UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-Q
___________________
ý
QUARTERLY REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
June 30, 2015
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: (866) 219-2025
Indicate by check
mark whether the registrant (1) has filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer, or a
non-accelerated filer.
| Large accelerated
filer ¨ |
Accelerated filer ¨ |
Non-Accelerated
filer ¨ |
Smaller reporting
company x |
On August
3, 2015,
the Registrant had 144,976,421 shares of common stock outstanding.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS
Back to Table of Contents
| Data Call
Technologies, Inc. |
|
Condensed Balance Sheets |
|
June 30, 2015 (Unaudited) and December
31, 2014 |
|
Back to Table of
Contents |
| |
|
June 30, 2015 (Unaudited) |
|
December 31, 2014 |
Assets |
|
|
|
|
| Current assets: |
|
|
|
|
|
Cash |
$ |
74,634 |
$ |
58,741 |
|
Accounts receivable |
|
76,327 |
|
114,563 |
|
Prepaid expenses |
|
11,370 |
|
2,580 |
| Total current assets |
|
162,331 |
|
175,884 |
| |
|
|
|
|
| Property
and equipment |
|
128,573 |
|
128,573 |
| Less accumulated depreciation and amortization |
|
125,946 |
|
124,902 |
| Net property and equipment |
|
2,627 |
|
3,671 |
| |
|
|
|
|
| Other
assets |
|
800 |
|
800 |
| Total assets |
$ |
165,758 |
$ |
180,355 |
| |
|
|
|
|
Liabilities
and Stockholders' Equity (Deficit) |
|
|
|
|
| |
|
|
|
|
| Current
liabilities: |
|
|
|
|
|
Accounts payable |
$ |
26,805 |
$ |
33,084 |
|
Accounts payable - related party |
|
460 |
|
5,990 |
| Accrued
salary - related party |
|
- |
|
5,461 |
| Accrued interest |
|
21,491 |
|
21,241 |
| Convertible short-term note payable to
related party - currently in default |
|
46,581 |
|
50,100 |
|
Deferred revenue - current |
|
6,084 |
|
6,084 |
| Total current liabilities |
|
101,421 |
|
121,960 |
| |
|
|
|
|
|
Deferred
revenue - net of current portion |
|
1,015 |
|
4,057 |
|
Total liabilities |
|
102,436 |
|
126,017 |
| |
|
|
|
|
| Stockholders'
equity: |
|
|
|
|
|
Preferred stock, $0.001 par value. Authorized 10,000,000 shares: |
|
|
|
|
|
Series A 12% Convertible - 800,000 shares issued and outstanding |
|
|
|
|
|
at June 30, 2015 and December 31, 2014, respectively |
|
800 |
|
800 |
|
Preferred stock, $0.001 par value. Authorized 1,000,000 shares: |
|
|
|
|
|
Series B - 10,000 shares issued and outstanding |
|
|
|
|
|
at June 30, 2015 and December 31, 2014,
respectively |
|
10 |
|
10 |
| Common stock, $0.001 par value. Authorized
200,000,000 shares: |
|
|
|
|
|
144,976,421 and 125,976,421 shares
issued and outstanding |
|
|
|
|
|
at June 30, 2015 and December 31, 2014,
respectively |
|
144,976 |
|
125,976 |
|
Additional paid-in capital |
|
9,370,367 |
|
9,253,066 |
|
Accumulated deficit |
|
(9,452,831) |
|
(9,325,514) |
|
Total stockholders' equity (deficit) |
|
63,322 |
|
54,338 |
|
Total liabilities and stockholders' equity (deficit) |
$ |
165,758 |
$ |
180,355 |
| |
|
|
|
|
| The
accompanying notes are an integral part of these financial statements. |
| DATA
CALL TECHNOLOGIES, INC. |
| Condensed
Statements of Operations |
| Three and
Six Months Ended June 30, 2015 and 2014 (Unaudited) |
|
Back to Table of Contents |
|
|
Three
Months |
|
Three
Months |
|
Six
Months |
|
Six
Months |
|
|
ended |
|
ended |
|
ended |
|
ended |
|
|
June
30, 2015 |
|
June
30, 2014 |
|
June
30, 2015 |
|
June
30, 2014 |
| |
|
|
|
|
|
|
|
|
| Revenues |
|
|
|
|
|
|
|
|
| Sales |
$ |
142,581 |
$ |
164,713 |
$ |
304,548 |
$ |
331,488 |
| Cost of sales |
|
35,493 |
|
26,921 |
|
70,138 |
|
59,495 |
| Gross margin |
|
107,088 |
|
137,792 |
|
234,410 |
|
271,993 |
| |
|
|
|
|
|
|
|
|
| Selling, general and administrative expenses |
|
155,984 |
|
143,790 |
|
357,955 |
|
287,569 |
| Depreciation and amortization expense |
|
522 |
|
842 |
|
1,044 |
|
1,685 |
| Total operating expenses |
|
156,506 |
|
144,632 |
|
358,999 |
|
289,254 |
| |
|
|
|
|
|
|
|
|
| Other (income) expense |
|
|
|
|
|
|
|
|
|
Interest income |
|
(2) |
|
(4) |
|
(4) |
|
(8) |
| Interest expense |
|
1,366 |
|
2,875 |
|
2,732 |
|
5,750 |
|
Total expenses |
|
157,870 |
|
147,503 |
|
361,727 |
|
294,996 |
| |
|
|
|
|
|
|
|
|
| Net loss
before income taxes |
|
(50,682) |
|
(9,711) |
|
(127,317) |
|
(23,003) |
| |
|
|
|
|
|
|
|
|
| Provision
for income taxes |
|
- |
|
- |
|
- |
|
- |
|
Net loss |
$ |
(50,682) |
$ |
(9,711) |
$ |
(127,317) |
$ |
(23,003) |
| |
|
|
|
|
|
|
|
|
| Net income
(loss) per common share - basic and diluted: |
|
|
|
|
|
|
|
|
| Net income
(loss) applicable to common shareholders |
$ |
(0.00) |
$ |
(0.00) |
$ |
(0.00) |
$ |
(0.00) |
|
|
|
|
|
|
|
|
|
|
| Weighted
average common shares: |
|
|
|
|
|
|
|
|
|
Basic |
|
144,844,553 |
|
125,976,421 |
|
138,865,924 |
|
125,976,421 |
|
Diluted |
|
144,844,553 |
|
125,976,421 |
|
138,865,924 |
|
125,976,421 |
| |
| The
accompanying notes are an integral part of these financial statements. |
| DATA
CALL TECHNOLOGIES INC. |
|
Condensed Statements of Cash Flows
|
| Six Months
Ended June 30, 2015 and 2014 (Unaudited) |
|
Back to Table of Contents |
|
|
Six Months |
|
Six Months |
|
|
Ended |
|
Ended |
| |
|
June 30, 2015 |
|
June 30, 2014 |
| Cash flows from operating activities: |
|
|
|
|
|
Net income or (loss) |
$ |
(127,317) |
$ |
(23,003) |
| Adjustments to reconcile net income
or (loss) to net cash provided
by (used in) operating activities: |
|
|
|
|
| Depreciation
and amortization of property and equipment |
|
1,044 |
|
1,685 |
| Shares issued for services |
|
134,536 |
|
91,530 |
| Options expense |
|
1,765 |
|
3,795 |
| Changes in operating assets and liabilities: |
|
|
|
|
|
Accounts receivable |
|
38,236 |
|
165,649 |
|
Prepaid expenses |
|
(8,790) |
|
- |
| Accounts payable |
|
(6,279) |
|
(19,067) |
| Accounts payable
- related party |
|
(5,530) |
|
258 |
| Accrued
expenses |
|
250 |
|
2,750 |
| Accrued
expenses - related party |
|
(5,461) |
|
(5,021) |
|
Deferred revenues |
|
(3,042) |
|
(136,029) |
|
Net cash provided by operating activities |
|
19,412 |
|
82,547 |
| |
|
|
|
|
| Cash flows
from investing activities |
|
|
|
|
|
Purchase of property and equipment |
|
- |
|
- |
|
Net cash used in investing activities |
|
- |
|
- |
| |
|
|
|
|
| Cash flows
from financing activities: |
|
|
|
|
| Principal
payment on borrowing from
related party |
|
(3,519) |
|
(11,750) |
|
Net cash used in financing activities |
|
(3,519) |
|
(11,750) |
| |
|
|
|
|
|
Net increase (decrease) in cash |
|
15,893 |
|
70,797 |
| Cash at
beginning of year |
|
58,741 |
|
- |
| Cash at
end of period |
$ |
74,634 |
$ |
70,797 |
| |
|
|
|
|
| Supplemental Cash Flow Information: |
|
|
|
|
| Cash paid for interest |
$ |
2,482 |
$ |
- |
|
Cash paid for interest |
$ |
- |
$ |
- |
| |
|
|
|
|
| The
accompanying notes are an integral part of these financial statements. |
DATA CALL TECHNOLOGIES, INC.
Notes to Financial Statements
June 30, 2015
Back to Table of
Contents
(1) Summary of Significant Accounting Policies
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 accompanying unaudited financial statements have been prepared
in accordance with U. S. generally accepted accounting principles ("GAAP") for
interim financial information and with the instructions to Form 10-Q.
Accordingly, they do not include all of the information and footnotes required
by GAAP for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included. Operating results for the three and
six-month period ended June 30, 2015 are not indicative of the results that may
be expected for the year ending December 31, 2015.
As contemplated by the
Securities and Exchange Commission (SEC) under Rules of Regulation S-X, the
accompanying financial statements and related footnotes have been condensed and
do not contain certain information that will be included in the Company's annual
financial statements and footnotes thereto. For further information, refer to
the Company's audited consolidated financial statements and related footnotes
thereto included in the Company's annual report on Form 10-K for the year ended
December 31, 2014.
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 June 30, 2015 or December
31, 2014.
Revenue Recognition
The 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.
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 June 30, 2015 and December 31, 2014 as we believe all
of our receivables are fully collectable.
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.
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 and Liabilities within the fair
value hierarchy utilized to measure fair value on a recurring basis as of June
30, 2015 and December 31, 2014:
|
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
| June
30, 2015 |
$ |
0 |
$ |
0 |
$ |
0 |
| December
31, 2014 |
$ |
0 |
$ |
0 |
$ |
0 |
Recent Accounting Pronouncements
On November 2014, The Financial Accounting Standards
Board (FASB) issued Accounting Standard Update No. 2014-16 - Derivatives and
Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial
Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity (a
consensus of the FASB Emerging Issues Task Force). The amendments in this Update
do not change the current criteria in GAAP for determining when separation of
certain embedded derivative features in a hybrid financial instrument is
required. That is, an entity will continue to evaluate whether the economic
characteristics and risks of the embedded derivative feature are clearly and
closely related to those of the host contract, among other relevant criteria.
The amendments clarify how current GAAP should be interpreted in evaluating the
economic characteristics and risks of a host contract in a hybrid financial
instrument that is issued in the form of a share. The effects of initially
adopting the amendments in this Update should be applied on a modified
retrospective basis to existing hybrid financial instruments issued in the form
of a share as of the beginning of the fiscal year for which the amendments are
effective. Retrospective application is permitted to all relevant prior periods.
On November 2014, The Financial Accounting Standards Board
(FASB) issued Accounting Standard Update No. 2014-17-Business Combinations
(Topic 805): Pushdown Accounting (a consensus of the FASB Emerging Issues Task
Force). The amendments in this Update provide an acquired entity with an option
to apply pushdown accounting in its separate financial statements upon
occurrence of an event in which an acquirer obtains control of the acquired
entity. The amendments in this Update are effective on November 18, 2014. After
the effective date, an acquired entity can make an election to apply the
guidance to future change-in-control events or to its most recent
change-in-control event. However, if the financial statements for the period in
which the most recent change-in-control event occurred already have been issued
or made available to be issued, the application of this guidance would be a
change in accounting principle.
On August 2014, The Financial Accounting Standards Board
(FASB) issued Accounting Standard Update No. 2014-15, Presentation of Financial
Statements - Going Concerns (Subtopic 205-40): Disclosures of Uncertainties
about an Entity's Ability to Continue as a Going Concern. The amendments require
management to assess an entity's ability to continue as a going concern by
incorporating and expanding upon certain principles that are currently in U.S.
auditing standards. Specifically, the amendments (1) provide a definition of the
term substantial doubt, (2) require an evaluation every reporting period
including interim periods, (3) provide principles for considering the mitigating
effect of management's plans, (4) require certain disclosures when substantial
doubt is alleviated as a result of consideration of management's plans, (5)
require an express statement and other disclosures when substantial doubt is not
alleviated, and (6) require an assessment for a period of one year after the
date that the financial statements are issued (or available to be issued). The
amendments in this Update are effective for the annual period ending after
December 15, 2016, and for annual periods and interim periods thereafter. Early
application is permitted.
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. 2041-10: 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, 2015, 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.
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.
(2) Related Party Transactions
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 the second quarter of 2015 was $44,318
(2014: $44,318) and $88,149 for the six months ended June 30, 2015 (2014:
$88,149).
During the first quarter of 2015, 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 expense recognized in the second quarter
of 2015 was $758 (2014: $Nil) and $1,241 for the six months ended June 30, 2015
(2014: $Nil). Total stock option compensation expense is calculated at $3,039.
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 2013 5 year employment
agreement and to Gary Woerz, CFO, in connection with the execution of a 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
expense recognized in the second quarter of 2015 was $524 (2014: $982) and $524
for the six months ended June 30, 2015 (2014: $1,439). Total stock option
compensation expense is calculated at $2,877.
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 2013 5 year employment
agreement and to Gary Woerz, CFO, in connection with the execution of a 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
expense recognized in the second quarter of 2015 was $Nil (2014: $2,356) and
$Nil for the six months ended June 30, 2015 (2014: $2,356). Total stock option
compensation expense is calculated at $26,872.
On July 2, 2014, the Company issued 10,000 shares of the
Company's Series B Preferred Stock. There is currently no market for the shares
of Series B Preferred Stock and cannot be converted into shares of common stock
of the Company. The Company received no cash proceeds from the issuance of the
shares Each share of Series B preferred stock shall be strictly limited and not
to be available for transfer or re sale unless authorized by a majority of a
quorum of the Board of Directors in accordance with the Company's Bylaws. The
Preferred Series B do not contain any rights to dividends; have no liquidation
preference; are not to be amended without the holders approval. The company had
a valuation completed and as a result expensed the value of the preferred B
during the quarter at a value of $76,000.
(3) Capital Stock, Warrants and Options
The Company is authorized to issue up to 10,000,000 shares of
Preferred Stock, $0.001 par value per share, of which 800,000 shares of Series A
convertible preferred stock are outstanding at June 30, 2015 and December 31,
2014. 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.
Each share of Series A Preferred Stock shall bear a
preferential dividend of twelve percent (12%) per year and is convertible into a
number shares of the Company's common stock, par value $0.001 per share ("Common
Stock") based upon Fifty (50%) percent of the average closing bid price of the
Common Stock During the ten (10) day period prior to the conversion. The Company
has not declared or accrued any dividends and as of June 30, 2015 or December
31, 2014. Unaccrued and undeclared dividends were $2,400 and $4,800 as of June
30, 2015 and December 31, 2014, respectively.
On July 2, 2014, the Company issued 10,000 shares of the
Company's Series B Preferred Stock. There is currently no market for the shares
of Series B Preferred Stock and cannot be converted into shares of common stock
of the Company. The Company received no cash proceeds from the issuance of the
shares Each share of Series B preferred stock shall be strictly limited and not
to be available for transfer or re sale unless authorized by a majority of a
quorum of the Board of Directors in accordance with the Company's Bylaws. The
Preferred Series B do not contain any rights to dividends; have no liquidation
preference; are not to be amended without the holders approval. The company had
a valuation completed and as a result expensed the value of the preferred B
during the quarter at a value of $76,000.
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 the second quarter of 2015 was $44,318
(2014: $44,318) and $ 88,149 for the six months ended June 30, 2015 (2014:
$88,149).
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 $0.001 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 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.
The Company issued a total of twelve million (12,000,000
restricted shares) of the Company'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 $0.0038 based upon services
provided by the Executive officers in improving the Company's financial
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.
The company expensed $7,600 for the quarter ending June 30, 2015 and $15,200 for
the six months ended June 30, 2015. The total value of the 12,000,000 shares
granted is $45,600.
During the first quarter of 2015, 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 2013 5 year employment
agreement and to Gary Woerz, CFO, in connection with the execution of the 2013 5
year employment agreement. The Company uses the Black-Scholes option valuation
model to value stock options granted. During the period ended March 31, 2015,
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. The change in value from the lower
exercise price and extended expiration date was considered immaterial. 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. 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 |
1.84 |
$0.001 |
900,000 |
The Company recorded $758 (2014: $Nil) in stock option compensation expense,
in relation to these options, during the quarter ended June 30, 2015. The
Company recorded $1,241 (2014: $Nil) in stock option compensation expense, in
relation to these options, during the six months ended June 30, 2015. Total
stock option compensation expense is calculated at $3,039.
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 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. During the
period ended March 31, 2015, 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.
The change in value from the lower exercise price and extended expiration date
was considered immaterial. 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.
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 |
1.84 |
$0.001 |
900,000 |
The Company recorded $524 (2014: $982) in stock option compensation
expense, in relation to these options, during the quarter ended June 30,
2015. The Company recorded $524 (2014: $1,439) in stock option compensation
expense, in relation to these options, during the six months ended June 30,
2015. Total stock option compensation expense is calculated at $2,877.
The Company is authorized to issue up to 200,000,000 shares of Common Stock
of which 144,976,421 are issued and outstanding at June 30, 2015 and 125,976,421
as of December 31, 2014, respectively.
(4) Property and Equipment
Major classes of property and equipment together with their estimated useful lives,
consisted of the following:
|
Years |
|
June 30, 2015 |
|
December 31, 2014 |
Equipment |
3-5 |
$ |
96,236 |
$ |
96,236 |
Office
furniture |
7 |
|
21,681 |
|
21,681 |
Leasehold
improvements |
3 |
|
10,656 |
|
10,656 |
|
|
|
128,573 |
|
128,573 |
Less
accumulated depreciation and amortization |
|
|
125,946 |
|
124,902 |
Net property
and equipment |
|
$ |
2,627 |
$ |
3,671 |
(5) Shareholder Notes Payable
Repayments on shareholder notes payable during the quarter
ended June 30, 2015 totaled $1,760 (2014: $2,750). Repayments on shareholder
notes payable during the six months ended June 30, 2015 totaled $3,519 (2014:
$11,750).
During the first quarter of 2014, the Company converted two
related party accrued salary balances and related interest to notes payable at a
5% interest rate. The interest for the notes payable balances has been
calculated annually and has been accrued for the first quarter of 2015. As of
June 30, 2015, the total due to these related parties for accrued salaries was
$Nil (December 31, 2014: $Nil) and included in short-term note payable to
shareholder. For the six months ended June 30, 2015, $Nil of the balance
converted was repaid (2014: $11,750).
(6) Subsequent Events and Contingencies
The Company has evaluated subsequent events from the date on
the balance sheet through the date these financial statements are being filed
with the Securities and Exchange Commission.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATION
Back to Table of Contents
Some of the statements contained in this quarterly report
of Data Call Technologies, Inc., Nevada corporation (hereinafter referred to as
"we", "us", "our", "Company" and the "Registrant") discuss future expectations,
contain projections of our plan of operation or financial condition or state
other forward-looking information. Forward-looking statements give our current
expectations or forecasts of future events. You can identify these statements by
the fact that they do not relate strictly to historical or current facts. They
use of words such as "anticipate," "estimate," "expect," "project," "intend,"
"plan," "believe," and other words and terms of similar meaning in connection
with any discussion of future operating or financial performance. From time to
time, we also may provide forward-looking statements in other materials we
release to the public.
Data Call Technologies, Inc. ("Data Call," or
the "Company") was incorporated under the laws of the State of Nevada as Data
Call Wireless on April 4, 2002. On March 1, 2006, we changed our name to Data
Call Technologies, Inc.
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. The Company's software and services put its clients in
control of real-time, news, and other content, including emergency alerts,
displayed within one building 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 continued offering of real-time
information/content, seeking to continually improve the delivery, security, and
variety of information/content to the Digital Signage and Kiosk community.
Overview
What Is Digital Signage?
LED and LCD displays are continually replacing printed
marketing materials such as signs and placards, as well as the old-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 Signage presentations are typically comprised of
repeating loops of information used to brand, market or sell the owner's
products and services. But once viewed, this information becomes repetitive and
the viewer tunes it out, resulting in low retention of the client's message. As
digital signage "comes of age," the dynamic characteristics of the digital
signage presentations has taken center-stage requiring fresh, relevant and
updated dynamic content.
Digital Signage Comes of Age
We believe that the Digital Signage industry is "coming of
age" and that Data Call through multiple industry relationships has been engaged
in the business for more than a decade. Our company has virtually been there
from the start and is in in a prime position to enjoy and benefit from our
industry's growth. A few short years ago, a business wanting to derive
commercial benefit from use of digital signage was often confronted with a
myriad of hardware and software companies, all offering their own version of
what digital signage should be. Typical customers for digital signage were
most-often offered the hardware for digital signage but without the full package
of content with which to build and tailor their systems for their target
customer base.
Those early digital signage customers often had to deal with
the fact that their digital signage hardware vendors lacked the know-how to
provide them with the "do's and don'ts" of content development. However, from
our inception, Data Call recognized that our competitors and their typical
customers lacked a key component which includes the offering of a comprehensive
content package.
Recently, as the cost of platforms supporting content
management infrastructure and displays have fallen significantly, digital
signage has become more accessible to a wider range of potential users while the
growing Kiosk market has cross-pollinated with Digital Signage. Companies in our
industry have come to understand as we have understood almost since our
inception in 2002, that the benefit that Data Call provides to our customers, in
the form of ongoing content development (dynamic content) is expected to
continue to provide our customers with desirable services. Content needs to stay
fresh. Data Call has automated this process for their subscribers. As the cost
of deployment has decreased, Data Call has continued to focus, as well as other
providers have only begun focusing, on offering "attention-grabbing content" as
a means of drawing target customers' attention to the core message of clients,
thereby keeping their target customers engaged throughout Digital Signage and
Kiosk presentations.
The Need for Speed-Active Content
Active and dynamic content is the integral part of digital
signage presentations that must be constantly updated with timely and relevant
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 attempting to "cut and paste" broadcast content
of others into their digital signage presentation.
Our clients, by integrating Data Call's active content as a
meaningful component of their digital signage presentations, can provide the
entertainment and information content necessary to 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, among others. With such a broad
range of offerings, our clients have access to the active and dynamic content
they need, regardless of the target customers and market they are addressing.
Our Business Opportunities
Our many opportunities for client development in the digital
signage industry are growing virtually exponentially. While many companies in
our industry have traditionally outsourced all or part of their content
creation, Data Call serves as a provider of dynamic active content to clients on
a tailored basis. Whether a client desires general entertainment information for
customers, such as news, sports, stock market quotes, etc. or location-specific
content, such as local weather, traffic, product sales and specials, etc., our
research has validated our long-held assumption that dynamic content draws and
retains our clients' target viewers to their digital signage and keeps them
engaged throughout the presentation.
Since our inception, management has developed strong
relationships working with the leaders in digital signage. Collaborative efforts
successfully created the data formats and means of communication to facilitate
the delivery of our dynamic content more easily and efficiently by our clients
for integration into their hardware and software products, setting industry
standards.
Partners, Not Customers
Data Call's approach to our clients is to build long-lasting
partnerships by creating client relationships that we believe are unique in the
digital signage industry. We do this because we understand that each client has
its own content requirement. In developing dynamic content for individual
digital signage clients, we have identified three content-related factors: (i)
reliability; (ii) objectivity; and (iii) ease of implementation. To address the
reliability requirement, we have elected to enter into license arrangements with
the leading providers of news, weather, sports and financial information, among
other client-desired content rather than either: (i) downloading and repackaging
content sourced from the Internet (which may 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 served us by satisfying the second criteria,
objectivity. Because it is commonly recognized that Internet content may often
be unreliable, unverifiable and biased, we have determined that we could not
simply use unfiltered Internet content for delivery to our clients. To achieve
ease of implementation, our licensing of data facilitates the ease of delivery
to and implementation and use by our client/partners. Data Call has understood
that it's Digital Signage and Kiosk clients needed more complete service than to
endeavor the sourcing of active content from multiple vendors. As a result, our
flexible content packages permit our clients to do "one stop shopping" for all
of their dynamic content requirements by a single 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.
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 presentations). We have created and
produced multiple sets of common data layouts in the industry-standard XML
(extensible markup language) format 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.
Nevertheless, we have also produced customized data formats to the exact and
specific requirements of our clients/partners, which, we believe ensures a
higher level of reliability and ease of 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
In August of 2013, we announced the release of our Direct Lynk Media (DLMedia) product. The DLMedia product encapsulates the Direct Lynk
Messenger product with major enhancements and options that allow 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 Forecast Maps; |
| - |
Listings of
the day's horoscopes; |
| - |
Listings of
the birthdays of famous persons born on each day; |
| - |
Amber
alerts; |
| - |
Listings of
historical events which occurred on each day in history; and |
| - |
Localized
Traffic and Weather Forecasts. |
We currently offer our Direct Lynk Messenger and DLMedia services to our
clients and other potential customers through the Internet. 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
work 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 deliver 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
benefits of on-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 received 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.
Results of Operations
The following discussion should be read in conjunction with our financial
statements.
During the last twelve months, the Company has implemented cost management
measurements to review monthly expenditures. We will continue these efforts to
streamline operations, as we focus on increasing sales and gross revenues over
the next twelve months. We do not currently have any plans to increase our
monthly expenditures or number of employees. We currently offer our Direct Lynk
Messenger and DLMedia services to our clients and other potential customers
through the Internet. 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 work 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.
We continually add subscribers for our technology throughout and intend to
build and increase such subscribers moving forward.
Three Months Ended June 30, 2015 Compared to Three Months Ended June 30,
2014
Our revenues for the three months ended June 30, 2015 were $142,581, compared
to $164,713 for the three-month period ended June 30, 2014, representing an
decrease of $22,132 or approximately 13.4%. The decrease in revenues was mainly
due to the reduction of standard renewals and new business.
Costs of sales for the three months ended June 30, 2015 were $35,493 compared
to $26,921 for the three-month period ended June 30, 2014, representing an
increase of $8,572 due to costs related to the licensing and royalty expense
required to provide enhanced subscription services.
Gross margins for the three months ended June 30, 2015 were 75.1%, compared
to 83.7%, for the three-month period ended June 30, 2014.
Selling, General and Administrative expenses for the three months ended June
30, 2015 were $155,984 compared to $143,790 for the three-month period ended
June 30, 2014, representing an increase of $12,194 from the same period in the
prior year. The increase in SG&A expenses is mainly due to an increase in
advertising and non-cash compensation to management. Net loss for the three
months ended June 30, 2015 was $50,782 compared to a net loss of $9,711 for the
three-month period ended June 30, 2014. The Company's net loss was significantly
higher for the second quarter due to an increase in advertising and non-cash
compensation to management. The Company has calculated that net income from
operations for the second quarter of 2015 would have been $4,201 if the non-cash
items (expense for stock and options which totaled $54,983) items were added
back to the current net loss.
Six months Ended June 30, 2015 Compared to Six months Ended June 30, 2014
Our revenues for the six months ended June 30, 2015 were $304,548, compared
to $331,488 for the six-month period ended June 30, 2014, representing an
decrease of $26,940.The decrease in revenues was mainly due to the reduction of
standard renewals and revenues from new business customers.
Costs of sales for the six months ended June 30, 2015 were $70,138, compared
to $59,495 for the same period of the prior year. This increase was due the
costs related to the licensing and royalty expense required to provide the
subscription services and the additional cost associated with the increase in
revenue.
Gross margins for the six months ended June 30, 2015 were 77.0%, compared to
82.1%, for the same six-month period of the prior year.
Selling, General and Administrative expenses for the six months ended June
30, 2015 were $357,955 compared to $287,569 for the three-month period ended
March 31, 2014, representing an increase of $70,386 from the same period in the
prior year. The increase in SG&A expenses is mainly due to an increase in show
expenses of $28,112 due to the fact that the company for the first time in many
years participated in the 2015 DSE Exposition and expense incurred with the
issuance of stock to consultants in the amount of $26,600. Net loss for the six
months ended June 30, 2015 was $127,317 compared to a net loss of $23,033 for
the six-month period ended June 30, 2014. The Company's net loss was
significantly higher for the first half of 2015 due to the show expense and the
issuance of shares to consultants. The Company has calculated that net income
from operations for the six months ended June 30, 2015 would have been $8,984 if
the non-cash items (expense for stock and options which totaled $136,301) items
were added back to the current net loss.
Liquidity and Capital Resources
As of June 30, 2015, we had total current assets of $162,331, consisting of
$74,634 in cash and $76,327 in accounts receivable and had total current
liabilities of $101,421 consisting or $26,805 in accounts payable, $460 in
accounts payable related party, $21,491 in accrued interest, $6,084 in deferred
revenues and $46,581 in short-term notes.
At June 30, 2015, we had a positive working capital of $60,910 and an
accumulated deficit since inception of $9,452,831.
We had net cash provided by operating activities of $19,412 during the
six-month period ended June 30, 2015, which was mainly due to a net loss of
$127,317, common and preferred stock expense of $136,301, a decrease in accounts
receivable of $38,236, offset by a decrease in accounts payable of $11,809, a
decrease in accrued expenses of $5,211 and a decrease in deferred revenue of
$3,042.
We had no investing activities during the six-month period ended June 30,
2015. We used $3,519 in our financing activities during the six months ended
June 30, 2015 for the repayment of a shareholder notes payable.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Back to Table of Contents
A smaller reporting company, as defined by Item 10 of Regulation S-K, is
not required to provide the information required by this item.
ITEM 4.
CONTROLS AND PROCEDURES
Back to Table of Contents
Evaluation of disclosure controls and
procedures.
As of June 30, 2015, 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 period
covered by this report. Management has identified corrective actions for the
weakness and has begun implementation during the fourth quarter of 2015.
Changes in internal controls.
During the quarterly period covered by this
report, no changes occurred in our internal control over financial reporting
that materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL
PROCEEDINGS Back to Table of Contents
None.
ITEM 1A.
RISK FACTORS Back to Table of Contents
In addition to the other
information set forth in this report, you should carefully consider the factors discussed
in Part I, “Item 1. Description of Business, subheading Risk Factors” in
our Annual Report on Form 10-K for the year ended December 31, 2014, which could
materially affect our business, financial condition or future results. The risks described
in our Annual Report on Form 10-K is not the only risks facing our company.
Additional risks and uncertainties not currently known to us or that we currently deem to
be immaterial also may materially adversely affect our business, financial condition
and/or operating results.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Back to Table of Contents
None.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
Back to Table of Contents
None.
ITEM
4. MINE SAFETY DISCLOSURE Back to Table of Contents
None.
ITEM
5. OTHER INFORMATION
Back to Table of Contents
None.
ITEM
6. EXHIBITS Back to Table of Contents
(a) The following documents
are filed as exhibits to this report on Form 10-Q or incorporated by reference herein. Any
document incorporated by reference is identified by a parenthetical reference to the SEC
filing that included such document.
Exhibit
No. |
Description |
| 31.1 |
Certification of CEO pursuant
to Rule 13a-14(a) or 15d-14(a) of the Exchange Act pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
| 31.2 |
Certification of CFO pursuant
to Rule 13a-14(a) or 15d-14(a) of the Exchange Act pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
| 32.1 |
Certification of CEO pursuant
to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. |
| 32.2 |
Certification of CFO pursuant
to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned.
DATA CALL TECHNOLOGIES INC.
By: /s/ Timothy E. Vance
Timothy E. Vance
Chief Executive Officer and Chairman
(Principal Executive Officer)
Date: August 3, 2015
By: /s/ Gary Woerz
Gary Woerz
Chief Financial Officer
(Principal Financial and Principal Accounting Officer)
Date: August 3, 2015
Pursuant to the requirements of the Securities Act of 1934, this report has been signed by
the following persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Timothy E. Vance
Timothy E. Vance
Chairman
(Principal Executive Officer)
Date: August 3, 2015
By: /s/
John Schafer
Director
Date: August 3, 2015
CERTIFICATION
I, Timothy E. Vance, certify that:
1. I have reviewed this quarterly report of Data Call Technologies,
Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the issuer as of, and for, the periods
presented in this report;
4. The issuer's other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (as 4efined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which
this report is being prepared;
(b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
(c) Evaluated the effectiveness of the issuer's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
(d) Disclosed in this report any change in the issuer's internal control
over financial reporting that occurred during the issuer's most recent fiscal
quarter (the issuer's fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the issuer's
internal control over financial reporting; and
5. The issuer's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial reporting, to the
issuer's auditors and the audit committee of the issuer's board of directors
(or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably likely to
adversely affect the issuer's ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether r not material, that involves management or other
employees who have a significant role in the issuer's internal control over
financial reporting.
Date: August 3, 2015
/s/ Timothy E. Vance
CEO
CERTIFICATION
I, Gary D. Woerz, certify that:
1. I have reviewed this quarterly report of Data Call Technologies,
Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the issuer as of, and for, the
periods presented in this report;
4. The issuer's other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (as 4efined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the issuer, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
(c) Evaluated the effectiveness of the issuer's disclosure
controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the issuer's internal
control over financial reporting that occurred during the issuer's most recent
fiscal quarter (the issuer's fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the
issuer's internal control over financial reporting; and
5. The issuer's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial reporting, to the
issuer's auditors and the audit committee of the issuer's board of directors
(or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably likely to
adversely affect the issuer's ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether r not material, that involves management or other
employees who have a significant role in the issuer's internal control over
financial reporting.
Date: August 3, 2015
/s/ Gary D. Woerz
CFO
Exhibit 32.1
CERTIFICATION
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the quarterly report of Data Call Technologies, Inc. (the
“Company”) on Form 10-Q for the period ended June 30, 2015 (the
“Report”), as filed with the Securities and Exchange Commission on the date
hereof, I, Timothy E. Vance, CEO of the Company, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The
Report fully complies with the requirements of section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended; and
2. The
information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
/s/ Timothy E. Vance
Timothy E. Vance
CEO
Dated: August 3, 2015
A signed original of this written
statement required by Section 906 has been provided to Data Call Technologies, Inc. and
will be retained by the Company and furnished to the Securities and Exchange Commission or
its staff upon request.
Exhibit 32.2
CERTIFICATION
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the quarterly report of Data Call Technologies, Inc. (the
“Company”) on Form 10-Q for the period ended June 30, 2015 (the
“Report”), as filed with the Securities and Exchange Commission on the date
hereof, I, Gary Woerz, CFO and Director of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The
Report fully complies with the requirements of section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended; and
2. The
information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
/s/ Gary D. Woerz
Gary D. Woerz
CFO
Dated: August 3, 2015
A signed original of this written
statement required by Section 906 has been provided to Data Call Technologies, Inc. and
will be retained by the Company and furnished to the Securities and Exchange Commission or
its staff upon request.
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