Data Call Technologies - Annual Report: 2012 (Form 10-K)

Report of Independent Registered Public Accounting Firm

To the Board of Directors
Data Call Technologies, Inc.
Friendswood, Texas

We have audited the accompanying balance sheet of Data Call Technologies, Inc. as of December 31, 2012 and the related statements of operations, stockholders’ equity (deficit) and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Data Call Technologies, Inc. as of December 31, 2011, were audited by other auditors whose report dated April 10, 2012 expressed an unqualified opinion on those statements.

We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Data Call Technologies, Inc. as of December 31, 2012 and the results of its operations and cash flows for the period described above in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 7 to the financial statements, the Company suffered a negative working capital balance, has limited cash on hand and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 7. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ M&K CPAS, PLLC
www.mkacpas.com
Houston, Texas
March 27, 2013

DATA CALL TECHNOLOGIES, INC.
Balance Sheets
December 31, 2012 and 2011
		2012		2011
Assets
Current assets:
Cash	$	14,568	$	44,851
Accounts receivable		317,164		47,224
Prepaid expenses		3,500		-
Total current assets		335,232		92,075
Property and equipment		121,175		121,175
Less accumulated depreciation and amortization		119,587		117,122
Net property and equipment		1,588		4,053
Other assets		1,755		5,255
Total assets	$	338,575	$	101,383
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable	$	89,998	$	40,889
Accrued salaries - related party		103,771		116,617
Accrued interest - related party		16,000		10,500
Convertible short-term note payable to shareholder		10,000		10,000
Deferred revenue		269,834		82,800
Short-term note payable to shareholder		50,000		50,000
Total current liabilities		539,603		310,806
Total liabilities		539,603		310,806
Stockholders' equity:
Preferred stock, $0.001 par value. Authorized 10,000,000 shares:
Series A 12% Convertible - 800,000 shares issued and outstanding
at December 31, 2011 and at December 31, 2010		800		800
Common stock, $0.001 par value. Authorized 200,000,000 shares:
19,976,421 shares issued and outstanding at December 31, 2012,
19,976,421 shares issued and outstanding at December 31, 2011		19,976		19,976
Additional paid-in capital		8,772,514		8,772,514
Accumulated deficit		(8,994,318)		(9,002,713)
Total stockholders' equity (deficit)		(201,028)		(209,423)
Total liabilities and stockholders' equity (deficit)	$	338,575	$	101,383
The accompanying notes are an integral part of these financial statements.

DATA CALL TECHNOLOGIES, INC.
Statements of Operations
Years ended December 31, 2012 and 2011
		2012		2011
Revenues
Sales	$	556,363	$	548,689
Cost of sales		116,045		121,297
Gross margin		440,318		427,392
Selling, general and administrative expenses		429,458		534,621
Depreciation and amortization expense		2,465		2,080
Total operating expenses		431,923		536,701
Net loss before income taxes		8,395		(109,309)
Provision for income taxes		-		-
Net income (loss)	$	8,395	$	(109,309)
Net income (loss) per common share - basic and diluted:
Net income (loss) applicable to common shareholders	$	0.00	$	(0.00)
Weighted average common shares:
Basic		19,976,421		19,909,753
Diluted		20,170,368		19,909,753
The accompanying notes are an integral part of these financial statements.

DATA CALL TECHNOLOGIES, INC.
Statements of Stockholders' Equity (Deficit)
Years ended December 31, 2012 and 2011
															Stockholders'
	Preferred Stock				Common Stock				Additional		Accumulated		Unearned		equity
	shares		amount		shares		amount		paid in capital		deficit		compensation		(deficit)
Balance, December 31, 2009	-	$	-		17,176,421	$	17,176	$	8,476,277	$	(8,551,560)	$	(50,281)	$	(108,388)
Issuance of preferred shares under private placement	800,000		800		-		-		39,200		-		-		40,000
Stock-based compensation expense					2,700,000		2,700		224,800		-		(110,000)		117,500
Amortization of deferred stock compensation	-		-		-		-		-		-		77,782		77,782
Compensation for stock options and warrants	-		-		-		-		22,337		-		-		22,337
Net loss	-		-		-		-		-		(341,844)		-		(341,844)
Balance, December 31, 2010	800,000		800		19,876,421		19,876		8,762,614		(8,893,404)		(82,499)		(192,613)
Issuance of common stock					100,000		100		9,900		-		-		10,000
Amortization of deferred stock compensation	-		-		-		-		-		-		82,499		82,499
Net loss	-		-		-		-		-		(109,309)		-		(109,309)
Balance, December 31, 2011	800,000		800		19,976,421		19,976		8,772,514		(9,002,713)		-		(209,423)
Net loss	-		-		-		-		-		8,395		-		8,395
Balance, December 31, 2012	800,000	$	800		19,976,421	$	19,976	$	8,772,514	$	(8,994,318)	$	-	$	201,028
The accompanying notes are an integral part of these financial statements.

DATA CALL TECHNOLOGIES INC.
Statements of Cash Flows
Years ended December 31, 2012 and 2011
		2012		2011
Cash flows from operating activities:
Net income (loss)	$	(8,395)	$	(109,309)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization of property and equipment		2,465		2,079
Amortization of deferred stock-based compensation		-		82,499
(Increase) decrease in operating assets:
Accounts receivable		(269,940)		(20,752)
Prepaid expenses		-		30,000
Increase (decrease) in operating liabilities:
Accounts payable		49,109		5,819
Accrued salaries - related party		(7,346)		(2,764)
Deferred revenues		187,034		14,126
Net cash provided by (used in) operating activities		(30,283)		1,798
Cash flows from investing activities
Capital expenditure for equipment		-		-
Net cash used in investing activities		-		-
Cash flows from financing activities:
Procceds from sale of common stock		-		10,000
Proceeds from sale of short-term borrowing from shareholder		-		10,000
Net cash provided by financing activities		-		20,000
Net increase (decrease) in cash		(30,283)		21,799
Cash at beginning of year		44,851		23,052
Cash at end of year	$	14,568	$	44,851
The accompanying notes are an integral part of these financial statements.

DATA CALL TECHNOLOGIES, INC.
Notes to Financial Statements
December 31, 2012 and 2011

(1) Summary of Significant Accounting Policies

Organization, Ownership and Business

Data Call Technologies, Inc. (the "Company") was incorporated under the laws of the State of Nevada in 2002. The Company's mission is to integrate cutting-edge information delivery solutions that are currently deployed by the media, and put them within the control of retail and commercial enterprises. The Company's software and services put its clients in control of real-time advertising, news, and other content, including emergency alerts, within one building or 10,000, local or thousands of miles away.

The Company’s financial statements are presented in accordance with accounting principles generally accepted (GAAP) in the United States. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and result of operations for the periods presented have been reflected herein.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid investment instruments purchased with original maturities of three months or less to be cash equivalents. There were no cash equivalents as of December 31, 2012 or 2011.

Revenue Recognition

Company recognizes revenues based on monthly fees for services provided to customers. Some customers prepay for annual services and the Company defers such amounts and amortizes them into revenues as the service is provided. The Company recognizes revenue in accordance with ASC 605 (1) when the price is fixed and determinable, (2) persuasive evidence of an arrangement exists, (3) the service has been provided, and (4) collectability is assured.

Accounts Receivable

Accounts receivable consist primarily of trade receivables. The Company provides an allowance for doubtful trade receivables equal to the estimated uncollectible amounts. That estimate is based on historical collection experience, current economic and market conditions and a review of the current status of each customer’s trade accounts receivable. The allowance for doubtful trade receivables was $0 as of December 31, 2012 and 2011 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.

Management's Estimates and Assumptions

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses. Actual results could differ from these estimates.

Earnings (Loss) Per Share

The basic net loss per common share is computed by dividing the net loss by the weighted average number of shares outstanding during a period. Diluted net loss per common share is computed by dividing the net loss, adjusted on an as if converted basis, by the weighted average number of common shares outstanding plus potential dilutive securities using the treasury stock method. For the years ended December 31, 2012 and 2011, potential dilutive securities that had an anti-dilutive effect were not included in the calculation of diluted net loss per common share. These securities include options and warrants to purchase shares of common stock. Under the treasury stock method, an increase in the fair market value of the Company’s common stock results in a greater dilutive effect from outstanding options, restricted stock awards and common stock warrants.

	Years Ended December 31,
		2012		2011
Net income (loss)	$	8,395	$	(109,309)
Net income (loss) per common share:
Basic	$	0.00	$	(0.00)
Diluted	$	0.00	$	(0.00)
Weighted average number of common shares outstanding:
Basic		19,976,421		19,909,753
Diluted		20,170,368		19,909,753

As of December 31, 2012 and 2011 there are no potentially dilutive securities that are anti-dilutive.

Emerging Growth Company

We qualify as an “emerging growth company” under the 2012 JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:

- have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
- comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
- submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and
- disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation.

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

Rule 12b-2 of the Securities Exchange Act of 1934, as amended, defines a Smaller Reporting Company as an issuer that is not an investment company, an asset-backed issuer), or a majority-owned subsidiary of a parent that is not a smaller reporting company and that:

- Had a public float of less than $ 75 million as of the last business day of its most recently completed second fiscal quarter, computed by multiplying the aggregate worldwide number of shares of its voting and non-voting common equity held by non-affiliates by the price at which the common equity was last sold, or the average of the bid and asked prices of common equity, in the principal market for the common equity; or

- In the case of an initial registration statement under the Securities Act or Exchange Act for shares of its common equity, had a public float of less than $75 million as of a date within 30 days of the date of the filing of the registration statement, computed by multiplying the aggregate worldwide number of such shares held by non-affiliates before the registration plus, in the case of a Securities Act registration statement, the number of such shares included in the registration statement by the estimated public offering price of the shares; or

- In the case of an issuer whose public float as calculated under paragraph (1) or (2) of this definition was zero, had annual revenues of less than $50 million during the most recently completed fiscal year for which audited financial statements are available.

We qualify as a Smaller Reporting Company. Moreover, as a Smaller Reporting Company and so long as we remain a Smaller Reporting Company, we benefit from the same exemptions and exclusions as an Emerging Growth Company. In the event that we cease to be an Emerging Growth Company as a result of a lapse of the five year period, but continue to be a Smaller Reporting Company, we would continue to be subject to the exemptions available to Emerging Growth Companies until such time as we were no longer a Smaller Reporting Company.

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 & Liabilities within the fair value hierarchy utilized to measure fair value on a recurring basis as of December 31, 2012 and 2011:

		(Level 1)		(Level 2)		(Level 3)
2012	$	0	$	0	$	0
2011	$	0	$	0	$	0

New Pronouncements

In October 2012, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2012-04, “Technical Corrections and Improvements” in Accounting Standards Update No. 2012-04. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on our financial position or results of operations.

In August 2012, the FASB issued ASU 2012-03, “Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)” in Accounting Standards Update No. 2012-03. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114. The adoption of ASU 2012-03 is not expected to have a material impact on our financial position or results of operations.

In July 2012, the FASB issued ASU 2012-02, “Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment” in Accounting Standards Update No. 2012-02. This update amends ASU 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment and permits an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, Intangibles - Goodwill and Other - General Intangibles Other than Goodwill. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. The adoption of ASU 2012-02 is not expected to have a material impact on our financial position or results of operations.

In December 2011, the FASB issued ASU 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items out of Accumulated Other Comprehensive Income” in Accounting Standards Update No. 2011-05. This update defers the requirement to present items that are reclassified from accumulated other comprehensive income to net income in both the statement of income where net income is presented and the statement where other comprehensive income is presented. The adoption of ASU 2011-12 is not expected to have a material impact on our financial position or results of operations.

In December 2011, the FASB issued ASU No. 2011-11 “Balance Sheet: Disclosures about Offsetting Assets and Liabilities” (“ASU 2011-11”). This Update requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The objective of this disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of IFRS. The amended guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Company is currently evaluating the impact, if any, that the adoption of this pronouncement may have on its results of operations or financial position.

In September 2011, the FASB issued authoritative accounting guidance related to “Presentation of Comprehensive Income” which amended existing accounting guidance related to “Comprehensive Income.” The update gives companies the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments in the update do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The amendments should be applied retrospectively for all prior periods presented. Early adoption is permitted because compliance with the amendments is already permitted. The adoption of this pronouncement did not have a material effect on our consolidated financial statements.

In June 2011, the FASB issued authoritative accounting guidance related to “Presentation of Comprehensive Income” which amended existing accounting guidance related to “Comprehensive Income.” The update gives companies the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments in the update do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The amendments should be applied retrospectively for all prior periods presented. Early adoption is permitted because compliance with the amendments is already permitted. We do not expect this guidance to have a material effect on our financial statements.

The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information.

Management has reviewed these new standards and believes that they have no impact on the financial statements of the Company at this time; however, they may apply in the future.

(2) Related Party Transactions

During 2009, the Company received cash in the sum of $50,000 from a shareholder for a Note Payable at a 10% interest rate. The interest for the note payable has been calculated annually and has been accrued for 2012 and 2011.

During the quarter ended September 30, 2011, the Company issued a short-term convertible note to a shareholder in the amount of $10,000. The convertible note is due in one year and bears interest of 12%. The interest for the convertible note has been calculated annually and has been accrued for 2012 and 2011. As of December 31, 2012, the convertible note contains a conversion feature at a 50% discount of the 10 day average closing price prior to notice. The note holder agreed that the conversion would not force the Company to issue more shares than allowed under the current capitalization which eliminates the existence of a derivative. The beneficial conversion feature included in the discounted share price of the conversion was found to be immaterial for the years ended December 31, 2012 and 2011.

During the year 2012 there were no related party transactions other than interest accrued on the above promissory notes.

(3) Prepaids

As of December 31, 2012, the Company has prepaid for certain future professional services in the amount of $3,500. There were no prepaid expenses as of December 31, 2011.

(4) Property and Equipment

Major classes of property and equipment together with their estimated useful lives, consisted of the following:

			December 31
	Years		2012		2011
Equipment	3-5	$	92,680	$	92,680
Office furniture	7		20,482		20,482
Leasehold improvements	3		8,013		8,013
			121,175		121,175
Less accumulated depreciation and amortization			119,587		117,122
Net property and equipment		$	1,588	$	4,053

(5) Income Taxes

		December 31
		2012		2011
Tax expense/(benefit) computed at statutory rate for continuing operations	$	(2,983)	$	(37,165)
Tax effect (benefit) of operating loss carryforwards		2,983		37,165
Tax expense/(benefit) for continuing operations	$	-	$	-

The Company has current net operating loss carryforwards in excess of $8,994,318 as of December 31, 2012, to offset future taxable income, which expire 2029.

Deferred taxes are determined based on the temporary differences between the financial statement and income tax bases of assets and liabilities as measured by the enacted tax rates, which will be in effect when these differences reverse. The components of deferred income tax assets are as follows:

		December 31
		2012		2011
Deferred tax assets:	$		$
Net operating loss		3,318,162		3,326,557
Valuation allowance		(3,318,162)		(3,326,557)
Net deferred asset	$	-	$	-

At December 31, 2012, the Company provided a 100% valuation allowance for the deferred tax asset because it could not be determined whether it was more likely than not that the deferred tax asset/(liability) would be realized.

(6) 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 800,000 are presently outstanding. The Preferred Stock may be issued in one or more series, the terms of which may be determined at the time of issuance by the Board of Directors, without further action by stockholders, and may include voting rights (including the right to vote as a series on particular matters), preferences as to dividends and liquidation, conversion, redemption rights and sinking fund provisions.

The Company is authorized to issue up to 200,000,000 shares of Common Stock. As of December 31, 2012, after the 1:5 stock split, the Company is authorized 200,000,000 shares of Common Stock, of which 19,976,421 shares were issued and outstanding.

The Company’s preferred stock has a preferential dividend rate of 12% per year. Accrued and undeclared dividends can be converted into common stock. The Company has not declared or accrued any dividends. As of December 31, 2012 unaccrued and undeclared dividends were $4,800 and for 2011 unaccrued and undeclared dividends were $8,100. The Company’s convertible notes include warrants. When the convertible notes were issued the price of our stock was $0.0065. The Company believes that the common stock is illiquid and has been infrequently traded during the last three years, the trading price of the stock price was not deemed to be a fair value of the conversion feature. Management decided that because of the Company’s ability to continue as a going concern was in question a price of less than $0.005 was a more reasonable measure of the fair market value. Based on that decision, no beneficial conversion feature was reflected in the financial statements.

On October 5, 2011 the Board of Directors unanimously approved an amendment to the Company’s Articles of Incorporation to effect a reverse stock split whereby all outstanding shares of the Company’s common stock will be subject to a reverse split on a One for Five (1:5) basis (the “Reverse Split”). Subsequently the Company obtained 52.2% shareholders’ vote to ratify the reverse stock split. The Reverse Split which was approved by FINRA effective February 24, 2012 reduces the number of outstanding shares of common stock from approximately 99,382,100 shares to approximately 19,976,421 shares. The Reverse Split does not have any effect on the percentage ownership of any holders of the Company’s common stock. The Company has retroactively shown the impact of the reverse stock split for all periods presented.

(7) Going Concern

The Company earned income of approximately $8,395 for the year ended December 31, 2012, has an accumulated deficit of $8,994,318, and does not have the resources at this time to repay credit and debt obligations, make payments in the form of dividends to its shareholders or fully implement its business plan. Without additional capital, the Company will not be able to continue as a going concern.

In the near term management plans to continue to focus on increasing sales and raising the funds necessary to fully implement the Company’s business plan. Management believes that certain shareholders will continue to advance the capital required to met the Company’s financial obligations. There is no assurance however, that these shareholders will continue to advance capital to the Company or that the business operations will be profitable. The possibility of failure in obtaining additional funding and the potential inability to achieve profitability raise doubts about the Company’s ability to continue as a going concern.

The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.

(8) Commitments and Contingencies

The Company conducted its operations from a facility located in Houston Texas during FY 2012. During January 2013 the Company moved facilities to Friendswood Texas under a 12 month operating lease expiring on January 30, 2014.

The following is a schedule of future minimum rental payments required under the above operating lease as of December 31, 2012:

Rent expense in 2012 and 2011 under the terms of the Houston Texas lease was $14,156 and $15,763, respectively.

(9) Concentrations

Concentration of Major Customers

As of December 31, 2012 the Company’s trade accounts receivables from one customer represented approximately 87% of its accounts receivable. As of December 31, 2011 the Company’s trade accounts receivables from two customers represented approximately 50% of its accounts receivable.

For the year ended December 31, 2012 the Company received approximately 84% of its revenue from three customers. The specific concentrations were Customer A 38%, Customer B 34%, and Customer C 12%. For the year ended December 31, 2011 the Company received approximately 50% of its revenue from two customers.

Concentration of Supplier Risk

The Company had 5 vendors that accounted for approximately 79% of purchases during the year ended December 31, 2012 related to operations. Specific concentrations were Vendor A 18%, Vendor B 18%, Vendor C 18%, Vendor D 14%, and Vendor E 10%.

(10) Shareholder Notes Payable

During 2009, the Company received cash in the sum of $50,000 from a shareholder for a note payable at a 10% interest rate. The interest for the note payable has been calculated annually and has been accrued for 2012 and 2011.

(11) Convertible Shareholder Notes Payable

During the quarter ended September 30, 2011, the Company issued a short-term convertible note to a shareholder in the amount of $10,000. The convertible note is due in one year and bears interest of 12%. The interest for the convertible note has been calculated annually and has been accrued for 2012 and 2011. As of December 31, 2012, the convertible note contains a conversion feature at a 50% discount of the 10 day average closing price prior to notice. The note holder agreed that the conversion would not force the Company to issue more shares than allowed under the current capitalization which eliminates the existence of a derivative. The beneficial conversion feature included in the discounted share price of the conversion was found to be immaterial for the years ended December 31, 2012 and 2011.

(12) Subsequent Events

On January 1, 2013, the board of directors of Data Call Technologies, Inc. (the "Company") appointed Gary Woerz to the Company's board of directors and to serve as CFO of the Company effective January 3, 2013.

Gary D. Woerz, From March 2009 to January 2011, Gary Woerz provided financial consulting services to private and public companies. From September 2007 to January 2008, Mr. Woerz was CFO and COO of Larrea Biosciences, a public reporting company. From July 2006 to July 2007, Mr. Woerz was the CFO of Virexx Medical Corp., a public reporting company. From April 2004 to May 2007, Mr. Woerz served as CFO of American International Industries, Inc., a public reporting company.

On January 3, 2013, the board of directors accepted the resignation of Larry Mosley as CFO and director of the Company. Mr. Mosley informed the Company that the reason for his resignation was to permit him to pursue new business opportunities. Mr. Mosley had no disagreements with the Company's operations, policies or practices.

On January 14, 2013, Mr. James Ammons resigned as chairman, secretary and treasurer of the Company. Mr. Ammons had no disagreements with the Company's operations, policies or practices.

On January 10, 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 $0.03 per share and are subject to the following: (i) the executive shall have voting rights with respect to the shares from the date of issuance except that the right to sell, transfer or assign the shares shall vest at the rate of 1,500,000 shares per year during the employment term; (ii) executive's right to sell, transfer or assign the shares shall be subject to the restrictions of Rule 144 promulgated by the Securities and Exchange Commission ("SEC") under the Securities Act of 1933, as amended (the "Act"); and (iii) in the event that executive shall elect, for any reason, to terminate his employment with the Company during the employment term, all rights to the shares shall immediately cease, including voting rights as well as rights to sell, transfer or assign the shares.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

As of December 31, 2012, the Company's chief executive officer and chief financial officer conducted an evaluation regarding the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the  Exchange Act. Based upon the evaluation of these controls and procedures, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective as of the end of the fiscal year 2012.

Management’s Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of those internal controls. As defined by the SEC, internal control over financial reporting is a process designed by our principal executive officer and principal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements in accordance with U.S. generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2012 . In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment and those criteria, we have concluded that our internal control over financial reporting had material weaknesses including lack of sufficient internal accounting personnel in order to ensure complete documentation of complex transactions and adequate financial reporting during the year ended December 31, 2012. Management has identified corrective actions for the weakness and has begun implementation during the first quarter of 2013.

This annual report does not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only Management’s report in this annual report.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting or in other factors identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the fourth quarter ended December 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS AND CORPORATE GOVERNANCE.

The following table sets forth the name, age and position of each of our Directors and executive officers. Our officers and Directors are as follows:

Timonthy Vance - Chief Executive Officer, Chief Operating Officer and Director

Timothy Vance, a co-founder, has served as one of our Directors since June 2003 and as our Chief Operating Officer since January 2007 and Chief Executive Officer since July 2008. However, Mr. Vance has been part of the Data Call Technologies, Inc. management team since our inception. From January 2000 through January 2001 Mr. Vance was employed at QVS Wireless Corporation, where his employment consisted of general office administration. Prior to his employment with QVS, Mr. Vance was employed in the Marine and Industrial sector for some 15 years implementing computer inventory and operation logistic systems.

Gary D. Woerz - Chief Financial Officer and Director

From March 2009 to January 2011, Gary Woerz provided financial consulting services to private and public companies. From September 2007 to January 2008, Mr. Woerz was CFO and COO of Larrea Biosciences, a public reporting company. From July 2006 to July 2007, Mr. Woerz was the CFO of Virexx Medical Corp., a public reporting company. From April 2004 to May 2007, Mr. Woerz served as CFO of American International Industries, Inc., a public reporting company.

Employment Agreements

On January 1, 2009 the Board of Directors met and after reviewing the operations and financial condition of the Company pasted a resolution which ratifies and approves the amendment of the employment agreements by and between the Corporation and all of its executive officers, directors and employees (the “Employment Agreements”), effective January 1,2008, as follows: i) the automatic renewal provision in each Employment Agreement is null and void; and (ii) the right of the officers, directors, and employees to the accrued compensations as stands, as of January 1, 2008; and (ii) there will be no accrued compensation for any officer, director or employee moving forward as of January 1, 2008.

Additionally, we agreed to indemnify and hold harmless the executives, their nominees and/or assigns against any and all losses, claims, damages, obligations, penalties, judgments, awards, liabilities, costs, expenses and disbursements (incurred in any and all actions, suits, proceedings and investigations in respect thereof and any and all legal and other costs, expenses and disbursements in giving testimony or furnishing documents in response to a subpoena or otherwise), including without limitation, the costs, expenses and disbursements, as and when incurred, of investigating, preparing or defending any such action, suit, proceeding or investigation that is in any way related to their employment with us (whether or not in connection with any action in which they are a party). Such indemnification does not apply to acts performed by the executives, which are criminal in nature or a violation of law.

The executive employment may terminate:

(a) in the event the executive suffers an injury, illness, or incapacity of such character as to prevent him from performing his duties without reasonable accommodation for a period of more than thirty (30) consecutive days upon us giving at least thirty (30) days written notice of termination to him;

(b) upon the death of the executive; c) at any time because of, (i) the conviction of executive of an act or acts constituting a felony or other crime involving moral turpitude, dishonesty or theft or fraud; or (ii) his gross negligence in the performance of his duties hereunder; or (d) additionally, the executive may terminate his employment for "good reason" by giving us ten (10) days written notice if: (i) he is assigned, without his express written consent, any duties materially inconsistent with his positions, duties, responsibilities, or status with us, or a change in his reporting responsibilities or titles as in effect as of the date hereof; (ii) his compensation is reduced; or (iii) we do not pay any material amount of compensation due hereunder and then fail either to pay such amount within the ten (10) day notice period required for termination hereunder or to contest in good faith such notice.

In the event Mr. Vance's or Mr. Mosley's employment is terminated under (a) through (d) above, either of them is entitled to all compensation earned by him through the date of his termination. The employment agreements of Mr. Vance and Mr Mosley were deemed to be null and void effective January 1, 2008. The employment agreement of Mr. Ammons was deemed to be null and void effective January 1, 2008. The employment agreement of Mr. Ammons was deemed to be null and void effective January 1, 2008.

ITEM 11. EXECUTIVE COMPENSATION.

The following table sets forth information concerning the total compensation during the fiscal years ending December 31, 2012, 2011 and 2010.

Summary Compensation Table
						Long Term
			Annual Compensation			Compensation Awards
					Other	Restricted	Securities
					Annual	Stock	Underlying	Total
			Salary	Bonus	Compensation	Award(s)	Options	Compensation
Name and Principal Position (a)		Year	($)	($)	($)	($)	($)	($)
Timothy Vance, CEO, COO and Director (1)		2012	76,150	---	6,000	---	---	82,150
		2011	75,000	---	6,000	---	---	81,000
		2010	75,000	---	---	---	---	75,000
James Ammons, former director (2)		2012	88,450	---	6,000	---	---	94,450
		2011	75,000	---	6,000	---	---	81,000
		2010	75,000	---	---	---	---	75,000
Larry Mosley, former CFO and Director (3)		2012	4,000	---	---	---	---	4,000
		2011	2,500	---	---	---	---	2,500
		2010	8,500	---	---	---	---	8,500

(1) In June 2008, Timothy E. Vance was appointed CEO of the Registrant. 
(2) On January 14, 2013, Mr. James Ammons resigned as director of the Company.
(3) On January 3, 2013, the board of directors accepted the resignation of Larry Mosley as CFO and director of the Company.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table sets forth information regarding the beneficial ownership of our common stock as of December 31, 2012. The information in this table provides the ownership information for: each person known by us to be the beneficial owner of more than 5% of our common stock; each of our directors; each of our executive officers; and our executive officers and directors as a group. Beneficial ownership has been determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to the shares. Unless otherwise indicated, the persons named in the table below have sole voting and investment power with respect to the number of shares indicated as beneficially owned by them.

Name of Beneficial Owner		Common Stock Beneficially Owned (1)		Percentage of Common Stock  Owned (1)
Timothy Vance, CEO, COO and Director		667,000		3.33%
700 South Friendswood Drive, Suite E
Friendswood, TX 77546
Gary D. Woerz, CFO and Director		200,000		1.00%
700 South Friendswood Drive, Suite E
Friendswood, TX 77546
James Ammons, former director		1,830,000		9.16%
600 Kenrick, Suite 12-B
Houston, TX 77060
Milford and Ruth Mast		2,203,300(2)		10.03%
466 N. Manor Rd.
Elverson, PA 19520
Director and Officer (2 people)		867,000		4.33%

(1) Applicable percentage ownership is based on 19,976,421 shares of common stock outstanding as of December 31, 2012. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock that are currently exercisable or exercisable within 60 days of December 31, 2012 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
(2) Milford and Ruth Mast are deemed to beneficially own the shares of common stock held by each other since they are husband and wife. Includes 3,000,000 shares held by an unincorporated entity, Regional Marketing Co., which is controlled by Milford Mast.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.

None.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Independent Public Accountants

Our auditor, M&K CPAS, PLLC. has served as the Company’s independent registered public accountants for the fiscal year 2012. Our auditor, McConnell & Jones, LLP. has served as the Company’s independent registered public accountants for the fiscal year 2011.

Principal Accounting Fees
The following table presents the fees for professional audit services rendered by M&K CPAS, PLLC and McConnell & Jones, LLP for the audit of the Registrant's annual financial statements for the years ended December 31, 2012 and 2011, and fees billed for other services rendered by M&K CPAS, PLLC and McConnell & Jones, LLP during those periods.

 

		Year Ended		Year Ended
		December 31, 2012		December 31, 2011
Audit fees (1)	$	13,000	$	15,150
Audit-related fees (2)		---		---
Tax fees (3)		---		---
All other fees		---		---
(1) Audit fees consist of audit and review services, consents and review of documents filed with the SEC.
(2) Audit-related fees consist of assistance and discussion concerning financial accounting and reporting standards and other accounting issues.
(3) Tax fees consist of preparation of federal and state tax returns, review of quarterly estimated tax payments, and consultation concerning tax compliance issues.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) The exhibits listed below are filed as part of this annual report.

3.1(1)	Articles of Incorporation
3.2(1)	Certificate of Amendment to Articles of Incorporation
3.3(2)	Amended and Restated Articles of Incorporation
3.4(1)	Amended Bylaws
10.1(1)	James Ammons Employment Agreement
10.2(1)	James Ammons Option Agreement
10.3(1)	Larry Mosley Employment Agreement
10.4(1)	Addendum to Larry Mosley's Employment Agreement
10.5(1)	Tim Vance Employment Agreement
10.6(1)	Addendum to Tim Vance's Employment Agreement
10.7(3)	Agreement with United Press International, with exhibits
10.8(2)	Data Call Technologies, Inc. Office Space Lease
10.9(3)	Content Licensing Agreement with plan b media/Mindmatics, LLC
10.10(3)	First Amendment to Content Licensing Agreement with Mindmatics, LLC
10.11(3)	Agreement with Traffic.com (which we have not received a signed copy of from Traffic.com)
10.12(4)(5)	Reseller Agreement with Texas Digital Systems, Inc.
10.13(3)	Sample Reseller Agreement (substantially similar to the reseller agreements entered into with certain companies as described herein)
10.14(5)	Letter of Intent with Ariamedia Corporation
10.15(4)(5)	Services Agreement with 3M Company
10.16	Debt Conversion Agreement with Milford Mast, filed with the Form 10-KSB for the year 2006
10.17	David Loev Warrant Agreement, filed with the Form 10-KSB for the year 2006
10.18	Warrant Amendment Agreement with Everett Poe, filed with the Form 10-KSB for the year 2006
10.19	Option Agreement with James Ammons, filed with the Form 10-KSB for the year 2006
10.20	Option Agreement with Larry Mosley, filed with the Form 10-KSB for the year 2006
10.21	Option Agreement with James Vance, filed with the Form 10-KSB for the year 2006
10.22	Option Agreement with Timothy Vance, filed with the Form 10-KSB for the year 2006
10.23	Option Agreement with James Tevis, filed with the Form 10-KSB for the year 2006
10.24	Option Agreement with Everett Poe, filed with the Form 10-KSB for the year 2006
31.1	Certificate of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith
31.2	Certificate of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith
32.1	Certificate of the Chief Executive Officer to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith
32.2	Certificate of the Chief Financial Officer to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith
(1) Filed as exhibits to our Form SB-2 Registration Statement filed with the Commission on February 21, 2006, and incorporated herein by reference. (2) Filed as exhibits to our amended Form SB-2 Registration Statement filed with the Commission on June 29, 2006, and incorporated herein by reference. (3) Filed as exhibits to our amended Form SB-2 Registration Statement filed with the Commission on August 18, 2006, and incorporated herein by reference. (4) Certain portions of these documents are incorporated by reference herein  (which portions have been replaced by "X's") have been omitted in connection with a request for Confidential Treatment as submitted to the Commission. (5) Filed as exhibits to our amended Form SB-2 Registration Statement filed with the Commission on October 26, 2006, and incorporated herein by reference.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURE		TITLE		DATE
/s/ Timothy Vance		Chief Executive Officer and Director		March 27, 2013
Tim Vance
/s/ Gary D. Woerz		Chief Financial Officer and Director		March 27, 2013
Gary D. Woerz