U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

(Mark One)

þ		QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

o		TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     .

FullNet Communications, Inc.

(Exact name of small business issuer 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
(Issuer’s telephone number)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The number of shares outstanding of the Issuer’s Common Stock, $.00001 par value, as of August 10, 2007 was 6,741,135.

Transitional Small Business Disclosure Format (Check one): Yes o No þ

 

 

FORM 10–QSB

			Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (Unaudited) – June 30, 2007 and December 31, 2006			3
Condensed Consolidated Statements of Operations – Three and six months ended June 30, 2007 and 2006 (Unaudited)			4
Condensed Consolidated Statement of Stockholders’ Deficit – Six months ended June 30, 2007 (Unaudited)			5
Condensed Consolidated Statements of Cash Flows – Six months ended June 30, 2007 and 2006 (Unaudited)			6
Notes to Condensed Consolidated Financial Statements (Unaudited)			7
Item 2. Management’s Discussion and Analysis or Plan of Operation			14
Item 3. Controls and Procedures			22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			23
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds			23
Item 3. Defaults Upon Senior Securities			23
Item 4. Submission of Matters to a Vote of Security Holders			23
Item 5. Other Information			23
Item 6. Exhibits and Reports on Form 8-K			23
Signatures			28
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

FullNet Communications, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

		JUNE 30,				DECEMBER 31,
		2007				2006
ASSETS
CURRENT ASSETS
Cash		$	15,430			$	16,007
Accounts receivable, net			13,849				24,407
Prepaid expenses and other current assets			92,544				95,452
Total current assets			121,823				135,866
PROPERTY AND EQUIPMENT, net			602,773				699,128
INTANGIBLE ASSETS, net			36,406				47,725
OTHER ASSETS			18,282				18,282
TOTAL		$	779,284			$	901,001
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES
Accounts payable – trade		$	171,009			$	185,949
Accounts payable – related party			306,672				270,142
Accrued and other current liabilities			933,332				848,783
Accrued interest – related party			200,066				184,197
Notes payable, current portion			543,446				592,933
Notes payable – related party			320,000				320,000
Deferred revenue			118,336				108,437
Total current liabilities			2,592,861				2,510,441
OTHER LIABILITIES			56,190				67,927
STOCKHOLDERS’ DEFICIT
Common stock — $.00001 par value; authorized, 10,000,000 shares; issued and outstanding, 6,670,878 shares in 2007 and 2006			68				68
Common stock issuable, 70,257 shares in 2007 and 2006			57,596				57,596
Additional paid-in capital			8,350,184				8,350,107
Accumulated deficit			(10,277,615	)			(10,085,138	)
Total stockholders’ deficit			(1,869,767	)			(1,677,367	)
TOTAL		$	779,284			$	901,001

See accompanying notes to condensed consolidated financial statements.

FullNet Communications, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

		Three Months Ended								Six Months Ended
		June 30, 2007				June 30, 2006				June 30, 2007				June 30, 2006
REVENUES
Access service revenues		$	163,800			$	188,880			$	325,653			$	383,612
Co-location and other revenues			310,329				229,881				610,447				465,337
Total revenues			474,129				418,761				936,100				848,949
OPERATING COSTS AND EXPENSES
Cost of access service revenues			76,578				63,851				147,998				121,402
Cost of co-location and other revenues			62,089				58,328				122,662				114,984
Selling, general and administrative expenses			318,419				341,227				659,467				697,086
Depreciation and amortization			74,834				74,833				149,426				159,840
Total operating costs and expenses			531,920				538,239				1,079,553				1,093,312
LOSS FROM OPERATIONS			(57,791	)			(119,478	)			(143,453	)			(244,363	)
INTEREST EXPENSE			(24,362	)			(26,780	)			(49,024	)			(53,758	)
LOSS before income taxes			(82,153	)			(146,258	)			(192,477	)			(298,121	)
Income tax benefit			—				—				—				—
NET LOSS		$	(82,153	)		$	(146,258	)		$	(192,477	)		$	(298,121	)
Net loss per share –basic		$	(.01	)		$	(.02	)		$	(.03	)		$	(.04	)
Net loss per share – assuming dilution		$	(.01	)		$	(.02	)		$	(.03	)		$	(.04	)
Weighted average shares outstanding – basic			6,741,135				6,741,135				6,741,135				6,740,833
Weighted average shares outstanding – assuming dilution			6,741,135				6,741,135				6,741,135				6,740,833

See accompanying notes to condensed consolidated financial statements.

FullNet Communications, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT (UNAUDITED)

Six Months Ended June 30, 2007

										Common
		Common stock								Stock				Additional				Accumulated
		Shares				Amount				Issuable				paid-in capital				Deficit				Total
Balance at January 1, 2006			6,670,878			$	68			$	57,596			$	8,350,107			$	(10,085,138	)		$	(1,677,367	)
Stock compensation expense			—				—				—				77				—				77
Net loss			—				—				—				—				(192,477	)			(192,477	)
Balance at June 30, 2007			6,670,878			$	68			$	57,596			$	8,350,184			$	(10,277,615	)		$	(1,869,767	)

See accompanying notes to the condensed consolidated financial statements.

FullNet Communications, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

		Six Months Ended
		June 30, 2007				June 30, 2006
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(192,477	)		$	(298,121	)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation and amortization			149,426				159,840
Stock compensation			77				—
Provision for uncollectible accounts receivable			1,768				19,503
Net (increase) decrease in
Accounts receivable			8,790				(6,885	)
Prepaid expenses and other current assets			2,908				47,040
Net increase (decrease) in
Accounts payable – trade			(14,940	)			20,070
Accounts payable – related party			36,530				36,530
Accrued and other liabilities			72,812				62,573
Accrued interest – related party			15,869				15,869
Deferred revenue			9,899				13,592
Net cash provided by operating activities			90,662				70,011
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment			(40,842	)			(18,088	)
Acquisition of assets			(910	)			(8,036	)
Net cash used in investing activities			(41,752	)			(26,124	)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on borrowings under notes payable			(49,487	)			(45,763	)
Proceeds from exercise of warrants			—				180
Net cash used in financing activities			(49,487	)			(45,583	)
NET DECREASE IN CASH			(577	)			(1,696	)
Cash at beginning of period			16,007				14,974
Cash at end of period		$	15,430			$	13,278
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest		$	6,660			$	10,320
Warrant extension granted in settlement of liabilities			—				17,960

See accompanying notes to the condensed consolidated financial statements.

FullNet Communications, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.		UNAUDITED INTERIM FINANCIAL STATEMENTS
		The unaudited condensed consolidated financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. The accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements of the Company and notes thereto for the year ended December 31, 2006.
		The information furnished reflects, in the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results of the interim periods presented. Operating results of the interim period are not necessarily indicative of the amounts that will be reported for the year ending December 31, 2007. Certain reclassifications have been made to prior period balances to conform with the presentation for the current period.
2.		MANAGEMENT’S PLANS
		At June 30, 2007, current liabilities exceed current assets by $2,471,038. The Company does not have a line of credit or credit facility to serve as an additional source of liquidity. Historically the Company has relied on shareholder loans as an additional source of funds. The Company is in default on various loans and lease agreements (see Note 9. Notes Payable and Note 12. Related Party Transactions). These factors raise substantial doubts about the Company’s ability to continue as a going concern.
		The ability of the Company to continue as a going concern is dependent upon continued operations of the Company that in turn is dependent upon the Company’s ability to meet its financing requirements on a continuing basis, to maintain present financing, to achieve the objectives of its business plan and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.
		The Company’s business plan includes, among other things, expansion of its Internet access services through mergers and acquisitions and the development of its web hosting, co-location, and traditional telephone services. Execution of the Company’s business plan will require significant capital to fund capital expenditures, working capital needs and debt service. Current cash balances will not be sufficient to fund the Company’s current business plan beyond the next few months. As a consequence, the Company is currently focusing on revenue enhancement and cost cutting opportunities as well as working to sell non-core assets and to extend vendor payment terms. The Company continues to seek additional convertible debt or equity financing as well as the placement of a credit facility to fund the Company’s liquidity. There can be no assurance that the Company will be able to raise additional capital on satisfactory terms or at all.

3.		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.
4.		LOSS PER SHARE
		Loss per share – basic is calculated by dividing net loss by the weighted average number of shares of stock outstanding during the period, including shares issuable without additional consideration. Loss per share – assuming dilution is calculated by dividing net loss by the weighted average number of shares outstanding during the period adjusted for the effect of dilutive potential shares calculated using the treasury stock method.

		Three Months Ended								Six Months Ended
		June 30, 2007				June 30, 2006				June 30, 2007				June 30, 2006
Numerator:
Net income (loss)		$	(82,153	)		$	(146,258	)		$	(192,477	)		$	(298,121	)
Denominator:
Weighted average shares outstanding – basic			6,741,135				6,741,135				6,741,135				6,740,833
Effect of dilutive stock options			—				—				—				—
Effect of dilutive warrants			—				—				—				—
Weighted average shares outstanding – assuming dilution			6,741,135				6,741,135				6,741,135				6,740,833
Net income (loss) per share – basic		$	(.01	)		$	(.02	)		$	(.03	)		$	(.04	)
Net income (loss) per share - assuming dilution		$	(.01	)		$	(.02	)		$	(.03	)		$	(.04	)

		Basic and diluted loss per share were the same for the three and six months ended June 30, 2007 and 2006 because there was a net loss for each period.
5.		ACCOUNTS RECEIVABLE
		Accounts receivable consist of the following:

		June 30,				December 31,
		2007				2006
Accounts receivable		$	203,271			$	212,061
Less allowance for doubtful accounts			(189,422	)			(187,654	)
		$	13,849			$	24,407

6.		PROPERTY AND EQUIPMENT
		Property and equipment consist of the following:

		June 30,				December 31,
		2007				2006
Computers and equipment		$	1,378,085			$	1,340,246
Leasehold improvements			965,864				962,861
Software			57,337				57,337
Furniture and fixtures			28,521				28,521
			2,429,807				2,388,965
Less accumulated depreciation			(1,827,034	)			(1,689,837	)
		$	602,773			$	699,128

		Depreciation expense for the three months ended June 30, 2007 and 2006 was $68,915 and $66,192, respectively. Depreciation expense for the six months ended June 30, 2007 and 2006 was $137,197 and $132,573, respectively.
7.		INTANGIBLE ASSETS
		Intangible assets consist primarily of acquired customer bases and covenants not to compete and are carried net of accumulated amortization. Upon initial application of Statement of Financial Accounting Standards No. 142, Goodwill and Intangible Assets, as of January 1, 2002, the Company reassessed useful lives and began amortizing these intangible assets over their estimated useful lives and in direct relation to any decreases in the acquired customer bases to which they relate. Management believes that such amortization reflects the pattern in which the economic benefits of the intangible asset are consumed or otherwise used.
		Amortization expense for the three months ended June 30, 2007 and 2006 relating to intangible assets was $5,919 and $8,641, respectively. Amortization expense for the six months ended June 30, 2007 and 2006 relating to intangible assets was $12,229 and $27,267, respectively.
8.		ACCRUED AND OTHER CURRENT LIABILITIES
		Accrued and other current liabilities consist of the following:

		June 30,				December 31,
		2007				2006
Accrued interest		$	323,321			$	294,995
Accrued deferred compensation			463,855				435,669
Accrued other liabilities			146,156				118,119
		$	933,332			$	848,783

9.		NOTES PAYABLE
		Notes payable consist of the following:

		June 30,				December 31,
		2007				2006
Note payable to a bank, payable in monthly installments of $8,768, including interest of 9.5%, maturing September 2008; collateralized by property and equipment, accounts receivable and Company common stock owned by the founder and CEO of the Company; guaranteed by the founder and CEO of the Company; partially guaranteed by the Small Business Administration		$	27,810			$	77,297
Interim loan from a related party, interest at 10%, requires payments equal to 50% of the net proceeds received by the Company from its private placement of convertible promissory notes, matured December 2001; unsecured (1)			320,000				320,000

		June 30,				December 31,
		2007				2006
Convertible promissory notes; interest at 12.5% of face amount, payable quarterly; these notes are unsecured and matured at June 30, 2007 (convertible into approximately 1,003,659 shares at June 30, 2007 and December 31, 2006) (2)			510,636				510,636
Other notes payable			5,000				5,000
			863,446				912,933
Less current portion			863,446				912,933
		$	—			$	—

10.

COMMON STOCK OPTIONS AND WARRANTS

The following table summarizes the Company’s employee stock option activity for the three and six months ended June 30, 2007:

		Three Months				Weighted				Six Months				Weighted
		Ended				Average				Ended				Average
		June 30, 2007				Exercise Price				June 30, 2007				Exercise Price
Options outstanding end of the period			3,122,034			$	.43				3,122,034			$	.43
Options granted during the period			3,000				.04				3,000				.04
Options cancelled during the period			(34,900	)			.09				(34,900	)			.09
Options outstanding end of the period			3,090,134			$	.43				3,090,134			$	.43

In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 123(R), Share-Based Payment. SFAS 123(R) replaced SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. The Company adopted SFAS 123(R) on January 1, 2006 using the modified prospective method as described in the standard. Under the modified prospective method, the Company is required to record compensation cost for new and modified awards over the related vesting period of such awards prospectively and record compensation cost prospectively for the unvested portion at time of adoption, of previously issued and outstanding awards over the remaining vesting period of such awards. As of January 1, 2006, the Company had no unvested outstanding awards and as a result, the adoption of SFAS123(R) had no impact on the Company’s consolidated financial statements or consolidated results of operations.

The following table summarizes the Company’s common stock purchase warrant and non-employee stock option activity for the three and six months ended June 30, 2007:

Three Months

Weighted

Six Months

Weighted

Ended

Average

Ended

Average

June 30, 2007

Exercise Price

June 30, 2007

Exercise Price

Warrants and non-employee stock options outstanding, beginning and end of the period

677,000

$

.44

677,000

$

.44

11.		RECENTLY ISSUED ACCOUNTING STANDARDS
		In July 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 is intended to clarify the accounting for uncertainty in income taxes recognized in a company’s financial statements and prescribes the recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
		Under FIN 48, evaluation of a tax position is a two-step process. The first step is to determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement.
		Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met.

		The adoption of FIN 48 at January 1, 2007 did not have a material effect on the Company’s financial position.
		In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 addresses how companies should measure fair value when they are required to use a fair value measure for recognition or disclosure purposes under GAAP. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007, with earlier adoption permitted. Management is assessing the impact of the adoption of this Statement.
		In February 2007, the FASB issued Statement No. 159 The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”). This statement permits companies to choose to measure many financial assets and liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently assessing the impact of SFAS 159 on its consolidated financial statements.
12.		RELATED PARTY TRANSACTIONS
		The Company is in default on an operating lease for certain equipment which is leased from one of its significant shareholders who also holds a $320,000 interim loan that is also in default (see the Note 9. Notes Payable, above). The original lease was dated November 21, 2001 and required 12 monthly rental payments of $6,088 with a fair market purchase option at the end of the 12-month lease. Upon default on the lease, the Company has continued leasing the equipment on a month-to-month basis at the same monthly rate as the original lease. The Company has been unable to make the month-to-month payments. In January and November 2006, the Company agreed to extend the expiration date of common stock purchase warrants exercisable for the purchase of 425,000 and 140,000 common stock shares, respectively, held by the lessor in return for a credit of $17,960 and $3,940, respectively, on the operating lease. At June 30, 2007 the Company had recorded $306,672 in unpaid lease payments. The lessor has not made any demands for payment or threatened to terminate the month-to-month lease arrangement.
13.		CONTINGENCIES
		During September 2005, the Company received a back billing from AT&T (formerly SBC) of approximately $230,000. Since then, the Company has received a number of additional back billings from AT&T that total in excess of $7,900,000. The Company believes AT&T has no basis for these charges, is currently reviewing these billings with its attorneys and plans to vigorously dispute the charges. Therefore, the Company has not recorded any expense or liability related to these billings.

As a provider of telecommunications, the Company is affected by regulatory proceedings in the ordinary course of its 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 its operations the Company relies on obtaining many of its underlying telecommunications services and/or facilities from incumbent local exchange carriers or other carriers pursuant to interconnection or other agreements or arrangements. In January, 2007, the Company concluded a regulatory proceeding pursuant to the Federal Telecommunications Act of 1996 before the OCC relating to the terms of its interconnection agreement with Southwestern Bell Telephone, L.P. d/b/a AT&T, which succeeds a prior interconnection agreement. The OCC approved this agreement in May, 2007. This agreement may be affected by regulatory proceedings at the federal and state levels, with possible adverse impacts on the Company. The Company is unable to accurately predict the outcomes of such regulatory proceedings at this time, but an unfavorable outcome could have a material adverse effect on the Company’s business, financial condition or results of operations.

Item 2. Management’s Discussion and Analysis or Plan of Operation

The following discussion is qualified in its entirety by the more detailed information in our Form 10-KSB and the financial statements contained therein, including the notes thereto, and our other periodic reports filed with the Securities and Exchange Commission since December 31, 2006 (collectively referred to as the “Disclosure Documents”). Certain forward-looking statements contained in this Report and in the Disclosure Documents regarding our business and prospects are based upon numerous assumptions about future conditions which may ultimately prove to be inaccurate and actual events and results may materially differ from anticipated results described in such statements. Our ability to achieve these results is subject to certain risks and uncertainties, including those inherent risks and uncertainties generally in the Internet service provider and competitive local exchange carrier industries, the impact of competition and pricing, changing market conditions, and other risks. Any forward-looking statements contained in this Report represent our judgment as of the date of this Report. We disclaim, however, any intent or obligation to update these forward-looking statements. As a result, the reader is cautioned not to place undue reliance on these forward-looking statements. References to us in this report include our subsidiaries: FullNet, Inc. (“FullNet”), FullTel, Inc. (“FullTel”) and FullWeb, Inc. (“FullWeb”).

Overview

We are an integrated communications provider offering integrated communications and Internet connectivity to individuals, businesses, organizations, educational institutions and government agencies. Through our subsidiaries, we provide high quality, reliable and scalable Internet access, web hosting, equipment co-location and traditional telephone services. Our overall strategy is to become the dominant integrated communications provider for residents and small to medium-sized businesses in Oklahoma.

Our principal executive offices are located at 201 Robert S. Kerr Avenue, Suite 210, Oklahoma City, Oklahoma 73102, and our telephone number is (405) 236-8200. We also maintain Internet sites on the World Wide Web (“WWW”) at www.fullnet.net and www.fulltel.com. Information contained on our Web sites 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, and shifted our focus from offering dial-up services to providing wholesale and private label network connectivity and related services to other Internet service providers. During 1995 and 1996, we furnished wholesale and private label network connectivity services to Internet service providers.

In 1997 we continued our focus on serving as a backbone provider by upgrading and acquiring more equipment. We also started offering our own Internet service provider brand access and services to our wholesale customers. As of June 30, 2007, there was one Internet service provider in Oklahoma that used the FullNet brand name for whom we provide the backbone to the Internet. There was one Internet service provider that used a private label brand name, for whom we are its access backbone and provide on an outsource basis technical support, systems management and operations. Additionally, we provide high-speed broadband connectivity, website hosting, network management and consulting solutions to over 100 businesses in Oklahoma.

In 1998 our gross revenues exceeded $1,000,000 and we made the Metro Oklahoma City Top 50 Fastest Growing Companies list. In 1998 we commenced the process of organizing a competitive local exchange carrier (“CLEC”) through FullTel, and acquired Animus Communications, Inc. (“Animus”), a wholesale Web-service company, which enabled us to become a total solutions provider to individuals and companies seeking a “one-stop shop” in Oklahoma. Animus was renamed FullWeb in January 2000.

With the incorporation of FullTel and the acquisition of FullWeb, our current business strategy is to become the dominant integrated communications provider in Oklahoma, focusing on rural areas. We expect to grow through the acquisition of additional customers for our carrier-neutral co-location space and traditional telephone services, the acquisition of Internet service providers, as well as through a FullNet brand marketing campaign.

During February 2000, our common stock began trading on the OTC Bulletin Board under the symbol FULO. While our common stock trades on the OTC Bulletin Board, it is very thinly traded, and there can be no assurance that our stockholders 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.

We completed our network operations center during the first quarter of 2001. We market our carrier neutral co-location solutions in our network operations center to other competitive local exchange carriers, Internet service providers and web-hosting companies. Our co-location facility is carrier neutral, allowing customers to choose among competitive offerings rather than being restricted to one carrier. Our network operations center is Telco-grade and provides customers a high level of operative reliability and security. We offer flexible space arrangements for customers, 24-hour onsite support with both battery and generator backup.

Through FullTel, our wholly owned subsidiary, we are a fully licensed competitive local exchange carrier or CLEC in Oklahoma. The FullTel data center telephone switching equipment was installed in March 2003. At which time, FullTel began the process of activating local access telephone numbers for the cities in which we will market, sell and operate our retail FullNet Internet service provider brand, wholesale dial-up Internet service; our business-to-business network design, connectivity, domain and Web hosting businesses; and traditional telephone services. At June 30, 2007 FullTel provided us with local telephone access in approximately 232 cities.

Results of Operations

The following table sets forth certain statement of operations data as a percentage of revenues for the three and six months ended June 30, 2007 and 2006:

		Three Months Ended															Six Months Ended
		June 30, 2007								June 30, 2006								June 30, 2007								June 30, 2006
		Amount				Percent				Amount				Percent				Amount				Percent				Amount				Percent
Revenues:
Access service revenues		$	163,800				34.5	%		$	188,880				45.1	%		$	325,653				34.8	%		$	383,612				45.2	%
Co-location and other revenues			310,329				65.5				229,881				54.9				610,447				65.2				465,337				54.8
Total revenues			474,129				100.0				418,761				100.0				936,100				100.0				848,949				100.0
Cost of access service revenues			76,578				16.1				63,851				15.2				147,998				15.8				121,402				14.3
Cost of co-location and other revenues			62,089				13.1				58,328				13.9				122,662				13.1				114,984				13.6
Selling, general and administrative expenses			318,419				67.2				341,227				81.5				659,467				70.4				697,086				82.1
Depreciation and amortization			74,834				15.8				74,833				17.9				149,426				16.0				159,840				18.8
Total operating costs and expenses			531,920				112.2				538,239				128.5				1,079,553				115.3				1,093,312				128.8
Income (loss) from operations			(57,791	)			(12.2	)			(119,478	)			(28.5	)			(143,453	)			(15.3	)			(244,363	)			(28.8	)
Interest expense			(24,362	)			(5.1	)			(26,780	)			(6.4	)			(49,024	)			(5.2	)			(53,758	)			(6.3	)
Net income (loss) before income taxes			(82,153	)			(17.3	)			(146,258	)			(34.9	)			(192,477	)			(20.5	)			(298,121	)			(35.1	)
Income tax expense (benefit)			—				—				—				—				—				—				—				—
Net income (loss)		$	(82,153	)			(17.3	)%		$	(146,258	)			(34.9	)%		$	(192,477	)			(20.5	)%		$	(298,121	)			(35.1	)%

Three Months Ended June 30, 2007 Compared to Three Months Ended June 30, 2006

Revenues

Access service revenues decreased $25,080 or 13.3% to $163,800 for the 2007 2^nd Quarter from $188,880 for the same period in 2006 primarily due to a decline in the number of customers.

Co-location and other revenues increased $80,448 or 35.0% to $310,329 for the 2007 2^nd Quarter from $229,881 for the same period in 2006. This increase was primarily attributable to the addition of new customers and the sale of additional services to existing customers.

Operating Costs and Expenses

Cost of access service revenues increased $12,727 or 19.9% to $76,578 for the 2007 2^nd Quarter from $63,851 for the same period in 2006. This increase was primarily due to recurring costs associated with expansion and support of our network. Cost of access service revenues as a percentage of access service revenues increased to 46.8% during the 2007 2^nd Quarter, compared to 33.8% during the same period in 2006.

Cost of co-location and other revenues increased $3,761 or 6.4% to $62,089 for the 2007 2^nd Quarter compared to $58,328 for the same period in 2006. This increase was primarily due to increases in recurring costs related to increased customers on traditional phone services. Cost of co-location and other revenues as a percentage of co-location and other revenues decreased to 20.0% during the 2007 2^nd Quarter compared to 25.4% during the same period in 2006.

Selling, general and administrative expenses decreased $22,808 or 6.7% to $318,419 for the 2007 2^nd Quarter compared to $341,227 for the same period in 2006 primarily attributable to a decrease in employee cost related to a temporary reduction in the number of employees. Selling, general and administrative expenses as a percentage of total revenues decreased to 67.2% during the 2007 2^nd Quarter from 81.5% during the same period in 2006.

Depreciation and amortization expense remained relatively the same for the 2007 2^nd Quarter compared to the same period in 2006.

Interest Expense

Interest expense decreased $2,418 or 9.0% to $24,362 for the 2007 2^nd Quarter compared to $26,780 for the same period in 2006. This decrease was primarily attributable to the lower note balances from the payment of principal on the notes.

Six Months Ended June 30, 2007 Compared to Six Months Ended June 30, 2006

Revenues

Access service revenues decreased $57,959 or 15.1% to $325,653 for the 2007 six-month period from $383,612 for the same period in 2006 primarily due to a decline in the number of customers.

Co-location and other revenues increased $145,110 or 31.2% to $610,447 for the 2007 six-month period from $465,337 for the same period in 2006. This increase was primarily attributable to the addition of new customers and the sale of additional services to existing customers. During the 2007 six-month period we did not record reciprocal compensation revenue (fees for terminating AT&T (formerly SBC) customers’ local calls onto our network). During the same period in 2006 we recorded approximately $7,800 of reciprocal compensation revenue. We began billing AT&T during 2004, and have billed for the periods of March 2003 through June 2006. AT&T failed to pay and is disputing approximately $166,700. We are pursuing AT&T for all balances due, however there is significant uncertainty as to whether or not we will be successful. Upon the ultimate resolution of AT&T’s challenge, we will recognize the associated revenue, if any. On a going-forward basis it is uncertain at what rate or if any reciprocal compensation will be allowed in our successor interconnection agreement with AT&T.

Operating Costs and Expenses

Cost of access service revenues increased $26,596 or 21.9% to $147,998 for the 2007 six-month period from $121,402 for the same period in 2006. This increase was primarily due to recurring costs associated with expansion and support of our network. Cost of access service revenues as a percentage of access service revenues increased to 45.4% during the 2007 six-month period, compared to 31.6% during the same period in 2006.

Cost of co-location and other revenues increased $7,678 or 6.7% to $122,662 for the 2007 six-month period compared to $114,984 for the same period in 2006. This increase was primarily due to increases in recurring costs related to increased customers on traditional phone services. Cost of co-location and other revenues as a percentage of co-location and other revenues decreased to 20.1% during the 2007 six-month period compared to 24.7% during the same period in 2006.

Selling, general and administrative expenses decreased $37,619 or 5.4% to $659,467 for the 2007 six-month period compared to $697,086 for the same period in 2006 primarily attributable to decreases in employee costs, professional fees and advertising expense of $31,289, $11,344 and $7,279, respectively. The decrease in employee costs was primarily related to temporary reductions in the number of employees during the 2007 six-month period compared to the same period in 2006. Professional fees decreased primarily due to non-recurring legal fees related to our interconnection agreement rights in the state of Missouri during the 2006 six-month period. Advertising expenses decreased primarily attributable to timing differences. These decreases were offset primarily by increases in agent commissions related to sales of traditional phone service and supplies of $7,993 and $5,809, respectively. Selling, general and administrative expenses as a percentage of total revenues decreased to 70.4% during the 2007 six-month period from 82.1% during the same period in 2006.

Depreciation and amortization expense decreased $10,414 or 6.5% to $149,426 for the 2007 six-month period compared to $159,840 for the same period in 2006. In January 2002, upon initially applying Statement of Financial Account Standards 142, Goodwill and Intangible Assets (“SFAS 142”), we reassessed the useful lives of our recorded goodwill and other intangible assets and we began amortizing our intangible assets over their estimated useful lives and in direct relation to any decreases in the acquired customer bases to which they relate. Amortization expense for the six-month periods ended June 30, 2007 and 2006 relating to intangible assets was $12,229 and $27,267, respectively.

Interest Expense

Interest expense decreased $4,734 or 8.8% to $49,024 for the 2007 six-month period compared to $53,758 for the same period in 2006. This decrease was primarily attributable to the lower note balances from the payment of principal on the notes.

Liquidity and Capital Resources

As of June 30, 2007, we had $15,430 in cash and $2,592,861 in current liabilities, including $118,336 of deferred revenues that will not require settlement in cash.

At June 30, 2007, we had a working capital deficit of $2,471,038, while at December 31, 2006 we had a working capital deficit of $2,374,575. 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.

As of June 30, 2007, substantially all of the $171,009 we owed to our trade creditors and the $306,672 payable owed to a related party was past due. We have no formal agreements regarding payment of these amounts. At June 30, 2007, we had outstanding principal and interest owed on matured notes totaling $1,351,550. We have not made payment or negotiated an extension of the notes and the lenders have not made any demands. We are currently developing a plan to satisfy these notes on terms acceptable to the note holders.

During September 2005, we received a back billing from AT&T (formerly SBC) of approximately $230,000. Since then, we have received a number of additional back billings from AT&T that total in excess of $7,900,000. We believe AT&T has no basis for these charges, are currently reviewing these billings with our attorneys and plan to vigorously dispute the charges. Therefore, we have not recorded any expense or liability related to these billings.

		For the Periods Ended June 30,
		2007				2006
Net cash flows provided by operations		$	90,662			$	70,011
Net cash flows used in investing activities			(41,752	)			(26,124	)
Net cash flows used in financing activities			(49,487	)			(45,583	)

Cash used for the purchases of equipment was $40,842 and $18,088, respectively, for the six months ended June 30, 2007 and 2006. Cash used for the acquisition of assets was $910 and $8,036, respectively, for the six months ended June 30, 2007 and 2006.

Cash used for principal payments on notes payable was $49,487 and $45,763, respectively, for the six months ended June 30, 2007 and 2006.

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:

o      mergers and acquisitions and

o     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 subscribers 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 current cash balances will not be sufficient to fund our current business plan beyond a few months. As a consequence, we are currently focusing on revenue enhancement and cost cutting opportunities as well as working to sell non-core assets and to extend vendor payment terms. We continue to seek additional convertible debt or equity financing as well as the placement of a credit facility to fund our liquidity needs. There is no assurance that we will be able to obtain additional capital on satisfactory terms or at all or on terms that will not dilute our shareholders’ interests.

In the event that we are unable to obtain additional capital or to obtain it on acceptable terms or in sufficient amounts, we will be required to delay the further development of our network or take other actions. This could have a material adverse effect on our business, operating results and financial condition and our ability to achieve sufficient cash flows to service debt requirements.

Our ability to fund the capital expenditures and other costs contemplated by our business plan and to make scheduled payments with respect to bank borrowings will depend upon, among other things, our ability to seek and obtain additional financing in the near term. 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 outstanding indebtedness. If we are unable to generate sufficient cash flows from operations to service our indebtedness, we will be required to modify our growth plans, limit our capital expenditures, restructure or refinance our indebtedness 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 service our debt or otherwise adequately fund operations.

Financing Activities

On January 5, 2001, we obtained a $250,000 interim loan. This loan bears interest at 10% per annum and requires payments equal to 50% of the net proceeds received by us from our private placement of convertible notes payable. Subsequently, the principal balance of the loan was increased to $320,000 and the due date was extended to December 31, 2001. Through June 30, 2007 we had made aggregate payments of principal and interest of $35,834 on this loan. Pursuant to the terms of this loan the balance was due on December 31, 2001 and we have not made payment or negotiated an extension of the loan and the lender has not made any demands. At June 30, 2007, the outstanding principal and interest of the loan was $520,066.

We are in default on an operating lease for certain equipment that is leased from one of our significant shareholders who also holds a $320,000 interim loan that is also in default (see Note 9. Notes Payable of the financial statements above). The original lease was dated November 21, 2001 and required 12 monthly rental payments of $6,088 with a fair market purchase option at the end of the 12-month lease term. Upon default on the lease, we have continued to lease the equipment on a month-to-month basis at the same monthly rental rate; however, we have been unable to make these monthly rental payments. In January and November 2006, we agreed to extend the expiration date of common stock purchase warrants held by the lessor exercisable for the purchase of 425,000 and 140,000 shares of our common stock, respectively, in return for credits of $17,960 and $3,940 on this lease obligation. At June 30, 2007 the unpaid lease payments totaled $306,672. The lessor has not made any demands for payment or threatened to terminate the month-to-month lease arrangement. The loss of this equipment would have a material adverse effect on the Company’s business, financial condition and results of operations.

Pursuant to the provisions of the convertible promissory notes, the conversion price was reduced from $1.00 per share on January 15, 2001 to $.49 per share on December 31, 2003 for failure to register under the Securities Act of 1933, as amended, the common stock underlying the convertible promissory notes and underlying warrants on February 15, 2001. Reductions in conversion price were recognized at the date of reduction by an increase to additional paid-in capital and an increase in the discount on the notes payable. Furthermore, the interest rate was increased to 12.5% per annum from 11% per annum because the registration statement was not filed before March 1, 2001. In November and December 2003 and March 2004, $455,000, $50,000 and $5,636, respectively, of these convertible promissory notes matured. We have not made payment or negotiated an extension of these notes, and the lenders have not made any demands. At June 30, 2007, the outstanding principal and interest of the convertible promissory notes was $831,484.

Recently Issued Accounting Standards

In July 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 is intended to clarify the accounting for uncertainty in income taxes recognized in a company’s financial statements and prescribes the recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Under FIN 48, evaluation of a tax position is a two-step process. The first step is to determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement.

Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met.

The adoption of FIN 48 at January 1, 2007 did not have a material effect on our financial position.

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 addresses how companies should measure fair value when they are required to use a fair value measure for recognition or disclosure purposes under GAAP. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007, with earlier adoption permitted. We are assessing the impact of the adoption of this Statement.

In February 2007, the FASB issued Statement No. 159 The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”). This statement permits companies to choose to measure many financial assets and liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We are currently assessing the impact of SFAS 159 on our consolidated financial statements.

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 our accounting principles, we must often make individual estimates and assumptions regarding expected outcomes or uncertainties. As you might expect, 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 such cash flows and fair value, however, could affect the calculation and result in additional impairment charges in future periods.

Item 3. Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer are responsible primarily for establishing and maintaining disclosure controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the U.S. Securities and Exchange Commission. These controls and procedures are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Furthermore, our Chief Executive Officer and Chief Financial Officer are responsible for the design and supervision of our internal controls over financial reporting that are then effected by and through our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. These policies and procedures (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Our Chief Executive Officer and Chief Financial Officer, based upon their evaluation of the effectiveness of our disclosure controls and procedures and the internal controls over financial reporting as of the last day of the period covered by this Report, concluded that our disclosure controls and procedures and internal controls over financial reporting were fully effective during and as of the last day of the period covered by this Report and reported to our auditors and the audit committee of our board of directors that no change in our disclosure controls and procedures and internal control over financial reporting occurred during the period covered by this Report that would materially affected or is reasonably likely to materially affect our disclosure controls and procedures or internal control over financial reporting. In conducting their evaluation of our disclosure controls and procedures and internal controls over financial reporting, these executive officers did not discover any fraud that involved management or other employees who have a significant role in our disclosure controls and procedures and internal controls over financial reporting. Furthermore, there were no significant changes in our disclosure controls and procedures, internal controls over financial reporting, or other factors that could significantly affect our disclosure controls and procedures or internal controls over financial reporting subsequent to the date of their evaluation. Because no significant deficiencies or material weaknesses were discovered, no corrective actions were necessary or taken to correct significant deficiencies and material weaknesses in our internal controls and disclosure controls and procedures.

PART II–OTHER INFORMATION

Item 1. Legal Proceedings

As 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. In January, 2007, we concluded a regulatory proceeding pursuant to the Federal Telecommunications Act of 1996 before the OCC relating to the terms of our interconnection agreement with Southwestern Bell Telephone, L.P. d/b/a AT&T, which succeeds a prior interconnection agreement. The OCC approved this agreement in May, 2007. This agreement may be affected by regulatory proceedings at the federal and state levels, with possible adverse impacts on us. We are unable to accurately predict the outcomes of such regulatory proceedings at this time, but an unfavorable outcome could have a material adverse effect on our business, financial condition or results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

We are in default on an interim loan that matured December 31, 2001. This loan bears interest at 10% per annum and requires payments equal to 50% of the net proceeds received by us from our private placement of convertible notes payable. Through June 30, 2007, we had made aggregate payments of principal and interest of $35,834 on this loan. At June 30, 2007, the outstanding principal and accrued interest of the loan was $520,066. We have not made payment or negotiated an extension of the loan and the lender has not made any demands.

We are in default on convertible promissory notes that matured in November 2003, December 2003 and March 2004. These notes bear interest at 12.5% per annum and are convertible into approximately 1,003,659 shares of our common stock. We were unable to pay these notes at maturity and are currently developing a plan to satisfy these notes on terms acceptable to the note holders. At June 30, 2007, the aggregate outstanding principal and accrued interest of the notes was $831,484. We have not made payment or negotiated an extension of these notes, and the lenders have not made any demands.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5. Other Information

None.

Item 6. Exhibits

(a) The following exhibits are either filed as part of or are incorporated by reference in this Report:

Exhibit
Number		Exhibit
3.1		Certificate of Incorporation, as amended (filed as Exhibit 2.1 to Registrant’s Registration Statement on Form 10-SB, file number 000-27031 and incorporated herein by reference).		#
3.2		Bylaws (filed as Exhibit 2.2 to Registrant’s Registration Statement on Form 10-SB, file number 000-27031 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, and incorporated herein by reference).		#
4.2		Certificate of Correction to the Amended Certificate of Incorporation and the Ninth Section of the Certificate of Incorporation (filed as Exhibit 2.1 to Registrant’s Registration Statement on form 10-SB, file number 000-27031 and incorporated 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 and incorporated herein by reference).		#
4.4		Form of Warrant Agreement for Interim Financing in the amount of $505,000 (filed as Exhibit 4.1 to Registrant’s Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference).		#
4.5		Form of Warrant Certificate for Florida Investors for Interim Financing in the amount of $505,000 (filed as Exhibit 4.2 to Registrant’s Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference).		#
4.6		Form of Promissory Note for Florida Investors for Interim Financing in the amount of $505,000 (filed as Exhibit 4.3 to Registrant’s Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference).		#
4.7		Form of Warrant Certificate for Georgia Investors for Interim Financing in the amount of $505,000 (filed as Exhibit 4.4 to Registrant’s Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference).		#
4.8		Form of Promissory Note for Georgia Investors for Interim Financing in the amount of $505,000 (filed as Exhibit 4.5 to Registrant’s Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference).		#
4.9		Form of Warrant Certificate for Illinois Investors for Interim Financing in the amount of $505,000 (filed as Exhibit 4.6 to Registrant’s Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference).		#
4.10		Form of Promissory Note for Illinois Investors for Interim Financing in the amount of $505,000 (filed as Exhibit 4.7 to Registrant’s Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference).		#
4.11		Form of Warrant Agreement for Interim Financing in the amount of $500,000 (filed as Exhibit 4.8 to Registrant’s Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference).		#
4.12		Form of Warrant Certificate for Interim Financing in the amount of $500,000 (filed as Exhibit 4.9 to Registrant’s Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference).		#
4.13		Form of Promissory Note for Interim Financing in the amount of $500,000 (filed as Exhibit 4.10 to Registrant’s Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference).		#

Exhibit
Number		Exhibit
4.14		Form of Convertible Promissory Note for September 29, 2000, private placement (filed as Exhibit 4.13 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000 and incorporated herein by reference).		#
4.15		Form of Warrant Agreement for September 29, 2000, private placement (filed as Exhibit 4.13 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000 and incorporated herein by reference).		#
4.16		Form of 2001 Exchange Warrant Agreement (filed as Exhibit 4.16 to Registrant’s Form 10-QSB for the quarter ended June 30, 2001 and incorporated herein by reference)		#
4.17		Form of 2001 Exchange Warrant Certificate (filed as Exhibit 4.17 to Registrant’s Form 10-QSB for the quarter ended June 30, 2001 and incorporated herein by reference)		#
10.1		Financial Advisory Services Agreement between the Company and National Securities Corporation, dated September 17, 1999 (filed as Exhibit 10.1 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 1999, and incorporated herein by reference).		#
10.2		Lease Agreement between the Company and BOK Plaza Associates, LLC, dated December 2, 1999 (filed as Exhibit 10.2 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 1999, and incorporated herein by reference).		#
10.3		Interconnection agreement between Registrant and Southwestern Bell dated March 19, 1999 (filed as Exhibit 6.1 to Registrant’s Registration Statement on Form 10-SB, file number 000-27031 and incorporated herein by reference).		#
10.4		Stock Purchase Agreement between the Company and Animus Communications, Inc. (filed as Exhibit 6.2 to Registrant’s Registration Statement on Form 10-SB, file number 000-27031 and incorporated herein by reference).		#
10.5		Registrar Accreditation Agreement effective February 8, 2000, by and between Internet Corporation for Assigned Names and Numbers and FullWeb, Inc. d/b/a FullNic f/k/a Animus Communications, Inc. (filed as Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-QSB for the Quarter ended March 31, 2000 and incorporated herein by reference).		#
10.6		Master License Agreement For KMC Telecom V, Inc., dated June 20, 2000, by and between FullNet Communications, Inc. and KMC Telecom V, Inc. (filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-QSB for the Quarter ended June 30, 2000 and incorporated herein by reference).		#
10.7		Domain Registrar Project Completion Agreement, dated May 10, 2000, by and between FullNet Communications, Inc., FullWeb, Inc. d/b/a FullNic and Think Capital (filed as Exhibit 10.2 to Registrant’s Quarterly Report on Form 10-QSB for the Quarter ended June 30, 2000 and incorporated herein by reference).		#
10.8		Amendment to Financial Advisory Services Agreement between Registrant and National Securities Corporation, dated April 21, 2000 (filed as Exhibit 10.3 to Registrant’s Quarterly Report on Form 10-QSB for the Quarter ended June 30, 2000 and incorporated herein by reference).		#
10.9		Asset Purchase Agreement dated June 2, 2000, by and between FullNet of Nowata and FullNet Communications, Inc. (filed as Exhibit 99.1 to Registrant’s Form 8-K filed on June 20, 2000 and incorporated herein by reference).		#
10.10		Asset Purchase Agreement dated February 4, 2000, by and between FullNet of Bartlesville and FullNet Communications, Inc. (filed as Exhibit 2.1 to Registrant’s Form 8-K filed on February 18, 2000 and incorporated herein by reference).		#

Exhibit
Number		Exhibit
10.11		Agreement and Plan of Merger Among FullNet Communications, Inc., FullNet, Inc. and Harvest Communications, Inc. dated February 29, 2000 (filed as Exhibit 2.1 to Registrant’s Form 8-K filed on March 10, 2000 and incorporated herein by reference).		#
10.12		Asset Purchase Agreement dated January 25, 2000, by and between FullNet of Tahlequah, and FullNet Communications, Inc. (filed as Exhibit 2.1 to Registrant’s Form 8-K filed on February 9, 2000 and incorporated herein by reference).		#
10.13		Promissory Note dated August 2, 2000, issued to Timothy J. Kilkenny (filed as Exhibit 10.13 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).		#
10.14		Warrant Agreement dated August 2, 2000, issued to Timothy J. Kilkenny (filed as Exhibit 10.14 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).		#
10.15		Warrant Certificate dated August 2, 2000 issued to Timothy J. Kilkenny (filed as Exhibit 10.15 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).		#
10.16		Stock Option Agreement dated December 8, 2000, issued to Timothy J. Kilkenny (filed as Exhibit 10.16 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).		#
10.17		Warrant Agreement dated November 9, 2000, issued to Roger P. Baresel (filed as Exhibit 10.17 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).		#
10.18		Warrant Agreement dated December 29, 2000, issued to Roger P. Baresel (filed as Exhibit 10.18 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).		#
10.19		Stock Option Agreement dated February 29, 2000, issued to Wallace L Walcher (filed as Exhibit 10.19 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).		#
10.20		Stock Option Agreement dated February 17, 1999, issued to Timothy J. Kilkenny (filed as Exhibit 3.1 to Registrant’s Registration Statement on Form 10-SB, file number 000-27031 and incorporated herein by reference).		#
10.21		Stock Option Agreement dated October 19, 1999, issued to Wesdon C. Peacock (filed as Exhibit 10.21 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).		#
10.22		Stock Option Agreement dated April 14, 2000, issued to Jason C. Ayers (filed as Exhibit 10.22 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).		#
10.23		Stock Option Agreement dated May 1, 2000, issued to B. Don Turner (filed as Exhibit 10.23 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).		#
10.24		Form of Stock Option Agreement dated December 8, 2000, issued to Jason C. Ayers, Wesdon C. Peacock, B. Don Turner and Wallace L. Walcher (filed as Exhibit 10.24 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).		#
10.25		Warrant Certificate Dated November 9, 2000, issued to Roger P. Baresel (filed as Exhibit 10.25 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).		#
10.26		Warrant Certificate Dated November 9, 2000, issued to Roger P. Baresel (filed as Exhibit 10.26 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).		#
10.27		Warrant Certificate Dated December 29, 2000, issued to Roger P. Baresel (filed as Exhibit 10.27 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).		#
10.28		Stock Option Agreement dated October 13, 2000, issued to Roger P. Baresel (filed as Exhibit 10.28 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).		#
10.29		Stock Option Agreement dated October 12, 1999, issued to Travis Lane (filed as Exhibit 10.29 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).		#

Exhibit
Number		Exhibit
10.30		Promissory Note dated January 5, 2001, issued to Generation Capital Associates (filed as Exhibit 10.30 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).		#
10.31		Placement Agency Agreement dated November 8, 2000 between FullNet Communications, Inc. and National Securities Corporation (filed as Exhibit 10.31 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000).		#
10.32		Promissory Note dated January 25, 2000, issued to Fullnet of Tahlequah, Inc.		#
10.33		Promissory Note dated February 7, 2000, issued to David Looper		#
10.34		Promissory Note dated February 29, 2000, issued to Wallace L. Walcher		#
10.35		Promissory Note dated June 2, 2000, issued to Lary Smith		#
10.36		Promissory Note dated June 15, 2001, issued to higganbotham.com L.L.C.		#
10.37		Promissory Note dated November 19, 2001, issued to Northeast Rural Services		#
10.38		Promissory Note dated November 19, 2001, issued to Northeast Rural Services		#
10.39		Form of Convertible Promissory Note dated September 6, 2002		#
10.40		Employment Agreement with Timothy J. Kilkenny dated July 31, 2002		#
10.41		Employment Agreement with Roger P. Baresel dated July 31, 2002		#
10.42		Letter from Grant Thornton LLP to the Securities and Exchange Commission dated January 30, 2003		#
10.43		Form 8-K dated January 30, 2003 reporting the change in certifying accountant		#
10.44		Form 8-K dated September 20, 2005 reporting the change in certifying accountant		#
22.1		Subsidiaries of the Registrant		#
31.1		Certification pursuant to Rules 13a-14(a) and 15d-14(a) of Timothy J. Kilkenny		*
31.2		Certification pursuant to Rules 13a-14(a) and 15d-14(a) of Roger P. Baresel		*
32.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Timothy J. Kilkenny		*
32.2		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		*

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.

Exhibit
Number		Exhibit
31.1		Certification pursuant to Rules 13a-14(a) and 15d-14(a) of Timothy J. Kilkenny
31.2		Certification pursuant to Rules 13a-14(a) and 15d-14(a) of Roger P. Baresel
32.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Timothy J. Kilkenny
32.2		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