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
September 30, 2018
Commission
file number 000-54696
DATA CALL
TECHNOLOGIES, INC.
(Exact Name Of Registrant
As Specified In Its Charter)
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Nevada
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30-0062823
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(State of Incorporation)
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(I.R.S. Employer Identification No.)
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|
|
|
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700
South Friendswood Drive, Suite E, Friendswood, TX
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77546
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(Address of Principal Executive Offices)
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(ZIP Code)
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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
¨
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Accelerated filer
¨
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Non-Accelerated
filer
¨
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Smaller reporting
company
x
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On
November 1, 2018,
the Registrant had 155,484,165 shares of common stock outstanding.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS
Back to Table of Contents
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Data Call
Technologies, Inc.
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Balance Sheets
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September 30, 2018 (Unaudited) and December
31, 2017
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Table of Contents
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September 30, 2018 (Unaudited)
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December 31, 2017
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Assets
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Current assets:
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|
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Cash
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$
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47,275
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$
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44,590
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Accounts receivable
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72,032
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73,386
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Prepaid expenses
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16,817
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6,100
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Total current assets
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136,124
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124,076
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Property
and equipment
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145,836
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144,949
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Less accumulated depreciation and amortization
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140,053
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136,651
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Net property and equipment
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5,783
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8,298
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Other
assets
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800
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800
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Total assets
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$
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142,707
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$
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133,174
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Liabilities
and Stockholders' Equity
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Current
liabilities:
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Accounts payable
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$
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21,314
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$
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18,122
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Accounts payable - related party
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3,451
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3,704
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Accrued
salaries - related party
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530
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484
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Accrued interest
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22,991
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22,616
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Convertible short-term note payable to
related party - default
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10,000
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10,000
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Deferred
revenue
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18,391
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14,446
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Short-term note payable to
related party - default
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13,715
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18,992
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Total current liabilities
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90,392
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88,364
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Total liabilities
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90,392
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88,364
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Stockholders'
equity:
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Preferred stock, $0.001 par value. Authorized 10,000,000 shares:
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Series A 12% Convertible - 800,000 shares issued and outstanding
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at September 30, 2018 and December 31, 2017
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800
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800
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Preferred stock, $0.001 par value. Authorized 1,000,000 shares:
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Series B - 10,000 shares issued and outstanding
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at
September 30, 2018 and December 31, 2017
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10
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10
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Common stock, $0.001 par value. Authorized
200,000,000 shares:
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|
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155,484,165
shares
issued and outstanding
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at September 30, 2017 and 145,484,165 at December 31, 2017
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155,484
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145,484
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Additional paid-in capital
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9,858,499
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9,851,042
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Accumulated deficit
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(9,962,478)
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(9,952,526)
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Total stockholders' equity
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52,315
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44,810
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Total liabilities and stockholders' equity
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$
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142,707
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$
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133,174
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The
accompanying notes are an integral part of these financial statements.
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DATA
CALL TECHNOLOGIES, INC.
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Condensed
Statements of Operations
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Three and
Nine Months Ended September 30, 2018 and 2017 (Unaudited)
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Back to Table of Contents
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Three
Months
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Three
Months
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Nine
Months
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Nine
Months
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ended
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ended
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ended
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ended
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September
30, 2018
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September
30, 2017
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September
30, 2018
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September
30, 2017
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Revenues
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Sales
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$
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144,902
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$
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161,537
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$
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472,973
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$
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462,079
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Cost of sales
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48,296
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36,411
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129,296
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109,816
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Gross margin
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96,606
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125,126
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343,677
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352,263
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Selling, general and administrative expenses
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95,786
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131,762
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346,134
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486,112
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Depreciation and amortization expense
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562
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5,315
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3,402
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5,657
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Total operating expenses
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96,348
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137,077
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349,536
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491,769
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Other (income) expense
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Interest income
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(2)
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(1)
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(5)
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(5)
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Interest expense
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1,366
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1,366
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4,098
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4,098
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Total expenses
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97,712
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138,442
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353,629
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495,862
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Net loss
before income taxes
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(1,006)
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(13,316)
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(9,952)
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(143,599)
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Provision
for income taxes
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-
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-
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-
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-
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Net income (loss)
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$
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(1,006)
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$
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(13,316)
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$
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(9,952)
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$
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(143,599)
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Net income
(loss) per common share - basic and diluted:
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Net income
(loss) applicable to common shareholders
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$
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(0.0
0)
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$
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(0.00)
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$
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(0.00)
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$
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(0.00)
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Weighted
average common shares:
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Basic
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155,484,165
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145,216,477
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151,088,561
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145,057,319
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Diluted
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155,484,165
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145,216,477
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151,088,561
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145,057,319
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The
accompanying notes are an integral part of these financial statements.
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DATA
CALL TECHNOLOGIES INC.
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Condensed
Statements of Cash Flows
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Nine
Months Ended September 30, 2018 and 2017 (Unaudited)
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Back to Table of Contents
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Nine Months
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Nine Months
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Ended
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Ended
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September 30, 2018
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September 30, 2017
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Cash flows from operating activities:
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Net loss
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$
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(9,952)
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$
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(143,599)
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Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
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Depreciation
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3,402
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5,657
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Stock-based
compensation
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17,327
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133,727
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Option expense
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130
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1,041
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Changes in operating assets and liabilities:
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Accounts receivable
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1,354
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(6,485)
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Prepaid expenses
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(10,717)
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8,328
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Other
assets
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-
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(7,500)
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Accounts payable
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3,192
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13,486
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Accounts payable -
related party
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(253)
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(81)
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Accrued expenses
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375
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375
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Accrued expenses - related party
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46
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24
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Deferred revenues
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3,945
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20,637
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Net cash provided by (used in) operating activities
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8,849
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25,610
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Cash flows
from investing activities:
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Cash paid
for purchase of fixed assets
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(887)
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(8,876)
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Net cash used in investing activities
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(887)
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(8,876)
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Cash flows
from financing activities:
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Principal payment on borrowing from
related party
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(5,277)
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(5,277)
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Net cash used in financing activities
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(5,277)
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(5,277)
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Net increase (decrease) in cash
|
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2,685
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(11,457)
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Cash at
beginning of year
|
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44,590
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|
53,499
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Cash at
end of period
|
$
|
47,275
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$
|
64,956
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|
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Supplemental Cash Flow Information:
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Cash paid for interest
|
$
|
3,723
|
$
|
3,723
|
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Cash paid for taxes
|
$
|
-
|
$
|
-
|
|
|
|
|
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The
accompanying notes are an integral part of these financial statements.
|
DATA CALL TECHNOLOGIES, INC.
Notes to Financial Statements
September 30, 2017
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.
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
nine-month period ended September 30, 2018 are not indicative of the results
that may be expected for the year ending December 31, 2018.
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, 2017.
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 September 30, 2018 or December 31, 2017.
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 September 30, 2018 and December 31, 2017 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
September 30, 2018 and December 31, 2017:
|
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
September
30, 2018
|
$
|
0
|
$
|
0
|
$
|
0
|
|
December
31, 2017
|
$
|
0
|
$
|
0
|
$
|
0
|
Recent Accounting Pronouncements -
In May 2017, the FASB issued Accounting Standard Update ("ASU") No.
2017-9, Compensation - Stock Compensation (Topic 718): Scope of Modification
Accounting ("ASU2017-9"), which provides guidance about which changes to the
terms or conditions of a share-based payment award require an entity to
apply modification accounting in Topic 718. Per ASU 2017-9, an entity should
account for the effects of a modification unless all the following are met:
(1) the fair value (or calculated value or intrinsic value, if such an
alternative measurement method is used) of the modified award is the same as
the fair value (or calculated value or intrinsic value, if such an
alternative measurement method is used) of the original award immediately
before the original award is modified. If the modification does not affect
any of the inputs to the valuation technique that the entity uses to value
the award, the entity is not required to estimate the value immediately
before and after the modification, (2) the vesting conditions of the
modified award are the same as the vesting conditions of the original award
immediately before the original award is modified, and (3) the
classification of the modified award as an equity instrument or a liability
instrument is the same as the classification of the original award
immediately before the original award is modified. The current disclosure
requirements in Topic 718 apply regardless of whether an entity is required
to apply modification accounting under the amendments in ASU 2017-9. ASU
2017-9 is effective for public business entities for annual and interim
periods in fiscal years beginning after December 15, 2017. Early adoption is
permitted, including adoption in any interim period, for (1) public business
entities for reporting periods for which financial statements have not yet
been issued and (2) all other entities for reporting periods for which
financial statements have not yet been made available for issuance. The
amendments in this ASU should be applied prospectively to an award modified
on or after the adoption date. The Company early adopted ASU 2017-9 and
adoption did not have a material impact on the Company's financial
statements or related disclosures.
In March, 2017, the FASB issued Update 2017-08 - Receivables -
Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization
on Purchased Callable Debt Securities. For public business entities, the
amendments in this Update are effective for fiscal years, and interim
periods within those fiscal years, beginning after December 15, 2018. For
all other entities, the amendments are effective for fiscal years beginning
after December 15, 2019, and interim periods within fiscal years beginning
after December 15, 2020. Early adoption is permitted, including adoption in
an interim period. If an entity early adopts the amendments in an interim
period, any adjustments should be reflected as of the beginning of the
fiscal year that includes that interim period.
In March 2017, the FASB issued Update 2017-07 - Compensation - Retirement
Benefits (Topic 715): Improving the Presentation of Net Periodic Pension
Cost and Net Periodic Postretirement Benefit Cost. Effective for public
business entities for annual periods beginning after December 15, 2017,
including interim periods within those annual periods. For other entities,
the amendments in this Update are effective for annual periods beginning
after December 15, 2018, and interim periods within annual periods beginning
after December 15, 2019. Early adoption is permitted as of the beginning of
an annual period for which financial statements (interim or annual) have not
been issued or made available for issuance. That is, early adoption should
be within the first interim period if an employer issues interim financial
statements. Disclosures of the nature of and reason for the change in
accounting principle are required in the first interim and annual periods of
adoption.
In August, 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows
(Topic 230): Classification of Certain Cash Receipts and Cash Payments(a
consensus of the Emerging Issues Task Force). Effective for public business
entities for fiscal years beginning after December 15, 2017, and interim
periods within those fiscal years. For all other entities, the amendments
are effective for fiscal years beginning after December 15, 2018, and
interim periods within fiscal years beginning after December 15, 2019. Early
adoption is permitted, including adoption in an interim period. If an entity
early adopts the amendments in an interim period, any adjustments should be
reflected as of the beginning of the fiscal year that includes that interim
period. An entity that elects early adoption must adopt all of the
amendments in the same period.
In September, 2016, the FASB issued ASU No. 2016-13, Financial
Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on
Financial Instruments. For public business entities that are U.S. Securities
and Exchange Commission (SEC) filers, the amendments in this Update are
effective for fiscal years beginning after December 15, 2019, including
interim periods within those fiscal years. For all other public business
entities, the amendments in this Update are effective for fiscal years
beginning after December 15, 2020, including interim periods within those
fiscal years. For all other entities, including not-for-profit entities and
employee benefit plans within the scope of Topics 960 through 965 on plan
accounting, the amendments in this Update are effective for fiscal years
beginning after December 15, 2020, and interim periods within fiscal years
beginning after December 15, 2021. All entities may adopt the amendments in
this Update earlier as of the fiscal years beginning after December 15,
2018, including interim periods within those fiscal years.
In May, 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts
with Customers (Topic 606): Narrow-Scope Improvements and Practical
Expedients. The amendments in this Update affect the guidance in Accounting
Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606),
which is not yet effective. The effective date and transition requirements
for the amendments in this Update are the same as the effective date and
transition requirements for Topic 606 (and any other Topic amended by Update
2014-09). Accounting Standards Update 2015-14,Revenue from Contracts with
Customers (Topic 606): Deferral of the Effective Date, defers the effective
date of Update 2014-09 by one year.
In April, 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts
with Customers (Topic 606): Identifying Performance Obligations and
Licensing. The amendments in this Update affect the guidance in Accounting
Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606),
which is not yet effective. The effective date and transition requirements
for the amendments in this Update are the same as the effective date and
transition requirements in Topic 606 (and any other Topic amended by Update
2014-09). Accounting Standards Update 2015-14,Revenue from Contracts with
Customers (Topic 606): Deferral of the Effective Date, defers the effective
date of Update 2014-09 by one year.
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 third quarter of 2018 was $Nil
and the expense in the third quarter of 2017 was $44,765. The expense
recognized in the nine months ended September 30, 2018 was $16,110 and the
expense in the nine months ended Jun 30, 2017 was $132,916. The January 2013
employment agreements calls for a 5 year term ending January 30, 2018,
annual compensation of $85,000 per year for services as CEO, annual
compensation of $52,000 per year for services as CFO, 500,000 options to the
CEO and 400,000 options to the CFO in addition to the 7,500,000 restricted
shares to each the CEO and CFO.
During the first quarter of 2016, the Company granted a total of 900,000
options for the purchase of up to 900,000 shares of common stock to Tim
Vance, the Company's CEO, in connection with the execution of a new 5 year
employment agreement and to Gary Woerz, the Company's newly designated CFO,
in connection with the execution of a new 5 year employment agreement. The
Company uses the Black-Scholes option valuation model to value stock options
granted. The Black- Scholes model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. The model requires management to make estimates, which are
subjective and may not be representative of actual results. The Company
recorded $Nil (September 30, 2017: $77) in stock option compensation
expense, in relation to these options for the nine months ended September
30, 2018. The Black-Scholes model calculations included stock price on date
of measurement of $0.0014, exercise price of $0.001, a term of 3 years,
computed volatility of 105% and a discount rate of 1.01%. The January 2013
employment agreements calls for a 5 year term ending January 30, 2018,
annual compensation of $85,000 per year for services as CEO, annual
compensation of $52,000 per year for services as CFO, 500,000 options to the
CEO and 400,000 options to the CFO in addition to the 7,500,000 restricted
shares to each the CEO and CFO.
During the first quarter of 2017, the Company granted a total of 900,000
options for the purchase of up to 900,000 shares of common stock to Tim
Vance, the Company's CEO, in connection with the execution of a new 5 year
employment agreement and to Gary Woerz, the Company's newly designated CFO,
in connection with the execution of a new 5 year employment agreement. The
Company uses the Black-Scholes option valuation model to value stock options
granted. The Black- Scholes model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. The model requires management to make estimates, which are
subjective and may not be representative of actual results. The Company
recorded $130 (September 30, 2017: $964) in stock option compensation
expense, in relation to these options for the nine months ended September
30, 2018. The Black-Scholes model calculations included stock price on date
of measurement of $0.002, exercise price of $0.001, a term of 3 years,
computed volatility of 124% and a discount rate of 1.93%. The January 2013
employment agreements calls for a 5 year term ending January 30, 2018,
annual compensation of $85,000 per year for services as CEO, annual
compensation of $52,000 per year for services as CFO, 500,000 options to the
CEO and 400,000 options to the CFO in addition to the 7,500,000 restricted
shares to each the CEO and CFO.
During the third quarter of 2018, the Company issued unregistered shares
as follows: (i) 3,500,000 restricted shares to Tim Vance, the Company's CEO,
in connection with the execution of a new 5 year employment agreement; and
2,000,000 restricted shares to Gary Woerz, the Company's CFO, in connection
with the execution of a new 5 year employment agreement. The restricted
shares were valued at $0.0034 per share using the closing price of the stock
on the date of grant. Total expense associated with the issuances is
calculated at $18,700 to be recognized over the 5 year term of the
agreements. The expense recognized in the third quarter of 2018 was $887
(2017: $Nil) and $1,217 for the nine months ended September 30, 2018 (2017:
$Nil). The April 30,2018 employment agreements calls for a 5 year term
ending April 30, 2023, annual compensation of $98,000 per year for services
as CEO, annual compensation of $57,200 per year for services as CFO.
During the quarter ended September 30, 2018, the CEO and CFO exercised
all warrants previously granted under the 2013 Employment Agreements. The
CEO received 2,500,000 shares of common stock and the CFO received 2,000,000
shares of common stock as a result of the cashless exercise. The options
were fully expensed during the period from January 2013 through January
2018.
During 2009, the Company received cash in the sum of $50,000 from a
shareholder for a Convertible Note Payable at a 10% interest rate. On July
30, 2015, the Company entered into an amendment agreement for the previously
convertible note. The amendment removed the prior conversion feature of the
note and amended the due date to September 30, 2016. The remaining balance
of the note as of September 30, 2018 and December 31, 2017 was $13,715 and
$18,992, respectively. The interest for the note payable has been calculated
annually and has been paid for the quarter ended September 30, 2018 and the
year ended December 31, 2017.
As of September 30, 2018 and December 31, 2017, convertible notes payable
to related party had a balance of $10,000. The note is past due and
considered in default. The interest for the note payable has been calculated
annually and has been accrued for the quarter ended September 30, 2018 and
the year ended December 31, 2017.
As of September 30, 2018 and December 31, 2017, the total due to
management for past accrued salaries is $530 and $484, respectively.
As of September 30, 2018 and December 31, 2017, the total due to
management included in accounts payable is $3,451 and $3,704, respectively.
During the nine-month periods ended September 30, 2018 and September 30,
2017, the company repaid a total of $5,277 and $5,277, respectively, to
related parties on various note payables.
(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 September 30, 2018 and
December 31, 2017. 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 September 30,
2018 or December 31, 2017. Unaccrued and undeclared dividends were $3,600
and $4,800 as of September 30, 2018 and December 31, 2017, respectively.
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 be 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.
During the first quarter of 2017, 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 Black- Scholes model was developed for use in estimating the fair
value of traded options that have no vesting restrictions and are fully
transferable. The model requires management to make estimates, which are
subjective and may not be representative of actual results. The
Black-Scholes model calculations included stock price on date of measurement
of $0.002, exercise price of $0.001, a term of 3 years, computed volatility
of 124% and a discount rate of 1.93%. 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
|
2.00
|
$0.001
|
900,000
|
The Company recorded $130 (2017: $964) in stock option
compensation expense, in relation to these options, during the nine month
period ended September 30, 2018. Total stock option compensation expense is
calculated at $1,460.
During the first quarter of 2016, 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 Black- Scholes model was developed for use in
estimating the fair value of traded options that have no vesting
restrictions and are fully transferable. The model requires management to
make estimates, which are subjective and may not be representative of actual
results. The Black-Scholes model calculations included stock price on date
of measurement of $0.0014, exercise price of $0.001, a term of 3 years,
computed volatility of 105% and a discount rate of 1.01%. Assumptions used
to determine the fair value of the stock based compensation is as follows:
|
Exercise price
|
Total Options Outstanding
|
Weighted Average Remaining Life
(Years)
|
Total Weighted Average Exercise Price
|
Options Exercisable
|
|
$0.001
|
900,000
|
0.96
|
$0.001
|
900,000
|
The Company recorded $Nil (2017: $77) in stock option compensation expense,
in relation to these options, during the nine months ended September 30,
2018. Total stock option compensation expense is calculated at $884.
During the quarter ended September 30, 2018, the CEO and CFO exercised all
warrants previously granted under the 2013 Employment Agreements. The CEO
received 2,500,000 shares of common stock and the CFO received 2,000,000
shares of common stock as a result of the cashless exercise. The options
were fully expensed during the period from January 2013 through January
2018.
The Company is authorized to issue up to 200,000,000 shares of
Common Stock of which 155,484,165 are issued and outstanding at September
30, 2018 and 145,484,165 December 31, 2017.
(4) Property and Equipment
Major classes of property and equipment together with their estimated useful lives, consisted of the following:
|
|
Years
|
|
September 30, 2018
|
|
December 31, 2017
|
|
Equipment
|
3-5
|
$
|
113,499
|
$
|
112,612
|
|
Office
furniture
|
7
|
|
21,681
|
|
21,681
|
|
Leasehold
improvements
|
3
|
|
10,656
|
|
10,656
|
|
|
|
|
145,836
|
|
144,949
|
|
Less
accumulated depreciation and amortization
|
|
|
(140,533)
|
|
(136,651)
|
|
Net property
and equipment
|
|
$
|
5,783
|
$
|
8,298
|
(5) Shareholder Notes Payable and Convertible Notes Payable
Repayments on shareholder notes payable during the nine-month period ended
September 30, 2018 totaled $5,277 (2017: $5,277).
(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. No additional
material events or transactions have occurred during this subsequent event
reporting period which required recognition or disclosure in the financial
statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATION
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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 continue to exponentially grow our
offering of our proprietary subscription services by integrating
cutting-edge information/content delivery solutions to and within the
control of retail and commercial resellers CMS manufacturers and end-users.
Our Company's services put its clients in control of real-time news, sports,
weather and other dynamic content, displayed within one or multiple
locations, spanning from local, regional to global end points, through
Digital Signage and Kiosk networks.
Our business plan continues to focus on growing our
client base by effectively offering this real-time and licensed
information/content displayed through Digital Signage and Kiosk networks,
seeking to improve the delivery, security, and variety of
information/content services to the growing Digital Signage and Kiosk
community.
Overview - What Is Digital Signage?
You've seen Digital Signage, it's everywhere. Whether
you're shopping, trying to find your way through the airport, in a taxi, or
even along the highway on your way home, it's there. LED and LCD displays
are continually replacing printed marketing materials such as signs and
placards, as well as the old-school whiteboard, for product and corporate
branding, marketing and assisted selling. The appeal of instantly updating
product videos and promotional messages on one or thousands of remotely
located displays is driving the adoption of this growing marketing platform.
Digital Signage presentations are typically comprised of repeating loops
(playlists) of information used to brand, market or sell the owner's
products and services or corporate messaging. 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 has matured, the
characteristics of the digital signage presentations have taken center-stage
requiring fresh, relevant and dynamic content mixed within the marketing
messages. Dynamic Content is key.
Digital Signage Matures
We are experiencing the Digital Signage Industry (back
then called connected signage) steadily maturing and Data Call, through its
multiple industry specific relationships, continues its engagement and
influence in the direction of the Digital Signage industry. Data Call has
been performing in this space for well over a decade. Our company has staked
claim in assisting the industry's birth and maintains its prime position to
enjoy and benefit from this industry's growth.
Early on, a business desiring to achieve commercial
benefits from the use of digital signage was often confronted by a plethora
of hardware and software solutions, all offering their own "standard" of
what digital signage should be. Typical customers for digital signage were
most-often offered expensive hardware to present digital signage with a very
minimalistic content management solution (CMS), lacking the full package of
content with which to build and tailor their systems for their target
customer base.
Those early adopters of digital signage, often had to
realize that their digital signage hardware vendors lacked the acumen to
fully provide best practice of content strategy. The tools to manage content
were provided, but not the content. From our inception, Data Call recognized
that early signage providers and their typical customers lacked that key
component - the offering of a comprehensive content package.
As the cost of platforms supporting infrastructure and
digital displays have fallen significantly, digital signage has become more
accessible to a wider range of potential users. Companies in our industry
have come to understand, as we have preached since our inception, that the
cost of Data Call's integrated, content-flexible subscription service is
extremely cost effective - and licensed for redistribution over their
networks. The benefit that Data Call continues to provide our client base,
in the form of ongoing content development, is expected to continue to
provide our customers with desirable user-friendly content and content
services.
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 to attract and retain target viewers to the
products, services, or messaging offered by typical Digital Signage clients.
For instance, a typical presentation may contain ten 15-third 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
constantly throughout the day. Those seeking to add active and dynamic
content to their digital signage presentations are educated and advised to
subscribe to Data Call's dynamic content rather than attempting to illegally
"cut and paste" or "scrape" broadcast content or RSS Feeds "not for
commercial use" of others into their digital signage presentation.
By integrating Data Call's content as a meaningful
component of digital signage presentations, our clients can legally provide
the entertainment and information content necessary to enhance the target
customer's information retention without disrupting the core message of the
presentation. Some of the Infotainment categories provided by Data Call
include news, sports, weather, financial data, the latest traffic alerts,
among many others. With such a broad range of offerings, our clients have
access to this 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 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, etc., our
research and experience has validated our long-held mantra that dynamic
content draws and retains our clients' target viewers to their digital
signage and keeps viewers engaged throughout the client presentation.
Since our inception, management has developed and
maintains strong relationships working with the leaders and associations of
the digital signage industry. Collaborative efforts have successfully
created, now industry standard, data formats and methods to facilitate the
delivery of our dynamic content more easily and efficiently for integration
into most hardware and software products.
Partners, Not Customers
Data Call's enduring 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 understand that each client
has their own content requirements. 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 are engaged in
multiple 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) Scraping RSS feeds from news
organizations (which may come and go at the provider's whim - not to mention
this practice is also illegal).
Licensing data from these premier providers has also
served us by satisfying the third criteria, objectivity. Because it is
commonly recognized that Internet content may often be unreliable,
unverifiable and biased, early on, we determined that we could not simply
use unfiltered Internet content for delivery to our clients. Our proper
licensing of data facilitates the standard of delivery and implementation by
our client/partners. Data Call does the heavy lifting by taking care of not
just the licensing, but the proper formatting of that data for consumption
by the industry utilizing our multiple formats offered. Data Call has
understood that it's Digital Signage and Kiosk clients needed a more
complete service than to endeavor the sourcing of active content from
multiple vendors. As a result, our flexible content plans permit our clients
to do "one stop shopping" for all dynamic content requirements by licensing
subscriptions through us.
We empower our clients to receive customized dynamic
content subscriptions to be displayed in a multitude of ways (banners,
tickers, scrolls or visualizations integrated with the overall
presentations). We have created "Playlist Ready" offerings and produced and
distribute multiple sets of common data layouts in the industry-standard
formats such as XML (extensible markup language), JSON (JavaScript Object
Notation), JPEG (Joint Photographic Experts Group), RSS (Rich Site Summary,
often called Really Simple Syndication), MRSS (Media RSS) and MPEG (Moving
Pictures Expert Group). With the advent of HTML5 (5th version of Hypertext
Markup Language), even more delivery methods have been made available to our
clients, many of whom have found any one or a combination of these formats
to be easily integrated into their products. Nevertheless, we have also
produced customized data formats and visualizations to the exact and
specific requirements of our clients/partners, which, we believe ensures a
higher level of reliability and ease of implementation.
Market demand, opportunity and technology converge at a
single point in time, and Data Call continues hold its position. Our
integrity persistently builds our business. Digital signage platforms
steadily evolve 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 March of 2017, we released our Direct Lynk Manager (DLManager)
customer portal at the Digital Signage Expo in Las Vegas. The DLManager
incorporates the Direct Lynk Media platform with major enhancements and
options that enable the client to self-serve in a webstore environment. This
is a moderated space that allows proper "white glove" treatment by our staff
that our clients have come to expect and appreciate. Once the client is
comfortable with navigation of the portal, they may then set up multiple
groups and displays within their account for testing results in a demo
fashion free of charge. Upon completion of their content selections and
distribution points, the client may purchase the proper number of licenses
needed to support their sections through various plans offered within the
portal.
Some of the current types of data and information, for
which a client may subscribe to through the Direct Lynk System, in multiple
formats include:
|
Ÿ
|
Headline
News top world and national news headlines;
|
|
Ÿ
|
Business
News top business headlines;
|
|
Ÿ
|
Financial
Highlights world-based financial indicators ;
|
|
Ÿ
|
Entertainment
News top entertainment headlines;
|
|
Ÿ
|
Health/Science
News top science/health headlines;
|
|
Ÿ
|
Strange News - latest off-beat news headlines;
|
|
Ÿ
|
Sports
Headlines top sports headlines
|
|
Ÿ
|
AP News Minute Video
|
|
Ÿ
|
AP This Day In History
Videos
|
|
Ÿ
|
AP Entertainment Minute
Videos
|
|
Ÿ
|
Latest
Sports Lines - latest sports odds for NFL, NBA, NHL, NCAA Football and NCAA Basketball;
|
|
Ÿ
|
National
Football League latest game schedule and in-game updates;
|
|
Ÿ
|
National
Basketball Association - latest game schedule and in-game updates;
|
|
Ÿ
|
Major
League Baseball - latest game schedule and in-game updates;
|
|
Ÿ
|
National
Hockey League - latest game schedule and in-game updates;
|
|
Ÿ
|
NCAA
Football - latest game schedule and in-game updates;
|
|
Ÿ
|
NCAA Men's
Basketball - latest game schedule and in-game updates;
|
|
Ÿ
|
Professional
Golf Association top 10 leaders continuously updated throughout the four-day tournament;
|
|
Ÿ
|
NASCAR top
10 race positions updated every 20 laps throughout the race;
|
|
Ÿ
|
Traffic
Mapping;
|
|
Ÿ
|
Animated
Doppler Radar and Forecast Maps;
|
|
Ÿ
|
Listings of
the day's horoscopes;
|
|
Ÿ
|
Listings of
the birthdays of famous persons born on each day;
|
|
Ÿ
|
Health and Wellness
|
|
Ÿ
|
Listings of
historical events which occurred on each day in history; and
|
|
Ÿ
|
Localized
Traffic and Weather Forecasts.
|
We continually add different types of content per client
requests. We provide our DLM services to our clients and other potential
customers through the Internet. All DLM Services are real-time information
services providing a wide range of up-to-date information for display. These
services are designed to work concurrently with customers' existing digital
signage systems. The Direct Lynk Messenger product is scheduled to be sunset
within the next 12 months, as DLMedia gradually moves into a legacy status with
the DLManager portal taking the forefront.
Since our inception in 2002, we have come to deeply
understand that this industry provides an exciting platform for advertisers,
including our clients, to promote, inform, educate, and entertain their
customers and employees regarding their business products, services, and
corporate communications. Through Digital Signage, and Digital Out of Home (DOOH)
businesses can use a single display or a complex, networked series of
displays and video walls to market their products and services directly at
their facilities and elsewhere to their customers and employees in real
time. Additionally, because the core of Digital Signage advertising takes
place in real time, businesses can change their marketing and messaging
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
to tailor their products, services, advertising and messaging 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 enabling our clients to create their own
Digital Signage 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 or Kiosk equipment solution - through a CMS or a standalone
player, or similar device, which receives the data from our servers online;
and (ii) an Internet connection. Our DLM 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 Systems allow customers to select from
their pre-determined data and information subscriptions offered. 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.
In December of 2017 the company completed the arduous
task of reconstructing our back-end systems architecture. This task was
initialized to exploit the latest technology advances within our space,
utilizing our data center efficiencies to further streamline our processes.
One of the greater culminations of this effort yielded the Data Call API
(Application Programming Interface) allowing our enterprise channel partners
to embed our products within their offerings to further widen our reach.
Data Call continues to grow its client base through
relationships that are gained through industry events such as seminars and
trade shows. Our company has become a leader in syndicated content and
custom content development for Digital Signage. Our licensed content is
utilized on thousands of screens in hundreds of deployments. We are truly
excited of our continued growth through our resellers, CMS manufacturers and
end users.
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, 2018 Compared to
Three Months Ended September 30, 2017
Our revenues for the three months ended September 30,
2017 were $144,902, compared to $161,537 for the three-month period ended
September 30, 2018, representing adecrease of $16,634 or approximately
10.3%. The decrease in revenues was mainly due to one customer not renewing
their subscription in time for the third quarter. The Company expects the
renewal to be completed in the fourth quarter.
Costs of sales for the three months ended September 30,
2018 were $48,296 compared to $36,411 for the three-month period ended
September 30, 2017, cost of sales for the quarter increased $11,885. These
costs are related to the licensing and royalty expense required providing
enhanced subscription services.
Gross margins for the three months ended September 30,
2018 were $96,606 compared to $125,126 as of September 30, 2017, or 66.7%
for the three-month period ended September 30, 2018 as compared to 77.5% for
the three-month period ending September 30, 2017.
Selling, General and Administrative expenses for the
three months ended September 30, 2018 were $95,786 compared to $131,762 for
the three-month period ended September 30, 2017, representing a decrease of
$35,976 from the same period in the prior year. The decrease in SG&A
expenses is mainly due to a decrease in personnel and reduction in stock
expense. Net loss for the three months ended September 30, 2018 was $1,006
compared to a net loss of $13,316 for the three-month period ended September
30, 2017 or a net change of $12,310. The Company's net loss was due to the
decrease in revenue.
Nine Months Ended September 30, 2018 Compared to Nine
Months Ended September 30, 2017
Our revenues for the nine months ended September 30, 2018
were $472,973, compared to $462,079 for the nine-month period ended
September 30, 2017, representing an increase of $10,894 or approximately
2.36%. The increase in revenues was mainly due to purchase of content by new
and existing customers.
Costs of sales for the nine months ended September 30,
2018 were $129,296, compared to $109,816 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,
2018 were $343,677 compared to $352,263 as of September 30, 2017, or 72.7%
for the nine-month period ended September 30, 2018 as compared to 76.2% for
the nine-month period ending September 30, 2017.
Selling, General and Administrative expenses for the nine
months ended September 30, 2018 were $346,134 compared to $486,112 for the
nine-month period ended September 30, 2017, representing a decrease of
$139,978 from the same period in the prior year. Net loss for the nine
months ended September 30, 2018 was $9,952 compared to a net loss of
$143,599 for the nine-month period ended September 30, 2017. The Company's
net loss was lower due to the reduction in expenses and the increase in
revenue.
Liquidity and Capital Resources
As of September 30, 2018, we had total current assets of
$136,124, consisting of $47,275 in cash, $72,032 in accounts receivable and
$16,817 in prepaid expenses and had total current liabilities of $90,392
consisting or $24,765 in accounts payable, $23,521 in accrued expenses,
$18,391 of deferred revenue and $23,715 in notes payable.
At September 30, 2018, we had a positive working capital
of $45,732 and an accumulated deficit since inception of $9,962,478. The
Company had net cash provided by operating activities of $8,849 during the
nine-month period ended September 30, 2018, which was mainly due to a net
loss of $9,952, an increase in accounts receivable of $1,354, offset by a
increase in accounts payable of $2,939, an increase in accrued expenses of
$421, an increase in prepaid expenses of $10,717, an increase in deferred
revenue of $3,945, stock compensation expense and options expense of $17,457
and depreciation expense of $3,402.
We had investing activities of $887 during the nine-month
period ended September 30, 2018 related to the purchase of property and
equipment. We used $5,277 in our financing activities during the nine months
ended September 30, 2018 for the repayment of a shareholder notes payable.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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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
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(a) Evaluation of Disclosure Controls and Procedures.
Our management, with the participation of our Principal
Executive Officer and our Principal Financial Officer, evaluated the
effectiveness of our disclosure controls and procedures as of September 30,
2018 (the "Evaluation Date"). The term "disclosure controls and procedures,"
as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means
controls and other procedures of a company that are designed to ensure that
information required to be disclosed by a company in the reports that it
files or submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the SEC's rules and
forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by a company in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the company's management,
including its principal executive and principal financial officers, as
appropriate, to allow timely decisions regarding required disclosure.
Management recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving
their objectives and management necessarily applies its judgment in
evaluating the cost-benefit relationship of possible controls and
procedures. Based on the evaluation of our disclosure controls and
procedures as of September 30, 2018, our Principal Executive Officer and
Principal Financial Officer concluded that, as of such date, our disclosure
controls and procedures were not effective at the reasonable assurance level
as described in our Annual Report on Internal Control Over Financial
Reporting filed in our Annual Report on Form 10-K.
Our principal executive officers do not expect that our
disclosure controls or internal controls will prevent all errors and all
fraud. Although our disclosure controls and procedures were designed to
provide reasonable assurance of achieving their objectives and our principal
executive officers have determined that our disclosure controls and
procedures are effective at doing so, a control system, no matter how well
conceived and operated, can provide only reasonable, not absolute assurance
that the objectives of the system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of
the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of
fraud, if any, within the Company have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented if there exists in an individual
a desire to do so. There can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions.
(b) Changes in Internal Control over Financial
Reporting
There have been no significant changes in our internal
control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) or in other factors that occurred during
the three-month period ended September 30, 2018 that have significantly
affected, or are reasonably likely to significantly affect, our internal
control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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None.
ITEM 1A. RISK FACTORS
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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, 2017, 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
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None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
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None.
ITEM 4. MINE SAFETY DISCLOSURE
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None.
ITEM 5. OTHER INFORMATION
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None.
ITEM 6. EXHIBITS
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(a) The following documents are filed as exhibits to this report on Form 10-Q/A or incorporated by reference herein. Any document incorporated by reference is identified by a parenthetical reference to the SEC filing that included such document.
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Exhibit
No.
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Description
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31.1
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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.
|
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31.2
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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.
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32.1
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Certification of CEO pursuant
to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
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32.2
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Certification of CFO pursuant
to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
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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: November 2, 2018
By:
/s/ Gary Woerz
Gary Woerz
Chief Financial Officer
(Principal Financial and Principal Accounting Officer)
Date: November 2, 2018