,836 for the year 2018 primarily related to assets reaching full depreciation and amortization.

Interest Expense

Interest expense decreased $1,572 or 85% to $277 for the year 2019 from $1,849 for the year 2018 primarily related to the payoff of the principal balance of the note payable on which the interest was calculated.

Liquidity and Capital Resources

As of December 31, 2019, we had $611,151 in cash and $1,087,065 in current liabilities. Current liabilities consist primarily of $467,682 in accrued and other liabilities, of which $314,165 is owed to our officers and directors, and $508,861 in 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, 2019 and 2018, we had working capital deficits of $454,985, and $718,712, respectively. We do not have a line of credit or credit facility to serve as an additional source of liquidity. Historically we have relied on shareholder loans as an additional source of funds.

At December 31, 2019, of the $6,872 we owed to our trade creditors, $1,917 was past due. At December 31, 2019, no amounts were owed to related parties.

Cash flows for the years ended December 31, 2019 and 2018, consist of the following:

	For the Years Ended
	December 31
	2019	2018

Net cash flow provided by operating activities – continuing operations	$ 427,770	`$186,646`
Net cash flow used in operating activities – discontinued operations–See Note I	(1,390)	`(59,319)`
Net cash flow used in investing activities – continuing operations	(14,543)	`(7,471)`
Net cash flow provided by investing activities – discontinued operations–See Note I	-	`218,153`
Net cash flow provided by financing activities – continuing operations	46,148	`5,354`
Net cash flow used in financing activities – discontinued operations–See Note I	-	`(116,592)`

Cash used for the purchases of equipment was $14,543 and $7,471, respectively, for the years ended December 31, 2019 and 2018.

No intangible assets were purchased in 2019 and 2018.

Cash used for principal payments on notes payable was $27,888 and $5,354, respectively, for the years ended December 31, 2019 and 2018.

During the year ended December 31,2019, employee stock options for 480,000 shares of the Company’s common stock were exercised by reducing deferred compensation payable by $1,440, and employee stock options for 38,666 shares of the Company’s common stock were exercised for $116. During the year ended December 31, 2018, employee stock options for 1,750,000 shares of the Company’s common stock were exercised by reducing deferred compensation payable by $70,000.

The planned expansion of our business will require significant capital to fund capital expenditures, working capital needs, and debt service. Our principal capital expenditure requirements will include:

•mergers and acquisitions;

•improvement of existing services, development of new services; and

•further development of operations support systems and other automated back office systems.

Because our cost of developing new networks and services, funding other strategic initiatives, and operating our business depend on a variety of factors (including, among other things, the number of customers and the service for which they subscribe, the nature and penetration of services that may be offered by us, regulatory changes, and actions taken by competitors in response to our strategic initiatives), it is almost certain that actual costs and revenues will materially vary from expected amounts and these variations are likely to increase our future capital requirements.

Our ability to fund the capital expenditures and other costs contemplated by our business plan in the near term will depend upon, among other things, our ability to generate consistent net income and positive cash flow from operations as well as our ability to seek and obtain additional financing. Capital will be needed in order to implement our business plan, deploy our network, expand our operations and obtain and retain a significant number of customers in our target markets. Each of these factors is, to a large extent, subject to economic, financial, competitive, political, regulatory, and other factors, many of which are beyond our control.

There is no assurance that we will be successful in developing and maintaining a level of cash flows from operations sufficient to permit payment of our liabilities. If we are unable to generate sufficient cash flows from operations, we will be required to modify or abandon our growth plans, limit our capital expenditures, restructure or refinance our liabilities or seek additional capital or liquidate our assets. There is no assurance that (i) any of these strategies could be effectuated on satisfactory terms, if at all, or on a timely basis or (ii) any of these strategies will yield sufficient proceeds to adequately fund operations.

As of December 31, 2019, 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

761,162

152,232

304,465

-

Total contractual cash obligations

$761,162

$152,232

$304,465

$-

Critical Accounting Policies and Estimates

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect certain reported amounts and disclosures. In applying these accounting principles, we must often make individual estimates and assumptions regarding expected outcomes or uncertainties. As might be expected, the actual results or outcomes are generally different than the estimated or assumed amounts. These differences are usually minor and are included in our consolidated financial statements as soon as they are known. Our estimates, judgments and assumptions are continually evaluated based on available information and experience. Because of the use of estimates inherent in the financial reporting process, actual results could differ from those estimates.

We periodically review the carrying value of our intangible assets when events and circumstances warrant such a review. One of the methods used for this review is performed using estimates of future cash flows. If the carrying value of our intangible assets is considered impaired, an impairment charge is recorded for the amount by which the carrying value of the intangible assets exceeds its fair value. We believe that the estimates of future cash flows and fair value are reasonable. Changes in estimates of these cash flows and fair value, however, could affect the calculation and result in additional impairment charges in future periods.

We periodically review the carrying value of our property and equipment whenever business conditions or events indicate that those assets may be impaired. If the estimated future undiscounted cash flows to be generated by the property and equipment are less than the carrying value of the assets, the assets are written down to fair market value and a charge is recorded to current operations. Significant and unanticipated changes in circumstances, including significant adverse changes in business climate, adverse actions by regulators, unanticipated competition, loss of key customers and/or changes in technology or markets, could require a provision for impairment in a future period.

We review loss contingencies and evaluate the events and circumstances related to these contingencies. We disclose material loss contingencies that are possible or probable, but cannot be estimated. For loss contingencies that are both estimable and probable the loss contingency is accrued and expense is recognized in the financial statements.

Access service revenues are recognized on a monthly basis over the life of each contract as services are provided. Contract periods range from monthly to yearly. Carrier-neutral telecommunications colocation revenues and traditional telephone services and advanced voice and data services are recognized on a monthly basis over the life of the contract as services are provided. Revenue that is received in advance of the services provided is deferred until the services are provided. 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.

During 2019 and 2018, we did not have disagreements with our principal independent accountants.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act that are designed to ensure that information required to be disclosed in our reports filed or submitted to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that information is accumulated and communicated to our management, including our principal executive and financial officer as appropriate, to allow timely decisions regarding required disclosures.

Our principal executive officer, who is also our principal financial officer, evaluated the effectiveness of disclosure controls and procedures as of December 31, 2019, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our CEO/CFO concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s

rules and forms, and that such information is accumulated and communicated to our management, including our CEO/CFO, as appropriate, to allow timely decisions regarding required disclosure.

A system of controls, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Report of Management on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Our internal control system was designed to, in general, provide reasonable assurance to our management and board regarding the preparation and fair presentation of published financial statements, but because of its 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 the Company’s internal control over financial reporting as of December 31, 2019. 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, 2019, was effective.

This annual report does not include an attestation report of our public accounting firm regarding internal control over financial reporting. Our management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC adopted as of September 21, 2010, that permit us to provide only our management’s report in this annual report.

Changes in Internal Control over Financial Reporting

No change in our system of internal control over financial reporting occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

We did not identify the proper accounting treatment for an operating lease pursuant to Financial Accounting Standards Board issued Accounting Standards Update No. 2016-02, Leases (Topic 842), which requires lessees to recognize on the balance sheet assets and liabilities for leases with lease terms of more than 12 months. As a result of our subsequent research and identification the appropriate accounting treatment for this transaction, we gained an appropriate level of understanding regarding this type of transaction and do not believe that there will be a recurrence of this failure.

As of the date of this filing, the item noted above was adjusted in the accompanying financial statements.

PART III.

Item 10. Directors, Executive Officers, and Corporate Governance.

The following information is furnished as of April 10, 2020, 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	61	Chairman of the Board of Directors
Roger P. Baresel	64	Chief Executive Officer, Chief Financial Officer and Secretary and Director
Jason C. Ayers	45	President and Director

Timothy J. Kilkenny has served as our Chairman of the Board of Directors since our inception in May 1995. He served as our Chief Executive Officer from May 1995 until June 6, 2016. Prior to that time, he spent 14 years in the financial planning business as a manager for both MetLife and Prudential. Mr. Kilkenny is a graduate of Central Bible College in Springfield, Missouri.

Roger P. Baresel became our Chief Executive Officer on June 6, 2016. He has been one of our directors and our Chief Financial Officer since November 2000, and our President from October 2003 until June 2016. Mr. Baresel is an experienced senior executive and consultant who has served at a variety of companies in a number of different industries. Mr. Baresel has the following degrees from the University of Central Oklahoma in Edmond, Oklahoma: BA Psychology, BS Accounting and MBA Finance, in which he graduated Summa Cum Laude. Mr. Baresel is also a certified public accountant.

Jason C. Ayers became our President on June 6, 2016. He has been one of our directors since May 2013 and served as our Vice President of Operations from December 2000 until June 2016. Prior to that he served as President of Animus, a privately-held web hosting company which we acquired in April 1998. Mr. Ayers received a BS degree from Southern Nazarene University in Bethany, Oklahoma in May 1996 with a triple major in Computer Science, Math and Physics. Upon graduating, he was a co-founder of Animus.

Audit Committee Financial Expert

Because our board of directors only consists of three directors, each of whom does not qualify as an independent director; our board performs the functions of an audit committee. Our board of directors has determined that Roger P. Baresel, our Chief Executive Officer and Chief Financial Officer qualifies as a “financial expert.” This determination was based upon Mr. Baresel’s

understanding of generally accepted accounting principles and financial statements;

ability to assess the general application of generally accepted accounting principles in connection with the accounting for estimates, accruals and reserves;

experience preparing, auditing, analyzing or evaluating financial statements that present the breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by our financial statements, or experience actively supervising one or more persons engaged in such activities;

understanding of internal controls and procedures for financial reporting; and

understanding of audit committee functions.

Mr. Baresel’s experience and qualification as a financial expert were acquired through the active supervision of a principal financial officer, principal accounting officer, controller, public accountant, auditor or person performing similar functions and overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing or evaluation of financial statements.

Mr. Baresel is not an independent director. We have been unable to attract a person to serve as one of our directors and that would qualify both as an independent director and as a financial expert because of inability to compensate our directors and provide liability insurance protection.

Compliance with Section 16(a) of the Exchange Act, Beneficial Ownership Reporting Requirements

Section 16(a) of the Securities and Exchange Act of 1934, as amended, requires our directors and executive officers and any persons who own more than 10% of a registered class of our equity securities to file with the SEC and each exchange on which our securities are listed, reports of ownership and subsequent changes in ownership of our common stock and our other securities. Officers, directors and greater than 10% shareholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. Based solely on review of the copies of such reports furnished to us or written representations that no other reports were required, we believe that during 2019 all filing requirements applicable to our officers, directors and greater than 10% beneficial owners were met.

Code of Ethics

Our board of directors has adopted our code of ethics that applies to all of our employees and directors, including our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. Our code of ethics may be found on our website at www.fullnet.net. We will describe the nature of amendments to the code on our website, except that we may not describe amendments that are purely a technical, administrative, or otherwise non-substantive. We will also disclose on our website any waivers from any provision of the code that we may grant. We will also disclose on our website any violation of the code by our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. Information about amendments and waivers to the code will be available on our website for at least 12 months, and thereafter, the information will be available upon request for five years.

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 2019.

Long-Term

Annual Compensation

Compensation

Securities

Underlying

Options and

Fiscal

Other

Warrants

Name and Principal Position

Year

Salary

Compensation

(#) (1)

Timothy J. Kilkenny

2019

$78,971

(2)

$20,136

(3)

160,000

Chairman

2018

$78,756

(4)

$51,680

(5)

350,000

Roger P. Baresel

2019

$85,040

(6)

$56,944

(7)

160,000

CEO and CFO

2018

$67,336

(8)

$71,590

(9)

700,000

Jason C. Ayers

2019

$134,382

(10)

$26,826

(11)

160,000

President

2018

$92,664

(12)

$48,988

(13)

700,000

(1)	Options are granted with an exercise price equal to the fair market value of our common stock on the date of the grant and are valued based on the Black-Scholes option pricing model.

(2)	Includes no deferred compensation.

(3)	Represents $2,100 of expense for business parking for Mr. Kilkenny, $10,301 of insurance premiums, $2,443 of post-retirement benefits paid by us for the benefit of Mr. Kilkenny, and $5,292 of stock options issued to Mr. Kilkenny.

(4)	Includes $31,266 of deferred compensation.

(5)	Represents $13,218 of expense reimbursement for business use of Mr. Kilkenny's automobile and parking, $1,799 of expense reimbursement for Mr. Kilkenny's Internet connection and cell phone, $21,052 of insurance premiums, $2,220 of post-retirement benefits paid by us for the benefit of Mr. Kilkenny, and $13,390 of stock options issued to Mr. Kilkenny.

(6)	Includes $34,423 of deferred compensation.

(7)	Represents $9,600 of expense reimbursement for business use of Mr. Baresel's automobile and parking, $4,560 of expense reimbursement for Mr. Baresel's home office and cell phone, $35,186 of insurance premiums, $1,390 of post-retirement benefits paid by us for the benefit of Mr. Baresel, and $5,292 of stock options issued to Mr. Baresel.

(8)	Includes $61,651 of deferred compensation.

(9)	Represents $9,600 of expense reimbursement for business use of Mr. Baresel's automobile and parking, $4,711 of expense reimbursement for Mr. Baresel's home office and cell phone, $26,925 of insurance premiums, $2,861 of post-retirement benefits paid by us for the benefit of Mr. Baresel, and $26,779 of stock options issued to Mr. Baresel.

(10)	Includes $3,500 of deferred compensation.

(11)	Represents $2,100 of expense reimbursement for Mr. Ayer's parking, $1,500 of expense reimbursement for Mr. Ayer's Internet connection and cell phone, $13,847 of insurance premiums, $4,088 of post-retirement benefits paid by us for the benefit of Mr. Ayers, and $5,292 of stock options issued to Mr. Ayers.

(12)	Includes $29,404 of deferred compensation.

(13)	Represents $2,100 of expense reimbursement for Mr. Ayer's parking, $1,500 of expense reimbursement for Mr. Ayer's Internet connection and cell phone, $14,894 of insurance premiums, $3,716 of post-retirement benefits paid by us for the benefit of Mr. Ayers, and $26,779 of stock options issued to Mr. Ayers.

Stock Options Granted

All options granted during 2019 were nonqualified stock options. During 2019, an aggregate of 483,000 options were granted outside of a formal plan. During 2019, 3,000 stock options were granted to one employee, and 160,000 stock options each were granted to Mr. Kilkenny, Mr. Baresel and Mr. Ayers. On May 17, 2019, an employee, certain officers and directors, and their family members exercised options to purchase 518,666 restricted shares of the Company’s common stock. Proceeds from the exercise of the Options were $1,556, of which $1,440 was derived from the reduction of deferred compensation payable that the Company owed to these officers and directors, and the remaining $116 derived from a cash payment from the employee. During 2018, an aggregate of 2,013,000 options were granted outside of a formal plan to employees. During 2018, 350,000 stock options were granted to Mr. Kilkenny, and 700,000 stock options each were granted to Mr. Baresel and Mr. Ayers. On September 28, 2018, certain officers and directors and their family members exercised options to purchase 1,750,000 restricted shares of the Company’s common stock. Proceeds from the exercise of the Options were $70,000, which was derived from the reduction of deferred compensation payable the Company owed to these officers and directors. All common shares were issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, without payment of any form of commissions or other remuneration.

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.

2019 Year End Option Values

Our executive officers (Timothy J. Kilkenny, Chairman of the Board, Roger P. Baresel, Chief Executive Officer and Chief Financial Officer and Jason C. Ayers, President) each held 250,000, 300,000, and 300,000, respectively of outstanding options at December 31, 2019, of which 166,666, 200,000, and 200,000 were exercisable. At December 31, 2019, the options had an aggregate value of $2,500, $3,000, and $3,000, respectively, based on an exercise price of $.01 per share and an average bid/ask price of $.01 per share.

Director Compensation

During the fiscal year ended December 31, 2019, our directors did not receive any compensation for serving in such capacities.

Employment Agreements and Lack of Keyman Insurance

On July 6, 2011, we entered into employment agreements with Timothy J. Kilkenny, Roger P. Baresel and Jason Ayers. Each agreement is effective July 1, 2011, and continued through an initial term ended December 31, 2018; however, the term was automatically extended for additional three-year terms, since neither we nor the employee gave a six-month advance notice of termination. These agreements provide, among other things, (i) an annual base salary of at least $61,656 for Mr. Kilkenny, $45,012 for Mr. Baresel and $68,436 for Mr. Ayers, (ii) bonuses at the discretion of the Board of Directors, (iii) entitlement to fringe benefits including medical and insurance benefits as may be provided to our other senior officers; and (iv) eligibility to participate in our incentive, bonus, benefit or similar plans. These agreements require the employee to devote the required time and attention to our business and affairs necessary to carry out his responsibilities and duties. These agreements may be terminated under certain circumstances and upon termination provide for (i) the employee to be released from personal liability for our debts and obligations, and (ii) the payment of any amounts we owe the employee. At December 31, 2019, we owed, including deferred compensation, $171,893, $53,049 and $87,224 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 April 10, 2020, concerning the beneficial ownership of our Common Stock by each of our directors, each executive officer named in the table under the heading “Item 10. Directors and Executive Officers, and Corporate Governance” and all of our directors and executive officers as a group, as well as each person who is known by us to own more than 5% of the outstanding shares of our Common Stock. The non-employee beneficial owner information is based on Schedules 13D or 13G filed by the applicable beneficial owner with the SEC or other information provided to us by the beneficial owner or our stock transfer agent. Unless otherwise indicated, the beneficial owner has sole voting and investment power with respect to such stock.

	Common Stock
	Beneficially Owned
	Number of		Percent of
Beneficial Owner (1)	Shares		Class (1)
Timothy J. Kilkenny (2)(3)		3,679,350		`24.5%`
Roger P. Baresel (2)(4)		3,027,762		`20.2%`
Jason C. Ayers (2)(5)		2,573,424		`17.3%`

All executive officers and directors as a group (3 individuals)		9,280,536		`62.0%`

High Capital Funding, LLC (6)		1,457,933		`9.9%`

(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 14,539,675 shares being outstanding at April 10, 2020.

(2)		Address is c/o 201 Robert S. Kerr Avenue, Suite 210, Oklahoma City, Oklahoma 73102.

(3)		Timothy J. Kilkenny and Barbara J. Kilkenny, husband and wife, hold 3,364,350 and 315,000 shares of our common stock, respectively. The number of shares includes 240,628 shares of our Series A convertible preferred stock held by Mr. Kilkenny that are currently convertible into common stock at the rate of one share of common stock per one share of Series A convertible preferred stock and 250,000 shares of our common stock that are subject to currently exercisable stock options at $.01 per share beginning January 9, 2020.

(4)		Roger P. Baresel and Judith A. Baresel, husband and wife, hold 5,600 and 3,022,162 shares of our common stock, respectively. The number of shares held by Mrs. Baresel includes 200,000 shares of our Series A convertible preferred stock that are currently convertible into common stock at the rate of one share of common stock per one share of Series A convertible preferred stock and 300,000 shares of our common stock that are subject to currently exercisable stock options at $.01 per share beginning January 9, 2020. Mr. Baresel disclaims any beneficial interest in the common stock, preferred stock and options held by Mrs. Baresel.

(5)		Jason C. Ayers holds 2,573,424 shares of our common stock. The number of shares includes 77,629 shares of our Series A convertible preferred stock that are currently convertible into common stock at the rate of one share of common stock per one share of Series A convertible preferred stock and 300,000 shares of our common stock that are subject to currently exercisable stock options at $.01 per share beginning January 9, 2020.

(6)		High Capital Funding, LLC, 333 Sandy Springs Circle, Suite 230, Atlanta, Georgia 30328, the parent company of Generation Capital Associates, holds 920,325 shares of our common stock. Generation Capital Associates holds 537,608 shares of our common stock. The number of shares includes 203,169 shares of our Series A convertible preferred stock held by High Capital Funding, LLC 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. Amounts shown do not include 200,000 shares of our common stock that are subject to common stock purchase warrants that are not currently exercisable because they contain a provision prohibiting their exercise to the extent that they would increase Generation Capital Associates’ percentage ownership beyond 9.9% of our outstanding shares of common stock.

Item 13. Certain Relationships and Related Transactions, and Director Independence

On February 26, 2019 we paid the $27,888 balance of a secured convertible promissory note from a shareholder.

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, 2019 and 2018, by our principal accountant.

		2019				2018
Audit Fees – MaloneBailey LLP			$32,500				$32,500

The audit fees include services rendered by our principal accountant for the audit of our financial statements, review of financial statements included in our quarterly reports and other fees that are normally provided by the accountant in connection with statutory and regulatory filings or engagements. Because our Board of Directors only consists of three directors, none of whom qualifies as an independent director; our Board of Directors performs the functions of an audit committee. It is our policy that the Board of Directors pre-approve all audit, tax and related services. All of the services described above in this Item 14 were approved in advance by our

Board of Directors. No items were approved by the Board of Directors pursuant to paragraph (c)(7)(ii)(C) of Rule 2-01 of Regulation S-X.

Item 15. Exhibits, Financial Statement Schedules.

(a) The following exhibits are filed as part of this Report:

Exhibit
Number	Exhibit


3.2	Bylaws (filed as Exhibit 2.2 to Registrant's Registration Statement on Form 10-SB, file number 000-27031 filed on August 13, 1999, and incorporated herein by reference)	#

3.3	Amended and Restated Certificate of Incorporation of FullNet Communications, Inc. (filed as Exhibit 3.3 to Registrant's Form 8-K, file number 000-27031 filed on June 7, 2013, and incorporated herein by reference)	#

4.1	Specimen Certificate of Registrant's Common Stock (filed as Exhibit 4.1 to the Company's Form 10-KSB for the fiscal year ended December 31, 1999, filed on March 30, 2000, and incorporated herein by reference).	#

4.3	Certificate of Correction to Articles II and V of Registrant's Bylaws (filed as Exhibit 2.1 to Registrant's Registration Statement on Form 10-SB, file number 000-27031 filed on August 13, 1999, and incorporated herein by reference).	#

4.4	Certificate of Designation, Preferences, and Rights of Series A Convertible Preferred Stock of FullNet Communications, Inc. (filed as Exhibit 4.18 to Registrant's Form 8K, file number 000-27031 filed on June 7, 2013, and incorporated herein by reference)	#

10.11	Employment Agreement with Timothy J. Kilkenny dated July 6, 2011 (filed as Exhibit 10.47 to Form 10Q filed on November 15, 2011)	#

10.12	Employment Agreement with Roger P. Baresel dated July 6, 2011 (filed as Exhibit 10.48 to Form 10Q filed on November 15, 2011)	#

10.13	Employment Agreement with Jason Ayers dated July 6, 2011 (filed as Exhibit 10.49 to Form 10Q filed on November 15, 2011)	#

10.15	Secured Exchange Promissory Note and Security Agreement dated May 31, 2013, issued to High Capital Funding, LLC (filed as Exhibit 10.51 to Form 10Q filed on November 14, 2013)	#

10.19	Asset Purchase Agreement dated February 1, 2018 between FullTel, Inc. and Dobson Technologies - Transport and Telecom Solutions, LLC (filed as Exhibit 2.1 to Form 8-K filed on February 6, 2018)	#

10.20	Issuance of fully-vested and immediately exercisable employee stock options on February 14, 2018 (filed as Item 5.02 on Form 8-K filed on February 21, 2018)	#

10.22	IPv4 Numbers Purchase Agreement executed August 7, 2018, by and between FullNet Communications, Inc. and EBOX, Inc. (filed as Exhibit 10.22 to Form 10Q filed on August 14, 2018)	#

10.23	IPv4 Numbers Purchase Agreement executed February 4, 2019, by and between FullNet Communications, Inc. and Paycom Payroll, LLC (filed as Exhibit 10.23 to Form 10Q filed on November 14, 2019)	#

10.24	Lease Agreements between the Company and BOKP Tower, LLC, dated November 22, 2019	*

21	Subsidiaries of the Registrant	*

31.1	Certification pursuant to Rules 13a-14(a) and 15d-14(a) of Roger P. Baresel	*

31.2	Certification pursuant to Rules 13a-14(a) and 15d-14(a) of Roger P. Baresel	*

32	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Roger P. Baresel	*

101.INS	XBRL Instance Document	**

101.SCH	XBRL Taxonomy Extension Schema Document	**

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	**

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	**

101.LAB	XBRL Taxonomy Extension Label Linkbase Document	**

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	**

____________________

#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 Quarterly Report on Form 10-Q 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.

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 10, 2020	By:	/s/ ROGER P. BARESEL
		Roger P. Baresel
		Chief Executive Officer and Chief Financial and Accounting Officer

Date: April 10, 2020	By:	/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 10, 2020	By:	/s/ TIMOTHY J. KILKENNY
		Timothy J. Kilkenny
		Chairman of the Board and Director

Date: April 10, 2020	By:	/s/ ROGER P. BARESEL
		Roger P. Baresel
		Director

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

Fullnet Communications, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Fullnet Communications, Inc. and its subsidiaries (collectively, the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of operations, shareholders’ 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, 2019 and 2018, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

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 audits. 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 audits 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 audits 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 audits 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 audits provide a reasonable basis for our opinion.

/s/ MaloneBailey, LLP

www.malonebailey.com

We have served as the Company's auditor since 2013.

Houston, Texas

April 10, 2020

FullNet Communications, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS


	DECEMBER 31,
		2019	2018
ASSETS
CURRENT ASSETS
Cash and cash equivalents		`$611,151`	`$245,462`
Accounts receivable, net		`943`	`5,026`
Prepaid expenses and other current assets		`19,986`	`30,848`

Total current assets		`632,080`	`281,336`

PROPERTY AND EQUIPMENT, net		`57,751`	`51,267`

OTHER ASSETS AND INTANGIBLE ASSETS		`18,250`	`12,979`

RIGHT OF USE LEASED ASSET		`618,333`	`-`

ASSETS OF DISCONTINUED OPERATIONS, net (NOTE I)	[1]	`854`	`775`

TOTAL ASSETS		`$1,327,268`	`$346,357`

LIABILITIES AND SHAREHOLDERS’ DEFICIT

CURRENT LIABILITIES
Accounts payable		`$6,872`	`$18,428`
Accounts payable, related party		`-`	`4,000`
Accrued and other liabilities		`467,682`	`534,168`
Convertible notes payable, related party - current portion		`-`	`7,203`
Operating lease liability – current portion		`103,651`	`-`
Deferred revenue		`508,861`	`442,771`

Total current liabilities		`1,087,066`	`1,006,570`

CONVERTIBLE NOTES PAYABLE, related party - less current portion		`-`	`20,685`

OPERATING LEASE LIABILITY – less current portion		`514,682`	`-`

LIABILITIES OF DISCONTINUED OPERATIONS (NOTE I)	[1]	`52,008`	`52,363`

Total liabilities		`1,653,756`	`1,079,618`

SHAREHOLDERS’ DEFICIT
Preferred stock —$0.001 par value; authorized, 10,000,000 shares; Series A convertible; issued and outstanding, 875,054 shares in 2019 and 987,102 shares in 2018		`554,516`	`638,849`
Common stock —$0.00001 par value; authorized, 40,000,000 shares; issued and outstanding, 14,539,675 and 13,621,009 shares in 2019 and 2018, respectively		`145`	`136`
Additional paid-in capital		`8,939,519`	`8,765,712`
Accumulated deficit		`(9,820,668)`	`(10,137,958)`

Total shareholders’ deficit		`(326,488)`	`(733,261)`


TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT		`$1,327,268`	`$346,357`

[1] See Note I.

See accompanying notes to consolidated financial statements.

FullNet Communications, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

	Years ended December 31,
	2019	2018
REVENUE
Total revenues, net	`$2,420,924`	$ 2,070,480

OPERATING COSTS AND EXPENSES
Cost of revenue	`320,609`	247,679
Selling, general and administrative expenses	`1,882,443`	1,820,736
Depreciation and amortization expenses	`15,788`	16,836

Total operating costs and expenses	`2,218,840`	2,085,251

INCOME (LOSS) FROM OPERATIONS	`202,084`	(14,771)

Other income	`116,440`	116,230
Interest expense	`(277)`	(1,849)

Net income from continuing operations	`$318,247`	$ 99,610
Gain from sale of discontinued asset	`-`	233,277
Net loss from discontinued operations (Note I)	`(957)`	(65,804)
NET INCOME	`$317,290`	$ 267,083

Preferred stock dividends	`(81,731)`	(79,400)
Net income available to common shareholders	`$235,559`	$ 187,683

Net income per share:
Continuing operations - basic	`$0.02`	`$0.00`
Continuing operations - diluted	`$0.01`	`$0.00`
Discontinued operations – basic and diluted	`$(0.00)`	`$0.01`
Net income – basic	`$0.02`	`$0.01`
Net income – diluted	`$0.01`	`$0.01`

Weighted average shares outstanding:
Basic	`14,275,957`	12,321,694
Diluted	`16,780,235`	15,259,570

See accompanying notes to consolidated financial statements.

FullNet Communications, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT

Years ended December 31, 2019 and 2018


	Common stock		Preferred stock		Additional	Accumulated
	Shares	Amount	Shares	Amount	paid-in capital	deficit	Total
Balance at January 1, 2018	11,871,009	$ 119	987,102	$ 618,675	$ 8,640,769	$ (10,405,041)	$ (1,145,478)

Stock options compensation	-	-	-	-	75,134	-	75,134

Stock options exercised by reducing deferred compensation payable	1,750,000	17	-	-	69,983	-	70,000

Amortization of increasing dividend rate preferred stock discount	-	-	-	20,174	(20,174)	-	-

Net income	-	-		-	-	267,083	267,083

Balance at December 31, 2018	13,621,009	136	987,102	638,849	8,765,712	(10,137,958)	(733,261)

Stock options compensation	-	-	-	-	23,795	-	23,795

Stock options exercised	38,666	-	-	-	116	-	116

Stock options exercised by reducing deferred compensation payable	480,000	5	-	-	1,435	-	1,440

Warrants expense	-	-	-	-	15,358	-	15,358

Warrants exercised	400,000	4	-	-	1,896	-	1,900

Preferred stock repurchased	-	-	(59,634)	(40,626)	20,350	-	(20,276)

Preferred stock returned	-	-	(114,792)	(78,203)	78,203	-	-

Preferred stock issued to settle related party liability	-	-	62,378	21,209	45,941	-	67,150

Amortization of increasing dividend rate preferred stock discount	-	-	-	13,287	(13,287)	-	-

Net income	-	-	-	-	-	317,290	317,290

Balance at December 31, 2019	14,539,675	$ 145	875,054	$ 554,516	$ 8,939,519	$ (9,820,668)	$ (326,488)

See accompanying notes to consolidated financial statements.

FullNet Communications, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years ended December 31,
	2019		2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	`$317,290`		`$267,083`
(Income) loss from discontinued operations	`957`		`(167,473)`
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	`15,788`		`16,836`
Noncash lease expense	`146,534`		`-`
Gain from partial termination of right of use leased asset	`(16,307)`		`-`
Stock options and warrants expense	`39,153`		`75,134`
Recovery of uncollectible accounts receivable	`(1,521)`		`(4,716)`
Net (increase) decrease in
Accounts receivable	`5,604`		`8,544`
Prepaid expenses and other current assets	`(2,138)`		`(24,738)`
Net increase (decrease) in
Accounts payable	`(11,558)`		`(18,943)`
Accounts payable, related party	`(4,000)`		`(3,982)`
Accrued and other liabilities	`2,105`		`(5,939)`
Deferred revenue	`66,090`		`44,840`
Operating lease liability	`(130,227)`		`-`
Net cash provided by operating activities	`427,770`		`186,646`

CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for property and equipment	`(14,543)`		`(7,471)`
Net cash used in investing activities	`(14,543)`		`(7,471)`

CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on borrowings under notes payable – related party	`(27,888)`		`(5,354)`
Proceeds from exercise of warrants	`1,900`		`-`
Proceeds from exercise of options	`116`		`-`
Repurchase of preferred stock for cash	`(20,276)`
Net cash used in financing activities	`(46,148)`		`(5,354)`

DISCONTINUED OPERATIONS
Net cash used in operating activities	`(1,390)`		`(59,319)`
Net cash provided by investing activities	`-`	`218,153`
Net cash used in financing activities	`-`		`(116,592)`
Net cash provided by (used in) discontinued operations	`(1,390)`		`42,242`

NET INCREASE IN CASH AND CASH EQUIVALENTS – CONTINUING OPERATIONS	`365,689`		`216,063`
Cash and cash equivalents at beginning of period	`245,462`		`29,399`
Cash and cash equivalents at end of period	`$611,151`		`$245,462`

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash and cash equivalents paid for interest – continuing operations	`$277`		`$1,849`
Cash and cash equivalents paid for interest – discontinued operations–See Note I	`$-`		`$51`

NON-CASH INVESTING AND FINANCING ACTIVITIES
ROU assets and operating lease obligations recognized	`$1,077,123`		`$-`
ROU assets and lease liability remeasurement adjustment	`$328,563`		`$-`
Amortization of increasing dividend rate preferred stock discount	`$13,287`		`$20,174`
Preferred stock returned	`$78,203`		`$-`
Preferred stock issued to settle related party liability	`$67,150`		`$-`
Exercise of options by reducing deferred compensation payable	`$1,440`		`$70,000`

See accompanying notes to consolidated financial statements.

FullNet Communications, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019 and 2018

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 (the Company) is an integrated communications provider offering Internet access, web hosting, equipment colocation, customized live help desk outsourcing services, group text and voice message delivery services, as well as advanced voice and data solutions to individuals, businesses, organizations, educational institutions and governmental agencies. Through its subsidiaries, FullNet, Inc., FullTel, Inc., FullWeb, Inc. and CallMultiplier, Inc., the Company provides high quality, reliable and scalable Internet based solutions designed to meet customer needs. Services offered include:

Dial-up and direct high-speed connectivity to the Internet through the FullNet brand name;

Carrier-neutral telecommunications premise colocation;

Web page hosting;

Equipment colocation;

Customized live help desk outsourcing services;

Group text and voice message delivery services; and

Advanced voice and data solutions.

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.

The Company maintains a significant portion of its cash and cash equivalents in funds with a financial institution that is not covered by FDIC insurance. As of December 31, 2019, and 2018, the Company had uninsured cash balances in this fund of $603,904 and $201,540, respectively.

The Company has not experienced any losses in such accounts. The Company does not believe there is significant credit risk related to its cash and cash equivalents.

Accounts Receivable

The Company operates and grants credit, on an uncollateralized basis. Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers comprising the Company’s customer base and their dispersion across different industries as well as the Company’s emphasis on obtaining deposits and/or payment in advance for services from the majority of its customers. During the year ended December 31, 2019, the Company had two customers that comprised approximately 14% and 5% of total revenues, respectively. During the year ended December 31, 2018, the Company had two customers that each comprised approximately 12% and 6% of total revenues, respectively.

Accounts receivable, other than certain large customer accounts which are evaluated individually, are considered past due for purposes of determining the allowance for doubtful accounts based on past experience of collectability as follows:


1 – 29 days			1.5 %
30 – 59 days			30 %
60 – 89 days			50 %
> 90 days			100 %

In addition, if the Company becomes aware of a specific customer’s inability to meet its 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 recovery for the year ended December 31, 2019 was $1,521. Total bad debt expense and direct write-off for the year ended December 31, 2018 was $2,560.

Accounts receivable consist of the following at December 31:

Schedule of Accounts Receivable
	2019	2018

Accounts receivable	`$206,612`	`$212,216`
Less allowance for doubtful accounts	`(205,669)`	`(207,190)`

	`$943`	`$5,026`

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 follows:


Software		3 years
Computers and equipment		5 years
Furniture and fixtures		7 years
Leasehold improvements		Shorter of estimated life of improvement or the lease term

Property and equipment consist of the following at December 31:

	2019	2018

Computers and equipment	`$1,478,344`	`$1,559,528`
Leasehold improvements	`1,088,934`	`1,088,934`
Software	`153,767`	`58,041`
Furniture and fixtures	`41,084`	`41,084`
	`2,762,129`	`2,747,587`
Less accumulated depreciation	`(2,704,378)`	`(2,696,320)`
	`$57,751`	`$51,267`

Depreciation expense from continuing operations for the years ended December 31, 2019 and 2018, was $8,058 and $8,003, respectively. Depreciation expense from discontinued operations for the years ended December 31, 2019 and 2018, was $0 and $9,273, respectively (see Note I).

Long-Lived Assets

All long-lived assets held and used by the Company, including intangible assets, are reviewed to determine whether any events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. In accordance with ASC 360-10-35 “Impairment or Disposal of Long-lived Assets”, the Company bases its evaluation on such impairment indicators as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements, as well as other external market conditions or factors that may be present. If such impairment indicators are present or other factors exist that indicate that the carrying amount of the asset may not be recoverable the Company determines whether impairment has occurred through the use of an undiscounted cash flows analysis of the asset. If impairment has occurred, the Company recognizes a loss for the difference between the carrying amount and the estimated value of the asset. No intangible assets were purchased in 2019 and 2018. The Company incurred no impairment expense in 2019 or 2018. Amortization expense of intangible assets for the years ended December 31, 2019 and 2018, was $7,730 and $8,833, respectively.

Revenue Recognition

Revenue is recognized when control of the services sold by the Company is transferred to customers in an amount that reflects the consideration the Company expects 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 the Company. 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.

The Company determines 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, the Company satisfies a performance obligation.

The Company’s revenue is derived from fees earned from customers utilizing the Company’s services. The Company has four primary streams of revenue consisting of its automated voice and text group message delivery service, its colocation and web hosting service and its technical support service. Prior to February 1, 2018, the Company also had revenue from traditional telephone services (see Note I – Discontinued Operations), which was approximately 2% of total revenue for the year ended December 31, 2018.

Revenue Description	For Year Ended December 31,2019	% of Total Revenue	For Year Ended December 31, 2018	% of Total Revenue
Automated voice and text group message delivery service	`$1,553,391`	64%	`$1,259,656`	61%
Colocation and web hosting service	`507,973`	21%	`520,923`	25%
Technical support service	`333,805`	14%	`238,431`	12%
Internet access service	`25,755`	1%	`51,470`	2%
Total revenue	`$2,420,924`	100%	`$2,070,480`	100%

Revenue from the Company’s automated voice and text group message delivery service and its access service is recognized pursuant to unwritten contracts created when the Company’s customers create an account on the Company’s website agreeing to be bound by the Company’s published Terms of Service when they purchase the Company’s service.

Revenue from the Company’s traditional telephone services, its colocation and web hosting service, and its technical support service is recognized pursuant to written contracts executed by the Company and its customers.

Each of the Company’s services represents a single performance obligation consisting of a distinct service. Access service revenues are recognized on a monthly basis over the life of each contract as services are provided. Contract periods range from monthly to yearly. Carrier-neutral telecommunications colocation revenues and traditional telephone services and advanced voice and data services are recognized on a monthly basis over the life of the contract as services are provided. Revenue that is received in advance of the services provided is deferred until the services are provided.

None of the Company’s 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 the Company expects to be entitled to in exchange for the service transferred to each customer.

Each of the Company’s services represents a single performance obligation and the “stand-alone selling price” is the same as the contract selling price.

All of the Company’s services are sold pursuant to written and unwritten contracts which require payment in advance for the services.

Advertising

The Company expenses advertising production costs as they are incurred and advertising communication costs the first time the advertisement takes place. Advertising expense for the years ended December 31, 2019 and 2018, was $343,497 and $283,979, respectively.

Income Taxes

The Company accounts for income taxes utilizing the asset and liability method. Deferred income taxes are determined based on the differences between the financial reporting and tax bases of assets and liabilities, 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. The Company recognizes the amount of taxes payable or refundable for the current year and recognizes deferred tax liabilities and assets for the expected future tax consequences of events and transactions that have been recognized in the Company’s financial statements or tax returns. The Company currently has substantial net operating loss carry forwards. The Company has recorded a 100% valuation allowance against net deferred tax assets due to uncertainty of their ultimate realization. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense and does not believe it has any material unrealized tax benefits at December 31, 2019. The Company files income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions.

Income (Loss) Per Share

Income (loss) per share – basic is calculated by dividing net income (loss) 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 (loss) per share (“EPS”) are as follows:

	December 31, 2019	December 31, 2018
Net income:
Income from continuing operations	$ 318,247	$ 99,610
Income (loss) from discontinued operations –See Note I	(957)	167,473
Net income	317,290	267,083
Preferred stock dividends	(81,731)	(79,400)
Net income available to common shareholders	235,559	187,683

Basic income (loss) per share:
Weighted-average common shares outstanding used in income (loss) per share computations	14,275,957	12,321,694

Basic income (loss) per share:
Continuing operations	0.02	0.00
Discontinued operations – See Note I	(0.00)	0.01
Basic income (loss) per share	0.02	0.01

Diluted income (loss) per share:
Shares used in diluted income (loss) per share computations	16,780,235	15,259,570

Diluted income (loss) per share
Continuing operations	0.01	0.00
Discontinued operations – See Note I	(0.00)	0.01
Diluted income (loss) per share	0.01	0.01

Computation of shares used in income (loss) per share:
Weighted average shares and share equivalents outstanding - basic	14,275,957	12,321,694
Effect of preferred stock	875,054	987,102
Effect of dilutive stock options	1,365,462	1,722,614
Effect of dilutive warrants	263,762	228,160
Weighted average shares and share equivalents outstanding – assuming dilution	16,780,235	15,259,570

Schedule of Anti-dilutive Securities Excluded	:
		December 31, 2019	December 31, 2018
Stock options		-	266,000
Convertible promissory notes		-	27,888
Total anti-dilutive securities excluded		-	293,888

Anti-dilutive securities consist of stock options and convertible promissory notes whose exercise price or conversion price, respectively, was greater than the average market price of the common stock.

Stock-Based Compensation

The Company does not have a written employee stock option plan. The Company has historically granted only employee stock options with an exercise price equal to the market price of the Company’s stock at the date of grant, a contractual term of ten years, and a vesting period of three years ratably on the first, second and third anniversaries of the date of grant (with limited exceptions).

All employee stock options granted during 2019 and 2018 were nonqualified stock options. Stock-based compensation is measured at the grant date, based on the calculated fair value of the option, and is recognized as an expense on a straight-line basis over the requisite employee service period (generally the vesting period of the grant).

The fair values of the granted options are estimated at the date of grant using the Black-Scholes option pricing model. See Note F – Common Stock and Stock-Based Compensation for further information on stock-based compensation.

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 the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company 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 its 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 its own separate interests is also a related party.

At December 31, 2018, the Company had a secured convertible promissory note from a shareholder with a balance of $27,888 (see Note C – Convertible Note Payable Related Party). On February 26, 2019, the Company paid the remaining balance of $27,888. Additionally, the Company had no related party accounts payable to officers and directors for unpaid expense reimbursements as of December 31, 2019.

Fair Value Measurements

The Company measures its 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 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, 2019 and 2018, are based upon the short-term nature of the assets and liabilities.

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-02, Leases (Topic 842), which requires lessees to record assets and liabilities reflecting the leased assets and lease obligations, respectively, while following the dual model for recognition in statements of income requiring leases to be classified as either operating or finance. Operating leases will result in straight-line expense (similar to current operating leases) while finance leases will result in a front-loaded expense pattern (similar to current capital leases). We adopted the new standard effective January 1, 2019, as allowed, using the modified retrospective approach by applying the new standard to all leases existing at the date of initial application and not restating comparative periods. The only lease that we have is the real estate lease for our headquarters facility. As of January 1, 2019, the adoption of the standard resulted in recognition of an operating right-of-use, or ROU, liability of approximately $1,077,123 and an operating ROU asset of $1,077,123. These amounts are based on the present value of such commitments using the Company’s incremental borrowing rate.

Effective January 1, 2019, the Company adopted ASU No. 2018-07, Compensation – Stock Based Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), which aligns accounting for share-based payments issued to nonemployees to that of employees under the existing guidance of Topic 718, with certain exceptions. This update supersedes previous guidance for equity-based payments to nonemployees under Subtopic 505-50, Equity – Equity-Based Payments to Non-Employees. The adoption of ASU 2018-07 did not have a material impact on the Company’s consolidated financial statements.

NOTE B — MANAGEMENT’S PLANS

On August 27, 2014, FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s ability to Continue as a Going Concern, which requires management to assess a company’s ability to continue as a going concern within one year from financial statement issuance and to provide related footnote disclosures in certain circumstances.

As a result of these initiatives, the Company generated positive cash flow from its operating activities of approximately $428,000 and $186,000 for the years ended December 31, 2019 and 2018, respectively. In addition, the Company was able to generate net income from continuing operations of approximately $318,000 for the year ended December 31, 2019, compared to a net income of approximately $100,000 for the year ended December 31, 2018.

Management expects that the success of these initiatives will provide the Company with sufficient liquidity for it to operate for the next 12 months.

As a result of the revenue enhancement initiatives, the cost saving initiatives, the excess asset sales and the successful exit from the CLEC business, the Company has been able to significantly improve its working capital position and alleviate any substantial doubt about the Company’s ability to continue as a going concern as defined by ASU 2014-05. We believe that the actions discussed above mitigate the substantial doubt raised by our prior operating losses and satisfy our estimated liquidity needs 12 months from the issuance of the financial statements. However, we cannot predict, with certainty, the outcome of our actions to generate additional liquidity, including the availability of additional debt financing, or whether such actions would generate the expected liquidity as currently planned. Additionally, a failure to generate additional liquidity could negatively impact our ability to effectively execute our business plan.

NOTE C — CONVERTIBLE NOTES PAYABLE RELATED PARTY

Notes payable consist of the following:

Schedule of Notes Payable Related Party
	December 31, 2019	December 31, 2018

Secured convertible promissory note from a shareholder; interest at 6%, requires monthly installments of interest only through May 31, 2014, then requires monthly installments of $600 including principal and interest; matures May 31, 2023; secured by certain equipment of the Company (1)	`-`	`27,888`
Total secured convertible promissory note from shareholder	`-`	`27,888`

Less current portion	`-`	`7,203`

Convertible notes payable, related party – less current portion	`$-`	`$20,685`

(1) The note holder had the right to convert the note, in its entirety or in part, into common stock of the Company at the rate of $1.00 per share. On February 26, 2019, the Company paid the remaining balance of $27,888. During the year 2018, the Company made principal payments of $5,354. The secured convertible promissory note had a balance of $27,888 at December 31, 2018, of which $7,203 was short-term and $20,685 was long-term.

This secured convertible promissory note was secured by certain equipment of the Company. Upon payment of the balance due on this secured convertible promissory note, title of the equipment was transferred to the Company free and clear of all liens and encumbrances.

The Company analyzed the conversion option for derivative accounting and beneficial conversion features consideration under ASC 815-15 “Derivatives and Hedging” and ASC 470-20 “Convertible Securities with Beneficial Conversion Features” and noted none.

NOTE D – COMMITMENTS

Operating Leases

Under the new lease guidance (Topic 842), the Company 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 $946,896, respectively. In recording the initial ROU Lease Asset and associated Lease Liability, the Company 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 the Company 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.

The Company leased its 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”). The Company subsequently negotiated and executed two new

leases on November 22, 2019, covering the Company’s 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 the Company’s data center and is with FullWeb, Inc., a wholly owned subsidiary of the Company (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 note, the FW Lease contains the right for the Company to opt-out of the FW Lease without penalty at each annual anniversary.

The Company considers the execution of the two new leases to be a lease modification and has re-evaluated the effect of the lease modification on the Company’s conclusions under ASC 842 and determined that the leases should still be classified as operating leases.

Pursuant to and upon execution of the FN Lease, the landlord transferred back to the Company 114,792 shares of the Company’s preferred stock which had been previously issued to the landlord in 2013, in satisfaction of $114,792 in unpaid rental payments which were then outstanding. The $78,203 value of these shares was recorded to Additional Paid-in Capital.

As a result of the lease modification and the associated remeasurement of the lease liability, the Company 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 the Company’s financial condition had not materially changed since the original lease calculation.

The partial termination of the Original Lease resulted in a reduction of the Company’s ROU Asset and associated Lease Liability by approximately 33% consistent with the reduction in square footage the Company is now leasing. The impact was to reduce the Lease Liability by $328,563 from $946,896 to $618,333 and to reduce the ROU Asset by the same percentage resulting in a $312,255 reduction from $930,588 to $618,333. As a result of the partial termination the Company recognized a gain of $16,307. Amortization of the ROU Asset and payments of the associated Lease Liability for the year ended December 31, 2019 was $146,534 and $130,227, respectively, leaving a year-end December 31, 2019 balance of $618,333 for both the ROU Asset and the associated Lease Liability.

Future minimum lease payments required at December 31, 2019, under non-cancelable operating leases that have initial lease terms exceeding one year are presented in the following table:

Year ending December 31
2020		$ 152,232

2021		152,232
2022		152,232
2023		152,232
2024		152,234
Total		761,162
Present value of discount		(142,829)
Current portion lease liability		(103,651)
Long-term lease liability		$ 514,682

Rental expense for all operating leases for the years ended December 31, 2019 and 2018, was approximately $237,014 and $296,166, respectively.

NOTE E — INCOME TAXES

The Company uses 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.

The Company has historically incurred losses from operations and therefore had no tax liability. The net deferred asset generated by the loss carry-forward has been fully reserved. The cumulative net operating loss carry-forward is approximately $2,064,225 and $2,749,945 for 2019 and 2018, respectively and will begin expiring in 2023.

Deferred tax assets consist of the tax effect of NOL carry-forwards. Management does not believe that the Company’s recent achievement of profitability has been of sufficient magnitude and consistency to offset the Company’s long history of losses and has therefore provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realizability. Deferred tax assets consist of the following:

	December 31,
	2019	2018
Net operating loss carry-forwards	`$433,487`	`$577,488`
Valuation allowance	`(433,487)`	`(577,488)`
	`$-`	`$-`

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 changes 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.

The net change during the 2019 year in the total valuation allowance was a decrease of $144,001 primarily related to the revaluation of deferred tax assets and liabilities due to an estimated taxable income of $317,290 for the year ended December 31, 2019. The reduction of net deferred tax assets due to the rate revaluation also decreased the amount of the valuation allowance by the same amount resulting in no overall net impact to the Company's income tax provision.

NOTE F — COMMON STOCK AND STOCK-BASED COMPENSATION

COMMON STOCK

On May 17, 2019, certain employees, officers and directors and their family members exercised options to purchase 518,666 restricted shares of the Company’s common stock for cash proceeds of $116 and the reduction of deferred compensation payable to officers and directors of $1,440.

STOCK-BASED COMPENSATION

The following table summarizes the Company’s employee stock option activity for the years ended December 31, 2019 and 2018:

Schedule of Employee Stock Option Activity

	Options	Weighted average exercise price	Weighted average remaining contractual life (yrs)	Aggregate intrinsic value
Options outstanding, December 31, 2017	`2,110,834`	$ 0.006	8.18
Options exercisable, December 31, 2017	`626,834`	$ 0.003	6.03	$ 22,902
Options granted during the year	`2,013,000`	0.040
Options exercised during the year	`(1,750,000)`	0.040
Options expired during the year	`(3,000)`	0.003
Options outstanding, December 31, 2018	`2,370,834`	$ 0.010	7.45
Options exercisable, December 31, 2018	`1,126,167`	$ 0.005	6.39	$ 34,623
Options granted during the year	`483,000`	0.003
Options exercised during the year	`(518,666)`	0.003
Options forfeited during the year	`(16,333)`	0.005
Options outstanding, December 31, 2019	`2,318,835`	$ 0.010	6.42
Options exercisable, December 31, 2019	`1,628,165`	$ 0.007	6.00	$ 37,682

The following table summarizes the Company’s non-vested employee stock option activity for years ended December 31, 2019 and 2018:

	2019	2018
Non-vested options outstanding, beginning of year	`1,244,667`	`1,484,000`
Options granted during the year	`483,000`	`2,013,000`
Options vested during the year	`(1,020,664)`	`(2,252,333)`
Options forfeited during the year	`(16,333)`	`-`
Non-vested options outstanding, end of year	`690,670`	`1,244,667`

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:

	2019	2018
Risk free interest rate	1.55%–2.51 %	2.65%-2.77%
Expected lives (in years)	1-5	5
Expected volatility	36.47%-170%	163%-178%
Dividend yield	0%	0%

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:

	2019	2018
Stock options compensation	`$23,795`	`$75,134`
Impact on income per share:
Basic and diluted	`$-`	`$-`

During the year 2019, 483,000 employee stock options were granted, of which 480,000 vested immediately, and 3,000 will vest one-third on each annual anniversary of the grant date resulting in $15,885 of stock options compensation. Stock options compensation of $7,910 recorded in the year 2019 was related to options that were granted in prior years. Additionally, 16,333 employee stock options were forfeited that were related to options granted in prior years. At December 31, 2019 there was $7,398 of unrecognized stock options compensation that is expected to be recognized as an expense over a weighted-average period of 3 years.

Common Stock Purchase Warrants – A summary of common stock purchase warrant activity for the years ended December 31, 2019 and 2018 follows:

Outstanding common stock purchase warrants issued to non-employees outstanding at December 31, 2019 are as follows:

Number

of shares

Exercise price

Expiration year

250,000

$ 0.003

2023

40,000

$ 0.010

2024

The following table summarizes the Company’s common stock purchase warrant activity for the years ended December 31:

	2019	Weighted Average Exercise Price	2018	Weighted Average Exercise Price
Warrants outstanding, beginning of year	`250,000`	`$0.003`	`250,000`	`$0.003`
Warrants granted during the year	`440,000`	`0.005`	`-`	`-`
Warrants exercised during the year	`(400,000)`	`(0.005)`	`-`	`-`
Warrants outstanding, end of year	290,000	$ 0.004	250,000	$ 0.003

The 250,000 warrants outstanding at December 31, 2018 were issued as equity compensation for consulting services.

In January 2019, the Company granted 440,000 warrants for the purchase of shares of its common stock with an expiration date in January 2024, of which 140,000 had an exercise price of $.01 per share and 300,000 had an exercise price of $.003 per share. The warrants were valued using Black-Scholes option pricing model on the respective date of issuance using the following assumptions: a) risk free rate of 2.51%; b) term of 5 years and c) expected volatility of 146%. The fair value of the warrants was determined to be $15,358, which was recognized as warrant expense. These warrants vested immediately upon grant (January 2, 2019) and will expire in five years from the date of grant. In March 2019, 400,000 of these warrants were exercised for which the Company received proceeds of $1,900. uring the year ended No warrants were granted during the year ended December 31, 2018.

NOTE G — SERIES A CONVERTIBLE PREFERRED STOCK

On March 13, 2020, the Company’s board of directors made the determination that it was in the best interest of the Company and its shareholders to conserve the Company’s working capital at this time and not make the annual dividend payment for the year ended December 31, 2019, on its Series A convertible preferred stock (the “Series A”). The Company has never made an annual dividend payment on its Series A.

The holders of shares of the Series A are entitled to receive, when and as declared by the Company’s board of directors, dividends in cash in the amount of one cent per share per annum through December 31, 2016, five cents per share per annum through December 31, 2017, six cents per share per annum through December 31, 2018, seven cents per share per annum through December 31, 2019, eight cents per share per annum through December 31, 2020, nine cents per share per annum through December 31, 2021, ten cents per share per annum through December 31, 2022, eleven cents per share per annum through December 31, 2023, and twelve cents per share per annum thereafter, payable within 90 days following the 31st day of December each year on such date as determined by the board of directors. The dividends are cumulative and beginning January 1, 2017, the board of directors of the Company may elect to make any required dividend payment with the Company’s unregistered common stock in lieu of cash.

Due to the unstated dividend cost arising from the gradually increasing dividends on the Series A, the Company calculated a discount on the Series A 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 a market rate of 12% totaling $309,337. The Series A was valued at the market price on the respective date of issuance for a total value of $672,472. The discount will be 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 by a corresponding amount. The discount amortization for the years ended December 31, 2019 and 2018 was $13,287 and $20,174, respectively. The discount amortization per share for the years 2019 and 2018 was $0.02 and $0.03, respectively. As of December 31, 2019, the aggregate outstanding accumulated arrearages of cumulative dividend was $188,817 or if issued in common shares, 6,293,907 shares.

The Series A was originally issued as non-voting and provided that in the event that the Company failed, for any reason, to make a dividend payment as set forth above, then each share of the Series A shall thereafter be entitled to two votes upon any matter that the holders of the common stock of the Company are entitled to vote upon. Since the Series A issuance in 2013, the Company’s board of directors determined annually that it was in the best interest of the Company and its shareholders to conserve the Company’s working capital and has not made the annual dividend payment. As a result, each share of the Series A is entitled to two votes upon any matter that the holders of the common stock of the Company are entitled to vote upon.

The Series A may be redeemed at the option of the Company’s 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 control of the Company, the holders of the Series A shall have the right, at the election of a majority of the holders, to require the Company to redeem all of the Series A for one dollar per share plus all accrued and unpaid dividends thereon at the date of redemption.

The Series A has a liquidation preference of one dollar per share plus all accrued and unpaid dividends thereon in the event of liquidation, dissolution or winding up of the Company.

Pursuant to and upon execution of its headquarters office space lease in the fourth quarter of 2019, the Company’s landlord transferred back to the Company 114,792 shares of the Company’s Series A which had been previously issued to the landlord in 2013, in satisfaction of $114,792 in unpaid rental payments which were then outstanding. Of these shares returned, 62,378 shares were reassigned to the CEO by reducing deferred compensation payable, and the remaining 52,414 were cancelled.

During the fourth quarter of 2019, the Company repurchased 59,634 shares of the Series A in return for a payment of $20,276.

As of December 31, 2019, there were 875,054 shares of Series A outstanding with voting power representing 10.74% of the total voting power of the Company’s outstanding stock.

The Company 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.

The Company analyzed the conversion option for beneficial conversion features consideration under ASC 470-20 “Convertible Securities with Beneficial Conversion Features” and noted none.

NOTE I – DISCONTINUED OPERATIONS

In response to the changes in the telecommunications market and deterioration in the Company’s ability to effectively compete, the Company made the decision to exit the CLEC business. On October 27, 2017, the Company’s board of directors adopted a plan to exit the CLEC business as soon as possible through the sale of its wholly owned CLEC subsidiary and/or substantially all of its CLEC subsidiary’s operating assets. The Company was in negotiations with a potential buyer at December 31, 2017, which buyer subsequently purchased substantially all of its CLEC subsidiary’s operating assets pursuant to an asset purchase agreement which was executed and closed on February 1, 2018, (the “Sale”).

Consideration:
Cash	$	246,500
Assumption of deferred revenue		8,366
Waived service obligation for February 2018		`10,006`
Total consideration	$	`264,872`

Total assets sold:
Customer contracts	$	`-`
Fiber innerduct		`3,248`
Fiber strands		`-`
Customer CPE		`-`
Total assets		`3,248`
Transactional costs		`28,347`
Total basis	$	`31,595`
Net gain	$	`233,277`

Assets and Liabilities of Discontinued Operations

	December 31,
	2019	2018
Carrying amounts of assets included in discontinued operations
Cash	`$854`	`$775`
Total Assets of Discontinued Operations	`$854`	`$775`

Carrying amounts of liabilities included in discontinued operations
Accounts payable	`$43,914`	`$42,905`
Accrued and other liabilities	`8,094`	`9,458`
Total Liabilities of Discontinued Operations	`$52,008`	`$52,363`

Operating Results of Discontinued Operations

	December 31,
	2019	2018
Revenues included in discontinued operations
Total revenue	`$-`	`$28,091`

Operating costs and expenses included in discontinued operations
Cost of revenue	`$-`	`$84,301`
Selling, general and administrative expenses	`1,595`	`8,666`
Depreciation and amortization	`-`	`9,273`
Interest expense	`-`	`51`
Total operating costs and expenses discontinued operations	`1,595`	`102,291`

Other Income included in discontinued operations
Gain on sale of assets	`-`	`233,277`
Other income from applied customer deposits	`638`	`8,396`
Net Income (Loss) from Discontinued Operations	`$(957)`	`$167,473`
Net Income (Loss) per share from discontinued operations basic and diluted	`$(0.00)`	`$0.01`

Cash Flows from Discontinued Operations

	December 31
	2019	2018
Net cash used in operating activities	(1,390)	(59,319)
Net cash provided by investing activities	-	218,153
Net cash used in financing activities	-	(116,592)
Net cash provided by (used in) discontinued operations	(1,390)	42,242

NOTE J – SUBSEQUENT EVENTS

In February 2020, the Company granted 1,108,000 employee stock options to 15 employees with an exercise price of $0.01. The stock options shall vest one-third each year starting in February 28, 2021, and shall expire on February 28, 2030.

As the global spread of COVID-19 continues, the pandemic has disrupted economies worldwide and its ultimate impacts are uncertain. While the ultimate impacts of COVID-19 cannot be determined, they are expected to have material and adverse economic effects, and the pandemic could materially and adversely affect the Company’s business, financial condition and results of operations.

OFFICE LEASE

THIS AGREEMENT is made as of November 22, 2019 (for reference purposes only), by and between the parties identified below as the LANDLORD and TENANT. The capitalized terms used in this Lease refer to the information provided below in Section 1.1.

ARTICLE 1:REFERENCE DATA

1.1SUBJECTS REFERRED TO:

Each reference in this Lease to any of the following subjects shall be construed to incorporate the data stated for that subject in this Section 1.1:

LANDLORD:	BOKP TOWER, LLC

LANDLORD’S ADDRESS:	% PRICE EDWARDS AND COMPANY, 210 PARK AVE., SUITE 700, OKLAHOMA CITY, OK 73102

LANDLORD’S REPRESENTATIVE:				PROPERTY MANAGER

TENANT:	FULLWEB, INC.

TENANT’S ADDRESS (FOR NOTICE AND BILLING)					201 ROBERT S. KERR, SUITE 210, OKC 73102

TENANT’S REPRESENTATIVE:					ROGER BARESEL, CEO

BUILDING:	201 RSK

SUITE NUMBER:	210

RENTABLE FLOOR AREA OF TENANT’S SPACE (IN SQUARE FEET):								4,117

TOTAL RENTABLE FLOOR AREA OF THE BUILDING (IN SQUARE FEET):									201,694

TENANT’S DESIGN COMPLETION DATE							N/A

SCHEDULED TERM COMMENCEMENT DATE:							JANUARY 1, 2020

TERM EXPIRATION DATE:							DECEMBER 31, 2024

APPROXIMATE TERM (IN YEARS):							FIVE (5)

SCHEDULE OF BASE RENT. 1/01/2020-12/31/2024: $6,003.96 PER MONTH ($360,237.60 TOTAL OVER TERM)
EXPENSE STOP: CALENDAR YEAR 2020						All Operating Expenses and Real Estate Assessments for the calendar year 2020.
TENANT IMPROVEMENT REIMBURSEMENT TO LANDLORD:								$N/A

SECURITY DEPOSIT:			$ 6,500.00
PERMITTED USES:		Data Center which has been operating in the Tenant’s Space since December 2, 1999, and which is in compliance with all Landlord requirements.

1.2EXHIBITS

The exhibits listed below are incorporated in this Lease by reference and are to be construed as part of this Lease:

EXHIBIT A~~LEGAL DESCRIPTION.~~ INTENTIONALLY DELETED

EXHIBIT B PLAN SHOWING TENANT'S SPACE.

EXHIBIT C ~~SPECIFICATIONS OF TENANT IMPROVEMENTS~~ INTENTIONALLY DELETED

EXHIBIT D RULES AND REGULATIONS.

EXHIBIT E ESTOPPEL CERTIFICATE.

EXHIBIT F ADDITIONAL TERMS

ASBESTOS NOTICE RIDER

CORPORATE GUARANTY

LEASE ADDENDUM

ARTICLE 2:PREMISES AND TERM

2. 1PREMISES

LANDLORD hereby leases to TENANT, and TENANT hereby leases from LANDLORD, TENANT's Space in the Building, as shown in Exhibit B. TENANT's Space is hereinafter referred to as "the Premises".

2.1.1RENTABLE FLOOR AREA. Rentable Floor Area or Rentable Square Feet as used is approximate and determined by Landlord or its representatives utilizing local industry standards.

2.2TERM

The Lease Term shall begin on the Scheduled Term Commencement Date (the "Commencement Date") and continue until the Expiration Date, unless postponed, accelerated or extended as hereinafter provided.

2.2.1EARLY OCCUPANCY. If the TENANT occupies the Leased Premises prior to the Commencement Date, Rent will commence on the date of such occupancy at the average rate applicable to the first twelve months of the Term, and the Term will be extended to include the period of such early occupancy.

2.2.2DELAYED OCCUPANCY. To the extent that LANDLORD agrees to perform construction pursuant to Exhibit C, if for any reason construction has not reached substantial completion on the Commencement Date, this Lease will nevertheless continue in effect. If the failure to reach substantial completion arises from: (a) the TENANT's failure to furnish final working drawings prior to TENANT's Design Completion Date; (b) any delay in construction caused by any change in or addition to the work ordered by the TENANT; (c) the TENANT's failure to pay the TENANT Improvement Reimbursement to LANDLORD; or (d) any other default, delay or omission by the TENANT; the payment of Rent will begin on the Commencement Date and the Term will not be modified. If the failure to reach substantial completion arises through no fault of the TENANT, the Rent will abate and not commence until the date of substantial completion; provided that such abatement will be for a period of no greater than one hundred eighty (180) days unless the LANDLORD and TENANT otherwise agree in writing. Such abatement of Rent will constitute full settlement of all claims which the TENANT might otherwise have against the LANDLORD by reason of any delay in occupancy of the Premises. Any delay in occupancy will not extend the Term Expiration Date as set forth in section 1.1.

ARTICLE 3:CONSTRUCTION INTENTIONALLY DELETED

3.1~~INITIAL CONSTRUCTION~~

~~Except to the extent of construction work that LANDLORD agrees to perform pursuant to EXHIBIT C, TENANT agrees to take the Premises in their existing condition as of the date of this Lease.~~

If the LANDLORD agrees in EXHIBIT C to perform construction, then TENANT shall, on or before TENANT's Design Completion Date, provide to LANDLORD complete sets of plans and specifications acceptable to LANDLORD prepared at TENANT's expense by an architect approved by LANDLORD, including but not limited to: dimensioned partition plans, furniture and equipment layout plans, dimensioned electrical and telephone outlet plans, reflected ceiling plans, door and hardware

~~schedules, room finish schedules including wall, carpet, and floor tile colors, electrical and mechanical engineering plans, and all other necessary construction details and specifications.~~

3.2~~TENANT IMPROVEMENT REIMBURSEMENT TO LANDLORD~~ INTENTIONALLY DELETED

Unless otherwise specified in EXHIBIT C, the cost of all construction performed by LANDLORD in accordance with the aforesaid plans and specifications shall be at TENANT's expense. TENANT agrees to pay the TENANT Improvement Reimbursement to LANDLORD one half before the LANDLORD begins construction and one half on the date of substantial completion. In the event the TENANT orders any changes in or additions to the work, all costs resulting there from will be paid by TENANT on the date of substantial completion. If no figure is shown in Section 1.1 hereof, the TENANT Improvement Reimbursement to LANDLORD shall equal the LANDLORD's total cost of construction (including any supervisory fee to LANDLORD's managing agent) less the cost of any allowance to TENANT specified in EXHIBIT C.

3.3~~GENERAL PROVISIONS APPLICABLE TO CONSTRUCTION~~

TENANT's furniture, furnishings, telephones, and equipment shall be the responsibility of TENANT, and shall be coordinated with any work being performed by LANDLORD in such a manner as to maintain harmonious labor relations and not damage the Building or interfere with Building operations. The installation of furniture, furnishings, telephones, and equipment shall be performed at TENANT's direction and expense during weekday working hours when LANDLORD's maintenance personnel are available for supervision and coordination with building operations. If TENANT wishes to perform this work at other times it shall pay the overtime cost of LANDLORD's supervisory personnel. TENANT agrees to provide LANDLORD with an insurance certificate from any contractor it employs before the contractor begins work in the Building.

All construction work required or permitted by this Lease, whether by LANDLORD or by TENANT, shall be done in a good and workmanlike manner and in compliance with all applicable laws and ordinances, regulations and orders of governmental authorities and insurers of the Building. LANDLORD's obligations under Section 3.1 shall be deemed to have been performed when TENANT commences to occupy any portion of the Premises, except for items which are incomplete or do not conform with the requirements of Section 3.1 and as to which TENANT in either case has given written notice to LANDLORD within thirty (30) days after such commencement. If TENANT has not commenced to occupy the Premises within thirty (30) days after they are ready for occupancy, a certificate of completion by a licensed architect or registered engineer shall be conclusive evidence that LANDLORD has performed all such obligations except for items stated in such certificate to be incomplete or not in conformity with such requirements.

LANDLORD will not approve any construction, alterations, or additions requiring unusual expense to readapt the Premises to normal office use on lease termination or increasing the cost of construction, insurance or taxes on the Building or of LANDLORD's services called for by Section 5.1 unless TENANT first gives assurances acceptable to LANDLORD that such re-adaptation will be made prior to such termination without expense to LANDLORD and makes provisions acceptable to LANDLORD for payment of such increased cost. LANDLORD will also disapprove any construction, alterations or additions requested by TENANT that will delay completion of the Premises or the Building. Following its approval of the plans and specifications, the LANDLORD agrees to carry out the construction called for in Exhibit C. All such work shall be performed by the LANDLORD's contractors. All construction, alterations, and additions shall be part of the Building and under no circumstances removed by TENANT except for items which the parties agree in writing at the time of LANDLORD's approval shall be removed by TENANT on termination of this Lease, or shall be removed or left at TENANT's election.

Intentionally deleted

3.4REPRESENTATIVES

Each party authorized the other to rely in connection with its rights and obligations under this ARTICLE 3 upon approval and other actions on the party's behalf by LANDLORD's Representative in the case

of LANDLORD or TENANT's Representative in the case of TENANT or by any person designated in substitution or addition by notice to the party relying.

ARTICLE 4:RENT

4. 1RENT

TENANT agrees to pay LANDLORD rent for the Premises, without any offset or reduction whatever (except as made in accordance with the express provisions of this Lease), equal to the Total Scheduled Base Rent, in monthly installments as shown in Section 1.1 payable in advance with the first month’s rent due upon Tenant’s execution of this Lease and then payable on the twenty-fifth day of each calendar month included in the Term; and for any portion of a calendar month at the beginning or end of the Term, at the prorated monthly rate in advance.

4.2ADDITIONAL RENT

4.2.1DEFINITIONS. For purposes of this paragraph the following terms shall have the following definitions:

(a)"OPERATING EXPENSES" shall mean all of LANDLORD's actual operating expenses in connection with the operation of the Building and the Real Estate according to standard accounting practices, including, but not limited to, expenses incurred by LANDLORD in providing the services contemplated by this Lease, expenses incurred by LANDLORD insuring the Building, routine maintenance and repair expenses, the cost, amortized over a reasonable period (not less than five (5) years), and associated financing costs, of any capital improvement made after completion of the Building if such improvement shall constitute a substantial cost saving or labor saving device, and management fees (not to exceed 5% of gross rents from the Building) and other expense, but excluding depreciation of the Building or equipment owned by LANDLORD, interest cost, income taxes, costs of maintaining LANDLORD's corporate existence, franchise taxes, real estate commissions, TENANT's improvements, salaries of officers and executives of LANDLORD or any expenditures required to be capitalized for federal income tax purposes, except as set forth above.

(b)"REAL ESTATE TAXES AND ASSESSMENTS" shall mean and include all general and special real and personal property taxes and assessments levied upon or assessed against the Building, the Real Estate, or any other improvements, fixtures, or personal property owned by LANDLORD and located on the Real Estate. With reference to special assessments when the same are payable over a period of years, only that portion required by law to be paid during a calendar year, together with any interest thereon, shall be treated as a tax or assessment allocable to such year.

(c)"BUILDING VACANCY" for any calendar year, shall mean the average of the rate of vacancy in the Building in each calendar month in such year. The rate of vacancy in the Building in any calendar month shall be determined by dividing the total square footage of the Building Rentable Area which is vacant on the first day of such calendar month by the total square footage of the Building Rentable Area.

(d)"TENANT'S SHARE" for any calendar year, shall be the proportion which the TENANT Rentable Area bears to ninety-five percent (95%) of the Building Rentable Area or to the total Building Rentable Area leased, if such total is greater than 95% of the Building Rentable Area.

(e)"ADDITIONAL RENT" shall mean all amounts payable by TENANT under this paragraph.

4.2.2REAL ESTATE TAXES AND ASSESSMENTS.If during any calendar year during any part of which this Lease shall be in effect, the sum of the Operating Expense and Real Estate Taxes and Assessments exceeds the product of the Building Rentable Area for such year

and the Expense Stop, TENANT shall pay to LANDLORD, TENANT's Share of such excess, if any.

4.2.3GROSS-UP. If, during any calendar year during any part of which this lease shall be in effect there is any Building Vacancy, Operating Expenses and Real Estate Taxes and Assessments shall be adjusted at the end of the year as though the Building had no vacancy during such year.

4.2.4DETERMINATION OF ADDITIONAL RENT.Additional Rent shall be determined annually, LANDLORD shall, as soon as possible after the determination of the Additional Rent for any calendar year, but no later than September 30 of the following calendar year, furnish TENANT a statement in writing setting forth the amount of Additional Rent and the basis for the calculations thereof.

4.2.5PAYMENT OF ADDITIONAL RENT.Within ten (10) days of TENANT's receipt of such statement, TENANT shall pay to LANDLORD (i) all Additional Rent for the previous calendar year not theretofore paid and (ii) the product of 1/12 of the Additional Rent for the previous calendar year and the number of lapsed months in the current calendar year less Additional Rent already paid during such months, for application on the Additional Rent payable with respect to the current calendar year. Until further notice of change in Additional Rent, there shall be due from TENANT on the twenty-fifth day of each calendar month an amount equal to one-twelfth (1/12) of the Additional Rent set forth in such notice, to be applied against the Additional Rent owed for the calendar year or years in which such payments are made.

4.2.6PARTIAL YEAR.If this Lease begins on a day other than the first day of a calendar year or ends on a day other than the last day of a calendar year, the Additional Rent for such calendar years shall be prorated. TENANT's obligation to pay Additional Rent for the final calendar year during any part of which the Lease shall be in effect shall survive the expiration of termination hereof. If this Lease expires on a day other than the last day of a calendar year, LANDLORD shall, within thirty (30) days of such date, send TENANT a statement for TENANT's share of any estimated increase in Operating Expenses for such partial year, which TENANT shall pay within ten (10) days from receipt of such statement. Should, upon final accounting, the actual increase in Operating Expenses be less than estimated, a refund shall be made to TENANT for such excess.

4.2.7AUDIT.TENANT may, at its own expense, cause an audit to be made of LANDLORD's Operating Expenses to be made with respect to LANDLORD's determination of Additional Rent upon written notice received by LANDLORD within thirty (30) days following the date on which TENANT receives notice of any Additional Rent pursuant to the terms hereof. If as a result of such audit, a determination is made that the Additional Rent specified in the LANDLORD's notice is in excess of or less than the Additional Rent determined on audit, then LANDLORD shall promptly refund to TENANT all sums theretofore paid by TENANT in excess of the amount owed, or TENANT shall pay to LANDLORD all additional sums owed to LANDLORD as Additional Rent and subsequent Installments of Additional Rent payable in such year shall be appropriately adjusted. If the Additional Rent specified in the LANDLORD's notice is 3% or more in excess of the Additional Rent due as determined by the audit, LANDLORD shall reimburse TENANT all costs and expenses incurred by TENANT in connection with such audit. Any audit conducted by TENANT hereunder shall not suspend TENANT's obligation to pay Additional Rent pursuant to the terms hereof during the period of such audit. LANDLORD's determination of Additional Rent shall be conclusively binding unless TENANT notifies LANDLORD of its intent to audit within the 30 days set forth above. In the event that TENANT elects to audit LANDLORD's Operating Expenses in accordance with this paragraph, such audit must be conducted by an independent accounting firm that is not being compensated by TENANT on a contingency fee basis.

4.3LATE PAYMENTS

4.3.1INTEREST. If any installment of Base Rent or Additional Rent, or on account of tenant improvements, is received more than 10 days after the due date thereof, at LANDLORD's

election, it shall bear interest at a rate equal to 1.5% per month from such due date, which interest shall be immediately due and payable as further rent.

4.3.2LATE CHARGES.If tenant fails to make any Rent or other payments due to the LANDLORD hereunder on or before the date such payment would constitute a Default, then in addition to the amount due and any interest hereon, TENANT will be obligated to the Late Charges as set out herein below. Rent not received by the LANDLORD by the 30th day of the month is subject to the Late Charges.

(a)LANDLORD MAY INCUR UNANTICIPATED COSTS.TENANT’s failure to pay Rent, Additional Rent, or any other Lease costs when due under this Lease may cause LANDLORD to incur unanticipated costs. The exact amount of such costs is impractical or extremely difficult to ascertain. Such costs may include, but are not limited to, processing and accounting charges and late charges that may be imposed on LANDLORD by any ground lease, mortgage, or deed of trust encumbering the Center.

(b)TENANT OWES LATE CHARGE.Therefore, if LANDLORD does not receive the Rent, Additional Rent, or any other Lease costs in full on or before the thirtieth (30th) day of the month it becomes due, tenant shall pay LANDLORD a late charge, which shall constitute liquidated damages, equal to ten percent (10%) of the payment due, with a minimum of fifty dollars ($50.00) (“Late Charge”), which shall be paid to LANDLORD together with such Rent, Additional Rent, or other lease costs then in arrears.

(c)LATE CHARGE IS FAIR ESTIMATE.The parties agree that such Late Charge represents a fair and reasonable estimate of the cost LANDLORD will incur by reason of such late payment.

(d)IF TENANT’S CHECK RETURNED.For each TENANT payment check to LANDLORD that is returned by a bank for any reason, TENANT shall pay both a Late Charge (if applicable) and a Returned Rent Charge of Fifty Dollars ($50.00) or such amount as shall be customarily charged by LANDLORD’S bank at the time.

(e)CHARGES BECOME “ADDITIONAL RENT”.All Late Charges and any Returned check Charge shall then become Additional Rent and shall be due and payable immediately along with such other Rent, Additional Rent, or other Lease costs then in arrears.

(f)APPLICATION OF MONEY FROM TENANT.Money paid by TENANT to LANDLORD shall be applied to TENANT’s account in the following order: (i) to any unpaid Additional Rent, including, without limitation, Late Charges, Returned Check Charges, legal fees and/or court costs legally chargeable to TENANT, and Operating Expenses and/or CAM Costs; and the (ii) to unpaid Base Rent.

(g)LANDLORD MAY PURSUE OTHER REMEDIES. Nothing herein contained shall be construed so as to compel LANDLORD to accept any payment of Rent, Additional Rent, or other Lease costs in arrears or Late Charge or Returned Check Charge should LANDLORD elect to apply its rights and remedies available under this Lease or at law or equity in the event of default hereunder by TENANT. LANDLORD’s acceptance of Rent, Additional Rent, or other Lease costs in arrears or late Charge or Returned Check Charge pursuant to this Clause shall not constitute a waiver of LANDLORD’s rights and remedies available under this Lease or at law or equity.

(h)PAYMENT BY CERTIFIED FUNDS.LANDLORD reserves the right to require that all payments due from TENANT be paid by cashier's check, money order or other certified funds if TENANT has more than two (2) checks returned for any reason.

ARTICLE 5:LANDLORD'S COVENANTS

5.1LANDLORD'S COVENANTS DURING THE TERM.LANDLORD covenants during the Term:

5.1.1BUILDING SERVICESTo furnish the services listed below through LANDLORD's employees or independent contractors so long as TENANT is not in default:

(a)~~CLEANING -~~ LANDLORD shall provide five-day a week cleaning of the Premises. Abnormal waste removal (e.g., bulk computer paper, bulk packaging, wood or cardboard crates, refuse from cafeteria operation, etc.) shall be TENANT's responsibility. Intentionally deleted

(b)HEATING, VENTILATION AND AIR CONDITIONING - LANDLORD shall provide heating, ventilation, and air conditioning as required to provide normal and reasonably comfortable temperatures for normal business day occupancy (excepting holidays), Monday through Friday from 8:00 a.m. to 6:00 p.m. and Saturdays from 8:00 a.m. to noon. Additional hours of operation will be provided at TENANT's expense, upon advance written request, at rates equal to LANDLORD's actual cost of operation. The cost of operation and maintenance of any additional or special air conditioning equipment will be paid by TENANT.

(c)ELEVATORS - LANDLORD shall provide elevators for the use of tenants and the general public and shall program them as LANDLORD from time to time determines best for the Building as a whole.

(d)ELECTRICITY –

(1)LANDLORD, at LANDLORD's expense, shall furnish normal electrical energy required for lighting, electrical facilities, equipment, normal office fixtures, and appliances used in or for the benefit of TENANT's Space, subject to the limitations in the following paragraph.

(2)TENANT shall not, without prior written notice to LANDLORD in each instance, connect to the Building's electric distribution system any fixtures, appliances or equipment other than normal office machines such as desktop calculators and typewriters, or any fixtures, appliances or equipment which TENANT on a regular basis operates beyond normal building operating hours, or which operate on a voltage in excess of 120 volts or which in the aggregate, including lighting, consume more than 2 watts multiplied by the Rentable Floor Area of TENANT's Space. In the event of any such connection, TENANT agrees to an increase in the Base Rent by an amount which will reflect the cost to LANDLORD of the additional electric service to be furnished by LANDLORD, such increase to be effective as of the date of any such installation.

(3)Whenever the Base Rent is to be increased pursuant to the foregoing paragraph, if LANDLORD and TENANT cannot agree thereon, such amount shall be conclusively determined by a reputable independent electrical engineer selected by LANDLORD and paid equally by both parties, and the cost to LANDLORD will be included in LANDLORD's Operating Costs as provided in Section 4.2 hereof. The parties agree to execute and deliver each to the other an amendment of this Lease confirming such increase.

5.1.2Additional Building ServicesTo furnish, through LANDLORD's employees or independent contractors, reasonable additional Building services upon reasonable advance request of TENANT at equitable rates from time to time established by LANDLORD to be paid by TENANT; Both parties acknowledge that the Tenant will be using additional utilities and services to operate the data center, including electricity, natural gas and HVAC. Tenant is responsible for costs associated with such additional utilities and services.

5.1.3RepairsExcept as otherwise provided in Article VI, to make such repairs to the roof, exterior walls, floor slabs and common facilities of the Building as may be necessary to keep them in serviceable condition; and

5.1.4Quiet EnjoymentThat LANDLORD has the right to make this Lease and that TENANT on paying the rent and performing its obligations hereunder shall peacefully and quietly have, hold and enjoy the Premises throughout the Term.

5.2INTERRUPTIONS

LANDLORD shall not be liable to TENANT for any compensation or reduction of rent by reason of inconvenience or annoyance or for loss of business arising from power losses or shortages or from the necessity of LANDLORD's entering the Premises for any of the purposes in this Lease authorized, or for repairing the Premises, Building, or lot. In case LANDLORD is prevented or delayed from making any repairs, alterations or improvements, or furnishing any service or performing any other covenant or duty to be performed on LANDLORD's part, by reason of any cause reasonably beyond LANDLORD's control or in case TENANT's access to the Premises is limited by LANDLORD's repairs, alterations, or improvements, LANDLORD shall not be liable to TENANT therefor, nor, except as expressly otherwise provided in ARTICLE Vll, shall TENANT be entitled to any abatement or reduction of rent by reason thereof, nor shall the same give rise to a claim in TENANT's favor that such failure constitutes actual or constructive, total or partial, eviction from the Premises.

LANDLORD reserves the right to stop any service or utility system when necessary by reason of accident or emergency or until necessary repairs have been completed. Except in case of emergency repairs, LANDLORD will give TENANT reasonable advance notice of any contemplated stoppage and will use reasonable efforts to avoid unnecessary inconvenience to TENANT by reason thereof.

LANDLORD also reserves the right to institute such policies, programs, and measures as may be necessary, required, or expedient for the conservation or preservation of energy or energy services or as may be necessary or required to comply with applicable codes, rules, regulations or standards.

ARTICLE 6:TENANT’S COVENANTS

6.1TENANT’S COVENANTS DURING THE TERM

TENANT covenants during the Term and such further time as TENANT occupies any part of the Premises:

6.1.1TENANT'S PAYMENTSTo pay when due (a) all Base Rent and Additional Rent, (b) all taxes which may be imposed on TENANT's personal property in the Premises (including, without limitation, TENANT's fixtures and equipment) regardless to whomever assessed, (c) all charges by public utilities for telephone and other utility services rendered to the Premises and not required hereunder to be furnished by LANDLORD and (d) as Additional Rent, all charges of LANDLORD for services rendered pursuant to Section 5.1.2 hereof;

6 1.2REPAIRS AND ALTERATIONSExcept as otherwise provided in Article V and Section 5.1.3, to maintain the Premises in good order, repair and condition, reasonable wear only excepted. TENANT agrees not to make any alterations, changes, or additions to the Premises without LANDLORD's prior written consent;

6.1.3USE AND OCCUPANCYTo use and occupy the Premises only for the Permitted Uses; and not to injure or deface the Premises, Building, or lot; and not to permit any use in the Premises which is improper, offensive, contrary to law or ordinances, liable to create a nuisance or to adversely affect the LANDLORD's leasing of the Building or to invalidate or increase the premiums for any insurance on the Building or its contents or liable to render necessary any alteration or addition to the Building.

6.1.4RULES AND REGULATIONSTo comply with the Rules and Regulations set forth herein and all other reasonable Rules and Regulations hereafter made by LANDLORD, of which TENANT has been given notice, it being understood that LANDLORD shall not be liable to TENANT for the failure of other tenants of the Building to conform to such Rules and Regulations.

6.1.5CAFETERIA AND VENDING INSTALLATIONSNot to install a lunch room, vending machine, or cafeteria service without LANDLORD's prior written approval. All cleaning necessitated by such an installation shall be at TENANT's expense.

6.1.6ASSIGNMENT AND SUBLETTINGTENANT shall not (a) transfer or assign this Lease or any interest hereunder, nor permit any assignment hereof by operation of law, (b) sublet the Premises or any part thereof nor (c) permit the use of the Premises by desk tenants or

any parties other than the Tenant or its agents, without in each case first obtaining the written consent of Landlord which consent shall not be unreasonably withheld.

6.1.7LANDLORD'S RIGHT OF ENTRYTo permit LANDLORD and LANDLORD's agents entry: to examine the Premises at reasonable times and, if LANDLORD shall so elect, to make repairs or replacements; to remove, at TENANT's expense, any changes, additions, signs, curtains, blinds, shades, awnings, aerials, flagpoles, or the like not consented to in writing; and to show the Premises to prospective tenants during the 12 months preceding expiration of the Term and at any time the TENANT is in default and to prospective purchasers and mortgagees at all reasonable times.

6.1.8LOADINGNot to place a load upon the Premises exceeding an average rate of 50 pounds of live load per square foot of floor area; and not to move any safe, vault or other heavy equipment in, about or out of the Premises except in such manner and at such times as LANDLORD shall in each instance approve;

6.1.9LANDLORD'S COSTSIn case LANDLORD shall, without any fault on its part, be made party to any litigation commenced by or against TENANT or by or against any parties in possession of the Premises or any part thereof claiming under TENANT, to pay, as Additional Rent, all costs including, without implied limitation, reasonable counsel fees incurred by or imposed upon LANDLORD in connection with such litigation.

6.1.10LABOR OR MATERIALMEN'S LIENSTo pay promptly when due the entire cost of any work done on the Premises by TENANT, its agents, employees, or independent contractors. TENANT shall not permit any liens for labor or materials performed or furnished in connection therewith to attach to the Premises and agrees to discharge any such liens immediately.

6.1.11YIELDING UPTo yield up the Premises peaceably at the expiration or termination of the Lease, in good order, repair and condition. TENANT agrees that all improvements, alterations and additions to the Premises are the property of LANDLORD whether paid for by LANDLORD or TENANT (including, without limitation: floor coverings, wall coverings, plumbing fixtures, built-in appliances, built-in furniture, and cabinets and shelving attached to the wall or floor) and will be left behind when TENANT yields up the Premises, unless the parties agreed otherwise in writing at the time of construction or installation. LANDLORD acknowledges that all existing conduit previously installed by TENANT, FullNet Communications, Inc. and /or FullTel, Inc. (the “Conduit”) is the property of TENANT FullNet Communications, Inc. and /or FullTel, Inc. (the “Conduit Owner”) and shall remain in place without charge and under Conduit Owner’s control until abandoned in writing by Conduit Owner.

6.1.12HOLDOVERTo pay to LANDLORD twice the total of the Base Rent and Additional Rent applicable to the last month of the Term for each month or portion thereof TENANT shall retain possession of the Premises or any part thereof after the termination of this Lease, and also to pay all damages sustained by LANDLORD on account thereof; the provisions of this subsection shall not operate as a waiver by LANDLORD of any right of re-entry provided in this Lease.

6.1.13SECURITY INTERESTTENANT hereby grants to LANDLORD a security interest in and to all of TENANT's equipment, inventory, contract rights, accounts receivable, general intangibles including any licenses used in operations, furniture and fixtures (wherever located) and any and all other property of any nature that had been brought onto the premises to secure the payment of all rent and other obligations provided for in this Lease. The TENANT shall be deemed the "Debtor" and the LANDLORD shall be deemed the "Secured Party" and both parties shall have the rights and remedies provided for by Oklahoma's Uniform Commercial Code. All of the LANDLORD/Secured Party's remedies shall be cumulative and not in the alternative. TENANT authorizes the LANDLORD to act as its duly appointed agent in executing any financing statement to perfect the security interest granted herein. LANDLORD shall have the option to also file this Lease with the appropriate governmental office as a financing statement. TENANT shall be responsible for reasonable

attorney fees in connection with any effort to enforce this Security Agreement, regardless of whether judicial process is required.

6.1.14ABANDONED PROPERTYAll personal property not removed by the TENANT from the premises within five days after the termination of this Lease will be conclusively presumed to have been abandoned by the TENANT and the LANDLORD may, at the LANDLORD's option, thereafter take possession of such property and either declare the same to be the property of the LANDLORD or, at the expense of the TENANT, dispose of such property in any manner and for whatever consideration the LANDLORD in the LANDLORD's sole discretion deems advisable.

ARTICLE VII.INSURANCE.

7.1LIABILITY OF TENANT: TENANT shall protect, indemnify and save LANDLORD harmless from and against all and any liability and expense of any kind arising from injuries or damages to persons or property on the Premises arising out of or resulting in any way from any act or omission of Tenant, its agents, servants and employees, in the use of the Premises during the Lease Term.

7.2NOTICE OF CLAIM OR SUIT: TENANT agrees to promptly notify LANDLORD of any claim, action, proceeding or suit instituted or threatened against the LANDLORD. In the event LANDLORD is made a party to any action for damages which TENANT has herewith indemnified LANDLORD against, then TENANT shall pay all costs and shall provide effective counsel in such litigation or shall pay, at LANDLORD’S option, the attorney fees and costs incurred in connection with said litigation by LANDLORD.

7.3LIABILITY INSURANCE: TENANT agrees to maintain at its expense at all times during the lease term Commercial General Liability insurance properly protecting and indemnifying LANDLORD and naming LANDLORD as additional insured with waiver of subrogation in an amount not less than $300,000 fire legal liability, $1,000,000 per occurrence, and not less than a $2,000,000 general aggregate limit written by a U.S. insurance company approved by Landlord and licensed to do business in the State of Oklahoma. TENANT shall deliver to LANDLORD certificates of such insurance, which shall declare that the respective insuror may not cancel the same in whole or in part without giving LANDLORD written notice of its intention so to do at least thirty (30) days in advance.

7.4WORKER’S COMPENSATION INSURANCE:TENANT shall keep in force, at all times, worker’s compensation insurance or similar insurance to the extent required by law in which the property is located.

7.5FAILURE TO PROCURE INSURANCE: In the event TENANT shall fail to procure insurance required under this ARTICLE and fail to maintain the same in force continuously during the term, LANDLORD shall be entitled to procure the same and TENANT shall immediately reimburse LANDLORD for such premium expense. Tenant shall be deemed to be in default and Landlord shall have the right to exercise any remedies provided herein for Tenant’s default

7.6INCREASE IN FIRE INSURANCE PREMIUM: TENANT agrees not to keep, upon the Premises any articles or goods which may be prohibited by the standard form of fire insurance policy or are considered dangerous.

7.7PROPERTY OF TENANT: Tenant agrees to maintain at its expense at all times during the lease term all Risk Property insurance for all personal property of tenant, improvements and betterments, Plate Glass insurance, fixtures and equipment in the tenant premises not less than full replacement cost to include business income and extra expense coverage with limits not less than 100% of gross revenues for 12 months. TENANT agrees that all property owned by it in, on or about the Premises shall be at the sole risk and hazard of the TENANT. LANDLORD shall not be liable or responsible for any loss of or damage to TENANT, or anyone claiming under or through TENANT, or otherwise, whether

caused by or resulting from a peril required to be insured hereunder, or from water, steam, gas, leakage, plumbing, electricity or electrical apparatus, pipe or apparatus of any kind, the elements or other similar or dissimilar causes, and whether or not originating in the demised Premises or elsewhere, irrespective of whether or not LANDLORD may be deemed to have been negligent with respect thereto, and provided such damage or loss is not the result of an intentional and willful wrongful act of LANDLORD.

7.8WAIVER OF SUBROGATION: TENANT agrees that, if any property owned by it and located in the leased Premises shall be damaged or destroyed by an insured peril, LANDLORD shall not have any liability to TENANT, nor to any insurer of TENANT, for or in respect of such damage or destruction, and TENANT shall require all policies of risk insurance carried by it on its property in the leased Premises to contain or be endorsed with a provision in and by which the insurer designated therein shall waive its right of subrogation against LANDLORD.

ARTICLE 8:CASUALTY AND TAKING

8. 1CASUALTY

If the Premises are damaged by fire or other casualty and such damage cannot be repaired within 120 days (as estimated by the LANDLORD as soon as reasonably practicable after the occurrence of such damage), this Lease, at the option of the LANDLORD, exercised by giving written notice thereof to the TENANT within thirty (30) days after the occurrence of such damage, will terminate as of the date such notice is given. On such termination the TENANT will pay Rent and all other obligations of the TENANT apportioned to the date on which such damage occurred and will immediately surrender the Premises to the LANDLORD. If the damage can be repaired within 120 days, or if the damage cannot be repaired within 120 days but the LANDLORD does not exercise the option to terminate this Lease, the LANDLORD will, at the LANDLORD's expense to the extent of the net award of insurance, make the necessary repairs and this Lease will continue in effect, but the Rent will be equitably abated (as determined in the good faith judgment of the LANDLORD) until such repairs are made, unless such damage is so slight that the TENANT's occupancy of the Premises is not materially interrupted, in which case the Rent will not be abated or reduced.

8.2TAKING

If all or any substantial part of the Premises, the Building, or the land is taken or condemned for any public use or purpose by right of eminent domain (with or without litigation) or is transferred by agreement in connection with or in lieu of or under threat of condemnation, the Term and the leasehold estate created hereby will, at the option of the LANDLORD, terminate as of the date title vests in the condemnor or transferee. If the Lease is not so terminated, the LANDLORD will put the Premises (or the remaining portion) into proper condition for occupancy to the extent permitted by the net award for damages, and the Rent will be equitably abated (as determined in the good faith judgment of the LANDLORD) until such repairs are made, or in the case of a permanent reduction in area of the Premises, until the end of the Term. The LANDLORD will receive the entire award from such taking (or the entire compensation paid on account of any transfer by agreement) and the TENANT will have no claim thereto. The TENANT shall have the right, however, to make a claim in a separate action for any damages payable for movable trade fixtures and moving expenses.

ARTICLE 9:RIGHTS OF MORTGAGEE

9.1PRIORITY OF LEASE

This Lease is and shall continue to be subject and subordinate to any presently existing mortgage or deed of trust of record covering the land or Building or both (the "mortgaged premises"). The holder of any such presently existing mortgage or deed of trust shall have the election to subordinate the same to the rights and interests of TENANT under this Lease exercisable by filing with the appropriate recording office a notice of such election.

This Lease shall be superior to any mortgage, deed of trust or other voluntary lien hereafter placed on the mortgaged premises unless the option provided in the following sentence shall be exercised. The holder of any such mortgage, deed of trust or other voluntary lien shall have the option to subordinate this Lease to the same, provided that such holder enters into an agreement with TENANT by the terms of which the holder will agree to recognize the rights of TENANT under this Lease in the event of acquisition of title by such holder through foreclosure proceedings or otherwise and TENANT will agree to recognize the holder of such mortgage as LANDLORD in such event, which agreement shall be made to expressly bind and inure to the benefit of the successors and assigns of TENANT and of the holder and upon anyone purchasing the mortgaged premises at any foreclosure sale.

9.2NO PREPAYMENT OR MODIFICATION

TENANT shall not pay Base Rent, Additional Rent, or any other charge more than ten days prior to the due dates thereof. No prepayment of Base Rent, Additional Rent or other charges, no assignment of this Lease and no agreement to make or accept any surrender, termination or cancellation of this Lease and no agreement to modify so as to reduce the rent, change the Term, or otherwise materially change the rights of LANDLORD under this Lease, or to relieve TENANT of any obligations or liability under this Lease, shall be valid unless consented to in writing by LANDLORD's mortgagees of record, if any.

9.3NO RELEASE OR TERMINATION

No act or failure to act on the part of LANDLORD which would entitle TENANT under the terms of this Lease, or by law, to be relieved of TENANT's obligations hereunder or to terminate this Lease, shall result in a release or termination of such obligations or a termination of this Lease unless (i) TENANT shall have first given written notice of LANDLORD's act or failure to act to LANDLORD's mortgagees of record, if any, specifying the act or failure to act on the part of LANDLORD which could or would give basis to TENANT's rights and (ii) such mortgagees, after receipt of such notice, have failed or refused to correct or cure the condition complained of within a reasonable time thereafter. Reasonable time as used above means a reasonable time to obtain possession of the mortgaged premises, if the mortgagee elects to do so, and a reasonable time to correct or cure the condition if such condition is determined to exist.

9.4MORTGAGEE’S APPROVAL

LANDLORD's obligation to perform its covenants and agreements hereunder may be subject to the condition precedent that this Lease be approved by the holder of any mortgage of which the Premises are a part and by the issuer of any commitment to provide permanent financing which is in effect on the date hereof. Unless LANDLORD gives TENANT written notice within 15 business days after the date hereof that such holder or issuer, or both, disapprove this Lease, then this condition shall be deemed to have been satisfied or waived and the provisions of this Section 8.4 shall be of no further force or effect.

ARTICLE 10:DEFAULT

10.1EVENTS OF DEFAULT

The following events will be deemed to be events of default by the TENANT under this Lease: (a) failure to pay any Base Rent or Additional Rent or other sums payable by the TENANT hereunder when such sums become due; (b) failure to comply with any term of this Lease or the Rules and Regulations to be observed by the TENANT; (c) vacation or abandonment of any portion of the Premises; (d) the filing by or against the TENANT or any Guarantor of any proceeding under the federal bankruptcy act or any similar law; (e) the adjudication of the TENANT or any Guarantor as bankrupt or insolvent in proceedings filed under the federal bankruptcy act or any similar law; (f) the insolvency of the TENANT or any Guarantor or the making of a transfer in fraud of creditors or an assignment for the benefit of creditors; or (g) the appointment of a receiver or trustee for the TENANT, any Guarantor or any of the assets of the TENANT.

10.2REMEDIES

If TENANT has failed to cure a default described in sub-paragraph 9.1(a) within ten (10) days after written notice, or if TENANT has failed to cure a default described in Subparagraph 9.1(b) within thirty (30) days after written notice or such longer time as is reasonably necessary if TENANT commences to cure within such thirty (30) days, or upon the occurrence of any other event of default the LANDLORD will have the option to do any one or more of the following without any further notice or demand including without limitation any notice of forfeiture or notice to vacate, in addition to and not in limitation of any other remedy permitted by law or by this Lease:

10.2.1TERMINATION.The LANDLORD may terminate this Lease, in which event the TENANT will immediately surrender the Premises to the LANDLORD, but if the TENANT fails to do so, the LANDLORD may without notice and without prejudice to any other remedy the LANDLORD might have, enter and take possession of the Premises and remove the TENANT and the TENANT's property therefrom without being liable to prosecution or any claim for damages therefor.

10.2.2ACCELERATION.The LANDLORD may declare the entire amount of the rent to become payable during the remainder of the Term to be due immediately, in which event the TENANT agrees to pay the same to the LANDLORD on demand. The acceleration and acceptance by the LANDLORD of the payment of such rent will not constitute a waiver of any default then existing or thereafter occurring hereunder.

10.2.3RE-LETTING.The LANDLORD may enter and take possession of the Premises as the agent of the TENANT without terminating this Lease and without being liable to prosecution or any claim for damages therefore, and the LANDLORD may re-let the Premises as the agent of the TENANT and receive the rent therefore, in which event the TENANT will pay to the LANDLORD, on demand, the cost of renovating, repairing and altering the Premises and any deficiency that might arise by reason of such re-letting; provided, however, that the LANDLORD will have no duty to re-let the Premises and the failure of the LANDLORD to re-let the Premises will not release or affect the TENANT's liability for rent or for damages.

10.2.4OPTION TO PERFORM.The LANDLORD may perform or cause to be performed the obligations of the TENANT under this Lease and may enter the Premises to accomplish such purpose without being liable to prosecution or any claim for damages therefore. The TENANT agrees to reimburse the LANDLORD on demand for any expense which the LANDLORD might incur in effecting compliance with this Lease on behalf of the TENANT (together with interest at the rate of 11/2% per month), and the TENANT further agrees that the LANDLORD will not be liable for any damages resulting to the TENANT from such action, whether caused by the negligence of the LANDLORD or otherwise.

10.3DAMAGES

In any case where LANDLORD has terminated this Lease under Section 10.2.1 or where LANDLORD has entered and repossessed the Premises under Section 10.2.3, LANDLORD, at LANDLORD's option, may cause the Premises to be redecorated, altered, divided, consolidated with adjoining premises, or otherwise changed or prepared for re-letting, and may re-let the Premises or any part thereof for any term or terms, and receive the rentals therefore, applying these rentals first to the payment of such reasonable expenses as LANDLORD may have incurred in connection with any termination of this Lease under Section 10.2.1 or any entry and repossession of the Premises under Section 10.2.3, and any redecoration, altering, dividing, consolidating with adjoining premises or otherwise changing or preparing for re-letting and re-letting, including attorneys' and brokerage fees, and then to the payment of LANDLORD's damages hereunder which damages are deemed to equal all rentals and all other payments due and to become due hereunder plus all expenses of LANDLORD's performance of TENANT's other covenants as herein provided; TENANT agrees that, upon any such termination or any such entry and repossession, and regardless of whether or not LANDLORD has re-let, TENANT shall pay to LANDLORD LANDLORD's damages hereunder equal to all accrued and accelerated rentals and to all other payments herein agreed to be paid by TENANT, less the net proceeds of re-letting, if any, payable to LANDLORD under any re-letting effected by LANDLORD prior to entry of judgment against TENANT for said damages. In re-letting the Premises, LANDLORD may grant rent concessions and

TENANT shall not be credited therewith. No re-letting shall constitute a surrender and acceptance or a release of TENANT or of any guarantor of TENANT from obligations under this Lease. LANDLORD shall have no obligation to attempt to re-let the Premises after any such termination or any such entry and repossession and LANDLORD shall have no liability to TENANT for any failure to re-let or for any failure to collect or to receive rentals from a re-letting. TENANT hereby waives and relinquishes any and all claims to any and all proceeds of any re-letting which exceed the damages required to be paid to LANDLORD by TENANT hereunder on account of TENANT's default.

10.4NO WAIVER OR ACCEPTANCE

No action by the LANDLORD during the Term will be deemed an acceptance of an attempted surrender of the Premises and no agreement to accept a surrender of the Premises will be valid unless made in writing and signed by the LANDLORD. No re-entry or taking possession of the Premises by the LANDLORD will be construed as an election by the LANDLORD to terminate this Lease, unless a written notice of termination is given to the TENANT. Notwithstanding any such re-letting, re-entry or taking possession, the LANDLORD may at any time thereafter elect to terminate this Lease for a previous default. The LANDLORD's acceptance of rent following the occurrence of an event of default will not be construed as the LANDLORD's waiver of such event of default. No waiver by the LANDLORD of any default by the TENANT will be deemed to constitute a waiver of any other or future default hereunder. Forbearance by the LANDLORD to enforce one or more of the remedies herein provided will not be deemed to constitute a waiver of any default. The failure of the LANDLORD to enforce the Rules and Regulations against the TENANT or any other tenant in the Building will not be deemed a waiver thereof. No provision of this Lease shall be deemed to have been waived by the LANDLORD unless such waiver is in writing signed by the LANDLORD. No endorsement or statement on any check or any letter accompanying any check or payment of rent shall be deemed an accord and satisfaction. LANDLORD may accept such check or payment without prejudice to LANDLORD's right to recover the balance of such installment or pursue any other remedy.

10.5CUMULATIVE REMEDIES

The rights granted to the LANDLORD in this Lease are cumulative and not intended to be exclusive of any other right or remedy which the LANDLORD might have at law or in equity and the exercise of one or more rights or remedies will not prejudice the concurrent or subsequent exercise of other rights or remedies.

10.6LANDLORD’S COSTS

If the LANDLORD brings any action under this Lease or consults or places this Lease or any amount payable by the TENANT hereunder with an attorney for the enforcement of any of the LANDLORD's rights hereunder, the TENANT agrees in each such case to pay to the LANDLORD the reasonable attorney's fees and other expenses incurred by the LANDLORD in connection therewith.

ARTICLE 11:MISCELLANEOUS

11.1TITLES

The titles of the articles and paragraphs are for convenience and are not to be considered in construing this Lease.

11.2NOTICE OF LEASE

Upon request of either party both parties shall execute and deliver, after the Term begins, a short form of this Lease in form appropriate for recording or registration, and if this Lease is terminated before the Term expires, an instrument in such form acknowledging the date of termination.

11.3~~RELOCATION~~ INTENTIONALLY DELETED

LANDLORD reserves the right to relocate the Premises to comparable space within the Building or another building in the office park or vicinity in which the Building is located by giving TENANT prior written notice of such intention to relocate. Effective on the date of such relocation, this Lease shall be amended by deleting the description of the original Premises and substituting therefore a

~~description of such comparable space. LANDLORD agrees to pay the reasonable costs of moving TENANT to such other space within the Building or the park.~~

11.4NOTICES FROM ONE PARTY TO THE OTHER

No notice, approval, consent requested or election required or permitted pursuant to this Lease shall be effective unless the same is in writing. Communications shall be addressed, if to LANDLORD, at LANDLORD's Address or at such other address as may have been specified by prior notice to TENANT and, if to TENANT, at TENANT's Address or at such other place as may have been specified by prior notice to LANDLORD. Any communication so addressed shall be deemed duly served when hand-delivered or two days after mailing by registered or certified mail return receipt requested.

11.5BIND AND INURE

The obligations of this Lease shall run with the land, and this Lease shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the LANDLORD named herein and each successive owner of the Premises shall be liable only for the obligations accruing during the period of its ownership. Whenever the Premises are owned by a trustee or trustees, the obligations of LANDLORD shall be binding upon LANDLORD's trust estate, but not upon any trustee, beneficiary or shareholder of the trust individually. In the event this Lease is executed by two or more persons or entities as "TENANT", the liability of each shall be joint and several.

11.6PARTIAL INVALIDITY

If any term of this Lease shall to any extent be invalid or unenforceable, the remainder of this Lease, or the application of such term to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term of this Lease shall be valid and enforceable to the fullest extent permitted by law.

11.7ESTOPPEL CERTIFICATE

TENANT agrees on the COMMENCEMENT DATE, and from time to time thereafter upon not less than fifteen (15) days prior written request by LANDLORD, to execute, acknowledge and deliver to LANDLORD a statement in writing in the form attached hereto as EXHIBIT G, certifying that this LEASE is unmodified and in full force and effect; that TENANT has no defenses, offset or counterclaims against its obligations to pay the Fixed Rent and Additional Rent and to perform its other covenants under this Lease; that there are no uncured defaults of LANDLORD or TENANT under this Lease (or, if there have been any modifications, defenses, offsets, counterclaims, or defaults, setting them forth in reasonable detail); and the dates to which the Fixed Rent, Additional Rent and other charges have been paid. Any such statement delivered pursuant to this Section 10.7 may be relied upon by any prospective purchaser or mortgagee of premises which include the Premises or any prospective assignee of any such mortgagee.

11.8BROKERAGE AND AGENCY DISCLOSURE

TENANT represents and warrants that it has dealt with no broker in connection with this transaction other than Price Edwards and Company and agrees to defend, indemnify and save LANDLORD harmless from and against any and all claims for a commission arising out of this Lease made by anyone other than Price Edwards and Company.

11.9EXEMPTIONS

TENANT and Guarantor waive any benefit of any exemption, homestead, or other laws which might restrict LANDLORD's efforts to execute upon any property of TENANT or assets of the TENANT or Guarantor in connection with enforcement of any obligation of the TENANT to pay rent or any other monetary obligation of TENANT to LANDLORD. Should default occur in the payment of rent, and suit and judgment should follow, TENANT and Guarantor specifically and expressly waive any exemption provided for in any State or Federal law which in any way limits execution upon any asset including homestead, insurance, annuity or other asset, without exception, of LANDLORD or Guarantor.

11.10ENTIRE AGREEMENT

The TENANT agrees that there are no representations, understandings, stipulations, agreements or promises pertaining to this Lease or the Leased Premises which are not incorporated herein. This Lease will not be altered, waived, amended or extended, except by a written agreement signed by the LANDLORD and the TENANT.

11.11TENANT’S TIME TO SUE

11.11.1COMMENCEMENT OF ACTION.Any claim, demand, right or, defense by TENANT that arises out of this Lease or the negotiations that preceded this Lease shall be barred unless TENANT commences an action thereon, or interposes a defense by reason thereof, within six (6) months after the date of the inaction, omission, event, or action that gave rise to such claim, demand, right, or defense.

11.11.2TENANT ACKNOWLEDGMENT.TENANT acknowledges and understands, after having consulted with its legal counsel that the purpose of Paragraph 11.11.1 is to shorten the period within which TENANT would otherwise have to raise such claims, demands, rights, or defenses under applicable laws.

ARTICLE 12:SECURITY DEPOSIT

The sum of $6,500.00 further defined in ARTICLE 1.1 is payable in advance due upon Tenant’s execution of this Lease. LANDLORD acknowledges receipt from TENANT of the Security Deposit to be held by LANDLORD, as security, without interest, for and during the Term, which deposit shall be returned to TENANT, at the termination of this Lease provided there exists no breach of any undertaking of TENANT. If all or any part of the Security Deposit is applied to an obligation of TENANT hereunder, TENANT shall immediately upon request by LANDLORD restore the Security Deposit to its original amount. TENANT shall not have the right to call upon LANDLORD to apply all or any part of the Security Deposit to cure any default or fulfill any obligation of TENANT, but such use shall be solely in the discretion of LANDLORD. Upon any conveyance by LANDLORD of its interest under this Lease, the Security Deposit may be delivered by LANDLORD to LANDLORD's grantee or transferee. Upon any such delivery, TENANT hereby releases LANDLORD herein named of any and all liability with respect to the Security Deposit, its application and return, and TENANT agrees to look solely to such grantee or transferee. It is further understood that this provision shall also apply to subsequent grantees and transferees.

Remainder of page intentionally left blank

EXECUTED AND DELIVERED as of the day and year first above written.

TENANT:FullWeb, Inc.

By:Date:_________________________

Roger P. Baresel, CEO

Landlord: BOKP Tower, LLC

By: __________________________________Date:__________________________

William Mee, Manager

EXHIBIT A

LEGAL DESCRIPTION

Intentionally deleted

EXHIBIT B

PLAN SHOWING TENANT'S SPACE

EXHIBIT C

~~SPECIFICATIONS OF TENANT IMPROVEMENTS.~~

N/A

EXHIBIT D

RULES AND REGULATIONS

1.The entrances, lobbies, passages, corridors, elevators and stairways shall not be encumbered or obstructed by TENANT, TENANT's agents, servants, employees, licensees, or visitors or be used by them for any purpose other than for ingress and egress to and from the Premises. The moving in or out of all safes, freight, furniture, or bulky matter of any description must take place during hours specifically approved in advance by the Building Manager. LANDLORD reserves the right to inspect all freight and bulky matter to be brought into the Building and to exclude from the Building all freight and bulky matter which violates any of these Rules and Regulations or the Lease of which these Rules and Regulations are a part.

2.No curtains, blinds, shades, or signs other than those furnished by LANDLORD shall be attached to, hung in, or used in connection with any window or door of the Premises, without the prior written consent of LANDLORD. Interior signs on doors shall be fabricated by LANDLORD or by sign makers first approved by LANDLORD, at the expense of TENANT, and shall be of a size, color, and style acceptable to LANDLORD.

3.No additional locks or bolts of any kind shall be placed upon the doors or windows by TENANT, nor shall any changes be made in existing locks or the mechanism thereof without the prior written consent of LANDLORD. TENANT must, upon the termination of its tenancy, restore to LANDLORD all keys either furnished to or otherwise procured by TENANT, and in the event of the loss of any keys so furnished, TENANT shall pay to LANDLORD the cost thereof.

4.Canvassing, soliciting, and peddling in the Building are prohibited and TENANT shall cooperate to prevent the same.

5.TENANT may request heating or air conditioning during periods in addition to normal working hours by contacting the Building Manager. TENANT shall submit to the Building Manager a list of personnel who are authorized to make such requests. Charges for the additional hours of operation shall be fair and reasonable and reflect the additional operating costs involved.

6.TENANT shall comply with all security measures from time to time established by LANDLORD for the Building.

7. Smoking is specifically prohibited within the confines of the entire Building as well as the parking garage at all

times.

8. No animals in the Building or Premises at any time.

EXHIBIT E

ESTOPPEL CERTIFICATE

(Name and address of Mortgage holder)Date:

RE:(Address)

Your Application #:

Gentlemen:

It is our understanding that you have committed to place a mortgage upon the subject premises and as a condition precedent thereof have required this certification by the undersigned.

The undersigned, as TENANT, under that certain lease dated , made with , as LANDLORD, hereby ratifies the said lease and certifies that:

1. The undersigned has entered into occupancy of the premises in said lease on ; and

2. The undersigned is presently open and conducting business with the public in the premises; and

3. The minimum rental in the annual amount of $ was payable from the date of occupancy; and

4. That said lease is in full force and effect and has not been assigned, modified, supplemented or amended in any way (except by agreement or agreements dated ), and neither party thereto is in default thereunder; and

5. That the same represents the entire agreement between the parties as to this leasing; and

6. That the term of said lease expires on ; and

7. That all conditions under said lease to be performed by the LANDLORD have been satisfied, including but without limitation, all co-tenancy requirements thereunder; and

8. All required contributions by LANDLORD to TENANT on account of TENANT's improvements have been received; and

9. On this date there are no existing defenses or offsets which the undersigned has against the enforcement of said lease by the LANDLORD; and

10. That no rental has been paid in advance and no security (or in the amount of $) has been deposited with LANDLORD; and

11. That rental for , 20___, has been paid.

Very truly yours,

TENANT:

By:

Title:

EXHIBIT F

Additional Terms

1.Right to Terminate Early: On each 12-month anniversary (12/31/20, 12/31/21, 12/31/22, and 12/31/23) Tenant shall have the right to terminate this Lease by giving Landlord a minimum of a 60-day written notice of Tenants intent to terminate, time is of the essence. Tenant may terminate without any penalty.

2.Options to Renew: Provided Tenant is not in default as to any provisions of this Lease; Tenant shall have two (2) options to renew for a period a period of 5 years each at the then fair market rent as determined in good faith by Landlord. Tenant must give a minimum of 270 days prior written notice from the then expiration date of Tenants intent to renew. The Landlord shall have 30 days from receipt of such Tenants written notice to reply with the then fair market rent. Tenant shall have the Right to Terminate Early as set forth in the preceding paragraph on each 12- month anniversary during the renewal periods.

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ASBESTOS NOTICE RIDER

This Rider is made and entered into by and between BOKP TOWER, LLC, (“Landlord”), and FullWeb, Inc. an Oklahoma corporation (“Tenant”), as of the day and year of the Lease between Landlord and Tenant to which this Rider is attached. Landlord and Tenant hereby agree that, notwithstanding anything contained in the Lease to the contrary, the provisions set forth below shall be deemed to be part of the Lease. All references in the Lease and in this Rider to the “Lease” shall be construed to mean the Lease (and all exhibits attached thereto), as amended and supplemented by this Rider. All capitalized terms not defined in this Rider shall have the same meaning as set forth in the Lease.

Tenant has received notification that asbestos containing building materials (ACBM) exist within the Building. Past inspections by two independent consulting firms to determine the location, amount, and type of ACBM concluded that the ACBM was in generally good condition and posed no health hazard unless disturbed. Landlord may engage in future asbestos abatement activities within the Building. As a result, Tenant understands that there may be temporary inconveniences caused by such abatement activities in adjoining or nearby leased premises. In addition, in order to avoid potential hazards caused by unauthorized disturbance of ACBM within the Building, Tenant agrees that it will not allow any construction activities within the Building that involve removal of ceiling panels, or any form of penetrations above the ceiling or into building columns, without requiring the persons or entities performing such work to obtain clearance for such activities through a written permit application with the Property Manager. Tenant shall take necessary measures to insure staff compliance with these requirements pertaining to asbestos management within the 201 RSK Building. Tenant shall further report immediately to Landlord any observed evidence or indication of unauthorized or accidental disturbance of ACBM. Tenant shall indemnify Landlord for claims resulting from Tenant’s violation of this Rider and the terms of this Rider shall survive the expiration of the Lease term.

TENANT: FullWeb, Inc.

_________________________________Date:_______________________________

Roger P. Baresel, CEO

Corporate Guaranty

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in consideration for, and as an inducement to Landlord to make the attached Lease with Tenant (FullWeb, Inc.) dated November 22, 2019 by and between BOKP Tower, LLC and FullWeb, Inc., an Oklahoma corporation, the undersigned does hereby corporately guarantee to Landlord, without condition or limitations except as hereinafter provided, the payment of Rent and Additional Rent to be paid by the Tenant and the full performance and observance of all the terms, covenants and conditions therein provided to be performed, observed or complied with by Tenant, including the Rules and Regulations as therein provided, without requiring any notice of non-payment, non-

performance or non-observance, or proof, or notice, or demand, whereby to charge the undersigned therefor, all of which the undersigned hereby expressly waives and expressly agrees that the validity of this guaranty and the obligations of the guarantor hereunder shall in no way be terminated, affected or impaired by reason of the assertion by Landlord against Tenant of any of the rights or remedies reserved to Landlord pursuant to the provisions of the attached Lease. Landlord may grant extensions of time and other indulgences and may modify, amend or waive any of the terms, covenants or conditions of the attached lease, and discharge or release any party or parties thereto, all without notice to the undersigned and without in any way impairing, releasing or affecting the liability or obligation of the undersigned. The undersigned agrees that Landlord may proceed directly against the undersigned without taking any action under the attached Lease and without exhausting Landlord remedies against Tenant; and no discharge of Tenant in bankruptcy or in any other insolvency proceedings shall in any way or to any extent discharge or release the undersigned from any liability or obligation hereunder. The undersigned further covenants and agrees that this guaranty shall remain and continue in full force and effect as to any renewal, modification or extension of the attached Lease, and that no subletting and no assignment of the within Lease, without Landlord’s written consent thereto, shall release or discharge the undersigned. However, this Guarantee shall terminate if the Landlord agrees in writing to the assignment of the attached Lease. As a further inducement to Landlord to make the within Lease and in consideration therefor, the undersigned agrees that in any action or proceeding brought by either Landlord or the undersigned against the other on any matter whatsoever arising out of, under, or by virtue of any of the terms, covenants or conditions of the attached Lease or of this guaranty, the undersigned shall pay, in addition to any damages which a court of competent jurisdiction may award, such amount or amounts as the court may determine to be reasonable attorneys’ fees incurred by Landlord or its successors or assigns in the enforcement of this guaranty. Landlord and Guarantor waive the right to trial by jury in any action, proceeding or counterclaim involving enforcement of this guaranty or involving the right to any statutory relief or remedy.

All rights under this Guaranty shall inure to the benefit of any successors or assigns of Landlord.

IN WITNESS WHEREOF, the undersigned has signed this Guaranty as of the ___ of ____________, 2019.

Corporate Guarantor: FullNet Communications, Inc.

_____________________________________

Roger Baresel, CEO

LEASE ADDENDUM

Notwithstanding anything in the foregoing Lease to the contrary, the Landlord and Tenant acknowledge and agree that Arvest Bank has exclusive rights with respect to the following uses in the Building (the "Protected Use") during all periods that the Arvest Bank lease remains in full force and effect:

Any use by or as financial institutions, and/or financial service companies, or similar companies that provide banking services/financial services, including the installation and operation of ATMs or any entities which: (a) are F.D.LC. insured, or the deposits and accounts of which are insured by a similar governmental agency backed in full by either the U.S. government or a State government, or (b) which could be reasonably deemed to be in direct competition with Arvest Bank (and shall include any direct and indirect holding companies, subsidiaries and affiliates of any such party).

Tenant agrees that to the extent the permitted use provisions in the Lease could be interpreted to allow the Protected Use, it is hereby amended to exclude the Protected Use and Tenant cannot under any circumstances use the Leased Premises for the Protected Use. In addition, in connection with any assignment or sublease transaction by the Tenant as contemplated by the Lease, no assignee or subtenant will ever have the right to use the Leased Premises for the Protected Use.

Name of Subsidiary	State of Organization
`1.`FullNet, Inc.	Oklahoma
`2.`FullTel, Inc.	Oklahoma
`3.`FullWeb, Inc.	Oklahoma
`4.`CallMultiplier, Inc.	Oklahoma