PART I
Cautionary Statement regarding
Forward-Looking Statements
This Annual Report on Form 10-K
of Data Call Technologies, Inc. (hereinafter the "Company", the
"Registrant", “we”, “us”, or "Data Call") includes
forward-looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The
Registrant has based these forward-looking statements on its current expectations and
projections about future events. These forward-looking statements are subject to known and
unknown risks, uncertainties and assumptions about the Registrant that may cause its
actual results, levels of activity, performance or achievements to be materially different
from any future results, levels of activity, performance or achievements expressed or
implied by such forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as "may," "will,"
"should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate,"
"continue," or the negative of such terms or other similar expressions. Factors
that might cause or contribute to such a discrepancy include, but are not limited to,
those described in this Annual Report on Form 10-K and in the Registrant's other
Securities and Exchange Commission filings. Should one or more of these risks or
uncertainties materialize, or should any of our assumptions prove incorrect, actual
results may vary in material respects from those projected in the forward-looking
statements. For a more detailed discussion of the foregoing risks and uncertainties, see
"Risk Factors".
ITEM
1. DESCRIPTION OF BUSINESS.
Data Call Technologies, Inc. was
incorporated under the laws of the State of Nevada as Data Call Wireless on April 4, 2002
and is sometimes referred to herein as "we", "us", "our",
"Data Call" or the "Company". On March 1, 2006, we changed our name to
Data Call Technologies, Inc.
Our mission is to integrate
cutting-edge information/content delivery solutions currently deployed by the media and
make this content rapidly available to and within the control of our retail and commercial
clients. The Company's software and services put its clients in control of
real-time, news, and other content, including emergency alerts, displayed within one
building as well as to thousands of local, regional and national clients, through Digital
Signage and Kiosk networks.
Our business plan is to focus on
growing our client base by continued offering of real-time information/content, seeking to
continually improve the delivery, security and variety of information/content to the
Digital Signage and Kiosk community, while developing a similar offering for smart phones
through the app community.
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. 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 dynamic
being fresh, relevant, updated content.
Digital Signage Comes of Age
Digital signage is coming of age
and Data Call Technologies has been there from the start. Five 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,
Data Call 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 three 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 while the growing Kiosk market
has cross-pollinated with Digital Signage. And those combined 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
Data Call stands ready to serve this exploding market.
The Need for Speed--Active
Content
Active 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 dynamic content, such as
that provided by Data Call, is updated with new information throughout the day. Those
seeking to add active and dynamic content to their digital signage presentations are
advised to employ Data Call’s integrated content rather than shoehorning broadcast
content into their digital signage presentation.
However, by integrating Data
Call’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 Data Call include news,
weather, sports, financial data and the latest traffic alerts, amongst others. With such a
broad range of offerings, companies have access to the active and dynamic content they
need, regardless of the market they are addressing.
Data Call Opportunities
The opportunities for Data Call
in the digital signage industry are countless. Many companies nowadays would outsource all
or part of their content creation. Data Call 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 that it is active content that draws viewers to
digital signage and keeps them engaged throughout the presentation.
Over the past six years, Data
Call has worked with the industry leaders in digital signage to develop the data formats
and communication methods to allow Data Call’s active content to be easily integrated
into their hardware and software products.
Partners, Not Customers
Data Call’s approach to
customer relations is to not accumulate customers, but to build partnerships. Each Data
Call 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,
Data Call identified three factors that had to be addressed - reliability, objectivity and
ease of implementation. To address the reliability requirement, Data Call opted to license
information from the leaders that create 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 Data Call’s active
content was completely unacceptable. Finally, the third requirement, ease of
implementation, was address by both Data Call’s licensing of data and the method by
which it was disseminated to their partners.
Data Call understood that digital
signage and Kiosk 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. Data Call 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 Data Call’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), Data Call 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, Data Call 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.
Market demand, opportunity and
technology converge at a single point in time, and Data Call 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.
Business Operations
We currently offer our Direct
Lynk Messenger service to customers through the Internet. The Direct Lynk Messenger
Service is a Digital Signage product and real-time information service which provides a
wide range of up-to-date information for display. The Direct Lynk Messenger service is
able to work concurrently with customers' existing digital signage systems.
Digital Signage is still a
relatively new and exciting method advertisers can use to promote, inform, educate, and
entertain clients and customers about their businesses and products. Through Digital
Signage, companies and businesses can use a single television or a series of networked
flat LCD or Plasma screens to market their services and products on site to their clients
and customers in real time. Additionally, because Digital Signage advertising takes place
in real time, businesses can change their marketing efforts at a moments notice. We
believe this real time advertising better allows companies to tailor their advertising to
individual customers, and thereby advertise and sell inventory which appeals to those
individual customers, thereby increasing sales and revenues. Benefits to Digital Signage
compared to regular print or video advertising include, being able to immediately change a
digitally displayed image or advertisement depending on the business’s current
clients and customers, and not getting locked into print advertising days or months in
advance, which may become stale or obsolete prior to the advertising date of such print
advertising.
Data Call specializes in allowing
its clients to create their own Digital Signage dynamic content feeds delivered, via the
Internet, to digital display devices (plasma, LCD, Jumbotron, Kiosks etc.) at their
establishments. The only requirements our clients must have are 1) a supported third party
digital signage or Kiosk solution, or similar device, which receives the data from our
servers via the Internet, and displays the content on digital displays and 2) an Internet
connection. The Direct Lynk System is supported by various third party systems, varying in
cost from $350 to $5,000, such as those marketed by 3M Digital Signage, BroadSign, ChyTV,
Hughes, Key West Technologies, Coolsign, Scala, and Cisco amongst others.
The Direct Lynk System allows
customers to select from the pre-determined data and information services described below.
The client may choose which individual locations and which displays they would like to
receive our feeds based on how their digital signage network is configured.
The current types of data and
information, for which a client is able to subscribe to through the Direct Lynk System
include:
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Headline News top world and
national news headlines;
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Business News top business
headlines;
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Financial Highlights world-based
financial indicators;
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Entertainment News top
entertainment headlines;
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Health/Science News top
science/health headlines;
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Quirky News Bits latest off-beat
news headlines;
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Sports Headlines top sports
headlines;
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Latest Sports Lines - latest sports
odds for NFL, NBA, NHL, NCAA Football and NCAA Basketball;
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National Football League latest
game schedule, and in-game updates;
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National Basketball Association -
latest game schedule, and in-game updates;
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Major League Baseball - latest game
schedule, and in-game updates;
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National Hockey League - latest
game schedule, and in-game updates;
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NCAA Football - latest game
schedule, and in-game updates;
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NCAA Men's Basketball - latest game
schedule, and in-game updates;
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Professional Golf Association top
10 leaders continuously updated throughout the four-day tournament;
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NASCAR top 10 race positions
updated every 20 laps throughout the race;
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Major league soccer;
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Traffic Mapping;
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Animated Doppler Radar and Forest
Maps;
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Listings of the day's horoscopes;
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Listings of the birthdays of famous
persons born on each day;
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Amber alerts;
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Listings of historical events which
occurred on each day in history; and
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Localized Traffic and Weather
Forecasts.
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In addition to the above information
categories and the client-generated messages, we may, at our discretion, include a Public
Service Announcement, third-party advertisement (for additional revenue streams) and/or a
Data Call tag line to our streaming text advertising in the future.
Material Contracts
On September 6, 2006, we entered into a two-year renewable services
agreement with 3M Digital Signature, pursuant to which we agreed to supply 3M the use of
our Direct Lynk Messenger technology. Pursuant to the agreement, all materials made
available to us by 3M in connection with the services we will provide will remain the
property of 3M. This contract has since been renewed for the years 2012 and 2011.
In September 2007, we entered into a three-year auto renew agreement
with a platform developer, Leightronix, a company which manufactures head end hardware and
software for use on PEG channels, which allows us to transfer our Direct Lynk System feeds
to head ends equipped with the Leightronix product through Leightronix servers. This
contract is currently being renewed annually
In March 2008 we entered into an annual agreement with various annual
purchase orders to provide our Direct Lynk System feeds to York Telecom’s network of
digital signage throughout digital signage deployments within the Social Security
Administration offices across the U.S. This contract is renewed annually.
Dependence On One Or A Few Customers
At December 31, 2012, we had over 1,000 customers who pay to subscribe
to our Direct Lynk System, We also have several companies which are testing the Direct
Lynk System, and expect that several of them may become future customers. We are dependent
upon three major customers, who include: Leightronix, Inc., Zero in Media, LLC, and York
Telecom. During 2012, our three largest customers accounted for over 50% of our revenues.
Employees
At December 31, 2012, we had 3 full time employees. Depending upon our
level of our growth, we expect that we will be required to hire additional personnel in
the areas of sales and marketing, software design, research and development, etc.
Estimate Of The Amount Spent On Research And Development
Activities
Since our inception in April 2002, the majority of our expenditures
have been on research and development of our Direct Lynk Messenger System, including
software and hardware development and testing. The amount spent on this research and
development since inception through December 31, 2012 is approximately $2,000,000.
ITEM 1A. RISK
FACTORS RELATED TO OUR BUSINESS.
Investing in our common stock will provide an investor with an equity
ownership interest. Shareholders will be subject to risks inherent in our business. The
performance of our shares will reflect the performance of our business relative to, among
other things, general economic and industry conditions, market conditions and competition.
The value of the investment may increase or decrease and could result in a loss. An
investor should carefully consider the following factors as well as other information
contained in this annual report on Form 10-K.
This annual report on Form 10-K also contains forward-looking
statements that involve risks and uncertainties. Our actual results could differ
materially from those anticipated in the forward-looking statements as a result of many
factors, including the risk factors described below and the other factors described
elsewhere in this Form 10-K.
We require additional financing to continue our business plan
Additional financing is expected to be required in 2013, but there can
be no assurance that such financing will be available at terms and conditions acceptable
to the Company. Further, there can be no assurance that unforeseen events, such
as the length of time necessary to generate increasing market acceptance of our Direct
Lynk System, or any unexpected material increased development costs, or the general
economy in the markets where we offer our Direct Lynk System, may result in an inability
to secure necessary additional financing at satisfactory terms and conditions, if at all.
Since inception, we have been dependent upon financing raised through the sale of
restricted shares of our common stock to support our operations. We expect that we will be
required to raise additional funding through the issuance of restricted shares of our
common stock, but there can be no assurance that we will be able to raise sufficient
capital in a timely manner to continue our business plan at anticipated levels of growth.
We do not have any commitments or identified sources of additional
capital from third parties or from our officers, directors or principal shareholders.
There is no assurance that additional financing will be available on favorable terms in
the future, if at all or that our Direct Lynk System will generate sufficient revenues in
order for us to continue to grow our operations. If we are unable to raise additional
financing in a timely manner, it would have a material adverse effect upon our ability to
fully implement our business plan and/or to continue with our current level of operations.
We compete with other companies that have more resources, which puts us at a
competitive disadvantage.
The market for digital signage software and systems is highly competitive and we expect
competition to increase in the future. Some of our competitors or potential competitors
may have significantly greater financial, technical and marketing resources than our
company. These competitors may be able to respond more rapidly than we can to new or
emerging technologies or changes in customer requirements. They may also devote greater
resources to the development, promotion and sale of their products than our company.
We expect competitors to continue to improve the performance of their current products
and to introduce new products, services and technologies. Successful new product and
service introductions or enhancements by our competitors could reduce sales and the market
acceptance of our products and services, cause intense price competition or make our
products and services obsolete. To be competitive, we must continue to invest significant
resources in research and development, sales and marketing and customer support. If we do
not have sufficient resources to make these investments or are unable to make the
technological advances necessary to be competitive, our competitive position will suffer.
Increased competition could result in price reductions, fewer customer orders, reduced
margins and loss of market share. Our failure to compete successfully against current or
future competitors could adversely affect our business and financial condition.
Lack of patent and proprietary information protection
We have no patents, patent applications, trademarks, trademark
applications or licenses covering our Direct Lynk System. We may choose to file patent
applications in the future, if our management believes it is in our best interests. In the
event that our Direct Lynk System infringes the patent or proprietary rights of others, we
may be required to modify our process or obtain a license. There can be no assurance that
we would be able to do so in a timely manner, upon acceptable terms and conditions or at
all. The failure to do so would have a material adverse effect on our business. In
addition, there can be no assurance that we will have the financial or other resources
necessary to prosecute or defend a patent infringement or proprietary rights action.
Moreover, if any of our products infringe patents or proprietary rights of others, we
could, under certain circumstances, become liable for damages, which could have a material
adverse effect on our operations and financial condition.
We rely on key management personnel
We are highly dependent upon the services and efforts of key management
personnel. Our ability to operate and implement our business plan is heavily dependent
upon the continued service of Messrs. Vance and Tevis, as well as our ability to attract,
retain and motivate other qualified personnel. The loss of Messrs. Vance or Tevis, or our
inability to hire and retain qualified sales and marketing, software engineers and
management personnel would have a material adverse effect on our business and operations
and would likely result in a decrease in the value of our securities.
We are highly dependent upon our ability to successfully market Direct
Lynk System to subscribers
We are dependent on the abilities of our sales and marketing
department, to continue to generate subscriptions for our Direct Lynk System and to
broaden our customer base. While the number of paying subscribers for our Direct Lynk
System increased at December 31, 2012 compared to December 31, 2011, there can be no
assurance that our sales and marketing department will be able to continue to achieve
market acceptance for our Direct Lynk System and increase our customer base to a level
that will permit profitable operations. If our sales and marketing department is unable to
continue to generate new customers and attract trial customers to test our Direct Lynk
System and experience what we believe are our advantages and learn of their potential
uses, we may not be able to generate sufficient revenues to continue with planned research
and development on new products and improve our current products.
Difficult and volatile conditions in the capital, credit and commodities markets and
general economic uncertainty have prompted companies to cut capital spending worldwide and
could continue to materially adversely affect our business.
Disruptions in the economy and constraints in the capital, credit and commodities
markets have caused companies to reduce or delay capital investment. Some of our
prospective customers may cancel or delay spending on the development or roll-out of
capital and technology projects with us due to continuing economic uncertainty. Our
financial position, results of operations and cash flow could continue to be materially
adversely affected by continuing difficult economic conditions and significant volatility
in the capital, credit and commodities markets and in the overall worldwide economy. The
continuing impact that these factors might have on us and our business is uncertain and
cannot be predicted at this time. Such economic conditions have accentuated each of the
risks we face and magnified their potential effect on us and our business. The difficult
conditions in these markets and the overall economy affect our business in a number of
ways. For example:
Market volatility has exerted downward pressure on our stock price, which may make it
more difficult for us to raise additional capital in the future.
Economic conditions could continue to result in our customers experiencing financial
difficulties or electing to limit spending because of the declining economy, which may
result in decreased revenue for us. Difficult economic conditions have adversely affected
certain industries in particular, including the automotive and restaurant industries, in
which we have major customers. We could also experience lower than anticipated order
levels from current customers, cancellations of existing but unfulfilled orders, and
extended payment terms.
Economic conditions could materially impact us through insolvency of our suppliers or
current customers.
Economic conditions combined with the weakness in the credit markets could continue to
lead to increased price competition for our products, increased risk of excess and
obsolete inventories and higher overhead costs as a percentage of revenue.
If the markets in which we participate experience further economic downturns or slow
recovery, this could continue to negatively impact our sales and revenue generation,
margins and operating expenses, and consequently have a material adverse effect on our
business, financial condition and results of operations. While we have down-sized our
operations to reflect decreased demand, we may not be successful in mirroring current
demand. If customer demand were to decline further, we might be unable to adjust expense
levels rapidly enough in response to falling demand or without changing the way in which
we operate. If revenue were to decrease further and we were unable to adequately reduce
expense levels, we might incur significant losses that could adversely affect our overall
financial performance and the market price of our common stock.
Potential future government regulation of the Internet may adversely
affect our business
We are dependent upon the Internet in connection with our business
operations and the delivery of content for our Direct Lynk System. The United States
Federal Communications Commission (the "FCC") does not currently regulate
companies that provide services over the Internet, as it does common carriers or
tele-communications service providers. Notwithstanding the current state of the FCC's
rules and regulations, the potential jurisdiction of the FCC over the Internet is broad
and if the FCC should determine in the future to regulate the Internet, our operations, as
well as those of other Internet service providers, could be adversely. Compliance with
future government regulation of the Internet could result in increased costs and because
of our limited resources, it would have a material adverse effect on our business
operations and operating results and financial condition.
We are dependent on the security of the Internet to serve our
customers; any security breaches or other Internet difficulties could adversely affect our
business
We offer the majority of our services through, the secure transmission of confidential
information over public networks is a critical element of our operations. A party who is
able to circumvent security measures (hacker) could misappropriate proprietary information
or cause interruptions in our operations. If we are unable to prevent unauthorized access
to our users' information and transactions, our customer relationships could be
irreparably harmed. Although we currently have in place security measures that we feel are
adequate to protect our business and those of our customers, these measures may not
prevent future security breaches. Nature’s events placed on our systems could cause
our systems to fail or cause our systems to operate at speeds unacceptable to our users,
in which event we could lose customers and experience a material impact on our financial
condition.
We must rely on other companies to maintain the Internet infrastructure
if we hope to be successful
Our future success depends, in large part, on other companies
maintaining the Internet system infrastructure, including maintaining a reliable network
backbone that provides adequate speed, data capacity and security. If the Internet
continues to experience anticipated significant growth in the number of users, frequency
of use and amount of data transmitted, as well as the number of malicious viruses and
worms introduced onto the Internet by hackers and others, the infrastructure of the
Internet may be unable to support the demands placed on it at any particular time or from
time-to-time. Because we rely heavily on the Internet and our limited capital, any
disruption of the Internet could adversely affect us to a greater degree than our
competitors and other users of the Internet.
Our website and systems are hosted by a third party and we are
vulnerable to disruptions or other events that are beyond our control
Our website and systems are hosted by a third party. We are dependent
on our systems’ ability to stream information over the Internet to customers. If our
systems fail or become unavailable, it would harm our reputation, result in a loss of
current and potential future customers and could cause us to breach existing agreements.
Our success depends, in part, on the performance, reliability and availability of our
services, which in turn are dependent on our third-party provider. Our systems and
operations could be damaged or interrupted by fire, flood, power loss, telecommunications
failure, Internet breakdown, break-in, earthquake and similar events. We would face
significant damage as a result of these events. For these reasons, we may be unable to
develop or successfully manage the infrastructure necessary to meet current or future
demands for reliability and scalability of our systems, which would have a negative impact
on our business and financial conditions.
Our software could contain bugs or be compromised by viruses which
could cause interruption of our services and negatively affect our ability to continue to
develop our reputation
Our Direct Lynk System uses sophisticated software which could be found
to contain bugs or could be compromised by viruses. While we have not experienced any
material bugs or viruses to date, if such event could occur, such event(s) could be costly
for us to identify and repair, and until such bugs or viruses, if any, are fixed, they
could cause interruptions in our service, which could cause our reputation to decline
and/or cause us to lose clients.
Our auditors have expressed a concern about our ability to continue as
a going concern
Our auditors, in our audited financial statements expressed a concern
about our ability to continue as a going concern. We had negative working capital of
$204,371and an accumulated deficit of $8,994,318 as of December 31, 2012, and have
generated limited revenues to date. These factors raise substantial doubt as to whether we
will be able to continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability and classification of liabilities that might be
necessary should we be unable to continue as a going concern.
RISK FACTORS RELATED TO MARKET OF OUR COMMON STOCK
We are subject to financial reporting and other requirements for which our accounting,
other management systems and resources may not be adequately prepared.
As a public company, we incur significant legal, accounting and other expenses,
including costs associated with reporting requirements and corporate governance
requirements, including requirements under the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010, the Sarbanes-Oxley Act of 2002, and rules implemented by the SEC.
If we identify significant deficiencies or material weaknesses in our internal control
over financial reporting that we cannot remediate in a timely manner, investors and others
may lose confidence in the reliability of our financial statements, and the trading price
of our common stock and ability to obtain any necessary equity or debt financing could
suffer. In addition, if our independent registered public accounting firm is unable to
rely on our internal control over financial reporting in connection with its audit of our
financial statements, and if it is unable to devise alternative procedures in order to
satisfy itself as to the material accuracy of our financial statements and related
disclosures, it is possible that we would be unable to file our annual report with the
SEC, which could also adversely affect the trading price of our common stock and our
ability to secure any necessary additional financing,
In addition, the foregoing regulatory requirements could make it difficult or costly
for us to obtain certain types of insurance, including directors’ and officers’
liability insurance, and we may be forced to accept reduced policy limits and coverage or
incur substantially higher costs to obtain the same or similar coverage. The impact of
these events could also make it more difficult for us to attract and retain qualified
persons to serve on our board of directors, on board committees or as executive officers.
Market prices of our equity securities can fluctuate significantly
The market prices of our common stock may change significantly in
response to various factors and events beyond our control, including the following:
- the other risk factors described in this Form 10-K;
- changing demand for our products and services and ability to develop and generate
sufficient revenues;
- any delay in our ability to generate operating revenue or net income;
- general conditions in markets we operate in;
- general conditions in the securities markets;
- issuance of a significant number of shares, whether for compensation under employee
stock options, conversion of debt, potential acquisitions, additional financing or
otherwise.
There is only a limited trading market for our common stock
Our Common Stock is subject to quotation on the NASD Bulletin Board.
There has only been limited trading activity in our common stock. There can be no
assurance that a more active trading market will commence in our securities as a result of
the increasing operations of Data Call. Further, in the event that an active trading
market commences, there can be no assurance as to the level of any market price of our
shares of common stock, whether any trading market will provide liquidity to investors, or
whether any trading market will be sustained.
State blue sky registration; potential limitations on resale of our
securities
Our common stock, the class of the Company’s securities that is
registered under the Exchange Act, has not been registered for resale under the Securities
Act of 1933 or the "blue sky" laws of any state. The holders of such shares and
persons who desire to purchase them in any trading market that might develop in the
future, should be aware that there may be significant state blue-sky law restrictions upon
the ability of investors to resell our securities. Accordingly, investors should consider
the secondary market for the Company's securities to be a limited one.
It is the intention of the management to seek coverage and
publication of information regarding the Company in an accepted publication which permits
a manual exemption. This manual exemption permits a security to be distributed in a
particular state without being registered if the Company issuing the security has a
listing for that security in a securities manual recognized by the state. However, it is
not enough for the security to be listed in a recognized manual. The listing entry must
contain (1) the names of issuers, officers, and directors, (2) an issuer's balance sheet,
and (3) a profit and loss statement for either the fiscal year preceding the balance sheet
or for the most recent fiscal year of operations. Furthermore, the manual exemption is a
nonissuer exemption restricted to secondary trading transactions, making it unavailable
for issuers selling newly issued securities.
Most of the accepted manuals are those published in Standard and
Poor's, Moody's Investor Service, Fitch's Investment Service, and Best's Insurance
Reports, and many states expressly recognize these manuals. A smaller number of states
declare that they "recognize securities manuals" but do not specify the
recognized manuals. The following states do not have any provisions and therefore do not
expressly recognize the manual exemption: Alabama, Georgia, Illinois, Kentucky, Louisiana,
Montana, South Dakota, Tennessee, Vermont and Wisconsin.
Dividends unlikely on our common stock
We do not expect to pay dividends for the foreseeable future. The
payment of dividends, if any, will be contingent upon our future revenues and earnings,
capital requirements and general financial condition. The payment of any dividends will be
within the discretion of our board of directors. It is our intention to retain all
earnings for use in our business operations and accordingly, we do not anticipate that the
Company will declare any dividends in the foreseeable future.
Compliance with Penny Stock Rules
Our securities will initially be considered a "penny stock"
as defined in the Exchange Act and the rules there under, since the price of our shares of
common stock is less than $5. Unless our common stock is otherwise excluded from the
definition of "penny stock," the penny stock rules apply with respect to that
particular security. The penny stock rules require a broker-dealer prior to a transaction
in penny stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document prepared by the SEC that provides information about penny stocks and
the nature and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its sales person in the transaction, and monthly
account statements showing the market value of each penny stock held in the customer's
account. In addition, the penny stock rules require that the broker-dealer, not otherwise
exempt from such rules, must make a special written determination that the penny stock is
suitable for the purchaser and receive the purchaser's written agreement to the
transaction. These disclosure rules have the effect of reducing the level of trading
activity in the secondary market for a stock that becomes subject to the penny stock
rules. So long as the common stock is subject to the penny stock rules, it may become more
difficult to sell such securities. Such requirements, if applicable, could additionally
limit the level of trading activity for our common stock and could make it more difficult
for investors to sell our common stock.
Shares eligible for future sale
As of December 31, 2012, the Registrant had 19,976,421 shares of common
stock issued and outstanding of which 6,951,070 shares are "restricted" as that
term is defined under the Securities Act, and in the future may be sold in compliance with
Rule 144 under the Securities Act. Rule 144 generally provides that a person holding
restricted securities for a period of six months may sell every three months in brokerage
transactions and/or market-maker transactions an amount equal to the greater of one (1%)
percent of (a) the Company's issued and outstanding common stock or (b) the average weekly
trading volume of the common stock during the four calendar weeks prior to such sale. Rule
144 also permits, under certain circumstances, the sale of shares without any quantity
limitation by a person who has not been an affiliate of the Company during the three
months preceding the sale and who has satisfied a six month holding period. However, all
of the current shareholders of the Company owning 5% or more of the issued and outstanding
common stock are subject to Rule 144 limitations on selling.
The Nevada Revised Statutes and our articles of incorporation authorize
to issue additional shares of common stock and shares of preferred stock, which preferred
stock having such rights, preferences and privileges as our board of directors shall
determine
Pursuant to our Articles of Incorporation, as amended and restated, we
have authorized capital stock of 200,000,000 shares of common stock and 10,000,000 shares
of preferred stock. As of the December 31, 2012, we have 19,976,421 shares of common stock
issued and outstanding and 800,000 shares of preferred stock issued and outstanding. Our
Board of Directors has the ability, without shareholder approval; to issue a significant
number of additional shares of common stock without shareholder approval, which if issued
would cause substantial dilution to our then common shareholders. Additionally, shares of
preferred stock may be issued by our Board of Directors at their sole discretion and
without shareholder approval, in such classes and series, having such rights, including
voting rights and super-majority voting rights, and such preferences and relative,
participating, optional or other special rights, powers and privileges as determined by
our Board of Directors from time-to-time. If shares of preferred stock are issued by our
Board of Directors having super-majority voting rights, or having conversion rights to
convert their preferred stock into a number of shares of common stock at a ratio of
greater that one-for-one, holders of our common stock would be subject to dilution that
may be significant.
Our current officers and directors can vote an amount of common stock
equal to approximately forty-five percent of our outstanding common stock. As a result,
our officers and directors have majority voting control.
ITEM 1B. UNRESOLVED STAFF
COMMENTS.
None.
ITEM 2. DESCRIPTION OF PROPERTY.
On July 1, 2011, we entered into a month-to-month lease for our
principal office consisting of approximately 2,240 square feet located at 600 Kenrick,
Suite B-12, Houston Texas 77060, with Kjoshbin L.P., an unaffiliated third party. The
lease provides for a monthly rental of $1, 164 . During January 2013 the Kenrick was
cancelled. A new lease was entered by the company with Bridwell Property Group Inc. for a
term of one year commencing on January 9, 2013. The new office is located at 700 S
Friendswood Drive, Ste E., Friendswood, TX 77546.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. MINE SAFETY DISCLOSURE
.
None.