UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-K
ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 20132014
Commission file number 000-54696
DATA CALL TECHNOLOGIES, INC.
(Exact Name Of Registrant As Specified In Its Charter)
| Nevada | 30-0062823 |
| (State of Incorporation) | (I.R.S. Employer Identification No.) |
| 700 South Friendswood Drive, Suite E, Friendswood, TX | 77546 |
| (Address of Principal Executive Offices) | (ZIP Code) |
Registrant's Telephone Number, Including Area Code: (832) 230-2376 | |
Registrant's Telephone Number, Including Area Code: (832) 230-2376
Securities Registered Pursuant to Section 12(g) of The Act: Common Stock, $0.001
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes¨ Nox x
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes¨Nox
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 (Section 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).months. Yes x No ¨
Indicate by check mark whether the registrantRegistrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
On December 31, 2013,June 30, 2014, the aggregate market value of the 109,106,421 shares of common stock held by non-affiliates of the Registrant was approximately $218,213$327,319 based on the shareclosing price of the Registrants common stock on December 31, 2013.June 30, 2014. On December 31, 2013,2014, the Registrant had 125,976,421 shares of common stock outstanding.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer (as(as defined in Rule 12b-2 of the Exchange Act) or a smaller reporting company.company.
| Large accelerated filer ¨ | Accelerated filer ¨ | Non-Accelerated filer ¨ | Smaller reporting company x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes¨ No x
PART I
Cautionary Statement regarding Forward-Looking Statements
This Annual Report on Form 10-K of Data Call Technologies, Inc. (hereinafter the "Company", the "Registrant", “we”, “us”, or "Data Call") includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Registrant has based these forward-looking statements on its current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about the Registrant that may cause its actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "continue," or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in this Annual Report on Form 10-K and in the Registrant's other Securities and Exchange Commission filings. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in the forward-looking statements. For a more detailed discussion of the foregoing risks and uncertainties, see "Risk Factors".
ITEM 1. DESCRIPTION OF BUSINESS.Table of Contents
Data Call Technologies, Inc. was incorporated under the laws of the State of Nevada as Data Call Wireless, Inc. on April 4, 2002, and is sometimes referred to herein as "we", "us", "our", "Data Call" or the "Company"."Company." On March 1, 2006, we changed our name to Data Call Technologies, Inc. Since our inception, we have been engaged in the business of offering real-time information/content via digital signage and kiosk networks to our clients, who we consider to be our partners rather than simply as customers.
Our mission is to integrate cutting-edge information/content delivery solutions currently deployed by the media and make this content rapidly available to and within the control of our retail and commercial clients.clients/customers. The Company's software and services put its clients in control of real-time news and other dynamic content, including emergency alerts, displayed within one buildingor more locations, as well as to thousands of local, regional and national clients, through Digital Signage and Kiosk networks.
Our business plan is to focus on growing our client base by continuedcontinually offering of real-time information/content via Digital Signage and Kiosk networks, seeking to continually improve the delivery, security and variety of information/content services to the Digital Signage and Kiosk community, while developing a similar offering for smart phones through the app community.
Overview
- What Is Digital Signage?
PlasmaLED and LCD displays are rapidlycontinually replacing printed marketing materials such as signs and placards, as well as the old fashionedold-fashioned whiteboard, for product and corporate branding, marketing and assisted selling. The appeal of instantly updating product videos and promotional messages on one or a thousand remotely located displays is driving the adoption of this exciting marketing tool. Digital signageSignage presentations are typically comprised of repeating loops of information used to brand, market or sell the owner's products and services. But once seen,viewed, this information becomes repetitive and the viewer tunes it out, resulting in low retention of the client's message. As digital signage comes"comes of age," the "dynamic" characteristicdynamic characteristics of the presentationdigital signage presentations has taken center stage dynamic beingcenter-stage requiring fresh, relevant and updated dynamic content.
Digital Signage Comes of Age
We believe that the Digital signageSignage industry is coming"coming of ageage" and that Data Call Technologiesthrough multiple industry relationships has been engaged in the business for more than a decade. Our company has virtually been there from the start. Fivestart and is in in a prime position to enjoy and benefit from our industry's growth. A few short years ago, a companybusiness wanting to take thederive commercial benefit from use of digital signage plunge was facedoften confronted with a myriad of hardware and software companies, all offering their own "vision"version of what digital signage should be. TheyTypical customers for digital signage were givenmost-often offered the tools ofhardware for digital signage but were left pretty much leftwithout the full package of content with which to build and tailor their own devices assystems for their target customer base.
Those early digital signage customers often had to what to build. Those companies that took the early plunge where then faceddeal with the fact that no one had come beforetheir digital signage hardware vendors lacked the know-how to provide them to showwith the rights"do's and wrongs, the dos and don'tsdon'ts" of content development. But, even at this early stage of the game,However, from our inception, Data Call recognized that these pioneers of digital signageour competitors and their typical customers lacked a key component that would become an integral partwhich includes the offering of any successful implementation-active content.a comprehensive content package.
In the years since those early days of digital signage, the market has taken care of weeding out the weaker providers of hardware and software. Companies now have a clearer understanding of what digital signage is, what is needed for a successful implementation and the best use of content space given their more-defined and attainable goals. In the past three years,Recently, as the cost of platforms supporting infrastructure and digital displays hashave fallen dramatically;significantly, digital signage has become more accessible to a wider range of companiespotential users while the growing Kiosk market has cross-pollinated with Digital Signage. And those combined companies are realizingCompanies in our industry have come to understand, as we have understood almost since our inception in 2002, that the initial, one-time, up-front cost of getting into the gameData Call's integrated, content-flexible, hardware and software package is far outweighedmore customer friendly and, as a result, far surpasses outweighs the up-front savings by the cost of staying in the game,not doing so. The benefit that Data Call provides to our customers, in the form of ongoing content development. development, is expected to continue to provide our customers with desirable user friendly services.
As the cost of deployment has decreased, companies beganData Call has continued to focus, as well as other providers have only begun focusing, on attention-grabbing content. Whether the goaloffering "attention-grabbing content" as a means of the presentation was product branding, marketing or assisted selling, content became king. Active content is on everyone's "needs" list because it is proven to draw customersdrawing target customers' attention to the core message and keepof clients, thereby keeping their target customers engaged throughout the presentation, And Data Call stands ready to serve this exploding market.Digital Signage and Kiosk presentations.
The Need for Speed--ActiveSpeed - Active Content
Active and dynamic content is thatthe integral part of a digital signage presentationpresentations that ismust be constantly updated with timely and relevant information.information in order to attract and retain target customers to the product and service offered by clients. For instance, a typical presentation may contain ten 15-second loops that provide the primary message of the presentation, but the active dynamic content, such as that provided by Data Call, is updated with new information throughout the day. Those seeking to add active and dynamic content to their digital signage presentations are advised to employ Data Call's integrated content rather than shoehorningattempting to "cut and paste" broadcast content of others into their digital signage presentation.
However,Our clients, by integrating Data Call's active content alongsideas a meaningful component of their digital signage presentations, companies can provide the entertainment and information content so necessary in dwell-timeto enhance the target customer's information retention without disrupting the core message of the presentation. Information categories provided by Data Call include news, weather, sports, financial data and the latest traffic alerts, amongstamong others. With such a broad range of offerings, companiesour clients have access to the active and dynamic content they need, regardless of the target customers and market they are addressing.
Data CallOur Business Opportunities
TheOur many opportunities for Data Callclient development in the digital signage industry are countless. Manygrowing virtually exponentially. While many companies nowadays would outsourcein our industry have traditionally outsourced all or part of their content creation.creation, Data Call stands readyserves as their outsourceda provider of dynamic active content data.to clients on a tailored basis. Whether it'sa client desires general entertainment information (news,for customers, such as news, sports, stocks,stock market quotes, etc.) or location-targeted activelocation-specific content, (weather,such as local weather, traffic, etc)product sales and specials, etc., our research is validating thehas validated our long-held assumption that it is activedynamic content that draws and retains our clients' target viewers to their digital signage and keeps them engaged throughout the presentation.
Over the past seven years, Data CallSince our inception, management has workeddeveloped strong relationships working with the industry leaders in digital signage to developsignage. Collaborative efforts successfully created the data formats and means of communication methods to allow Data Call's activefacilitate the delivery of our dynamic content to bemore easily integratedand efficiently by our clients for integration into their hardware and software products.products, setting industry standards.
Partners, Not Customers
Data Call's approach to customer relationsour clients is to not accumulate customers, but to build partnerships. Each Data Call partner is aslong-lasting partnerships by creating client relationships that we believe are unique asin the digital signage market they service, andindustry. We do this because we understand that each client has theirits own requirements for active content.content requirement. In developing activedynamic content for individual digital signage Data Callclients, we have identified three factors that had to be addressed - reliability, objectivitycontent-related factors: (i) reliability; (ii) objectivity; and (iii) ease of implementation. To address the reliability requirement, Data Call optedwe have elected to enter into license information fromarrangements with the leaders that createleading providers of news, weather, sports and financial datainformation, among other client-desired content rather than "scrapping" informationeither: (i) downloading and repackaging content sourced from the Internet (which canmay be illegal); or (ii) pulling RSS feeds (which may come and go at the provider's whim). Licensing data from these premier providers has also satisfiedserved us by satisfying the second requirement,criteria, objectivity. TheBecause it is commonly recognized that Internet is as littered of slanted opinionscontent may often be unreliable, unverifiable and hidden agendas as there are users of thebiased, we have determined that we could not simply use unfiltered Internet So arbitrarily allowing these "news" sourcescontent for delivery to go unchecked into Data Call's active content was completely unacceptable. Finally, the third requirement,our clients. To achieve ease of implementation, was address by both Data Call'sour licensing of data facilitates the ease of delivery to and the methodimplementation and use by which it was disseminated to their our client/partners.
Data Call has understood that digital signageit's Digital Signage and Kiosk implementers had larger issuesclients needed more complete service than to tackle thanendeavor the multitudesourcing of licenses that would need to be managed and the varying formats of the source data to be dealt with if active content was obtained from multiple vendors. Data Call offersAs a result, our flexible content packages permit our clients to do "one stop shop"shopping" for all of their activedynamic content requirements covered by a single license.sublicense from us. Ease of implementation also would require that the multiple formats of all Data Call's data providers be distilled into a single, usable format. Because active
We enable our clients to receive customized dynamic content which may be displayed in a multitude of ways (banners, tickers, scrolls or artistically integrated with the overall presentation), Data Callpresentations). We have created and produced a setmultiple sets of common data layouts in the industry-standard XML (extensible markup language) format. Many partners findformat inclusive of MRSS. With the advent of HTML5, even more delivery methods have been made available to our clients, many of whom have found these new formats to be easily integrated into their products, but in several cases, Data Call hasproducts. Nevertheless, we have also produced customized data formats to the exact and specific requirements of their partners. This customizationour clients/partners, which, we believe ensures the highesta higher level of reliablereliability and ease of integration possible.integration.
Market demand, opportunity and technology converge at a single point in time, and Data Call is there. Our integrity continues to build our business. Digital signage platforms are evolving to meet mass market requirements, costs for hardware and software are falling to the point of becoming commodities and the markets for digital signage are clarifying through historical trial and error.
Business Operations
We currently offer our Direct Lynk Messenger service to customers through the Internet. The Direct Lynk Messenger Service is a Digital Signage product and real-time information service which provides a wide range of up-to-date information for display. The Direct Lynk Messenger service is able to work concurrently with customers' existing digital signage systems.
Digital Signage is still a relatively new and exciting method advertisers can use to promote, inform, educate, and entertain clients and customers about their businesses and products. Through Digital Signage, companies and businesses can use a single television or a series of networked flat LCD or Plasma screens to market their services and products on site to their clients and customers in real time. Additionally, because Digital Signage advertising takes place in real time, businesses can change their marketing efforts at a moments notice. We believe this real time advertising better allows companies to tailor their advertising to individual customers, and thereby advertise and sell inventory which appeals to those individual customers, thereby increasing sales and revenues. Benefits to Digital Signage compared to regular print or video advertising include, being able to immediately change a digitally displayed image or advertisement depending on the business's current clients and customers, and not getting locked into print advertising days or months in advance, which may become stale or obsolete prior to the advertising date of such print advertising.
Data Call specializes in allowing its clients to create their own Digital Signage dynamic content feeds delivered, via the Internet, to digital display devices (plasma, LCD, Jumbotron, Kiosks etc.) at their establishments. The only requirements our clients must have are 1) a supported third party digital signage or Kiosk solution, or similar device, which receives the data from our servers via the Internet, and displays the content on digital displays and 2) an Internet connection. The Direct Lynk System is supported by various third party systems, varying in cost from $350 to $5,000.
The Direct Lynk System allows customers to select from the pre-determined data and information services described below. The client may choose which individual locations and which displays they would like to receive our feeds based on how their digital signage network is configured.
In August of 2013, the companywe announced the release of it'sour Direct Lynk Media (DLMedia) product. The DLMedia product encapsulates the Direct Lynk Messenger product with major enhancements and options that allowtheallow the client to select and include in their feed images relative to the news feeds. Also in the release,both Weather and Traffic image products have been enhanced considerably. Other additions included within the release bring more value to the company's clients and create more interest from new and existing clients.
The current types of data and information, for which a client is able to subscribe to through the Direct Lynk System include:
| - | Headline News top world and national news headlines; |
| - | Business News top business headlines; |
| - | Financial Highlights world-based financial indicators; |
| - | Entertainment News top entertainment headlines; |
| - | Health/Science News top science/health headlines; |
| - | Quirky News Bits latest off-beat news headlines; |
| - | Sports Headlines top sports headlines; |
| - | Latest Sports Lines - latest sports odds for NFL, NBA, NHL, NCAA Football and NCAA Basketball; |
| - | National Football League latest game schedule, and in-game updates; |
| - | National Basketball Association - latest game schedule, and in-game updates; |
| - | Major League Baseball - latest game schedule, and in-game updates; |
| - | National Hockey League - latest game schedule, and in-game updates; |
| - | NCAA Football - latest game schedule, and in-game updates; |
| - | NCAA Men's Basketball - latest game schedule, and in-game updates; |
| - | Professional Golf Association top 10 leaders continuously updated throughout the four-day tournament; |
| - | NASCAR top 10 race positions updated every 20 laps throughout the race; |
| - | Major league soccer; |
| - | Traffic Mapping; |
| - | Animated Doppler Radar and Forest Maps; |
| - | Listings of the day's horoscopes; |
| - | Listings of the birthdays of famous persons born on each day; |
| - | |
| - | Listings of historical events which occurred on each day in history; and |
| - | Localized Traffic and Weather Forecasts. |
In addition to the above information categories and the client-generated messages, we may, at our discretion, include a Public Service Announcement, third-party advertisement (for additional revenue streams) and/or a Data Call tag line to our streaming text advertising in the future.
Material Contracts
On September 6, 2006, we entered into a two-year renewable services agreement with 3M Digital Signature, pursuant to which we agreed to supply 3M the use ofWe currently offer our Direct Lynk Messenger technology. Pursuantand DLMedia services to our clients and other potential customers through the agreement, all materials made availableInternet. Both DLM Services are Digital Signage products and real-time information services which provides a wide range of up-to-date information for display. Both DLM services are able to us by 3M in connectionwork concurrently with customers' existing digital signage systems. The Direct Lynk Messenger product is slowly becoming a legacy product with the DLMedia product in the forefront.
The Digital Signage and Kiosk industry is still a relatively new and since our inception in 2002 we have come to understand that it provides an exciting method for advertisers, including our clients, to promote, inform, educate, and entertain their customers regarding their business products and services. Through Digital Signage, businesses can use a single display or a complex, networked series of flat screen LED, LCD and even combined as video walls as display devices to market their products and services directly at their facilities and elsewhere to their customers and patrons in real time. Additionally, because Digital Signage advertising takes place in real time, businesses can change their marketing efforts literally from moment to moment and over the course of a day or such other period as they may determine.
We believe that the ability of our clients to display in real-time the information and content we will provide will remaindeliver better allows our clients companies to tailor their products, services and advertising to individual and target-group customers, thereby advertising and offering, for example, inventory and sales discounts that may be designed to appeal to those individual customers and target customer groups, increasing sales and revenues. We believe that the propertybenefits of 3M. This contracton-site, real-time Digital Signage displays compared to regular print or video advertising are substantial and include, among other advantages, being able to immediately change digitally-displayed images/advertisements depending on our client's customers own situation, not simply being restricted by in-store print circulars produced days, weeks or even months in advance, which may become stale or obsolete prior to or shortly after publication and dissemination.
We specialize in allowing clients to create their own Digital Signage dynamic content feeds which are delivered online directly to their chosen, electronic digital display devices at their various facilities. The only requirements our clients must have are: (i) a supported, third-party Digital Signage and/or Kiosk equipment solution, or similar device, which receives the data from our servers online; and (ii) an Internet connection. Our Direct Lynk System is supported by various, readily available third-party systems, varying in costs from inexpensive monthly cloud-based licenses to much more extensive and expensive content management/playback systems. Our Direct Lynk Systems allow customers to select from the pre-determined data and information subscriptions of those described above. We enable our clients to also select location specific content they wish to receive based on how and where their Digital Signage network is configured.
During the first quarter of fiscal 2014, we released our "Playlist-Ready" content products, enhancing our ability to further accommodate our current clients and appease new prospects. One product within the "Above the Fold" line has since been renewedreceived a high level of acceptance at the industry trade shows, most recently at the Digital Signage Expo held in Las Vegas in March 2015. All of our products and services can be viewed on our website: datacalltech.com.
Dependence On A Few Major Customers
At December 31, 2014, we had over 1,000 customer/subscribers for the years 2013 and 2012.
In September 2007, we entered into a three-year auto renew agreement with a platform developer, Leightronix, a company which manufactures head end hardware and software for use on PEG channels, which allows us to transfer our Direct Lynk System, feedswhich customers are relatively small, paying cumulatively an average monthly fee to head ends equipped withData Call of $10,000. We also have several larger new potential partner/clients that are testing our Digital Link Media products, and we expect that some or all of them may be expected to become significant clients in the Leightronix product through Leightronix servers. This contract is currently being renewed annually
In March 2008 we entered into an annual agreement with various annual purchase orders to provide our Direct Lynk System feeds to York Telecom's network of digital signage throughout digital signage deployments withinnear future. During the Social Security Administration offices across the U.S. This contract is renewed annually.
Dependence On One Or A Few Customers
Atyears ended December 31, 2014 and December 31, 2013, we had over 1,000 customers who pay to subscribe to our Direct Lynk System, We also have several companies which are testing the Direct Lynk System, and expect that several of them may become future customers. We arewere dependent upon three major customers, who accounted for over 85%approximately 84% of our revenues.
Notwithstanding the forgoing, based upon recent communications with several potential clients who are volume users and/or wholesale distributors of digital signage content and content management systems, we believe that during 2015, several new clients will contribute significant revenue which should materially reduce our reliance on our three major customers to less than 50%. As a result, we believe that that we should become far less reliant on a few business clients for our source of revenue. However, there can be no assurance that our belief will prove to be justified or, if justified, that such trend will continue for any future period, if at all.
Employees
At December 31, 2013,2014, we had 3 full time employees.full-time employees, including our two executive officers. Depending upon our level of our growth, if any, we expect that we may or will be required to hire additional personnel in the areas of sales and marketing, software design, research and development etc.and otherwise, during 2015 and continuing into 2016. However, we will be dependent upon revenue growth and profitability, of which there can be no assurance, to fund any increase in staff. None of our employees are covered by a selective bargaining agreement
Estimate Of The Amount Spent On Research And Development Activities
Since our inception in April 2002, the majority of our expenditures have been on research and development ofto create our Direct Lynk Messenger System,Systems, including software and hardware development and testing.testing costs. The amount spent on this research and development sincefrom inception through December 31, 20132014 is approximately $2,000,000.
ITEM 1A. RISK FACTORS RELATED TO OUR BUSINESS.FACTORS.Table of Contents
Investing in our common stock, will provide an investorwhile providing investors with an equity ownership interest.interest, involves a high degree of risk, including the potential loss of all or a significant portion of their investment. Shareholders will be subject to risks inherent in our business. The performance of our shares will reflect the performance of our business relative to, among other things, general economic and industry conditions, market conditions and competition. The value of the investment may increase or decrease and could result in a loss.loss, the size and extent of which cannot be predicted. An investor should carefully consider the following factors as well as other information contained in this annual report on Form 10-K.10-K for our year-ended December 31, 2014.
This annual report on Form 10-K also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of many factors, including the risk factors described below and the other factors described elsewhere in this Form 10-K.
Since our inception, we have had a history of generating operating losses. However, in the past two calendar years, we have reversed that trend and have been able to generate positive cash flow from operations. As a result, our auditors have removed the going concern from their opinion. We requireanticipate being profitable in the near future. We currently expect to significantly increase our revenues by increasing our client base and/or generating additional financing to continue our business plan
Additional financing is expected to be required in 2014, butrevenue streams by offering new and enhanced products and services. However, there can be no assurance that such financingour plan will be available at termssuccessful, either in whole or in part. If we fail to grow our revenues, our ability to achieve and conditions acceptable to the Company. Further, therefulfill our business plan may be delayed, which could adversely impact our results of operations.
Unforeseen events.
There can be no assurance that unforeseen events, such asas: (i) the length of time necessary to generate increasing market acceptance of our Direct Lynk System, orSystems; (ii) any unexpected material increased development costs, orcosts; (iii), the general economy in the markets where we offer our Direct Lynk System, may result in an inability to secure necessary additional financing at satisfactory terms and conditions, if at all. Since inception, weSystems.
We have been dependent upon financing raised through the sale of restricted shares of our common stock to support our operations. We expect that we will be required to raise additional funding through the issuance of restricted shares of our common stock, but there can be no assurance that we will be able to raise sufficient capital in a timely manner to continue our business plan at anticipated levels of growth.competition.
We do not have any commitments or identified sources of additional capital from third parties or from our officers, directors or principal shareholders. There is no assurance that additional financing will be available on favorable termsare many different sectors in the future, if at all or thatDigital Signage industry, including but not limited to (i) content Management providers, (ii) content Creation services, (III) hardware manufacturers, (iv) network management providers and (v) installation service providers. These sectors are extremely vas and well capitalized. We are in the content sector within a more specific niche of providing subscriptions of dynamic content. We provide subscription service of a wide variety of dynamic infotainment to the industry. As the leader in our Direct Lynk System will generate sufficient revenues in order for us to continue to grow our operations. If we are unable to raise additional financing in a timely manner, it would have a material adverse effect upon our ability to fully implement our business plan and/or to continue with our current levelsubsector of operations.
We compete withthe industry, other companies that have more resources, which putsattempted to duplicate us at a competitive disadvantage.
The market for digital signage software and systems is highly competitive and we expect competition to increase in the future. Some of our competitors or potential competitors may have significantly greater financial, technical and marketing resources than our company. These competitors may be able to respond more rapidly than we can to new or emerging technologies or changes in customer requirements. They may also devote greater resources to the development, promotion and sale of their products than our company.
We expect competitors to continue to improve the performance of their current products and to introduce new products, services and technologies. Successful new product and service introductions or enhancements by our competitors could reduce sales and the market acceptance of our products and services, cause intense price competition or make our products and services obsolete. To be competitive, we must continue to invest significant resources in research and development, sales and marketing and customer support. If we do notFew have sufficient resources to make these investments or are unable to make the technological advances necessary to be competitive,continue to remain the leader, our competitive position willmay suffer. Increased competition could result in price reductions, fewer customer orders, reduced margins and loss of market share. Our failure to compete successfully against current or future competitors could adversely affect our businessfussiness and financial condition.
Lack of patent and proprietary information protection
We have no patents, patent applications, trademarks, trademark applications or licenses covering our Direct Lynk System. We may choose to file patent applications in the future, if our management believes it is in our best interests. In the event that our Direct Lynk System infringes the patent or proprietary rights of others, we may be required to modify our process or obtain a license. There can be no assurance that we would be able to do so in a timely manner, upon acceptable terms and conditions or at all. The failure to do so would have a material adverse effect on our business. In addition, there can be no assurance that we will have the financial or other resources necessary to prosecute or defend a patent infringement or proprietary rights action. Moreover, if any of our products infringe patents or proprietary rights of others, we could, under certain circumstances, become liable for damages, which could have a material adverse effect on our operations and financial condition.
We rely on key management personnelpersonnel.
We are highly dependent upon the services and efforts of key management personnel.persons, as follows: Tim Vance, our founder and full-time CEO and Chief Operating Officer. Our ability to operate and implement our business plan is heavily dependent upon the continued serviceservices of Messrs.Mr. Vance and Tevis,to grow as well asanticipated, our ability to attract, retain and motivate other qualified, newly-hired, full and part-time personnel. The loss of Messrs.Mr. Vance, or Tevis, orin particular, and our inability, in the future to hire and retain qualified sales and marketing, software engineers and additional management personnel, wouldas needed, could have a material adverse effect on our business and operations and would likely result in a decrease in the value of our securities.operations. We do not have "key man" life insurance on Mr. Vance.
We are highly dependent upon our ability to successfully market Direct Lynk System to subscriberssubscribers.
We are dependent on the abilities of our sales and marketing department,activities and to continue to generate new clients for subscriptions forto our Direct Lynk SystemSystems and to broaden our customer base. While the number of paying subscribers for our Direct Lynk System increased atduring December 31, 20132014 compared to December 31, 2012,2013, there can be no assurance that our sales and marketing departmentefforts will be able to continue to achieve market acceptance for our Direct Lynk System and increase our customer base to a level that will permit continued profitable operations. If our sales and marketing department iscannot continue to achieve market acceptance for our Direct Lynk Systems, and increase our customer base to a level that will permit profitable operations. If our sales and marketing efforts are unable to continue to generate new customers, and attract trial customers to test our Direct Lynk System and experience what we believe are our advantages and learn of their potential uses, we may not be able to generate sufficient revenues to continue with planned research and development on new products and improve our current products.
Difficult and volatile conditions in the capital, credit and commodities markets and general economic uncertainty have prompted companies to cut capital spending worldwide and could continue to materially adversely affect our business.
Disruptions in the economy and constraints in the capital credit and commodities markets have caused companies to reduce or delay capital investment. Some of our prospective customers may cancel or delay spending on the development or roll-out of capital and technology projects with us due to continuing economic uncertainty. Our financial position, results of operations and cash flow could continue to be materially adversely affected by continuing difficult economic conditions and significant volatility in the capital, credit and commodities markets and in the overall worldwide economy.capital. The continuing impact that these factors might have on us and our business is uncertain and cannot be predicted at this time. Such economic conditions have accentuated each of the risks we face and magnified their potential effect on us and our business. The difficult conditions in these markets and the overall economy affect our business in a number of ways. For example:
- Market volatility has exerted downward pressure on our stock price, which may make it more difficult for us to raise additional capital in the future.
Economic conditions could continue to result in our customers experiencing financial difficulties or electing to limit spending because of the declining economy, which may result in decreased revenue for us.
- Difficult economic conditions have adversely affected certain industries in particular, including the automotive and restaurant industries, in which we have major customers. We could also experience lower than anticipated order levels from current customers, cancellations of existing but unfulfilled orders, and extended payment terms.
Economic conditions could materially impact us through insolvency of our suppliers or current customers.
- Economic conditions combined with the weakness in the credit markets could continue to lead to increased price competition for our products, increased risk of excess and obsolete inventories and higher overhead costs as a percentage of revenue.
If the markets in which we participate experience further economic downturns or slow recovery, this could continue to negatively impact our sales and revenue generation, margins and operating expenses, and consequently have a material adverse effect on our business, financial condition and results of operations. While we have down-sized our operations to reflect decreased demand, we may not be successful in mirroring current demand. If customer demand were to decline further, we might be unable to adjust expense levels rapidly enough in response to falling demand or without changing the way in which we operate. If revenue were to decrease further and we were unable to adequately reduce expense levels, we might incur significant losses that could adversely affect our overall financial performance and the market price of our common stock.
Potential future government regulation of the Internet may adversely affect our businessbusiness.
We are dependent upon the Internet in connection with our business operations and the delivery of content for our Direct Lynk System.Systems. The United States Federal Communications Commission (the "FCC") does not currently regulate companies that provide services over the Internet, as it does common carriers or tele-communications service providers. Notwithstanding the current state of the FCC's rules and regulations, the potential jurisdiction of the FCC over the Internet is broad and if the FCC should determine in the future to regulate the Internet, our operations, as well as those of other Internet service providers, could be adversely. Compliance with future government regulation of the Internet could result in increased costs and because of our limited resources,resources; it would have a material adverse effect on our business operations and operating results and financial condition.
We are dependent on the security of the Internet to serve our customers; any security breaches or other Internet difficulties could adversely affect our businessbusiness.
We offer the majority of our services through, the secure transmission of confidential information over public networks isare a critical element of our operations. A party who is able to circumvent security measures (hacker) could misappropriate proprietary information or cause interruptions in our operations. If we are unable to prevent unauthorized access to our users' information and transactions, our customer relationships could be irreparably harmed. Although we currently have in place security measures that we feel are adequate to protect our business and those of our customers, these measures may not prevent future security breaches. Nature's events placed on our systems could cause our systems to fail or cause our systems to operate at speeds unacceptable to our users, in which event we could lose customers and experience a material impact on our financial condition.
We must rely on other companies to maintain the Internet infrastructure if we hope to be successfulsuccessful.
Our future success depends, in large part, on other companies maintaining the Internet system infrastructure, including maintaining a reliable network backbone that provides adequate speed, data capacity and security. If the Internet continues to experience anticipated significant growth in the number of users, frequency of use and amount of data transmitted, as well as the number of malicious viruses and worms introduced onto the Internet by hackers and others, the infrastructure of the Internet may be unable to support the demands placed on it at any particular time or from time-to-time. Because we rely heavily on the Internet and our limited capital, any disruption of the Internet could adversely affect us to a greater degree than our competitors and other users of the Internet.
Our website and systems are hosted by a third party and we are vulnerable to disruptions or other events that are beyond our controlcontrol.
Our website and systems are hosted by a third party. We are dependent on our systems' ability to streamdistribute information over the Internet to customers. If our systems fail or become unavailable, it would harm our reputation, result in a loss of current and potential future customers and could cause us to breach existing agreements. Our success depends, in part, on the performance, reliability and availability of our services, which in turn are dependent on our third-party provider. Our systems and operations could be damaged or interrupted by fire, flood, power loss, telecommunications failure, Internet breakdown, break-in, earthquake and similar events. We would face significant damage as a result of these events. For these reasons, we may be unable to develop or successfully manage the infrastructure necessary to meet current or future demands for reliability and scalability of our systems, which would have a negative impact on our business and financial conditions.
Our software could contain bugs or be compromised by viruses which could cause interruption of our services and negatively affect our ability to continue to develop our reputation
Our Direct Lynk System usesSystems use sophisticated software which could be found to contain bugs or could be compromised by viruses. While we have not experienced any material bugs or viruses to date, if such event could occur, such event(s) could be costly for us to identify and repair, and until such bugs or viruses, if any, are fixed, they could cause interruptions in our service, which could cause our reputation to decline and/or cause us to lose clients.
Risk Factors Related to Our Common Stock
Our auditors have expressed a concern about our ability to continue as a going concern
Our auditors, in our audited financial statements expressed a concern about our ability to continue as a going concern. We had negative working capital of $96,549 and an accumulated deficit of $9,214,487 as of December 31, 2013, and have generated limited revenues to date. These factors raise substantial doubt as to whether we will be able to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should we be unable to continue as a going concern.
RISK FACTORS RELATED TO MARKET OF OUR COMMON STOCK
We are subject to financial reporting and other requirements for which our accounting, other management systems and resources may not be adequately prepared.
As a public company, we incur significant legal, accounting and other expenses, including costs associated with reporting requirements and corporate governance requirements, including requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Sarbanes-Oxley Act of 2002, and rules implemented by the SEC.
If we identify significant deficiencies or material weaknesses in our internal control over financial reporting that we cannot remediate in a timely manner, investors and others may lose confidence in the reliability of our financial statements, and the trading price of our common stock and ability to obtain any necessary equity or debt financing could suffer. In addition, if our independent registered public accounting firm is unable to rely on our internal control over financial reporting in connection with its audit of our financial statements, and if it is unable to devise alternative procedures in order to satisfy itself as to the material accuracy of our financial statements and related disclosures, it is possible that we would be unable to file our annual report with the SEC, which could also adversely affect the trading price of our common stock and our ability to secure any necessary additional financing,
In addition, the foregoing regulatory requirements could make it difficult or costly for us to obtain certain types of insurance, including directors' and officers' liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on board committees or as executive officers.
Market prices of our equity securities can fluctuate significantly
significantly.
The market prices of our common stock may change significantly in response to various factors and events beyond our control, including the following:
- the other risk factors described in this Form 10-K;
- changing demand for our products and services and ability to develop and generate sufficient revenues;
- any delay in our ability to generate operating revenue or net income;
- general conditions in markets we operate in;
- general conditions in the securities markets;
- issuance of a significant number of shares, whether for compensation under employee stock options, conversion of debt, potential acquisitions, additional financing or otherwise.
There is only a limited trading market for our common stock
stock.
Our Common Stock is subject to quotation on the NASD Bulletin Board.OTC market. There has only been limited trading activity in our common stock. There can be no assurance that a more active trading market will commence in our securities as a result of the increasing operations of Data Call. Further, in the event that an active trading market commences, there can be no assurance as to the level of any market price of our shares of common stock, whether any trading market will provide liquidity to investors, or whether any trading market will be sustained.
State blue sky registration; potential limitations on resale of our securities
securities.
Our common stock, the class of the Company's securities that is registered under the Exchange Act, has not been registered for resale under the Securities Act of 1933 or the "blue sky" laws of any state. The holders of such shares and persons, who desire to purchase them in any trading market that might develop in the future, should be aware that there may be significant state blue-sky law restrictions upon the ability of investors to resell our securities. Accordingly, investors should consider the secondary market for the Company's securities to be a limited one.
It is the intention of the management to seek coverage and publication of information regarding the Company in an accepted publication which permits a manual exemption. This manual exemption permits a security to be distributed in a particular state without being registered if the Company issuing the security has a listing for that security in a securities manual recognized by the state. However, it is not enough for the security to be listed in a recognized manual. The listing entry must contain (1) the names of issuers, officers, and directors, (2) an issuer's balance sheet, and (3) a profit and loss statement for either the fiscal year preceding the balance sheet or for the most recent fiscal year of operations. Furthermore, the manual exemption is a nonissuer exemption restricted to secondary trading transactions, making it unavailable for issuers selling newly issued securities.
Most of the accepted manuals are those published in Standard and Poor's, Moody's Investor Service, Fitch's Investment Service, and Best's Insurance Reports, and many states expressly recognize these manuals. A smaller number of states declare that they "recognize securities manuals" but do not specify the recognized manuals. The following states do not have any provisions and therefore do not expressly recognize the manual exemption: Alabama, Georgia, Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont and Wisconsin.
Dividends unlikely on our common stock
stock.
We do not expect to pay dividends for the foreseeable future. The payment of dividends, if any, will be contingent upon our future revenues and earnings, capital requirements and general financial condition. The payment of any dividends will be within the discretion of our board of directors. It is our intention to retain all earnings for use in our business operations and accordingly, we do not anticipate that the Company will declare any dividends in the foreseeable future.
Compliance with Penny Stock Rules
Rules.
Our securities will initially be considered a "penny stock" as defined in the Exchange Act and the rules there under, since the price of our shares of common stock is less than $5. Unless our common stock is otherwise excluded from the definition of "penny stock," the penny stock rules apply with respect to that particular security. The penny stock rules require a broker-dealer prior to a transaction in penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document prepared by the SEC 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 sales person in the transaction, and monthly account statements showing the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that the broker-dealer, not otherwise exempt from such rules, must make a special written determination that the penny stock is suitable for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure rules have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules. So long as the common stock is subject to the penny stock rules, it may become more difficult to sell such securities. Such requirements, if applicable, could additionally limit the level of trading activity for our common stock and could make it more difficult for investors to sell our common stock.
Shares eligible for future sale
sale.
As of December 31, 2013,2014, the Registrant had 125,976,421, shares of common stock issued and outstanding of which 90,642,85020,361,450 shares are "restricted" as that term is defined under the Securities Act, and in the future may be sold in compliance with Rule 144 under the Securities Act. Rule 144 generally provides that a person holding restricted securities for a period of six months may sell every three months in brokerage transactions and/or market-maker transactions an amount equal to the greater of one (1%) percent of (a) the Company's issued and outstanding common stock or (b) the average weekly trading volume of the common stock during the four calendar weeks prior to such sale. Rule 144 also permits, under certain circumstances, the sale of shares without any quantity limitation by a person who has not been an affiliate of the Company during the three months preceding the sale and who has satisfied a six month holding period. However, all of the current shareholders of the Company owning 5% or more of the issued and outstanding common stock are subject to Rule 144 limitations on selling.
The Nevada Revised Statutes and our articles of incorporation authorize to issue additional shares of common stock and shares of preferred stock, which preferred stock having such rights, preferences and privileges as our board of directors shall determine
determine.
Pursuant to our Articles of Incorporation, as amended and restated, we have authorized capital stock of 200,000,000 shares of common stock and 11,000,00010,000,000 shares of preferred stock. As of the December 31, 2013,2014, we have 125,976,421shares125,976,421 shares of common stock issued and outstanding and 800,000 shares of preferred A stock issued and outstanding. Our Board of Directors has the ability, without shareholder approval; to issue a significant number of additional shares of common stock without shareholder approval, which if issued would cause substantial dilution to our then common shareholders. Additionally, shares of preferred stock may be issued by our Board of Directors at their sole discretion and without shareholder approval, in such classes and series, having such rights, including voting rights and super-majority voting rights, and such preferences and relative, participating, optional or other special rights, powers and privileges as determined by our Board of Directors from time-to-time. If shares of preferred stock are issued by our Board of Directors having super-majority voting rights, or having conversion rights to convert their preferred stock into a number of shares of common stock at a ratio of greater that one-for-one, holders of our common stock would be subject to dilution that may be significant.
During the quarter ended September 30, 20132014 the Company amended its Articles of Incorporation to authorize 1,000,000 shares of Series B Preferred Stock, at a par value $0.001 (the "Series B Stock"), 10,000 shares of $0.001.which were issued to our CEO, Tim Vance. The Series B Preferred Stock, which may be issued in one or more series by the terms of which may be and may include preferences as to dividends and liquidation, conversion, redemption rights and sinking fund provisions. The Series B Preferred Shares haveprovisions, has the right to vote, in the aggregate, on all shareholder matters, votes equal to 30%51% of the total shareholder vote on any and all shareholder matters. The Series B Preferred Stock will beis entitled to this 30%super-majority, 51% voting right no matter how many shares of common stock or other voting stock of Data Call Technology stock is issued and outstanding in the future. The voting rights of the Series B Stock make a change in control without the approval of Timothy Vance, our CEO, impossible.
ITEM 1B. UNRESOLVED STAFF COMMENTS.Table of Contents
None.
ITEM 2. DESCRIPTION OF PROPERTY.Table of Contents
On July 1, 2012, weJanuary 9, 2013, the Company entered into a month-to-monthone-year lease for our principal office consisting of approximately 2,240 square feet located at 600 Kenrick, Suite B-12, Houston Texas 77060, with Kjoshbin L.P., an unaffiliated third party. The lease provides for a monthly rental of $1, 164. During January 2013 the Kenrick lease was cancelled. A new lease was entered by the Companyagreement with Bridwell Property Group Inc., our landlord, for a term of one year commencing on January 9, 2013. The new office isfacilities of 700 square feet located at 700 S Friendswood Drive, SteSuite E., Friendswood, TX 77546. OnThe property changed ownership and on February 1, 2014, the FriendswoodCompany and the new owner, Berkenmeier Properties, LLC mutually agreed extend the lease was extended for a term of two years.additional years at the same monthly rent of $900. We believe that these facilities are sufficient for our present level of operations including the growth we anticipate during the next twelve months. In the event that we need additional space, we believe that it will be available in the same property at comparable rates.
ITEM 3. LEGAL PROCEEDINGS.Table of Contents
None.
ITEM 4. MINE SAFETY DISCLOSUREDISCLOSURE..Table of Contents
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.Table of Contents
Market Information
Our common stock is currently quoted on the OTCQB under the symbol DCLT. Quotation of the Company's securities on the OTCQB limits the liquidity and price of the Company's common stock more than if the Company's shares of common stock were listed on The Nasdaq Stock Market or a national exchange. For the periods indicated, the following table sets forth the high and low bid prices per share of common stock. The below prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions.
Fiscal 2013 | Fiscal 2012 | Fiscal 2011 | Fiscal 2014 | Fiscal 2013 | Fiscal 2012 | |||||||||||||||||||||||||||||||
High | Low | High | Low | High | Low | High | Low | High | Low | High | Low | |||||||||||||||||||||||||
First Quarter ended March 31 | $ | 0.30 | $ | 0.01 | $ | 0.25 | $ | 0.01 | $ | 0.045 |
| $ | 0.045 | $ | 0.00 | $ | 0.00 | $ | 0.70 | $ | 0.01 | $ | 0.25 | $ | 0.01 | |||||||||||
Second Quarter ended June 30 | $ | 0.30 | $ | 0.01 | $ | 0.10 | $ | 0.02 | $ | 0.032 |
| $ | 0.032 | $ | 0.01 | $ | 0.00 | $ | 0.70 | $ | 0.01 | $ | 0.10 | $ | 0.02 | |||||||||||
Third Quarter ended September 30 | $ | 0.01 | $ | 0.00 | $ | 0.07 | $ | 0.02 | $ | 0.095 | $ | 0.027 | $ | 0.00 | $ | 0.00 | $ | 0.34 | $ | 0.00 | $ | 0.07 | $ | 0.02 | ||||||||||||
Fourth Quarter ended December 31 | $ | 0.00 | $ | 0.00 | $ | 0.07 | $ | 0.027 | $ | 0.017 | $ | 0.017 | $ | 0.01 | $ | 0.00 | $ | 0.12 | $ | 0.00 | $ | 0.07 | $ | 0.03 | ||||||||||||
As of December 31, 2013,2014, our shares of common stock were held by approximately 281 stockholders of record.
Dividends
HoldersThe holders of our preferred stock have dividends atPreferred Stock, Series A, are entitled to a dividend of 12 percent annually, subject to conversion into common stock. The undeclared dividends of this stock are calculated, but have not been recorded.
Holders of common stock are entitled to dividends when, as, and if declared by the Board of Directors, out of funds legally available therefore. We have never declared cash dividends on its common stock and our Board of Directors does not anticipate paying cash dividends in the foreseeable future as it intends to retain future earnings to finance the growth of our businesses. There are no restrictions in our articles of incorporation or bylaws that restrict us from declaring dividends.
Securities Authorized for Issuance Under Equity Compensation Plans
No equity compensation planOn December 26, 2014, the board of directors approved the Company's 2015 Employee Incentive Plan (the "Plan") pursuant to which the Company's board of director or agreements under which our common stocka committee is authorized for issuance has been adopted duringto issue 25,000,000 shares.
The board of director or committee shall determine at any time and from time to time after the fiscal year ended December 31, 2013.effective date of this Plan:
(i) the Eligible Participants;
(ii) the number of shares of Common Stock issuable directly or to be granted pursuant to an Option;
(iii) the price per share at which each Option may be exercised or the value per share if a direct issue of stock pursuant to a Stock Award; and
(iv) the terms on which each Option may be granted.
ITEM 6. SELECTED FINANCIAL DATA.Table of Contents
N.A.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATION.Table of Contents
THE YEAR ENDED DECEMBERResults of Operations during the year ended December 31, 2014 as compared to the year ended December 31, 2013 COMPARED TO THE YEAR ENDED DECEMBER 31, 2012
We had $630,395$671,814 of sales revenue for the year ended December 31, 2013,2014, compared to sales revenue of $556,363$630,395 for the year ended December 31, 2012,2013, an increase in sales revenue of $74,032$41,419 or approximately a 13.3%6.6% from the prior period. We generate revenues through subscription fees received in connection with our Direct Lynk System. In accordance with accounting regulations.
We had total costs of sales for the year ended December 31, 20132014 of $115,128$132,258 compared to total costs of sales of $116,045$115,128 for the year ended December 31, 2012,2013, which resulted in a gross margin of $539,556 for the year ended December 31, 2014, compared to a gross margin of $515,267 for the year ended December 31, 2013, compared to a gross margin of $440,318 for the year ended December 31, 2012, an increase in gross margin of $74,949$24,289 from the prior year, orour increase in gross margin was due to our increase in sales and our decrease in cost of sales was due our new server hosting fees.
sales.
Cost of sales as a percentage of sales was 19.7% for the year ended December 31, 2014, compared to 18.3% for the year ended December 31, 2013, compared to 20.9% for the year ended December 31, 2012.2013. As we gain more customers and enter into more service agreements, we anticipate our cost of sales will decrease further as we expect to take advantage of applicable economies of scale. Our expenses increaseddecreased to $735,436$645,853 for the year ended December 31, 2014, compared to total expenses of $675,453 for the year ended December 31, 2013, compared to total expenses of $431,923 for the year ended December 31, 2012, an increasedecrease in expenses of $303,513$29,600 from the prior period. The increasedecrease in expenses for the year of 20132014 was due to the company's ongoing efforts to reduce expenses. The company had non-cash expense of $302,175$265,487, which was for common stock for its officers and directors of $227,659,$184,778, options expense of $24,516$4,709 and amortizationvaluation of debt discountPreferred B expense of $50,000.$76,000. The nonrecurring cash expense which the company expensed in 2013 for its departed officers and directors totaled $108,250,$11,750 in 2014 this is expected to decrease to $11,750.2014. We had a net loss of $111,027 for the year ended December 31, 2014, compared to a net loss of $220,169 for the year ended December 31, 2013, compared to a net income of $8,395 for the year ended December 31, 2012.2013. The adjusted net profit from operations for 2014 was $82,006$154,460 as compared to 2013 which was $82,006. Net Profit from operations is calculated by subtracting the non-cash items of $302,175$265,487 from our loss of $220,169.$111,027. While there can be no assurance regarding our operating results in 2014,2015, we believe that we will experience a significant reduction in non-cash expense as well as increased operating revenues which should result in profitable operations.
LIQUIDITY AND CAPITAL RESOURCESLiquidity and Capital Resources
We had current assets of $175,884 as of December 31, 2014, which consisted of, $58,741 in cash, accounts receivable of $114,563 and $2,580 in prepaid expense as compared to $203,371 as of December 31, 2013, which consisted of $203,371 in accounts receivablereceivable.
We had total assets of $203,371 as compared to $335,232$180,355 as of December 31, 2012, which consisted of $14,568 in cash and $317,164 in accounts receivable, and $3,500 of prepaid expense.
We had total assets of2014, compared to $209,939 as of December 31, 2013 compared to $338,575 as of December 31, 2012 or a decrease of $128,636,$29,584, which consisted of current assets of $203,371,$175,884, total property and equipment (net of accumulated depreciation) of $5,768,$3,671, which included high end flat screen televisions, computers and software equipment responsible for running our Direct Lynk System which is stored in our Houston office; and other assets of $800, which included our deposit on our Houston office space.
We had total liabilities of $126,017 as of December 31, 2014, compared to $310,061 as of December 31, 2013, compared to $539,603 as of December 31, 2012, a decrease of $229,542,$184,044, primarily consisting of accounts payable of $53,699$39,074 accrued expenses of $44,300,$26.702, short-term note of $62,850$50,100 and deferred revenue of $149,212.$10,141. We had negativepositive working capital of $96,549$53,924 and an accumulated deficit of $9,214,487$9,325,514 as of December 31, 2013.
2014.
Operating activities provided $64,329$71,491 of cash for the year ended December 31, 2013,2014, which was mainly due to a net loss of $220,169,$111,027, common stock and options expense of $252,175,$265,487, increase in accounts receivables of $113,793,$88,808, increase in prepaid expenses of $2,580, decrease in accounts payable of $14,625, a decrease in accrued salaries of $17,399, and change in deferred revenue of $120,622.
$139,071.
We used $7,397 inhad no investing activities during 2014 as compared to 2013 which was related to the move and acquisitionwe had investing activity of fixed assets. $7,397 for capital expenditures on equipment.
We used $71,500$12,750 of cash for financing activities for the year ended December 31, 2013. We had no2014 for the repayment of principal on notes payable as compared to 2013 we used cash for financing activities of $71,500 consisting of $10,000 borrowings on notes payable and $81,500 principal payments on notes payable.
Off-Balance Sheet Arrangements
As of December 31, 2014 and 2013, we did not have any off-balance sheet arrangements as defined in Item 303(a) (4) (ii) of Regulation S-K promulgated under the Securities Act of 1934.
Contractual Obligations and Commitments
As of December 31, 2014 and 2013, we did not have any contractual obligations.
Critical Accounting Policies
Our significant accounting policies are described in the notes to our financial statements for the yearyears ended December 31, 2012.2014and 2013, and are included elsewhere in this annual report.
Although we hope to generate meaningful revenues sufficient to support our operations in the next eight to twelve months, if we are unsuccessful in generating such revenues, we will likely need to take steps to raise equity capital or to borrow additional funds, to continue our operations and meet our upcoming liabilities, as described above. We have no commitments from officers, Directors, or affiliates to provide funding. Our failure to obtain adequate additional financing may require us to delay, curtail or scale back some or all of our operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.Table of Contents
We have not entered into, and do not expect to enter into, financial instruments for trading or hedging purposes.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.Table of Contents
DATA CALL TECHNOLOGIES, INC.
Financial Statements:Statements
Report of Independent Registered Public Accounting Firm
Table of Contents
To the Board of Directors
Data Call Technologies, Inc.
Friendswood, Texas
We have audited the accompanying balance sheets of Data Call Technologies, Inc. as of December 31, 20132014 and 20122013 and the related statements of operations, stockholders' equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Data Call Technologies, Inc. as of December 31, 20132014 and 20122013 and the results of its operations and cash flows for the periods described above in conformity with accounting principles generally accepted in the United States of America.The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 7 to the financial statements, the Company suffered a negative working capital balance, has limited cash on hand and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters are also described in Note 7. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ M&K CPAS, PLLC
www.mkacpas.com
Houston, Texas
March 28, 201430, 2015
| Data Call Technologies, Inc. | ||||
| Balance Sheets | ||||
| December 31, 2014 and 2013 | ||||
| Table of Contents | ||||
| 2014 | 2013 | |||
Assets | ||||
| Current assets: | ||||
| Cash | $ | 58,741 | $ | - |
| Accounts receivable | 114,563 | 203,371 | ||
| Prepaid expenses | 2,580 | - | ||
| Total current assets | 175,884 | 203,371 | ||
| Property and equipment | 128,573 | 128,573 | ||
| Less accumulated depreciation and amortization | 124,902 | 122,805 | ||
| Net property and equipment | 3,671 | 5,768 | ||
| Other assets | 800 | 800 | ||
| Total assets | $ | 180,355 | $ | 209,939 |
Liabilities and Stockholders' Equity (Deficit) | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 33,084 | $ | 52,617 |
| Accounts payable - related party | 5,990 | 1,082 | ||
| Accrued salaries - related party | 5,461 | 22,800 | ||
| Accrued interest | 21,241 | 21,500 | ||
| Convertible short-term note payable to related party - default | 50,100 | 50,100 | ||
| Deferred revenue - current | 6,084 | 139,071 | ||
| Short-term note payable to related party | - | 11,750 | ||
| Total current liabilities | 121,960 | 299,920 | ||
| Deferred revenue - net of current portion | 4,057 | 10,141 | ||
| Total liabilities | 126,017 | 310,061 | ||
| Stockholders' equity: | ||||
| Preferred stock, $0.001 par value. Authorized 10,000,000 shares: | ||||
| Series A 12% Convertible - 800,000 shares issued and outstanding | ||||
| at December 31, 2014 and at December 31, 2013 | 800 | 800 | ||
| Preferred stock, $0.001 par value. Authorized 1,000,000 shares: | ||||
| Series B - 10,000 shares issued and outstanding | ||||
| at December 31, 2014 and none at December 31, 2013 | 10 | - | ||
| Common stock, $0.001 par value. Authorized 200,000,000 shares: | ||||
| 125,976,421 shares issued and outstanding at December 31, 2014 and 2013 | 125,976 | 125,976 | ||
| Additional paid-in capital | 9,253,066 | 8,987,589 | ||
| Accumulated deficit | (9,325,514) | (9,214,487) | ||
| Total stockholders' equity (deficit) | 54,338 | (100,122) | ||
| Total liabilities and stockholders' equity (deficit) | $ | 180,355 | $ | 209,939 |
| The accompanying notes are an integral part of these financial statements. | ||||
| DATA CALL TECHNOLOGIES, INC. | ||||
| Balance Sheets | ||||
| December 31, 2013 and 2012 | ||||
| ||||
| 2013 | 2012 | |||
Assets | ||||
| Current assets: | ||||
| Cash | $ | - | $ | 14,568 |
| Accounts receivable | 203,371 | 317,164 | ||
| Prepaid expenses | - | 3,500 | ||
| Total current assets | 203,371 | 335,232 | ||
| Property and equipment | 128,573 | 121,175 | ||
| Less accumulated depreciation and amortization | 122,805 | 119,587 | ||
| Net property and equipment | 5,768 | 1,588 | ||
| Other assets | 800 | 1,755 | ||
| Total assets | $ | 209,939 | $ | 338,575 |
Liabilities and Stockholders' Equity (Deficit) | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 52,617 | $ | 89,998 |
| Accounts payable - related party | 1,082 | - | ||
| Accrued salaries - related party | 22,800 | 103,771 | ||
| Accrued interest | 21,500 | 16,000 | ||
| Convertible short-term note payable to shareholder - default | 51,100 | 10,000 | ||
| Deferred revenue - current | 139,071 | 269,834 | ||
| Short-term note payable to shareholder | 11,750 | 50,000 | ||
| Total current liabilities | 299,920 | 539,603 | ||
| Deferred revenue - net of current portion | 10,141 | |||
| Total liabilities | 310,061 | 539,603 | ||
| Stockholders' equity: | ||||
| Preferred stock, $0.001 par value. Authorized 10,000,000 shares: | ||||
| Series A 12% Convertible - 800,000 shares issued and outstanding | ||||
| at December 31, 2013 and at December 31, 2012 | 800 | 800 | ||
| Preferred stock, $0.001 par value. Authorized 1,000,000 shares: | ||||
| Series B - none shares issued and outstanding at December 31, 2013 and at December 31, 2012 | - | - | ||
| Common stock, $0.001 par value. Authorized 200,000,000 shares: | ||||
| 125,976,421 shares issued and outstanding at December 31, 2013, | ||||
| 19,976,421 shares issued and outstanding at December 31, 2012 | 125,976 | 19,976 | ||
| Additional paid-in capital | 8,987,589 | 8,772,514 | ||
| Accumulated deficit | (9,214,487) | (8,994,318) | ||
| Total stockholders' equity (deficit) | (100,122) | (201,028) | ||
| Total liabilities and stockholders' equity (deficit) | $ | 209,939 | $ | 338,575 |
| The accompanying notes are an integral part of these financial statements. | ||||
| Data Call Technologies, Inc. | ||||
| Statements of Operations | ||||
| Years ended December 31, 2014 and 2013 | ||||
| Table of Contents | ||||
| 2014 | 2013 | |||
| Revenues | ||||
| Sales | $ | 671,814 | $ | 630,395 |
| Cost of sales | 132,258 | 115,128 | ||
| Gross margin | 539,556 | 515,267 | ||
| Selling, general and administrative expenses | 643,756 | 672,235 | ||
| Depreciation and amortization expense | 2,097 | 3,218 | ||
| Total operating expenses | 645,853 | 675,453 | ||
| Other (income) expenses | ||||
| Interest income | (11) | (17) | ||
| Interest expense | 4,741 | 60,000 | ||
| Total expenses | 650,583 | 735,436 | ||
| Net (loss) before income taxes | (111,027) | (220,169) | ||
| Provision for income taxes | - | - | ||
| Net (loss) | $ | (111,027) | $ | (220,169) |
| Net (loss) per common share - basic and diluted: | ||||
| Net (loss) applicable to common shareholders | $ | (0.00) | $ | 0.00 |
| Weighted average common shares: | ||||
| Basic and diluted | 125,976,421 | 64,329,846 | ||
| The accompanying notes are an integral part of these financial statements. | ||||
| DATA CALL TECHNOLOGIES, INC. | ||||
| Statements of Operations | ||||
| Years ended December 31, 2013 and 2012 | ||||
| 2013 | 2012 | |||
| Revenues | ||||
| Sales | $ | 630,395 | $ | 556,363 |
| Cost of sales | 115,128 | 116,045 | ||
| Gross margin | 515,267 | 440,318 | ||
| Selling, general and administrative expenses | 672,235 | 423,958 | ||
| Depreciation and amortization expense | 3,218 | 2,465 | ||
| Total operating expenses | 675,453 | 426,423 | ||
| Other (income) expenses | ||||
| Interest income | (17) | - | ||
| Interest expense | 60,000 | 5,500 | ||
| Total expenses | 735,436 | 431,923 | ||
| Net income (loss) before income taxes | (220,169) | 8,395 | ||
| Provision for income taxes | - | - | ||
| Net income (loss) | $ | (220,169) | $ | 8,395 |
| Net income (loss) per common share - basic and diluted: | ||||
| Net income (loss) applicable to common shareholders | $ | (0.00) | $ | 0.00 |
| Weighted average common shares: | ||||
| Basic | 64,329,846 | 19,976,421 | ||
| Diluted | 64,329,846 | 20,170,368 | ||
| The accompanying notes are an integral part of these financial statements. | ||||
| Data Call Technologies, Inc. | |||||||||||||||||
| Statement of Stockholders' Equity (Deficit) | |||||||||||||||||
| Years ended December 31, 2014 and 2013 | |||||||||||||||||
| Table of Contents | |||||||||||||||||
Stockholders' | |||||||||||||||||
| Preferred Stock A | Preferred Stock B | Common Stock | Additional | Accumulated | equity | ||||||||||||
| shares | amount | shares | amount | shares | amount | paid in capital | deficit | (deficit) | |||||||||
| Balance year ended December 31, 2012 | 800,000 | $ | 800 | - | $ | - | 19,976,421 | $ | 19,976 | $ | 8,772,514 | $ | (8,994,318) | $ | (201,028) | ||
| Share issued for conversion of debt | - | - | - | - | 90,000,000 | 90,000 | (21,100) | - | 68,900 | ||||||||
| Shares issued for services | - | - | - | - | 16,000,000 | 16,000 | 161,659 | - | 177,659 | ||||||||
| Beneficial conversion feature | - | - | - | - | - | - | 50,000 | - | 50,000 | ||||||||
| Fair value of options granted | - | - | - | - | - | - | 24,516 | - | 24,516 | ||||||||
| Net loss | - | - | - | - | - | - | - | (220,169) | (220,169) | ||||||||
| Balance year ended December 31, 2013 | 800,000 | $ | 800 | - | $ | - | 125,976,421 | $ | 125,976 | $ | 8,987,589 | $ | (9,214,487) | $ | (100,122) | ||
| Shares issued for services | - | - | - | - | - | - | 184,778 | - | 184,778 | ||||||||
| Fair value of options granted | - | - | - | - | - | - | 4,709 | - | 4,709 | ||||||||
| Preferred shares issued for services | - | - | 10,000 | 10 | - | - | 75,990 | - | 76,000 | ||||||||
| Net loss | - | - | - | - | - | - | - | (111,027) | (111,027) | ||||||||
| Balance year ended December 31, 2014 | 800,000 | $ | 800 | 10,000 | $ | 10 | 125,976,421 | $ | 125,976 | $ | 9,253,066 | $ | (9,325,514) | $ | 54,338 | ||
| The accompanying notes are an integral part of these financial statements. | |||||||||||||||||
| DATA CALL TECHNOLOGIES, INC. | |||||||||||||
| Statement of Stockholders' Equity (Deficit) | |||||||||||||
| Years ended December 31, 2013 and 2012 | |||||||||||||
Stockholders' | |||||||||||||
| Preferred Stock | Common Stock | Additional | Accumulated | equity | |||||||||
| shares | amount | shares | amount | paid in capital | deficit | (deficit) | |||||||
| Balance, December 31, 2011 | 800,000 | 800 | 19,976,421 | 19,976 | 8,772,514 | (9,002,713) | (209,423) | ||||||
| Net income | - | - | - | - | - | 8,395 | 8,395 | ||||||
| Balance, December 31, 2012 | 800,000 | 800 | 19,976,421 | 19,976 | 8,772,514 | (8,994,318) | (201,028) | ||||||
| Share issued for conversion of debt | - | - | 90,000,000 | 90,000 | (21,100) | - | 68,900 | ||||||
| Shares issued for services | - | - | 16,000,000 | 16,000 | 161,659 | - | 177,659 | ||||||
| Beneficial conversion feature | - | - | - | - | 50,000 | - | 50,000 | ||||||
| Fair value of options granted | - | - | - | - | 24,516 | - | 24,516 | ||||||
| Net loss | - | - | - | - | - | (220,169) | (220,169) | ||||||
| Balance, December 31, 2013 | 800,000 | $ | 800 | 125,976,421 | $ | 125,976 | $ | 8,987,589 | $ | (9,214,487) | $ | (100,122) | |
| The accompanying notes are an integral part of these financial statements. | |||||||||||||
| Data Call Technologies, Inc. | ||||
| Statements of Cash Flows | ||||
| Years ended December 31, 2014 and 2013 | ||||
| Table of Contents | ||||
| 2014 | 2013 | |||
| Cash flows from operating activities: | ||||
| Net (loss) | $ | (111,027) | $ | (220,169) |
| Adjustments to reconcile net (loss) to net cash provided by operating activities: | ||||
| Shares issued for services | 260,778 | 227,659 | ||
| Options expense | 4,709 | 24,516 | ||
| Depreciation and amortization of property and equipment | 2,097 | 3,217 | ||
| Amortization of debt discount | - | 50,000 | ||
| (Increase) decrease in operating assets: | ||||
| Accounts receivable | 88,808 | 113,793 | ||
| Prepaid expenses | (3,580) | 3,500 | ||
| Other assets | - | 955 | ||
| Accounts payable | (19,533) | (38,016) | ||
| Accounts payable - related party | 4,908 | 1,675 | ||
| Accrued expenses | (259) | 13,683 | ||
| Accrued expenses - related party | (17,339) | 4,138 | ||
| Deferred revenues | (139,071) | (120,622) | ||
| Net cash provided by operating activities | 71,491 | 64,329 | ||
| Cash flows from investing activities | ||||
| Capital expenditure for equipment | - | (7,397) | ||
| Net cash (used in) investing activities | - | (7,397) | ||
| Cash flows from financing activities: | ||||
| Borrowing on debt | - | 10,000 | ||
| Principal payment on debt | (12,750) | (81,500) | ||
| Net cash (used in) financing activities | (12,750) | (71,500) | ||
| Net increase (decrease) in cash | 58,741 | (14,568) | ||
| Cash at beginning of year | - | 14,568 | ||
| Cash at end of year | $ | 58,741 | $ | - |
| NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||
| Conversion of debt to common stock | $ | - | $ | 18,900 |
| Beneficial conversion feature | $ | - | $ | 50,000 |
| SUPPLEMENTAL CASH FLOW INFORMATION | ||||
| Cash paid for interest | $ | 5,000 | $ | 4,500 |
| Cash paid for taxes | $ | - | $ | - |
| The accompanying notes are an integral part of these financial statements. | ||||
| DATA CALL TECHNOLOGIES INC. | ||||
| Statements of Cash Flows | ||||
| Years ended December 31, 2013 and 2012 | ||||
| 2013 | 2012 | |||
| Cash flows from operating activities: | ||||
| Net income (loss) | $ | (220,169) | $ | 8,395 |
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||
| Shares issued for services | 227,659 | - | ||
| Options expense | 24,516 | - | ||
| Depreciation and amortization of property and equipment | 3,217 | 2,465 | ||
| Amortization of debt discount | 50,000 | - | ||
| (Increase) decrease in operating assets: | ||||
| Accounts receivable | 113,793 | (269,940) | ||
| Prepaid expenses | 3,500 | - | ||
| Other assets | 955 | - | ||
| Accounts payable | (38,016) | 46,913 | ||
| Accounts payable - related party | 1,675 | 2,196 | ||
| Accrued expenses | 13,683 | (1,396) | ||
| Accrued expenses - related party | 4,138 | (5,950) | ||
| Deferred revenues | (120,622) | 187,034 | ||
| Net cash provided by (used in) operating activities | 64,329 | (30,283) | ||
| Cash flows from investing activities | ||||
| Capital expenditure for equipment | (7,397) | - | ||
| Net cash used in investing activities | (7,397) | - | ||
| Cash flows from financing activities: | ||||
| Borrowing on debt | 10,000 | - | ||
| Principal payment on debt | (81,500) | - | ||
| Net cash provided by financing activities | (71,500) | - | ||
| Net increase (decrease) in cash | (14,568) | (30,283) | ||
| Cash at beginning of year | 14,568 | 44,851 | ||
| Cash at end of year | $ | - | $ | 14,568 |
| NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||
| Conversion of debt to common stock | $ | 18,900 | $ | - |
| Beneficial conversion feature | $ | 50,000 | $ | - |
| SUPPLEMENTAL CASH FLOW INFORMATION | ||||
| Cash paid for interest | $ | 4,500 | $ | - |
| Cash paid for taxes | $ | - | $ | - |
| The accompanying notes are an integral part of these financial statements. | ||||
DATA CALL TECHNOLOGIES, INC.Data Call Technologies, Inc.
Notes to Financial Statements
December 31, 2013 and 20122014
Table of Contents
(1)Note 1. Summary of Significant Accounting PoliciesPolicies.
Organization, Ownership and Business
Data Call Technologies, Inc. (the "Company") was incorporated under the laws of the State of Nevada in 2002. The Company's mission is to integrate cutting-edge information delivery solutions that are currently deployed by the media, and put them within the control of retail and commercial enterprises. The Company's software and services put its clients in control of real-time advertising, news, and other content, including emergency alerts, within one building or 10,000, local or thousands of miles away.
The Company's financial statements are presented in accordance with accounting principles generally accepted (GAAP) in the United States. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and result of operations for the periods presented have been reflected herein.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid investment instruments purchased with original maturities of three months or less to be cash equivalents. There were no cash equivalents as of December 31, 20132014 or 2012.2013.
Revenue Recognition
Company recognizes revenues based on monthly fees for services provided to customers. Some customers prepay for annual services and the Company defers such amounts and amortizes them into revenues as the service is provided. The Company recognizes revenue in accordance with ASC 605 (1) when the price is fixed and determinable, (2) persuasive evidence of an arrangement exists, (3) the service has been provided, and (4) collectability is assured.
Accounts Receivable
Accounts receivable consist primarily of trade receivables. The Company provides an allowance for doubtful trade receivables equal to the estimated uncollectible amounts. That estimate is based on historical collection experience, current economic and market conditions and a review of the current status of each customer's trade accounts receivable. The allowance for doubtful trade receivables was $0 as of December 31, 20132014 and 20122013 as we believe all of our receivables are fully collectable.
Property,Property, Equipment and Depreciation
Property and equipment are recorded at cost less accumulated depreciation. Upon retirement or sale, the cost of the assets disposed of and the related accumulated depreciation are removed from the accounts, with any resultant gain or loss being recognized as a component of other income or expense. Depreciation is computed over the estimated useful lives of the assets (3-5 years) using the straight-line method for financial reporting purposes and accelerated methods for income tax purposes. Maintenance and repairs are charged to operations as incurred.
Advertising Costs
The cost of advertising is expensed as incurred.
Research and Development
Research and development costs are expensed as incurred.
Product Development Costs
Product development costs consist of cost incurred to develop the Company's website and software for internal and external use. All product development costs are expensed as incurred.
Income Taxes
The Company is a taxable entity and recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to be in effect when the temporary differences reverse. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the year that includes the enactment date of the rate change. A valuation allowance is used to reduce deferred tax assets to the amount that is more likely than not to be realized.
Use of Estimates
The preparation of financial statements in conformity with U. S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could vary from those estimates.
Beneficial Conversion Feature
Convertible debt includes conversion terms that are considered in the money compared to the market price of the stock on the date of the related agreement. The Company calculates the beneficial conversion feature and records a debt discount with the amount being amortized to interest expense over the term of the note.
Management's Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses. Actual results could differ from these estimates.
Earnings (Loss) Per Share
The basic net income per common share is computed by dividing the net loss by the weighted average number of shares outstanding during a period. Diluted net loss per common share is computed by dividing the net loss, adjusted on an as if converted basis, by the weighted average number of common shares outstanding plus potential dilutive securities using the treasury stock method. For the years ended December 31, 20132014 and 2012,2013, potential dilutive securities that had an anti-dilutive effect were not included in the calculation of diluted net loss per common share. These securities include options and warrants to purchase shares of common stock. Under the treasury stock method, an increase in the fair market value of the Company's common stock results in a greater dilutive effect from outstanding options, restricted stock awards and common stock warrants. In years with a net loss, potentially dilutive securities are not included because their effect is anti-dilutive.
Years Ended December 31, | Years Ended December 31, | |||||||
| 2013 | 2012 | 2014 | 2013 | |||||
Net income (loss) | $ | (220,169) | $ | 8,395 | ||||
Net (loss) | $ | (111,027) | $ | (220,169) | ||||
Net income (loss) per common share: | ||||||||
Net (loss) per common share: | ||||||||
Basic | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 |
| Diluted | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 |
| Weighted average number of common shares outstanding: | ||||||||
| Basic | 64,329,846 | 19,976,421 | 125,976,421 | 64,329,846 | ||||
| Diluted | 64,329,846 | 20,170,368 | 125,976,421 | 64,329,846 | ||||
Stock-based Compensation
We account for stock-based compensation in accordance with "FASB ASC 718-10." Stock-based compensation expense recognized during the period is based on the value of the portion of share-based awards that are ultimately expected to vest during the period. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. The fair value of restricted stock is determined based on the number of shares granted and the closing price of the Company's common stock on the date of grant. Compensation expense for all share-based payment awards is recognized using the straight-line amortization method over the vesting period.
Fair Value of Financial Instruments
The Company estimates the fair value of its financial instruments using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the Company estimates of fair value are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumption and/or estimation methodologies may have a material effect on the estimated fair value amounts. The interest rates payable by the Company on its notes payable approximate market rates. The Company believes that the fair value of its financial instruments comprising accounts receivable, notes receivable, accounts payable, and notes payable approximate their carrying amounts.
On January 1, 2009, the Company adopted an accounting standard for applying fair value measurements to certain assets, liabilities and transactions that are periodically measured at fair value. The adoption did not have a material effect on the Company's financial position, results of operations or cash flows. In August 2009, the FASB issued an amendment to the accounting standards related to the measurement of liabilities that are routinely recognized or disclosed at fair value. This standard clarifies how a company should measure the fair value of liabilities, and that restrictions preventing the transfer of a liability should not be considered as a factor in the measurement of liabilities within the scope of this standard. This standard became effective for the Company on October 1,
2009. The adoption of this standard did not have a material impact on the Company's financial statements. The fair value accounting standard creates a three-level hierarchy to prioritize the inputs used in the valuation techniques to derive fair values. The basis for fair value measurements for each level within the hierarchy is described below with Level 1 having the highest priority and Level 3 having the lowest.
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.
Level 3: Valuations derived from valuation techniques in which one or more significant inputs are unobservable.
The following table presents the Company's Assets & Liabilitiesassets and liabilities within the fair value hierarchy utilized to measure fair value on a recurring basis as of December 31, 20132014 and 2012:2013:
(Level 1) | (Level 2) | (Level 3) | (Level 1) | (Level 2) | (Level 3) | |||||||
| 2014 | $ | 0 | $ | 0 | $ | 0 | ||||||
| 2013 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 |
| 2012 | $ | 0 | $ | 0 | $ | 0 | ||||||
Recent Accounting Pronouncements
In June 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-12, Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The new guidance requires that share-based compensation that require a specific performance target to be achieved in order for employees to become eligible to vest in the awards and that could be achieved after an employee completes the requisite service period be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation costs should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. This new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2015. Early adoption is permitted. Entities may apply the amendments in this Update either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. The adoption of ASU 2014-12 is not expected to have a material impact on our financial position or results of operations.
In June 2014, the FASB issued ASU No. 2014-10: Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation , to improve financial reporting by reducing the cost and complexity associated with the incremental reporting requirements of development stage entities. The amendments in this update remove all incremental financial reporting requirements from U.S. GAAP for development stage entities, thereby improving financial reporting by eliminating the cost and complexity associated with providing that information. The amendments in this Update also eliminate an exception provided to development stage entities in Topic 810, Consolidation, for determining whether an entity is a variable interest entity on the basis of the amount of investment equity that is at risk. The amendments to eliminate that exception simplify U.S. GAAP by reducing avoidable complexity in existing accounting literature and improve the relevance of information provided to financial statement users by requiring the application of the same consolidation guidance by all reporting entities. The elimination of the exception may change the consolidation analysis, consolidation decision, and disclosure requirements for a reporting entity that has an interest in an entity in the development stage. The amendments related to the elimination of inception-to-date information and the other remaining disclosure requirements of Topic 915 should be applied retrospectively except for the clarification to Topic 275, which shall be applied prospectively. For public companies, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early adoption is permitted. The adoption of ASU 2014-10 is not expected to have a material impact on our financial position or results of operations.
In July 2013, FASB issued ASU No. 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists."The provisions of ASU No. 2013-11 require an entity to present an unrecognized tax benefit, or portion thereof, in the statement of financial position as a reduction to a deferred tax asset for a net operating loss carryforward or a tax credit carryforward, with certain exceptions related to availability. ASU No. 2013-11 is effective for interim and annual reporting periods beginning after December 15, 2013. The adoption of ASU No. 2013-11 is not expected to have a material impact on the Company's Consolidated Financial Statements.
In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, , to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP. The new amendments will require an organization to:
- Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period; and
- Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.
The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). The amendments are effective for reporting periods beginning after December 15, 2012, for public companies. Early adoption is permitted. The adoption of ASU No. 2013-02 is not expected to have a material impact on our financial position or results of operations.
In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, , which clarifies which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011-11. The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement users. In choosing to narrow the scope of the offsetting disclosures, the Board determined that it could make them more operable and cost effective for preparers while still giving financial statement users sufficient information to analyze the most significant presentation differences between financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs. Like ASU 2011-11, the amendments in this update will be effective for fiscal periods beginning on, or after January 1, 2013. The adoption of ASU 2013-01 is not expected to have a material impact on our financial position or results of operations.
In October 2012, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2013-04, "Technical Corrections and Improvements" in Accounting Standards Update No. 2013-04. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2013. The adoption of ASU 2013-04 is not expected to have a material impact on our financial position or results of operations.
In August 2012, the FASB issued ASU 2013-03, "Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)" in Accounting Standards Update No. 2013-03. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114. The adoption of ASU 2013-03 is not expected to have a material impact on our financial position or results of operations.
In July 2012, the FASB issued ASU 2013-02, "Intangibles - Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment" in Accounting Standards Update No. 2013-02. This update amends ASU 2012-08, Intangibles - Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment and permits an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, Intangibles - Goodwill and Other - General Intangibles Other than Goodwill. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2013. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2013, if a public entity's financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. The adoption of ASU 2013-02 is not expected to have a material impact on our financial position or results of operations.
In December 2012, the FASB issued ASU 2012-12, "Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items out of Accumulated Other Comprehensive Income" in Accounting Standards Update No. 2012-05. This update defers the requirement to present items that are reclassified from accumulated other comprehensive income to net income in both the statement of income where net income is presented and the statement where other comprehensive income is presented. The adoption of ASU 2012-12 is not expected to have a material impact on our financial position or results of operations.
The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information.
Management has reviewed these new standards and believes that they have no impact on the financial statements of the Company at this time; however, they may apply in the future.
(2)Note 2. Related Party TransactionsTransactions.
During the third quarter of 2013, the Company issued unregistered shares as follows: (i) 1,000,000 restricted shares to Jim Tevis, the Company's CTO, in connection with the execution of a new 2 year consulting agreement. The restricted shares were valued at $0.0185 per share using the closing price of the stock on the date of grant. Total expense associated with the issuances is calculated at $18,500 to be recognized over the 2 year term of the agreement. The expense recognized in 2014 was $7,992. The expense recognized in 2013 was $4,283.
During the quarter ended March 31, 2013, two related parties agreed to convert their accrued salaries and related interest to notes payable carrying 5% interest. As of December 31, 2013, the total due to these two related parties for past accrued salaries is $11,750.
During the first quarter of 2013, the Company issued unregistered shares as follows: (i) 7,500,000 restricted shares to Tim Vance, the Company's CEO, in connection with the execution of a new 5 year employment agreement; and 7,500,000 restricted shares to Gary Woerz, the Company's newly designated CFO, in connection with the execution of a new 5 year employment agreement. The restricted shares were valued at $0.06 per share using the closing price of the stock on the date of grant. Total expense associated with the issuances is calculated at $900,000 to be recognized over the 5 year term of the agreements. The expense recognized in 2014 was $176,786 and the expense in 2013 was $173,376. The January 2013 employment agreements calls for a 5 year term ending January 30, 2018, annual compensation of $85,000 per year for services as CEO, annual compensation of $52,000 per year for services as CFO, 500,000 options to the CEO and 400,000 options to the CFO in addition to the 7,500,000 restricted shares to each the CEO and CFO.
During the first quarter of 2013,2014, the Company granted a total of 900,000 options for the purchase of up to 900,000 shares of common stock to Tim Vance, the Company's CEO, in connection with the execution of a new 5 year employment agreement and to Gary Woerz, the Company's newly designated CFO, in connection with the execution of a new 5 year employment agreement. The Company uses the Black-Scholes option valuation model to value stock options granted. The Black- Scholes model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The model requires management to make estimates, which are subjective and may not be representative of actual results. The Company recorded $24,516 (2012: $Nil)$4,709 (2013: $24,516) in stock option compensation expense, in relation to these options, during the year ended December 31, 2013.options. The Black-Scholes model calculations included stock price on date of measurement of $0.30, exercise price of $0.001, a term of 1.5 years, computed volatility of 348% and a discount rate of 0.27%. The January 2013 employment agreements calls for a 5 year term ending January 30, 2018, annual compensation of $85,000 per year for services as CEO, annual compensation of $52,000 per year for services as CFO, 500,000 options to the CEO and 400,000 options to the CFO in addition to the 7,500,000 restricted shares to each the CEO and CFO.
During the first quarter of 2013, the Company received cash in the sum of $10,000 from a shareholder for a note payable at a 5% interest rate. The note and related interest were converted to 1,000,000 shares of common stock resulting in a loss of $50,000 on conversion using the closing price of the stock on the date of conversion of $0.06 per share.
During 2009, the Company received cash in the sum of $50,000 from a shareholder for a Note Payable at a 10% interest rate. The interest for the note payable has been calculated annually and has been accrued for 2014 and 2013.
During the quarter ended September 30.2014 the Company amended its Articles of incorporation to authorize 1,000,000 shares of Series B Preferred Stock at a par value of $0.001and issued 10,000 shares. The Series B shares were valued at $76,000 and were expensed during 2014. The Series B Preferred Stock may be issued to one or series by the terms of which may be and may include preferences as to dividends and liquidation, conversion, redemption rights and sinking fund provisions. The Series B Preferred Shares have the right to vote in the aggregate, on all shareholder matters votes equal to 51% of the total shareholder vote on any and all shareholder matters. The Series B Preferred Stock will by entitled to this 51% voting right no matter how many shares of common stock or other voting stock of Data Call Technology stock is issued and outstanding in the future.
As of December 31, 2013, and 2012.the total due to these two related parties for past accrued salaries is $11,750.
(3) PrepaidsDuring the year ended December 31, 2013, the company repaid a total of $81,500 to related parties on various note payables.
Note. 3. Prepaid Expenses.
As of December 31, 2014, the Company had prepaid expenses of $2,580 for 2015 trade show expenses paid in 2014. As of December 31, 2013 the Company had no prepaid expenses. As of December 31, 2012 the Company had a prepaid expense for certain professional services in the amount of $3,500.
(4)Note 4. Property and EquipmentEquipment.
Major classes of property and equipment together with their estimated useful lives, consisted of the following:
| December 31 | December 31 | |||||||||
Years | 2013 | 2012 | Years | 2014 | 2013 | |||||
Equipment | 3-5 | $ | 96,236 | $ | 92,680 | 3-5 | $ | 96,236 | $ | 96,236 |
Office furniture | 7 | 21,681 | 20,482 | 7 | 21,681 | 21,681 | ||||
Leasehold improvements | 3 | 10,656 | 8,013 | 3 | 10,656 | 10,656 | ||||
128,573 | 121,175 | 128,573 | 128,573 | |||||||
Less accumulated depreciation and amortization | 122,805 | 119,587 | 124,902 | 122,805 | ||||||
Net property and equipment | $ | 5,768 | $ | 1,588 | $ | 3,671 | $ | 5,768 | ||
(5)Note 5. Income TaxesTaxes.
December 31 | December 31 | |||||||
2013 | 2012 | 2014 | 2013 | |||||
Tax expense/(benefit) computed at statutory rate for continuing operations | $ | (28,702) | $ | (2,983) | $ | 54,061 | $ | (28,702) |
| Tax effect (benefit) of operating loss carryforwards | 28,702 | 2,983 | (54,061) | 28,702 | ||||
| Tax expense/(benefit) for continuing operations | $ | - | $ | - | $ | - | $ | - |
The Company has current net operating loss carryforwards in excess of $3,236,156$3,081,696 as of December 31, 2013,2014, to offset future taxable income, which expire beginning 2029.
Deferred taxes are determined based on the temporary differences between the financial statement and income tax bases of assets and liabilities as measured by the enacted tax rates, which will be in effect when these differences reverse. The components of deferred income tax assets are as follows:
December 31 | December 31 | |||||||
2013 | 2012 | 2014 | 2013 | |||||
Deferred tax assets: | $ | $ | $ | $ | ||||
| Net operating loss | 1,132,655 | 1,161,357 | 1,078,594 | 1,132,655 | ||||
Valuation allowance | (1,132,655) | (1,161,357) | (1,078,594) | (1,132,655) | ||||
Net deferred asset | $ | - | $ | - | $ | - | $ | - |
At December 31, 2013,2014, the Company provided a 100% valuation allowance for the deferred tax asset because it could not be determined whether it was more likely than not that the deferred tax asset/(liability) would be realized.
(6)Note 6. Capital Stock, Options and WarrantsWarrants.
The Company is authorized to issue up to 10,000,000 shares of Series A Preferred Stock, $.001$0.001 par value per share, of which 800,000 are presently outstanding. The Preferred Stock may be issued in one or more series, the terms of which may be determined at the time of issuance by the Board of Directors, without further action by stockholders, and may include voting rights (including the right to vote as a series on particular matters), preferences as to dividends and liquidation, conversion, redemption rights and sinking fund provisions.
During the quarter ended September 30, 20132014 the Company amended its Articles of Incorporation to authorize 1,000,000 shares of Series B Preferred Stock at a par value of $0.001.$0.001 and issued 10,000 shares. The Series B shares were valued at $76,000 and were expensed during 2014. The Series B Preferred Stock may be issued in one or more series by the terms of which may be and may include preferences as to dividends and liquidation, conversion, redemption rights and sinking fund provisions. The Series B Preferred Shares have the right to vote in the aggregate, on all shareholder matters votes equal to 30%51% of the total shareholder vote on any and all shareholder matters. The Series B Preferred Stock will be entitled to this 30%51% voting right no matter how many shares of common stock or other voting stock of Data Call Technology stock is issued and outstanding in the future.
The Company is authorized to issue up to 200,000,000 shares of Common Stock. As of December 31, 2013,2014, after the 1:5 stock split, the Company is authorized 200,000,000 shares of Common Stock, of which 125,976,421 shares were issued and outstanding.
The Company's preferred stock Series A has a preferential dividend rate of 12% per year. Accrued and undeclared dividends can be converted into common stock. The Company has not declared or accrued any dividends. As of December 31, 20132014 unaccrued and undeclared dividends were $4,800 and for 20132014 unaccrued and undeclared dividends were $12,900$17,700. The Company's convertible notes include warrants. When the convertible notes were issued the price of our stock was $0.0065.$0.0065. The Company believes that the common stock is illiquid and has been infrequently traded during the last three years, the trading price of the stock price was not deemed to be a fair value of the conversion feature. Management decided that because of the Company's ability to continue as a going concern was in question a price of less than $0.005 was a more reasonable measure of the fair market value. Based on that decision, no beneficial conversion feature was reflected in the financial statements.
During the year ended December 31, 2013, the Company amended its Articles of Incorporation to authorize 1,000,000 shares of Series B Preferred Stock at a par value of $0.001. The Series B Preferred Stock may be issued in one or more series by the terms of which may be and may include preferences as to dividends and liquidation, conversion, redemption rights and sinking fund provisions. The Series B Preferred Shares have the right to vote in the aggregate, on all shareholder matters votes equal to 30% of the total shareholder vote on any and all shareholder matters. The Series B Preferred Stock will be entitled to this 30% voting right no matter how many shares of common stock or other voting stock of Data Call Technology stock is issued and outstanding in the future.
During the year ended December 31, 2013,the Company amended a note agreement with our creditor who held a $50,000 note payable adding a conversion feature at $0.0001 per share. The amendment was treated as a debt modification and the amended terms resulted in a beneficial conversion feature. The conversion feature was evaluated with a debt discount of $50,000 being recorded and expensed during the year ending December 31, 2013 as the note was considered due. The creditor sold a portion of his note for $8,900. At the request of the new creditors the Company issued 89,000,000 shares of common stock at $0.0001 in terms with the amended agreement. No gain or loss was recorded on the conversion of debt to equity during the period ending December 31, 2013 as it was converted within the terms of the agreement.
During the first quarter of 2013, the Company issued unregistered shares as follows: (i) 7,500,000 restricted shares to Tim Vance, the Company's CEO, in connection with the execution of a new 5 year employment agreement; and 7,500,000 restricted shares to Gary Woerz, the Company's newly designated CFO, in connection with the execution of a new 5 year employment agreement. The restricted shares were valued at $0.06 per share using the closing price of the stock on the date of grant. Total expense associated with the issuances is calculated at $900,000 to be recognized over the 5 year term of the agreements. The expense recognized in 2014 was $176,786 and in 2013 the recognized expense was $173,376.
During the first quarter of 2013, the Company granted a total of 900,000 options for the purchase of up to 900,000 shares of common stock to Tim Vance, the Company's CEO, in connection with the execution of a new 5 year employment agreement and to Gary Woerz, the Company's newly designated CFO, in connection with the execution of a new 5 year employment agreement. The Company uses the Black-Scholes option valuation model to value stock options granted. The Black- Scholes model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The model requires management to make estimates, which are subjective and may not be representative of actual results. The Black-Scholes model calculations included stock price on date of measurement of $0.30, exercise price of $0.001, a term of 1.5 years, computed volatility of 348% and a discount rate of 0.27%. Assumptions used to determine the fair value of the stock based compensation is as follows:
Risk free interest rateExpected dividend yieldExpected stock price volatilityExpected life of options
Exercise price | Total Options Outstanding | Weighted Average Remaining Life (Years) | Total Weighted Average Exercise Price | Options Exercisable | Total Options Outstanding | Weighted Average Remaining Life (Years) | Total Weighted Average Exercise Price | Options Exercisable |
$0.001 | 900,000 | 0.6 | $0.001 | - | 900,000 | 0.04 | $0.001 | 900,000 |
The Company recorded $24,516 (2012: $Nil)$2,356 ($24,516 in 2013) in stock option compensation expense, in relation to these options, during the year ended December 31, 2013.2014. Total stock option compensation expense is calculated at $26,872, to be recognized over the vesting period of one year.
During the first quarter of 2014, the Company granted a total of 900,000 options for the purchase of up to 900,000 shares of common stock to Tim Vance, the Company's CEO, in connection with the execution of a the 5 year employment agreement and to Gary Woerz, the Company's newly designated CFO, in connection with the execution of a new 5 year employment agreement. The Company uses the Black-Scholes option valuation model to value stock options granted. The Black- Scholes model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The model requires management to make estimates, which are subjective and may not be representative of actual results. The Black-Scholes model calculations included stock price on date of measurement of $0.003, exercise price of $0.001, a term of 1.5 years, computed volatility of 256% and a discount rate of 0.34%. Assumptions used to determine the fair value of the stock based compensation is as follows:
Exercise price | Total Options Outstanding | Weighted Average Remaining Life (Years) | Total Weighted Average Exercise Price | Options Exercisable |
$0.001 | 900,000 | 0.05 | $0.001 | 900,000 |
The Company recorded $2,353 (2013: Nil) in stock option compensation expense, in relation to these options, during the year ended December 31, 2014. Total stock option compensation expense is calculated at $2,877, to be recognized over the vesting period of one year.
During 2013, the Company issued unregistered shares as follows: (i) 1,000,000 restricted shares to Jim Tevis, the Company's CTO, in connection with the execution of a new 2 year consulting agreement. The restricted shares were valued at $0.0185 per share using the closing price of the stock on the date of grant. Total expense associated with the issuances is calculated at $18,500 to be recognized over the 2 year term of the agreement. The expense recognized in 2013 was $4,283.
The Company is authorized to issue up to 200,000,000 shares of Common Stock of which 125,976,421 are issued and outstanding at December 31, 2014 and 2013.
On October 5, 2011 the Board of Directors unanimously approved an amendment to the Company's Articles of Incorporation to effect a reverse stock split whereby all outstanding shares of the Company's common stock will be subject to a reverse split on a One for Five (1:5) basis (the "Reverse Split"). Subsequently the Company obtained 52.2% shareholders' vote to ratify the reverse stock split. The Reverse Split which was approved by FINRA effective February 24, 2013 reduces the number of outstanding shares of common stock from approximately 99,382,100 shares to approximately 19,976,421 shares. The Reverse Split does not have any effect on the percentage ownership of any holders of the Company's common stock. The Company has retroactively shown the impact of the reverse stock split for all periods presented.
(7) Going Concern
The Company experienced a net loss of $220,169 for the year ended December 31, 2013, has an accumulated deficit of $9,214,487, and does not have the resources at this time to repay credit and debt obligations, make payments in the form of dividends to its shareholders or fully implement its business plan. Without additional capital, the Company will not be able to continue as a going concern.
In the near term management plans to continue to focus on increasing sales and raising the funds necessary to fully implement the Company's business plan. Management believes that certain shareholders will continue to advance the capital required to meet the Company's financial obligations. There is no assurance however, that these shareholders will continue to advance capital to the Company or that the business operations will be profitable. The possibility of failure in obtaining additional funding and the potential inability to achieve profitability raise doubts about the Company's ability to continue as a going concern.
The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.
(8)Note 7. Commitments and ContingenciesContingencies.
The Company conducted its operations from a facility located in Houston Texas during FY 2013. During January 2013 the Company moved facilities to Friendswood Texas under a 12 month operating lease expiring on January 30, 2014. The Friendswood lease was extended in February 2014 for a term of 24 months expiring on February 1, 2016.
The following is a schedule of future minimum rental payments required under the above operating lease as of December 31, 2013:2014:
| Year | Amount | |
| 2014 | $ | 10,700 |
| 2015 | $ | 10,800 |
| 2016 | $ | 900 |
| 2017 | $ | - |
| 2018 | $ | - |
Rent expense in 20132014 and 20122013 under the terms of the Houston Texas lease was $12,294$10,700 and $14,156,$12,294, respectively.
(9) ConcentrationsNote 8. Concentrations.
Concentration of Major Customers
As of December 31, 2014, the Company's trade accounts receivables from two customers represented approximately 87% of its accounts receivable. As of December 31, 2013 the Company's trade accounts receivables from two customers represented approximately 92% of its accounts receivable. As of
For the year ended December 31, 20122014 the Company's trade accounts receivables from one customer representedCompany received approximately 87%84% of its accounts receivable.
revenue from three customers. The specific concentrations were Customer A, 47%, Customer B, 27%, and Customer C, 10%. For the year ended December 31, 2013 the Company received approximately 85% of its revenue from three customers. The specific concentrations were Customer A 45%, Customer B 30%, and Customer C 10%. For the year ended December 31, 2012 the Company received approximately 84% of its revenue from three customers.
Concentration of Supplier Risk
The Company had 6 vendors that accounted for approximately 83%84% of purchases during the year ended December 31, 20132014 related to operations. Specific concentrations were Vendor A 20%18%, Vendor B 16%17%, Vendor C 14%, Vendor D 14%12%, Vendor E 10%12%, and Vendor F 10%11%. For the year ended December 31, 2013 the Company had 6 vendors that accounted for approximately 83% of purchases.
(10)Note 9. Shareholder Notes PayablePayable.
During the first quarter of 2013, the Company converted two related party accrued salary balances and related interest to notes payable at a 5% interest rate. The interest for the note payable balances has been calculated annually and has been accrued for 2013. The notes were issued for a total debt of $93,250 in January of 2013 with the due date of April 1, 2014. As of December 31, 2013, the total due to these related parties for accrued salaries was $11,750 and included in short-term note payable to shareholder. The $11,750 due as of December 31, 2013 and was paid during 2014.
During the first quarter of 2013, the Company received cash in the sum of $10,000 from a shareholder for a note payable at a 5% interest rate. The note and related interest were converted to 1,000,000 shares of common stock resulting in a loss of $50,000 on conversion using the closing price of the stock on the date of conversion of $0.06 per share.
(11)Note 10. Convertible Shareholder Notes PayablePayable.
During 2009, the Company received cash in the sum of $50,000 from a shareholder for a note payable at a 10% interest rate. The interest for the note payable has been calculated annually and has been accrued for 2013 and 2012. During 2013, the note payable agreement was amended to include a conversion feature to the Company's common stock at $0.0001 per share. Under ASC 470-50, the amendment adds a substantive conversion option which causes the amended note to be evaluated as a new debt issuance. As the conversion term is considered in the money a beneficial conversion feature was present with a debt discount calculated at $50,000. The debt discount was amortized to interest expense during 2013 due to the note being due at the time of the amendment. During 2013, the creditor sold a portion of his note for $8,900. At the request of the new creditors the Company issued 89,000,000 shares of common stock at $0.0001 in terms with the amended agreement. No gain or loss was recorded on the conversion of debt to equity during the period ending December 31, 2013 as it was converted within the terms of the agreement. The remaining balance due under this note was $40,100 as of December 31, 2014 and $41,100 as of December 31, 2013. As the note is past its due date of January 21, 2013, the note is considered in default.
During the quarter ended September 30, 2011, the Company issued a short-term convertible note to a shareholder in the amount of $10,000. The convertible note is due in one year and bears interest of 12%. The interest for the convertible note has been calculated annually and has been accrued for 20132014 and 2012.2013. As of December 31, 2013,2014, the convertible note contains a conversion feature at a 50% discount of the 10 day average closing price prior to notice. The note holder agreed that the conversion would not force the Company to issue more shares than allowed under the current capitalization which eliminates the existence of a derivative. The beneficial conversion feature included in the discounted share price of the conversion was found to be immaterial for the years ended December 31, 20132014 and 2012.2013. As the note is past its due date of June 2, 2012, the note is considered in default.
(12)Note 11. Debt Modification and Beneficial Conversion FeatureFeature.
During the year ended December 31, 2013, a note payable agreement was amended to include a conversion feature to the Company's common stock at $0.0001 per share. Under ASC 470-50, the amendment adds a substantive conversion option which causes the amended note to be evaluated as a new debt issuance. As the conversion term is considered in the money a beneficial conversion feature was present with a debt discount calculated at $50,000. The debt discount was amortized to interest expense during 2013 due to the note being due at the time of the amendment.
(13)Note 12. Subsequent EventsEvents.
The Company has evaluated subsequent events fromissued a total of twelve million (12,000,000 restricted shares) of the date on the balance sheet through the date these financial statements are being filed with the Securities and Exchange Commission. No material events or transactions have occurred during this subsequent event reporting period which required recognition or disclosureCompany's common stock as follows: six million restricted shares in the name of Timothy E. Vance and six million restricted shares in the name of Gary D. Woerz valued at $0.0015 based upon services provided by the Executive officers in improving the Company's financial statements.condition and operations and the shares will be subject to a holding period of eighteen months prior to their availability for resale pursuant to the provisions of Rule 144 , and the Company determined that the Employment Agreements between the Company and its Executive Officers be amended to adjust the exercise price form the lower of $0.03 to $0.0015 and that the expiration date of the options to be extended from January 31, 2018 to December 31, 2019.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.Table of Contents
None.
ITEM 9A. CONTROLS AND PROCEDURES.Table of Contents
Evaluation of Disclosure Controls and Procedures
As of December 31, 2013,2014, the Company's chief executive officer and chief financial officer conducted an evaluation regarding the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act. Based upon the evaluation of these controls and procedures, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective as of the end of the fiscal year 2013.2014.
Management's Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of those internal controls. As defined by the SEC, internal control over financial reporting is a process designed by our principal executive officer and principal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements in accordance with U.S. generally accepted accounting principles.
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.
Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2013.2014. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment and those criteria, we have concluded that our internal control over financial reporting had material weaknesses including lack of sufficient internal accounting personnel in order to ensure complete documentation of complex transactions and adequate financial reporting during the year ended December 31, 2013. Management has identified corrective actions for the weakness and has begun implementation during the first quarter of 2014.2015.
This annual report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only Management's report in this annual report.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting or in other factors identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the fourth quarter ended December 31, 20132014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.Table of Contents
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS AND CORPORATE GOVERNANCE.Table of Contents
The following table sets forth the name, age and position of each of our Directors and executive officers. Our officers and Directors are as follows:
| Name | Age | Position |
| Timothy Vance | Chief Executive Officer, Chief Operating Officer and Director | |
| Gary D. Woerz | Chief Financial Officer and Director | |
| John Schafer | Director |
Timothy Vance - Chief Executive Officer, Chief Operating Officer and Director
Timothy Vance, a co-founder,founder of the Company, has served as one of our Directors since June 2003, and as our Chief Operating Officer since January 2007 and also as our Chief Executive Officer since July 2008. However, Mr. Vance has been part of the Data Call Technologies, Inc. management team since our inception. From January 2000 through January 2001Prior to founding Data Call, Mr. Vance was employed at QVS Wireless Corporation, where his employment consisted of general office administration. Prior to his employment with QVS, Mr. Vance was employed in the Marine and Industrial sector for some 15 years implementing computer inventory and operation logistic systems.Corporation.
Gary D. Woerz - Chief Financial Officer and Director
From March 2009 to January 2012, Gary Woerz provided financial consulting services to private and public companies. From September 2007 to January 2008, Mr. Woerz was CFO and COO of Larrea Biosciences, a public reporting company. From July 2006 to July 2007, Mr. Woerz was the CFO of Virexx Medical Corp., a public reporting company.company organized under the laws of the Province of Alberta, Canada. From April 2004 to May 2007, Mr. Woerz served as CFO of American International Industries, Inc., a public reporting company.
John Schafer - Director
Mr. Schafer has been a member of Data Call's Board of Directors since his appointment in May 2013. From March 2005 through the present, Mr. Schafer has served as Vice President of Operations of Waterfront Ventures LLC, a private company engaged in real estate development and operations, specializing in the hospitality and public service industry. Mr. Schafer's duties at Waterfront Ventures include strategic and financial planning and chief of operations. In addition, from 2004 through the present, Mr. Schafer has been President and principal of JLS Holdings LLC, a private company engaged in the business of marketing, business development, financial planning and promotion, primarily for the real estate and hospitality industry, among others.
Employment Agreements
Effective January 30, 2013, the Company entered into a five-year employment agreement with Tim Vance, to as Chief Executive Officer and Chief Operating Officer at a base compensation of $85,000 per year. The agreement also provided for the issuance of 7,500,000 restricted shares of the Company's common stock which vest at the rate of 1,500,000 shares per year and the grant of warrants to purchase 500,000 shares per annum at a price of $0.0015, commencing on February 1, 2013. On January 1, 2009 the8, 2015, Board of Directors met and after reviewingamended the operations and financial conditionemployment agreement with Mr. Vance to provide for the issuance of an additional 6,000,000 restricted shares which vest at the rate of 2,000,000 shares per year.
Also effective on January 30, 2013, the Company entered into a five-year employment agreement with Gary D. Woerz to serve as Chief Financial Officer at a base compensation of $52,000 per year. The agreement also provided for the issuance of 7,500,000 restricted shares of the Company pastedCompany's common stock which vest at the rate of 1,500,000 shares per year, and the grant of warrants to purchase 400,000 shares per annum at a resolution which ratifies and approves the amendmentprice of $0.0015, commencing on February 1, 2013. On January 8, 2015, Board of Directors amended the employment agreements by and betweenagreement with Mr. Woerz to provide for the Corporation and all of its executive officers, directors and employees (the "Employment Agreements"), effective January 1, 2008, as follows: i) the automatic renewal provision in each Employment Agreement is null and void; and (ii) the right of the officers, directors, and employees to the accrued compensations as stands, as of January 1, 2008; and (ii) there will be no accrued compensation for any officer, director or employee moving forward as of January 1, 2008.
Additionally, we agreed to indemnify and hold harmless the executives, their nominees and/or assigns against any and all losses, claims, damages, obligations, penalties, judgments, awards, liabilities, costs, expenses and disbursements (incurred in any and all actions, suits, proceedings and investigations in respect thereof and any and all legal and other costs, expenses and disbursements in giving testimony or furnishing documents in response to a subpoena or otherwise), including without limitation, the costs, expenses and disbursements, as and when incurred, of investigating, preparing or defending any such action, suit, proceeding or investigation that is in any way related to their employment with us (whether or not in connection with any action in which they are a party). Such indemnification does not apply to acts performed by the executives, which are criminal in nature or a violation of law.
The executive employment may terminate:
(a) in the event the executive suffers an injury, illness, or incapacity of such character as to prevent him from performing his duties without reasonable accommodation for a period of more than thirty (30) consecutive days upon us giving at least thirty (30) days written notice of termination to him;
(b) upon the death of the executive; c) at any time because of, (i) the conviction of executiveissuance of an act or acts constituting a felony or other crime involving moral turpitude, dishonesty or theft or fraud; or (ii) his gross negligence inadditional 6,000,000 restricted shares which vest at the performancerate of his duties hereunder; or (d) additionally, the executive may terminate his employment for "good reason" by giving us ten (10) days written notice if: (i) he is assigned, without his express written consent, any duties materially inconsistent with his positions, duties, responsibilities, or status with us, or a change in his reporting responsibilities or titles as in effect as of the date hereof; (ii) his compensation is reduced; or (iii) we do not pay any material amount of compensation due hereunder and then fail either to pay such amount within the ten (10) day notice period required for termination hereunder or to contest in good faith such notice.
In the event Mr. Vance's or Mr. Mosley's employment is terminated under (a) through (d) above, either of them is entitled to all compensation earned by him through the date of his termination. The employment agreements of Mr. Vance and Mr Mosley were deemed to be null and void effective January 1, 2008. The employment agreement of Mr. Ammons was deemed to be null and void effective January 1, 2008. The employment agreement of Mr. Ammons was deemed to be null and void effective January 1, 2008.2,000,000 shares per year.
ITEM 11. EXECUTIVE COMPENSATION.Table of Contents
The following table sets forth information concerning the total compensation during the fiscal years ending December 31, 2014, 2013 2012 and 2011.2012.
Summary Compensation Table | Summary Compensation Table | Summary Compensation Table | ||||||||||||||
Long Term | Long Term | |||||||||||||||
Annual Compensation | Compensation Awards | Annual Compensation | Compensation Awards | |||||||||||||
| Other | Restricted | Securities | Other | Restricted | Securities | |||||||||||
| Annual | Stock | Underlying | Total | Annual | Stock | Underlying | Total | |||||||||
Salary | Bonus | Compensation | Award(s) | Options | Compensation | Salary | Bonus | Compensation | Award(s) | Options | Compensation | |||||
| Name and Principal Position (a) | Year | ($) | Year | ($) | ||||||||||||
| Timothy Vance, CEO, COO and Director (1) | 2013 | 84,702 | --- | 1,500 | --- | 86,202 | 2014 | 85,000 | --- | 2,500 | --- | 87,500 | ||||
| 2012 | 76,150 | --- | 6,000 | --- | 82,150 | 2013 | 84,702 | --- | 1,500 | --- | 86,202 | |||||
| 2011 | 75,000 | --- | 6,000 | --- | 81,000 | 2012 | 76,150 | --- | 6,000 | --- | 82,150 | |||||
| Garry D. Woerz, CFO (2) | 2013 | 52,000 | --- | 1,500 | --- | 53,500 | 2014 | 52,000 | --- | 2,500 | --- | 54,500 | ||||
| James Ammons, former director (3) | 2013 | 53,500 | --- | --- | --- | 53,500 | ||||||||||
| 2012 | 88,450 | --- | 6,000 | --- | 94,450 | 2013 | 52,000 | --- | 1,500 | --- | 53,500 | |||||
| 2011 | 75,000 | --- | 6,000 | --- | 81,000 | |||||||||||
| Larry Mosley, former CFO and Director (3) | 2013 | 54,750 | --- | 54,750 | ||||||||||||
| 2012 | 4,000 | --- | 4,000 | |||||||||||||
| 2011 | 2,500 | --- | 2,500 | |||||||||||||
(1) In June 2008, Timothy E. Vance was appointed CEO of the Registrant.
(2) In January 2013, Gary D. Woerz was appointed CFO of the Registrant.(3) On January 14, 2013, Mr. James Ammons resigned as director of the Company.(4) On January 3, 2013, the board of directors accepted the resignation of Larry Mosley as CFO and director of the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.Table of Contents
The following table sets forth information regarding the beneficial ownership of our common stock as of December 31, 2013.2014. The information in this table provides the ownership information for: each person known by us to be the beneficial owner of more than 5% of our common stock; each of our directors; each of our executive officers; and our executive officers and directors as a group. Beneficial ownership has been determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to the shares. Unless otherwise indicated, the persons named in the table below have sole voting and investment power with respect to the number of shares indicated as beneficially owned by them.
| Name of Beneficial Owner | Common Stock Beneficially Owned (1) | Percentage of Common Stock Owned (1) | Common Stock Beneficially Owned | Percentage of Common Stock Owned (1) | ||||
| Timothy Vance, CEO, COO and Director | 8,170,000 | 6.49% | ||||||
| Timothy E. Vance, CEO, COO and Director | 8,170,000 | 6.49% | ||||||
| 700 South Friendswood Drive, Suite E | ||||||||
| Friendswood, TX 77546 | ||||||||
| Gary D. Woerz, CFO and Director | 7,700,000 | 6.11 | 7,700,000 | 6.11% | ||||
| 700 South Friendswood Drive, Suite E | ||||||||
| Friendswood, TX 77546 | ||||||||
| John Schafer, CFO and Director | 1,000,000 | 0.79% | ||||||
| John Schafer, Director | 1,000,000 | 0.79% | ||||||
| 700 South Friendswood Drive, Suite E | ||||||||
| Friendswood, TX 77546 | ||||||||
| Director and Officer (3 people) | 16,870,000 | 13.39% | 16,870,000 | 13.39% | ||||
(1) Applicable percentage ownership is based on 125,976,421 shares of common stock outstanding as of December 31, 2013.2014. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock that are currently exercisable or exercisable within 60 days of December 31, 2013 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.Table of Contents
None.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.Table of Contents
Independent Public Accountants
Our auditor, M&K CPAS, PLLC. has served as the Company's independent registered public accountants for the fiscal years 20132014 and 2012.2013.
Principal Accounting Fees
The following table presents the fees for professional audit services rendered by M&K CPAS, PLLC and McConnell & Jones, LLP for the auditaudits of the Registrant's annual financial statements for the years ended December 31, 20132014 and 2012,2013, and fees billed for other services rendered by M&K CPAS, PLLC and McConnell & Jones, LLP during those periods.
| Year Ended | Year Ended | |||
| December 31, 2013 | December 31, 2012 | |||
Audit fees (1) | $ | 20,500 | $ | 13,000 |
Audit-related fees (2) | --- | --- | ||
Tax fees (3) | --- | --- | ||
All other fees | --- | --- | ||
| (1) Audit fees consist of audit and review services, consents and review of documents filed with the SEC. | ||||
| (2) Audit-related fees consist of assistance and discussion concerning financial accounting and reporting standards and other accounting issues. | ||||
| (3) Tax fees consist of preparation of federal and state tax returns, review of quarterly estimated tax payments, and consultation concerning tax compliance issues. | ||||
| Year Ended | Year Ended | |||
| December 31, 2014 | December 31, 2013 | |||
Audit fees (1) | $ | 24,000 | $ | 20,500 |
Audit-related fees (2) | --- | --- | ||
Tax fees (3) | 1,300 | --- | ||
All other fees | --- | --- | ||
| (1) Audit fees consist of audit and review services, consents and review of documents filed with the SEC. | ||||
| (2) Audit-related fees consist of assistance and discussion concerning financial accounting and reporting standards and other accounting issues. | ||||
| (3) Tax fees consist of preparation of federal and state tax returns, review of quarterly estimated tax payments, and consultation concerning tax compliance issues. | ||||
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.Table of Contents
(a) The exhibits listed below are filed as part of this annual report.
| Articles of Incorporation, attached to the Company's Form S-1 as filed with the SEC on February 21, 2006. | |
| Certificate of Amendment to Articles of Incorporation,attached to the Company's Form S-1 as filed with the SEC on February 21, 2006. | |
| Amended and Restated Articles of Incorporation,attached to the Company's Form S-1/A as filed with the SEC on June 29, 2006. | |
| Amended Bylaws,attached to the Company's Form S-1 as filed with the SEC on February 21, 2006. | |
| 10.16 | |
| 10.17 | |
| 31.1 | Certificate of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith |
| 31.2 | Certificate of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith |
| 32.1 | Certificate of the Chief Executive Officer to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith |
| 32.2 | Certificate of the Chief Financial Officer to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith |
SIGNATURES
SIGNATURES
In accordance withPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.undersigned.
DATA CALL TECHNOLOGIES INC. | ||||