DCLT Data Call Technologies Inc (PK)

Recent Accounting Pronouncements

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 has 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:

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 2016. 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 September 30, 2016 Compared to Three Months Ended September 30, 2015

Our revenues for the three months ended September 30, 2016 were $167,602, compared to $153,697 for the three-month period ended September 30, 2015, representing an increase of $13,905 or approximately 9.0%. The increase in revenues was mainly due to additional sales and marketing efforts.

Costs of sales for the three months ended September 30, 2016 were $41,076 compared to $39,244 for the three-month period ended September 30, 2015, cost of sales for the quarter increased $1,832. These costs are related to the licensing and royalty expense required providing enhanced subscription services.

Gross margins for the three months ended September 30, 2016 were $126,526 compared to $114,453 as of September 30, 2015, or 75.5% for the three-month period ended September 30, 2016 as compared to 74.5% for the three month period ending September 30, 2015.

Selling, General and Administrative expenses for the three months ended September 30, 2016 were $163,104 compared to $160,711 for the three-month period ended September 30, 2015, representing an increase of $2,393 from the same period in the prior year. The increase in SG&A expenses is mainly due to an increase in personnel. Net loss for the three months ended September 30, 2016 was $37,988 compared to a net loss of $47,834 for the three-month period ended September 30, 2015. The Company's net loss was significantly lower for the third quarter of 2016 due to increased operational efficiencies and the increase in new sales. The Company has calculated that net income from operations for the third quarter of 2016 would have been $7,039 if the non-cash items (expense for stock for services and options which totaled $45,027) were added back to the current net loss.

Nine months Ended September 30, 2016 Compared to Nine months Ended September 30, 2015

Our revenues for the nine months ended September 30, 2016 were $494,798, compared to $458,245 for the nine-month period ended September 30, 2015, representing an increase of $36,553 or approximately 8.0%. The increase in revenues was mainly due to additional sales and marketing efforts.

Costs of sales for the nine months ended September 30, 2016 were $118,528, compared to $109,382 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 nine months ended September 30, 2016 were $ 376,270 compared to $348,863 as of September 30, 2015, or 76.1% for the nine month period ended September 30, 2016 as compared to 76.1% for the nine month period ending September 30, 2015.

Selling, General and Administrative expenses for the nine months ended September 30, 2016 were $517,285 compared to $518,666 for the nine month period ended September 30, 2015, representing a decrease of $1,381 from the same period in the prior year. The decrease in SG&A expenses is mainly due to managements ongoing efforts to increase operational efficiencies. Net loss for the nine months ended September 30, 2016 was $144,340 compared to a net loss of $175,151 for the nine month period ended September 30, 2015. The Company's net loss was significantly lower for the third quarter of 2016 due to increased operational efficiencies and the increase in new sales. The Company has calculated that net loss from operations for the nine month period ended September 30, 2016 would have been $5,152 if the non-cash items (expense for stock for services and options which totaled $149,492 were added back to the current net loss.

Liquidity and Capital Resources

As of September 30, 2016, we had total current assets of $159,330, consisting of $ 72,049 in cash, $79,281 in accounts receivable and $8,000 in prepaid expenses and had total current liabilities of $90,993 consisting or $29,415 in accounts payable, $23,791 in accrued expenses and $37,787 in notes payable.

At September 30, 2016, we had a positive working capital of $68,337 and an accumulated deficit since inception of $9,701,535. The Company had net cash used by operating activities of $8,484 during the nine-month period ended September 30, 2016, which was mainly due to a net loss of $144,340, stock for services and options expense of $149,492, an increase in accounts receivable of $22,435, offset by an increase in accounts payable of $6,965, an increase in accrued expenses of $2,008, a decrease in prepaid expenses of $3,370, depreciation expense of $513 and a decrease in deferred revenue of $4,057.

We had no investing activities during the nine-month period ended September 30, 2016. We used $5,277 in our financing activities during the nine months ended September 30, 2016 for the repayment of a shareholder notes payable.

As of September 30, 2016, 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 as provided under the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013) , our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were ineffective as September 30, 2016. Management has identified corrective actions to address the weaknesses and plans to implement them during the fourth quarter of 2016.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company's internal control over financial reporting during the third quarter of 2016, which were identified in connection with management's evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.