Data Call Technologies - Quarter Report: 2008 September (Form 10-Q)
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, 2008
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission
file number 333-131948
DATA CALL
TECHNOLOGIES, INC.
(Exact Name Of Registrant
As Specified In Its Charter)
| Nevada | 30-0062823 |
| (State of Incorporation) | (I.R.S. Employer Identification No.) |
| 600 Kenrick, Suite B-12, Houston, TX | 77060 |
| (Address of Principal Executive Offices) | (ZIP Code) |
Registrant's Telephone Number, Including Area Code: (832) 230-2376
Indicate by check
mark whether the registrant (1) has filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
| Large accelerated filer ¨ | Accelerated filer ¨ | Non-Accelerated filer ¨ | Smaller reporting company x |
At September 30, 2008, the Registrant had 82,188,100 shares of common stock outstanding.
| Item |
Description |
Page |
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|---|---|---|---|---|---|
PART I - FINANCIAL INFORMATION |
|||||
ITEM 1. |
3 | ||||
ITEM 2. |
3 | ||||
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 6 | |||
ITEM 4. |
6 | ||||
PART II - OTHER INFORMATION |
|||||
ITEM 1. |
6 | ||||
| ITEM 1A. | RISK FACTORS | 6 | |||
ITEM 2. |
6 | ||||
ITEM 3. |
6 | ||||
ITEM 4. |
7 | ||||
ITEM 5. |
7 | ||||
| ITEM 6. | EXHIBITS. | 7 | |||
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS Back to Table of Contents
The Registrant's unaudited interim financial statements are attached hereto. Unaudited Interim Financial Statements
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATION Back to Table of Contents
Some of the statements contained in this quarterly report of Data Call Technologies, Inc., Nevada corporation (hereinafter referred to as "we", "us", "our", "Company" and the "Registrant") discuss future expectations, contain projections of our plan of operation or financial condition or state other forward-looking information. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use of words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. From time to time, we also may provide forward-looking statements in other materials we release to the public.
OVERVIEW
What Is Digital Signage?Plasma and LCD displays are rapidly 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. James Bickers, senior editor of Digital Signage Today magazine recently described digital signage as “any form of business communication where a dynamic messaging device is used to take the place of, or supplement, other forms of messaging.” The key word in this definition of digital signage is “dynamic.” 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 seen, 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” characteristic of the presentation has taken center stage.
Digital Signage Comes of AgeDigital signage is coming of age and DataCall Technologies has been there from the start. Four years ago, a company wanting to take the digital signage plunge was faced with a myriad of hardware and software companies, all offering their own “vision” of what digital signage should be. They were given the tools of digital signage, but were left pretty much left to their own devices as to what to build. Those companies that took the early plunge where then faced with the fact that no one had come before them to show the rights and wrongs, the dos and don’ts of content development. But, even at this early stage of the game, DataCall recognized that these pioneers of digital signage lacked a key component that would become an integral part of any successful implementation—active content.
In the years since those early days of digital signage, the market has taken care of weeding out the weaker providers of hardware and software. Companies now have a clearer understanding of what digital signage is, what is needed for a successful implementation and the best use of content space given their more-defined and attainable goals. In the past two years, as the cost of platforms, supporting infrastructure and displays has fallen dramatically; digital signage has become more accessible to a wider range of companies. And those companies are realizing that the initial, one-time cost of getting into the game is far outweighed by the cost of staying in the game, in the form of ongoing content development. As the cost of deployment decreased, companies began focusing on attention-grabbing content. Whether the goal of the presentation was product branding, marketing or assisted selling, content became king. Active content is on everyone’s “needs” list because it is proven to draw customers to the core message and keep customers engaged throughout the presentation, And DataCall stands ready to serve this exploding market.
The Need for Speed--Active ContentActive content is that part of a digital signage presentation that is constantly updated with timely and relevant information. For instance, a typical presentation may contain ten 15-second loops that provide the primary message of the presentation, but the active content, such as that provided by DataCall, is updated with new information throughout the day. Those seeking to add active content to their digital signage presentations are advised to employ DataCall’s integrated content rather than shoehorning broadcast content into their digital signage presentation.
However, by integrating DataCall’s active content alongside their presentations, companies can provide the entertainment content so necessary in dwell-time retention without disrupting the core message of the presentation. Information categories provided by DataCall include news, weather, sports, financial data and the latest traffic alerts. With such a broad range of offerings, companies have access to the active content they need, regardless of the market they are addressing.
DataCall OpportunitiesThe opportunities for DataCall in the digital signage industry are countless. Many companies nowadays would outsource all or part of their content creation. DataCall stands ready as their outsourced provider of active content data. Whether it’s general entertainment information (news, sports, stocks, etc.) or location-targeted active content (weather, traffic, etc), research is validating the long-held assumption--it is active content that draws viewers to digital signage and keeps them engaged throughout the presentation.
Over the past four years, DataCall has worked with the industry leaders in digital signage to develop the data formats and communication methods to allow DataCall’s active content to be easily integrated into their hardware and software products.
The Stage is SetThe stage is set and the players are on their marks. The experience and lessons learned by both providers and implementers of digital signage are converging at that point where explosive growth in the industry can be realistically anticipated. DataCall is excited to be in the position they are, poised to leverage their expertise and relationships in the digital signage industry to bring its offerings to the next level.
Already, DataCall is actively developing the next generation in digital signage content. Delivering active content video is an opportunity that is in the immediate future, as well as implementation of interactive digital signage. Whether it is the use of radio frequency identification (RFID) to delivery active content directly to customers via their cell phone or engaging the customer to create their own digital signage experience via text messaging, DataCall will be at the forefront of the evolution of digital signage--just as DataCall was at the forefront of the revolution of digital signage. DataCall is poised to ride this explosive growth in digital signage not just as a service provider, but as a partner providing a key component to the most successful implementations of digital signage,
Partners, Not CustomersDataCall’s approach to customer relations is to not accumulate customers, but to build partnerships. Each DataCall partner is as unique as the digital signage market they service—and each has their own requirements for active content. In developing active content for digital signage, DataCall identified three factors that had to be addressed—reliability, objectivity and ease of implementation. To address the reliability requirement, DataCall opted to license information from the leaders news, weather, sports and financial data rather than “scrapping” information from the Internet (which can be illegal) or pulling RSS feeds (which may come and go at the provider’s whim). Licensing data from these providers also satisfied the second requirement—objectivity. The Internet is as littered of slanted opinions and hidden agendas as there are users of the Internet, So arbitrarily allowing these “news” sources to go unchecked into DataCall’s active content was completely unacceptable. Finally, the third requirement—ease of implementation—was address by both DataCall’s licensing of data and the method by which it was disseminated to their partners.
DataCall understood that digital signage implementers had larger issues to tackle than the multitude of licenses that would need to be managed and the varying formats of the source data to be dealt with if active content was obtained from multiple vendors. DataCall offers a “one stop shop” for all of their active content requirements covered by a single license. Ease of implementation also would require that the multiple formats of all DataCall’s data providers be distilled into a single format. Because active content may be displayed in a multitude of ways (banners, tickers, scrolls or artistically integrated with the overall presentation), DataCall produced a set of common data layouts in the industry-standard XML (extensible markup language) format. Many partners find these formats to be easily integrated into their products, but in several cases, DataCall has produced customized data formats to the exact requirements of their partners. This customization ensures the highest level of reliable and ease of integration possible.
Go For LaunchThe stage is set and the players are on their marks. Market demand, opportunity and technology converge at a single point in time, and DataCall is there. 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.
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our financial statements.
Since our filing of our annual report, we have implemented numerous cost management measurements to reduce monthly expenditures. Our current rate of monthly cash expenditures are now averaging approximately $49,,000 per month, compared to an approximate monthly average of $104,000 for the nine-month period ended September 30, 2007. This represents a 5% reduction in expenses over nine months of the prior year. Furthermore, this is a 5% reduction from the previous quarter. We will continue to maintain these efforts to streamline operations, as we focus on increasing sales and gross revenues over the next 12 months. We currently have no initial plans to increase the number of employees we employ. However, as new opportunities present themselves, we may find it necessary to bring human resources on staff to accommodate the preparations for those opportunities.
Recent partner, marketing and/or customer agreements have allowed us to expand our product line into the Public Access Broadcast arena (i.e. Leightronix), as well as providing our product line to an industry leader in the ad-revenue based model of digital signage (i.e., AdTek Media). Additionally, we recently engaged Lamar Advertising, to provide Data Call content to their digital billboard solutions being implemented throughout the country. Moving forward, we feel these three vertical market opportunities will provide strong positive growth over the next 36 months.
Assuming we have sufficient working capital moving forward, we plan to continue to grow our business and market our Direct Lynk System to potential customers over the course of the next twelve months by marketing our technology to digital signage manufacturers, trade magazines, trade shows and call centers. We will also continue, on a limited basis, our practice of providing potential customers free trials of the Direct Lynk System, for which we will receive no revenue, in an attempt to build both product awareness for the Direct Lynk System and to potentially drive sales in the future, which in the opinion of management, has been successful in building brand awareness for the Direct Lynk System and in bringing in new clients for subscriptions.
We are planning and negotiating with current vendors and partners, to expand our offering to other lateral markets. Hardware, software, and sales processes are currently being modified and/or developed. Additionally, we are negotiating with a national broadcast news group to provide localized and repurposed video clips, through a Data Call Technologies licensing agreement, to the digital signage space.
Projected revenue for the fourth quarter ending December 31, 2008 is $107,000. This represents a 27% increase over the previous quarter. Projected cash expenses for the fourth quarter ending December 31, 2008 is $88,000. Projected revenue for the next fiscal year is $1,100,000, with projected cash expenses of $685,000. The Company’s operations are expected to generate positive cash flow from operations in the fourth quarter of 2008. Effective July 1, 2008, executive salaries were reduced to $7,292 monthly, which represents a 32% reduction in monthly executive salaries.
Three and Nine Months Ended September 30, 2008 Compared to Three and Nine Months Ended September 30, 2007
Sales revenue for the three and nine months ended September 30, 2008 were $90,572 and $244,944, respectively, compared to $26,733 and $82,146, respectively, for the three and nine-month periods ended September 30, 2007 representing an increase of 238.80% and 198.18%, respectively, from the prior period. The increase in sales revenue was mainly due to an increase subscriptions from current customers and new customer subscriptions.
Costs of sales for the three and nine months ended September 30, 2008 were $23,596 and $47,465, respectively, compared to $15,720 and $35,927, respectively, for the three and nine-month periods ended September 30, 2007. Costs of sales do not increase in direct proportion to an increase in sales revenue because costs of sales are related to the amount bandwidth required to provide the subscription services.
Gross margins for the three and nine months ended September 30, 2008 were 73.94% and 80.62%, respectively, compared to 41.19% and 56.26%, respectively, for the three and nine-month periods ended September 30, 2007. The increase in gross margin is directly related to the explanation of decreases in costs of sales in the paragraph directly above.
Operating expenses for the three and nine months ended September 30, 2008 were $271,608 and $735,562, respectively, compared to $362,832 and $1,252,207, respectively, for the three and nine-month periods ended September 30, 2007 representing a decrease of $91,224 or 25.14% and $516,654 or 41.11% decrease from the prior period. The significant decrease in operating expenses is due to a decrease in compensation costs.
Net losses for the three and nine months ended September 30, 2008 were $204,627 and $538,083, respectively, compared to $351,819 and $1,205,988, respectively, for the three and nine-month periods ended September 30, 2007. The significant decrease in our net losses are due to the increase in sale revenues and a decrease in operating expenses as noted above.
Liquidity and Capital Resources
We had total current assets of $33,011, consisting of $4,400 of cash and $28,611 in accounts receivable. We had total current liabilities of $156,952 as of September 30, 2008, which represented $61,119 of accounts payable and $95,833 in accrued salaries.
We had total non-current liabilities of $204,400 as of September 30, 2008, consisting of redeemable common stock. Redeemable common stock consisted of shares of common stock sold to certain investors from 2003-2006, which investors may have ongoing rescission rights, even though those investors previously rejected our rescission offer to them to return their shares of our common stock for their original subscription cost plus statutory interest. While we are obligated to carry the $204,400 in redeemable common stock on our balance sheet as a liability, we believe that the likelihood of any of the shareholders who hold those shares exercising their remaining rescission rights, if any, is very small. We had negative working capital of $123,941 and a deficit accumulated during the development stage of $8,297,378 as of September 30, 2008.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Back to Table of Contents
We have not entered into, and do not expect to enter into, financial instruments for trading or hedging purposes.
ITEM 4. CONTROLS AND PROCEDURES Back to Table of Contents
Evaluation of disclosure controls and procedures. As of September 30, 2008, the Company's chief executive officer and chief financial officer conducted an evaluation regarding the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act. Based upon the evaluation of these controls and procedures, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
Changes in internal controls. During the quarterly period covered by this report, no changes occurred in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS Back to Table of Contents
None.
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-KSB for the year ended December 31, 2007, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-KSB are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Back to Table of Contents
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES Back to Table of Contents
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Back to Table of Contents
None.
ITEM 5. OTHER INFORMATION Back to Table of Contents
None.
ITEM 6. EXHIBITS Back to Table of Contents
(a) The following documents are filed as exhibits to this report on Form 10-Q or incorporated by reference herein. Any document incorporated by reference is identified by a parenthetical reference to the SEC filing that included such document.
Exhibit No. |
Description |
|---|---|
| 31.1 | Certification of CEO pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 31.2 | Certification of CFO pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 32.1 | Certification of CEO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 32.2 | Certification of CFO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
/s/ Timothy E.
Vance
Timothy E. Vance
CEO
Dated: November 14, 2008
/s/ Larry Mosley
Larry Mosley
CFO
Dated: November 14, 2008
Unaudited Interim Financial Statements Back to Table of Contents |
||||
| DATA CALL TECHNOLOGIES, INC. | ||||
| (A Development Stage Company) | ||||
| Balance Sheets | ||||
| September 30, 2008 (Unaudited) and December 31, 2007 (Audited) | ||||
Assets |
||||
| September 30, 2008 | December 31, 2007 (Audited) |
|||
| Current assets: | ||||
| Cash | $ | 4,400 | $ | 30,413 |
| Accounts receivable | 28,611 | 20,644 | ||
| Total current assets | 33,011 | 51,057 | ||
| Property and equipment | 118,304 | 118,304 | ||
| Less accumulated depreciation and amortization | 80,564 | 63,200 | ||
| Net property and equipment | 37,740 | 55,104 | ||
| Other assets | 5,255 | 5,255 | ||
| Total assets | $ | 76,006 | $ | 111,416 |
Liabilities and Stockholders' Deficiency |
||||
| Current liabilities: | ||||
| Accounts payable | 61,119 | 69,073 | ||
| Accrued salaries and related liabilities | 95,833 | 52,550 | ||
| Total current liabilities | 156,952 | 121,623 | ||
| Redeemable common stock | 204,400 | 204,400 | ||
| Total liabilities | 361,352 | 326,023 | ||
| Stockholders' equity: | ||||
| Preferred stock, $.001 par value. Authorized 10,000,000 shares: None issued | - | - | ||
| Common stock, $.001 par value. Authorized 200,000,000 shares: | ||||
| 82,188,100 shares issued and outstanding at September 30, 2008, | ||||
| 73,068,100 shares issued and outstanding at December 31, 2007 | 82,188 | 73,068 | ||
| Additional paid-in capital | 8,109,290 | 7,744,565 | ||
| Deficit accumulated during the development stage | (8,297,378) | (7,759,295) | ||
| (105,900) | 58,338 | |||
| Deferred stock compensation | (179,446) | (272,945) | ||
| Total stockholders' equity (deficit) | (285,346) | (214,607) | ||
| Total liabilities and stockholders' equity | $ | 76,006 | $ | 111,416 |
| The accompanying notes are an integral part of these financial statements. | ||||
| DATA CALL TECHNOLOGIES, INC. | ||||||||||
| (A Development Stage Company) | ||||||||||
| Statements of Operations | ||||||||||
| Three and Nine Months Ended September 30, 2008 and 2007 (Unaudited) | ||||||||||
| Cumulative | ||||||||||
| Three Months | Three Months | Nine Months | Nine Months | totals from | ||||||
| Ended | Ended | Ended | Ended | inception to | ||||||
| September 30, 2008 | September 30, 2007 | September 30, 2008 | September 30, 2007 | September 30, 2008 | ||||||
| Revenues | ||||||||||
| Sales | $ | 90,572 | $ | 26,733 | $ | 244,944 | $ | 82,146 | $ | 449,486 |
| Cost of sales | 23,596 | 15,720 | 47,465 | 35,927 | 148,162 | |||||
| Gross margin | 66,976 | 11,013 | 197,479 | 46,219 | 301,324 | |||||
| Operating expenses: | ||||||||||
| Employee compensation | 123,585 | 131,903 | 357,555 | 723,477 | 4,800,162 | |||||
| Contractual services | - | 135,000 | - | 160,000 | 916,074 | |||||
| Legal and accounting | 96,658 | 34,441 | 178,981 | 154,114 | 976,582 | |||||
| Product development costs | 19,014 | 6,966 | 21,673 | 22,022 | 428,588 | |||||
| Travel | 1,089 | 20,955 | 14,513 | 97,598 | 406,091 | |||||
| Office and equipment rental | 11,967 | 8,783 | 32,165 | 25,534 | 170,236 | |||||
| Office supplies and expenses | 869 | 919 | 6,839 | 13,744 | 179,617 | |||||
| Telephone | 3,598 | 5,084 | 15,191 | 18,915 | 122,567 | |||||
| Advertising | 10,321 | 10,919 | 77,453 | 12,919 | 387,376 | |||||
| Other | 294 | 1,284 | 13,828 | 4,150 | 130,845 | |||||
| Depreciation expense | 4,208 | 6,578 | 17,364 | 19,734 | 80,564 | |||||
| Total operating expenses | 271,603 | 362,832 | 735,562 | 1,252,207 | 8,598,702 | |||||
| Net loss before income taxes | (204,627) | (351,819) | (538,083) | (1,205,988) | (8,297,378) | |||||
| Provision for income taxes | - | - | - | - | - | |||||
| Net loss | $ | (204,627) | $ | (351,819) | $ | (538,083) | $ | (1,205,988) | $ | (8,297,378) |
| Net loss per common share - basic and diluted: | ||||||||||
| Net loss applicable to common shareholders | $ | (0.00) | $ | (0.01) | $ | (0.01) | $ | (0.02) | ||
| Weighted average common shares: | ||||||||||
| Basic and Diluted | 79,959,050 | 67,438,100 | 76,931,350 | 63,837,100 | ||||||
| The accompanying notes are an integral part of these financial statements. | ||||||||||
| DATA CALL TECHNOLOGIES INC. | ||||||
| (A Development Stage Company) | ||||||
| Statements of Cash Flows | ||||||
| Nine Months Ended September 30, 2008 and 2007 (Unaudited) | ||||||
| Cumulative | ||||||
| Nine Months | Nine Months | totals from | ||||
| Ended | Ended | inception to | ||||
| September 30, 2008 | September 30, 2007 | September 30, 2008 | ||||
| Cash flows from operating activities: | ||||||
| Net loss | $ | (538,083) | $ | (1,205,988) | $ | (8,297,378) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
| Depreciation | 17,364 | 19,734 | 80,564 | |||
| Common stock issued for services | 96,125 | 260,000 | 3,503,707 | |||
| Stock options and warrants issued for services | 37,995 | 142,936 | 193,596 | |||
| Amortization of deferred compensation | 93,499 | 67,499 | 276,554 | |||
| (Increase) decrease in operating assets: | ||||||
| Accounts receivable | (7,967) | (6,746) | (28,611) | |||
| Other assets | - | - | (5,255) | |||
| Increase (decrease) in operating liabilities: | ||||||
| Accounts payable | (7,954) | (13,515) | 65,119 | |||
| Accrued salaries and related liabilities | 118,008 | - | 166,558 | |||
| Net cash used in operating activities | (191,013) | (736,080) | (4,045,146) | |||
| Cash flows from investing activities | ||||||
| Purchase of property and equipment | - | - | (118,304) | |||
| Net cash used in investing activities | - | - | (118,304) | |||
| Cash flows from financing activities: | ||||||
| Proceeds from issuance of common shares under private placement | 165,000 | 495,000 | 3,913,450 | |||
| Proceeds from issuance of redeemable common shares under private placement | - | - | 204,400 | |||
| Proceeds from short-term borrowing from shareholder | - | - | 50,000 | |||
| Net cash provided by financing activities | 165,000 | 495,000 | 4,167,850 | |||
| Net increase (decrease) in cash | (26,013) | (241,080) | 4,400 | |||
| Cash at beginning of year | 30,413 | 281,699 | - | |||
| Cash at end of year | $ | 4,400 | $ | 40,619 | $ | 4,400 |
| Supplemental schedule of cash flow information: | ||||||
| Non-cash financing transactions: | ||||||
| Issuance of common shares for conversion of debt | $ | 74,725 | $ | 50,000 | $ | 124,725 |
| The accompanying notes are an integral part of these financial statements. | ||||||
DATA CALL TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2008
Data Call Technologies, Inc. (the "Company") was incorporated under the laws of the State of Nevada in 2002. The Company's mission is to integrate cutting-edge information delivery solutions that are currently deployed by the media, and put them within the control of retail and commercial enterprises. The Company's software and services put its clients in control of real-time advertising, news, and other content, including emergency alerts, within one building or 10,000, local or thousands of miles away. The Company is as development stage company.
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-QSB. 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 nine-month period ended September 30, 2008 are not indicative of the results that may be expected for the year ending December 31, 2008.
As contemplated by the Securities and Exchange Commission (SEC) under Rules of Regulation S-B, 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-KSB for the year ended December 31, 2007.
(2) 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.
(3) Recent Accounting Pronouncements
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115,” which is effective for fiscal years beginning after November 15, 2007. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. This statement also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. Unrealized gains and losses on items for which the fair value option is elected would be reported in earnings.
In December 2007, the FASB issued SFAS No. 141R, "Business Combinations". SFAS 141R requires the acquiring entity in a business combination to record all assets acquired and liabilities assumed at their respective acquisition-date fair values, changes the recognition of assets acquired and liabilities assumed arising from contingencies, changes the recognition and measurement of contingent consideration, and requires the expensing of acquisition-related costs as incurred. SFAS 141R also requires additional disclosure of information surrounding a business combination, such that users of the entity's financial statements can fully understand the nature and financial impact of the business combination. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date.
In December 2007, the FASB issued SFAS No. 160. “Noncontrolling Interests in Consolidated Financial Statements-and Amendment of ARB No. 51.” SFAS 160 establishes accounting and reporting standards pertaining to ownership interests in subsidiaries held by parties other than the parent, the amount of net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest, and the valuation of any retained noncontrolling equity investment when a subsidiary is deconsolidated. This statement also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008.
Management has reviewed these new standards and believes that they have no impact on the financial statements of the Company at this time; however, they may apply in the future.
(4) Capital Stock, Options and Warrants
The Company is authorized to issue up to 10,000,000 shares of Preferred Stock, $.001 par value per share, of which none are presently outstanding. The Preferred Stock may be issued in one or more series, the terms of which may be determined at the time of issuance by the Board of Directors, without further action by stockholders, and may include voting rights (including the right to vote as a series on particular matters), preferences as to dividends and liquidation, conversion, redemption rights and sinking fund provisions.
The Company is authorized to issue up to 200,000,000 shares of Common Stock, of which 82,188,100 shares were issued and outstanding at September 30, 2008, and 17,600,000 shares were reserved for issuance pursuant to the exercise of outstanding stock options and warrants as of September 30, 2008.
In addition to the amount of common shares issued and outstanding as noted above, 2,044,000 shares were issued and are in the hands of shareholders at September 30, 2008; however, these shares are not included in the Company’s permanent equity at September 30, 2008. These shares are considered “Redeemable Common Stock” and are included in the financial statements as a long-term liability.
The following table summarizes information about options and warrants outstanding at September 30, 2008 and 2007:
Shares |
Weighted Average Exercise Price September 30, 2008 |
Shares |
Weighted Average Exercise Price September 30, 2007 |
||||
Outstanding at beginning of period |
17,600,000 |
$ |
.10 |
3,500,000 |
$ |
.10 |
|
Granted |
- |
.10 |
14,100,000 |
.10 |
|||
Exercised |
- |
- |
- |
- |
|||
Canceled |
- |
- |
- |
- |
|||
Outstanding at end of period |
17,600,000 |
$ |
.10 |
17,600,000 |
$ |
.10 |
|
Weighted average fair value of options and warrants granted during the period |
.10 |
.10 |
None |
$ |
.10 |
||
| Exercisable at end of period | 17,600,000 |
$ |
.10 |
17,600,000 |
.10 |
Stock-based compensation is composed of the following for the six-months ended September 30, 2008 and 2007:
2008 |
2007 |
|||
Stock-based compensation at fair value |
$ |
146,125 |
$ |
260,000 |
Options and warrants |
37,995 |
142,936 |
||
Amortization of deferred stock compensation |
93,499 |
67,499 |
||
| Cancellation of previously issued shares | (50,000) |
- |
||
Total stock-based compensation expense |
$ |
227,619 |
$ |
470,435 |