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Data Call
Technologies, Inc.
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Balance Sheets
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March 31, 2018 (Unaudited) and December
31, 2017
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Back to Table of
Contents
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March 31, 2018 (Unaudited)
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December 31, 2017
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Assets
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Current assets:
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Cash
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$
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42,347
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$
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44,590
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Accounts receivable
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86,348
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73,386
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Prepaid expenses
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900
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6,100
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Total current assets
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129,595
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124,076
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Property
and equipment
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144,949
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144,949
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Less accumulated depreciation and amortization
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138,930
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136,651
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Net property and equipment
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6,019
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8,298
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Other
assets
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800
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800
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Total assets
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$
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136,414
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$
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133,174
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Liabilities
and Stockholders' Equity
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Current
liabilities:
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Accounts payable
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$
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23,930
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$
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18,122
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Accounts payable - related party
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18,147
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3,704
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Accrued
salaries - related party
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580
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484
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Accrued interest
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22,741
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22,616
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Convertible short-term note payable to
related party - default
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10,000
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10,000
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Deferred
revenue - current
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8,255
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14,446
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Short-term note payable to
related party - default
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17,233
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18,992
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Total current liabilities
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100,886
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88,364
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Total liabilities
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100,886
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88,364
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Stockholders'
equity:
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Preferred stock, $0.001 par value. Authorized 10,000,000 shares:
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Series A 12% Convertible - 800,000 shares issued and outstanding
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at March 31, 2018 and December 31, 2017
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800
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800
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Preferred stock, $0.001 par value. Authorized 1,000,000 shares:
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Series B - 10,000 shares issued and outstanding
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at March 31, 2018 and December 31, 2017
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10
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10
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Common stock, $0.001 par value. Authorized
200,000,000 shares:
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145,484,165
shares
issued and outstanding
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at March 31, 2018 and December 31, 2017
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145,484
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145,484
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Additional paid-in capital
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9,867,282
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9,851,042
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Accumulated deficit
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(9,978,048)
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(9,952,526)
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Total stockholders' equity
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35,528
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44,810
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Total liabilities and stockholders' equity
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$
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136,414
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$
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133,174
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The
accompanying notes are an integral part of these financial statements.
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Data Call Technologies, Inc.
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Condensed Statements of Operations
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Three Months Ended March 31, 2018 and 2017 (Unaudited)
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Back to Table of
Contents
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Three Months
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Three Months
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ended
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ended
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March 31, 2018
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March 31, 2017
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Revenues
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Sales
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$
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167,590
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$
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152,239
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Cost of sales
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38,567
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35,911
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Gross margin
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129,023
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116,328
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Selling, general and administrative
expenses
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150,902
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193,696
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Depreciation and
amortization expense
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2,279
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171
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Total operating
expenses
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153,181
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193,867
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Other (income) expense
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Interest income
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(2)
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(2)
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Interest expense
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1,366
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1,366
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Total expenses
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154,545
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195,232
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Net income
(loss) before income taxes
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(25,522)
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(78,903)
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Provision
for income taxes
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-
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-
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Net loss
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$
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(25,522)
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$
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(78,903)
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Net loss per common share - basic and diluted:
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Net loss applicable to common shareholders
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$
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(0.00
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$
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(0.00
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Weighted
average common shares:
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Basic
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145,484,165
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144,976,421
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Diluted
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145,484,165
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144,976,421
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The
accompanying notes are an integral part of these financial statements.
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Data
Call Technologies, Inc.
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Condensed Statements of Cash Flows
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Three
Months Ended March 31, 2018 and 2017 (Unaudited)
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Back to Table of
Contents
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Three Months
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Three Months
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Ended
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Ended
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March 31, 2018
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March 31, 2017
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Cash flows from operating activities:
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Net loss
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$
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(25,522)
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$
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(78,903)
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Adjustments to reconcile net loss to net cash
provided by (used in)
operating activities:
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Depreciation
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2,279
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171
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Stock
based compensation
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16,110
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43,832
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Options expense
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130
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309
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Changes in operating assets and liabilities:
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Accounts receivable
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(12,962)
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(41,118)
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Prepaid expenses
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5,200
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17,000
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Accounts payable
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5,808
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9,209
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Accounts payable -
related party
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14,443
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7,227
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Accrued expenses
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125
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125
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Accrued expenses -
related party
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96
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39
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Deferred revenues
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(6,191)
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-
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Net cash provided by (used in) operating activities
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(484)
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(42,109)
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Cash flows
from investing activities
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Purchase of property and equipment
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-
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-
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Net cash used in investing activities
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-
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-
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Cash flows
from financing activities:
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Principal payment on borrowing from
related party
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(1,759)
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(1,759)
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Net cash used in financing activities
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(1,759)
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(1,759)
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Net increase (decrease) in cash
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(2,243)
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(43,868)
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Cash at
beginning of year
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44,590
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53,499
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Cash at
end of period
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$
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42,347
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$
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9,631
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Non-Cash Investing and Financing Activities:
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Conversion of short-term borrowing
from shareholder to common stock
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$
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-
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$
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-
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Supplemental Cash Flow Information:
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Cash paid for interest
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$
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1,241
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$
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1,366
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Cash paid for taxes
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$
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-
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$
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-
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The
accompanying notes are an integral part of these financial statements.
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Data Call Technologies, Inc.
Notes to Financial Statements
March 31, 2018
(Unaudited)
Back to Table of
Contents
(1) Summary of Significant
Accounting Policies
Organization, Ownership and Business
Data Call Technologies, Inc. (the
"Company") was incorporated under the laws of the State of Nevada in 2002.
The Company's mission is to integrate cutting-edge information delivery
solutions that are currently deployed by the media, and put them within the
control of retail and commercial enterprises. The Company's software and
services put its clients in control of real-time advertising, news, and
other content, including emergency alerts.
The accompanying unaudited financial
statements have been prepared in accordance with U. S. generally accepted
accounting principles ("GAAP") for interim financial information and with the
instructions to Form 10-Q. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the three-month period ended March 31, 2018 are not
indicative of the results that may be expected for the year ending December 31,
2018.
As contemplated by the Securities and Exchange
Commission (SEC) under Rules of Regulation S-X, the accompanying financial
statements and related footnotes have been condensed and do not contain certain
information that will be included in the Company's annual financial statements
and footnotes thereto. For further information, refer to the Company's audited
financial statements and related footnotes thereto included in the Company's
annual report on Form 10-K for the year ended December 31, 2017.
Cash and Cash Equivalents
For purposes of the statement of cash flows,
the Company considers all highly liquid investment instruments purchased with
original maturities of three months or less to be cash equivalents. There were
no cash equivalents as of March 31, 2018 and December 31, 2017.
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.
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 March 31, 2018 and December
31, 2017 as we believe all of our receivables are fully collectable.
Property, Equipment and Depreciation
Property and equipment are recorded at cost
less accumulated depreciation. Upon retirement or sale, the cost of the assets
disposed of and the related accumulated depreciation are removed from the
accounts, with any resultant gain or loss being recognized as a component of
other income or expense. Depreciation is computed over the estimated useful
lives of the assets (3-5 years) using the straight-line method for financial
reporting purposes and accelerated methods for income tax purposes. Maintenance
and repairs are charged to operations as incurred.
Advertising Costs
The cost of advertising is expensed as
incurred.
Research and Development
Research and development costs are expensed as
incurred.
Product Development Costs
Product development costs consist of cost
incurred to develop the Company's website and software for internal and external
use. All product development costs are expensed as incurred.
Income Taxes
The Company is a taxable entity and recognizes
deferred tax assets and liabilities for the future tax consequences attributable
to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax basis. Deferred tax assets and
liabilities are measured using enacted tax rates expected to be in effect when
the temporary differences reverse. The effect on the deferred tax assets and
liabilities of a change in tax rates is recognized in income in the year that
includes the enactment date of the rate change. A valuation allowance is used to
reduce deferred tax assets to the amount that is more likely than not to be
realized.
Use of Estimates
The preparation of financial statements in
conformity with U. S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could vary from those estimates.
Beneficial Conversion Feature
Convertible debt includes conversion terms
that are considered in the money compared to the market price of the stock on
the date of the related agreement. The Company calculates the beneficial
conversion feature and records a debt discount with the amount being amortized
to interest expense over the term of the note.
Management's Estimates and Assumptions
The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses. Actual
results could differ from these estimates.
Stock-based Compensation
We account for stock-based compensation in
accordance with "FASB ASC 718-10." Stock-based compensation expense recognized
during the period is based on the value of the portion of share-based awards
that are ultimately expected to vest during the period. The fair value of each
stock option grant is estimated on the date of grant using the Black-Scholes
option pricing model. The fair value of restricted stock is determined based on
the number of shares granted and the closing price of the Company's common stock
on the date of grant. Compensation expense for all share-based payment awards is
recognized using the straight-line amortization method over the vesting period.
Fair Value of Financial Instruments
The Company estimates the fair value of its
financial instruments using available market information and appropriate
valuation methodologies. However, considerable judgment is required in
interpreting market data to develop the estimates of fair value. Accordingly,
the Company estimates of fair value are not necessarily indicative of the
amounts that the Company could realize in a current market exchange. The use of
different market assumption and/or estimation methodologies may have a material
effect on the estimated fair value amounts. The interest rates payable by the
Company on its notes payable approximate market rates. The Company believes that
the fair value of its financial instruments comprising accounts receivable,
notes receivable, accounts payable, and notes payable approximate their carrying
amounts.
On January 1, 2009, the Company adopted an
accounting standard for applying fair value measurements to certain assets,
liabilities and transactions that are periodically measured at fair value. The
adoption did not have a material effect on the Company's financial position,
results of operations or cash flows. In August 2009, the FASB issued an
amendment to the accounting standards related to the measurement of liabilities
that are routinely recognized or disclosed at fair value. This standard
clarifies how a company should measure the fair value of liabilities, and that
restrictions preventing the transfer of a liability should not be considered as
a factor in the measurement of liabilities within the scope of this standard.
This standard became effective for the Company on October 1, 2009. The adoption
of this standard did not have a material impact on the Company's financial
statements. The fair value accounting standard creates a three level hierarchy
to prioritize the inputs used in the valuation techniques to derive fair values.
The basis for fair value measurements for each level within the hierarchy is
described below with Level 1 having the highest priority and Level 3 having the
lowest.
Level 1: Quoted prices in active markets for
identical assets or liabilities.
Level 2: Quoted prices for similar assets or
liabilities in active markets; quoted prices for identical or similar
instruments in markets that are not active; and model-derived valuations in
which all significant inputs are observable in active markets.
Level 3: Valuations derived from valuation techniques in which
one or more significant inputs are unobservable.
The following table presents the Company's
Assets & Liabilities within the fair value hierarchy utilized to measure fair
value on a recurring basis as of March 31, 2018 and December 31, 2017:
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(Level 1)
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(Level 2)
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(Level 3)
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March 31, 2018
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$
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0
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$
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0
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$
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0
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December 31, 2017
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$
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0
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$
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0
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$
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0
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Recent Accounting Pronouncements
In May 2017, the FASB issued Accounting
Standard Update ("ASU") No. 2017-9, Compensation - Stock Compensation (Topic
718): Scope of Modification Accounting ("ASU2017-9"), which provides guidance
about which changes to the terms or conditions of a share-based payment award
require an entity to apply modification accounting in Topic 718. Per ASU 2017-9,
an entity should account for the effects of a modification unless all the
following are met: (1) the fair value (or calculated value or intrinsic value,
if such an alternative measurement method is used) of the modified award is the
same as the fair value (or calculated value or intrinsic value, if such an
alternative measurement method is used) of the original award immediately before
the original award is modified. If the modification does not affect any of the
inputs to the valuation technique that the entity uses to value the award, the
entity is not required to estimate the value immediately before and after the
modification, (2) the vesting conditions of the modified award are the same as
the vesting conditions of the original award immediately before the original
award is modified, and (3) the classification of the modified award as an equity
instrument or a liability instrument is the same as the classification of the
original award immediately before the original award is modified. The current
disclosure requirements in Topic 718 apply regardless of whether an entity is
required to apply modification accounting under the amendments in ASU 2017-9.
ASU 2017-9 is effective for public business entities for annual and interim
periods in fiscal years beginning after December 15, 2017. Early adoption is
permitted, including adoption in any interim period, for (1) public business
entities for reporting periods for which financial statements have not yet been
issued and (2) all other entities for reporting periods for which financial
statements have not yet been made available for issuance. The amendments in this
ASU should be applied prospectively to an award modified on or after the
adoption date. The Company early adopted ASU 2017-9 and adoption did not have a
material impact on the Company's financial statements or related disclosures.
In March, 2017, the FASB issued Update 2017-08
- Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium
Amortization on Purchased Callable Debt Securities. For public business
entities, the amendments in this Update are effective for fiscal years, and
interim periods within those fiscal years, beginning after December 15, 2018.
For all other entities, the amendments are effective for fiscal years beginning
after December 15, 2019, and interim periods within fiscal years beginning after
December 15, 2020. Early adoption is permitted, including adoption in an interim
period. If an entity early adopts the amendments in an interim period, any
adjustments should be reflected as of the beginning of the fiscal year that
includes that interim period.
In March 2017, the FASB issued Update 2017-07
- Compensation - Retirement Benefits (Topic 715): Improving the Presentation of
Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.
Effective for public business entities for annual periods beginning after
December 15, 2017, including interim periods within those annual periods. For
other entities, the amendments in this Update are effective for annual periods
beginning after December 15, 2018, and interim periods within annual periods
beginning after December 15, 2019. Early adoption is permitted as of the
beginning of an annual period for which financial statements (interim or annual)
have not been issued or made available for issuance. That is, early adoption
should be within the first interim period if an employer issues interim
financial statements. Disclosures of the nature of and reason for the change in
accounting principle are required in the first interim and annual periods of
adoption.
In August, 2016, the FASB issued ASU No.
2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash
Receipts and Cash Payments(a consensus of the Emerging Issues Task Force).
Effective for public business entities for fiscal years beginning after December
15, 2017, and interim periods within those fiscal years. For all other entities,
the amendments are effective for fiscal years beginning after December 15, 2018,
and interim periods within fiscal years beginning after December 15, 2019. Early
adoption is permitted, including adoption in an interim period. If an entity
early adopts the amendments in an interim period, any adjustments should be
reflected as of the beginning of the fiscal year that includes that interim
period. An entity that elects early adoption must adopt all of the amendments in
the same period.
In June, 2016, the FASB issued ASU No.
2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments. For public business entities that are
U.S. Securities and Exchange Commission (SEC) filers, the amendments in this
Update are effective for fiscal years beginning after December 15, 2019,
including interim periods within those fiscal years. For all other public
business entities, the amendments in this Update are effective for fiscal years
beginning after December 15, 2020, including interim periods within those fiscal
years. For all other entities, including not-for-profit entities and employee
benefit plans within the scope of Topics 960 through 965 on plan accounting, the
amendments in this Update are effective for fiscal years beginning after
December 15, 2020, and interim periods within fiscal years beginning after
December 15, 2021. All entities may adopt the amendments in this Update earlier
as of the fiscal years beginning after December 15, 2018, including interim
periods within those fiscal years.
In May, 2016, the FASB issued ASU No. 2016-12,
Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and
Practical Expedients. The amendments in this Update affect the guidance in
Accounting Standards Update 2014-09, Revenue from Contracts with Customers
(Topic 606), which is not yet effective. The effective date and transition
requirements for the amendments in this Update are the same as the effective
date and transition requirements for Topic 606 (and any other Topic amended by
Update 2014-09). Accounting Standards Update 2015-14, Revenue from Contracts
with Customers (Topic 606): Deferral of the Effective Date, defers the effective
date of Update 2014-09 by one year.
In April, 2016, the FASB issued ASU No.
2016-10, Revenue from Contracts with Customers (Topic 606): Identifying
Performance Obligations and Licensing. The amendments in this Update affect the
guidance in Accounting Standards Update 2014-09, Revenue from Contracts with
Customers (Topic 606), which is not yet effective. The effective date and
transition requirements for the amendments in this Update are the same as the
effective date and transition requirements in Topic 606 (and any other Topic
amended by Update 2014-09). Accounting Standards Update 2015-14,Revenue from
Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the
effective date of Update 2014-09 by one year.
The Company has considered all new accounting
pronouncements and has concluded that there are no new pronouncements that may
have a material impact on results of operations, financial condition, or cash
flows, based on current information.
(2) Related Party Transactions
During the first quarter of 2013, the Company
issued unregistered shares as follows: (i) 7,500,000 restricted shares to Tim
Vance, the Company's CEO, in connection with the execution of a new 5 year
employment agreement; and 7,500,000 restricted shares to Gary Woerz, the
Company's newly designated CFO, in connection with the execution of a new 5 year
employment agreement. The restricted shares were valued at $0.06 per share using
the closing price of the stock on the date of grant. Total expense associated
with the issuances is calculated at $900,000 to be recognized over the 5 year
term of the agreements. The expense recognized in the first quarter of 2018 was
$16,110 and the expense in the first quarter of 2017 was $43,832. The January
2013 employment agreements calls for a 5 year term ending January 30, 2018,
annual compensation of $85,000 per year for services as CEO, annual compensation
of $52,000 per year for services as CFO, 500,000 options to the CEO and 400,000
options to the CFO in addition to the 7,500,000 restricted shares to each the
CEO and CFO.
During the first quarter of 2016, the Company
granted a total of 900,000 options for the purchase of up to 900,000 shares of
common stock to Tim Vance, the Company's CEO, in connection with the execution
of a new 5 year employment agreement and to Gary Woerz, the Company's newly
designated CFO, in connection with the execution of a new 5 year employment
agreement. The Company uses the Black-Scholes option valuation model to value
stock options granted. The Black- Scholes model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. The model requires management to make estimates,
which are subjective and may not be representative of actual results. The
Company recorded $Nil (March 31, 2017: $177) in stock option compensation
expense, in relation to these options for the quarter ended March 31, 2018. The
Black-Scholes model calculations included stock price on date of measurement of
$0.0014, exercise price of $0.001, a term of 3 years, computed volatility of
105% and a discount rate of 1.01%. The January 2016 employment agreements calls
for a 5 year term ending January 30, 2018, annual compensation of $85,000 per
year for services as CEO, annual compensation of $52,000 per year for services
as CFO, 500,000 options to the CEO and 400,000 options to the CFO in addition to
the 7,500,000 restricted shares to each the CEO and CFO.
During the first quarter of 2017, the Company
granted a total of 900,000 options for the purchase of up to 900,000 shares of
common stock to Tim Vance, the Company's CEO, in connection with the execution
of a new 5 year employment agreement and to Gary Woerz, the Company's newly
designated CFO, in connection with the execution of a new 5 year employment
agreement. The Company uses the Black-Scholes option valuation model to value
stock options granted. The Black- Scholes model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. The model requires management to make estimates,
which are subjective and may not be representative of actual results. The
Company recorded $130 (March 31, 2017: $232) in stock option compensation
expense, in relation to these options for the quarter ended March 31, 2018. The
Black-Scholes model calculations included stock price on date of measurement of
$0.002, exercise price of $0.001, a term of 3 years, computed volatility of 124%
and a discount rate of 1.93%. The January 2016 employment agreements calls for a
5 year term ending January 30, 2018, annual compensation of $85,000 per year for
services as CEO, annual compensation of $52,000 per year for services as CFO,
500,000 options to the CEO and 400,000 options to the CFO in addition to the
7,500,000 restricted shares to each the CEO and CFO.
During 2009, the Company received cash in the
sum of $50,000 from a shareholder for a Convertible Note Payable at a 10%
interest rate. On July 30, 2015, the Company entered into an amendment agreement
for the previously convertible note. The amendment removed the prior conversion
feature of the note and amended the due date to June 30, 2016. The remaining
balance of the note as of March 31, 2018 and December 31, 2017 was $17,233 and
$18,992, respectively. The interest for the note payable has been calculated
annually and has been paid for the quarter ended March 31, 2017 and the year
ended December 31, 2016.
As of March 31, 2018 and December 31, 2017,
convertible notes payable to related party had a balance of $10,000.The note is
past due and considered in default. The interest for the note payable has been
calculated annually and has been accrued for the quarter ended March 31, 2018
and the year ended December 31, 2017.
During the quarters ended March 31, 2018 and
March 31, 2017, the company repaid a total of $1,759 and $1,759, respectively,
to related parties on various note payables.
As of March 31, 2018 and December 31, 2017 the
total due to management for past accrued salaries is $580 and $484,
respectively.
As of March 31, 2018 and December 31, 2017 the
total due to management included in accounts payable is $18,147 and $3,704,
respectively.
(3) Capital Stock, Warrants and Options
The Company is authorized to issue up to
10,000,000 shares of Series A Preferred Stock, $0.001 par value per share, of
which 800,000 shares are outstanding at March 31, 2018 and December 31, 2017.
The Preferred Stock may be issued in one or more series, the terms of which may
be determined at the time of issuance by the Board of Directors, without further
action by stockholders, and may include voting rights (including the right to
vote as a series on particular matters), preferences as to dividends and
liquidation, conversion, redemption rights and sinking fund provisions.
Each share of Series A Preferred Stock shall
bear a preferential dividend of twelve percent (12%) per year and is convertible
into a number shares of the Company's common stock, par value $0.001 per share
("Common Stock") based upon Fifty (50%) percent of the average closing bid price
of the Common Stock During the ten (10) day period prior to the conversion. The
Company has not declared or accrued any dividends and as of March 31, 2018 and
2017 un accrued and undeclared dividends were $1,200.
During the first quarter of 2013, the Company
issued unregistered shares as follows: (i) 7,500,000 restricted shares to Tim
Vance, the Company's CEO, in connection with the execution of a new 5 year
employment agreement; and 7,500,000 restricted shares to Gary Woerz, the
Company's newly designated CFO, in connection with the execution of a new 5 year
employment agreement. The restricted shares were valued at $0.06 per share using
the closing price of the stock on the date of grant. Total expense associated
with the issuances is calculated at $900,000 to be recognized over the 5 year
term of the agreements. The expense recognized in the first quarter of 2018 was
$16,110 (2017: $43,832).
During the quarter ended September 30, 2014,
the Company amended its Articles of incorporation to authorize 1,000,000 shares
of Series B Preferred Stock at a par value of $0.001 and issued 10,000 shares.
The Series B shares were valued at $76,000 and were expensed during 2014. The
Series B Preferred Stock may be issued to one or series by the terms of which
may be and may include preferences as to dividends and liquidation, conversion,
redemption rights and sinking fund provisions. The Series B Preferred Shares
have the right to vote in the aggregate, on all shareholder matters votes equal
to 51% of the total shareholder vote on any and all shareholder matters. The
Series B Preferred Stock will be entitled to this 51% voting right no matter how
many shares of common stock or other voting stock of Data Call Technology stock
is issued and outstanding in the future.
During the first quarter of 2017, the Company
granted a total of 900,000 options for the purchase of up to 900,000 shares of
common stock to Tim Vance, the Company's CEO, in connection with the 2013 5 year
employment agreement and to Gary Woerz, CFO, in connection with the execution of
the 2013 5 year employment agreement. The Company uses the Black-Scholes option
valuation model to value stock options granted. During the period ended March
31, 2015, the Company determined that the Employment Agreements between the
Company and its Executive Officers be amended to adjust the exercise price form
the lower of $0.03 to $0.0015 and that the expiration date of the options to be
extended from January 31, 2018 to December 31, 2019. The Black- Scholes model
was developed for use in estimating the fair value of traded options that have
no vesting restrictions and are fully transferable. The model requires
management to make estimates, which are subjective and may not be representative
of actual results. The Black-Scholes model calculations included stock price on
date of measurement of $0.002, exercise price of $0.001, a term of 3 years,
computed volatility of 124% and a discount rate of 1.93%. Assumptions used to
determine the fair value of the stock based compensation is as follows:
|
Exercise price
|
Total Options Outstanding
|
Weighted Average Remaining Life (Years)
|
Total Weighted Average Exercise Price
|
Options Exercisable
|
|
$0.001
|
900,000
|
2.31
|
$0.001
|
900,000
|
The Company recorded $130 (2017: $232) in
stock option compensation expense, in relation to these options, during the
quarter ended March 31, 2018. Total stock option compensation expense is
calculated at $1,460.
During the first quarter of 2016, the Company
granted a total of 900,000 options for the purchase of up to 900,000 shares of
common stock to Tim Vance, the Company's CEO, in connection with the 2013 5 year
employment agreement and to Gary Woerz, CFO, in connection with the execution of
the 2013 5 year employment agreement. The Company uses the Black-Scholes option
valuation model to value stock options granted. During the period ended March
31, 2015, the Company determined that the Employment Agreements between the
Company and its Executive Officers be amended to adjust the exercise price form
the lower of $0.03 to $0.0015 and that the expiration date of the options to be
extended from January 31, 2018 to December 31, 2019. The Black- Scholes model
was developed for use in estimating the fair value of traded options that have
no vesting restrictions and are fully transferable. The model requires
management to make estimates, which are subjective and may not be representative
of actual results. The Black-Scholes model calculations included stock price on
date of measurement of $0.0014, exercise price of $0.001, a term of 3 years,
computed volatility of 105% and a discount rate of 1.01%. Assumptions used to
determine the fair value of the stock based compensation is as follows:
|
Exercise price
|
Total Options Outstanding
|
Weighted Average Remaining Life (Years)
|
Total Weighted Average Exercise Price
|
Options Exercisable
|
|
$0.001
|
900,000
|
1.34
|
$0.001
|
900,000
|
The Company recorded $Nil (2017: $77) in stock
option compensation expense, in relation to these options, during the quarter
ended March 31, 2018. Total stock option compensation expense is calculated at
$884.
The Company is authorized to issue up to
200,000,000 shares of Common Stock, of which 145,484,165 shares were issued and
outstanding as of March 31, 2018 and December 31, 2017.
(4) Property and Equipment
Major classes of property and equipment
together with their estimated useful lives, consisted of the following:
|
|
Years
|
|
March 31, 2018
|
|
December 31, 2017
|
|
Equipment
|
3-5
|
$
|
112,612
|
$
|
112,612
|
|
Office
furniture
|
7
|
|
21,681
|
|
21,681
|
|
Leasehold
improvements
|
3
|
|
10,656
|
|
10,656
|
|
|
|
|
144,949
|
|
144,949
|
|
Less
accumulated depreciation and amortization
|
|
|
(138,930)
|
|
(136,651)
|
|
Net property
and equipment
|
|
$
|
6,019
|
$
|
8,298
|
(5) Shareholder Notes Payable
Repayments on shareholder notes payable during
the quarter ended March 31, 2018 totaled $1,759 (2016: $1,759).
(6) Subsequent Events and Contingencies
On April 30, 2018, the Company executed new
5-year employment agreements with the CEO Tim Vance and CFO Gary Woerz. The
agreements include the grant of a total of 5,500,000 shares of Common Stock to
be vested over a 5-year period ending April 30, 2023.
The Company has evaluated subsequent events
from the date on the balance sheet through the date these financial statements
are being filed with the Securities and Exchange Commission. No additional
material events or transactions have occurred during this subsequent event
reporting period which required recognition or disclosure in the financial
statements.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATION
Back to Table of Contents
Some of the statements contained in this quarterly report of Data
Call Technologies, Inc., Nevada corporation (hereinafter referred to as "we",
"us", "our", "Company" and the "Registrant")
discuss future expectations, contain projections of our plan of operation or financial
condition or state other forward-looking information. Forward-looking statements give our
current expectations or forecasts of future events. You can identify these statements by
the fact that they do not relate strictly to historical or current facts. They use of
words such as "anticipate," "estimate," "expect,"
"project," "intend," "plan," "believe," and other
words and terms of similar meaning in connection with any discussion of future operating
or financial performance. From time to time, we also may provide forward-looking
statements in other materials we release to the public.
Data Call Technologies, Inc. ("Data Call," or the "Company") was incorporated
under the laws of the State of Nevada as Data Call Wireless on April 4, 2002. On
March 1, 2006, we changed our name to Data Call Technologies, Inc.
Our mission is to continue to exponentially grow our offering of our
proprietary subscription services by integrating cutting-edge
information/content delivery solutions to and within the control of retail and
commercial resellers CMS manufacturers and end-users. Our Company's services put
its clients in control of real-time news, sports, weather and other dynamic
content, displayed within one or multiple locations, spanning from local,
regional to global end points, through Digital Signage and Kiosk networks.
Our business plan continues to focus on growing our client base by
effectively offering this real-time and licensed information/content displayed
through Digital Signage and Kiosk networks, seeking to improve the delivery,
security, and variety of information/content services to the growing Digital
Signage and Kiosk community.
Overview - What Is Digital Signage?
You've seen Digital Signage, it's everywhere. Whether you're shopping, trying
to find your way through the airport, in a taxi, or even along the highway on
your way home, it's there. LED and LCD displays are continually replacing
printed marketing materials such as signs and placards, as well as the
old-school whiteboard, for product and corporate branding, marketing and
assisted selling. The appeal of instantly updating product videos and
promotional messages on one or thousands of remotely located displays is driving
the adoption of this growing marketing platform. Digital Signage presentations
are typically comprised of repeating loops (playlists) of information used to
brand, market or sell the owner's products and services or corporate messaging.
But once viewed, this information becomes repetitive and the viewer tunes it
out, resulting in low retention of the client's message. As digital signage has
matured, the characteristics of the digital signage presentations have taken
center-stage requiring fresh, relevant and dynamic content mixed within the
marketing messages. Dynamic Content is key.
Digital Signage Matures
We are experiencing the Digital Signage Industry (back then called connected
signage) steadily maturing and Data Call, through its multiple industry specific
relationships, continues its engagement and influence in the direction of the
Digital Signage industry. Data Call has been performing in this space for well
over a decade. Our company has staked claim in assisting the industry's birth
and maintains its prime position to enjoy and benefit from this industry's
growth.
Early on, a business desiring to achieve commercial benefits from the use of
digital signage was often confronted by a plethora of hardware and software
solutions, all offering their own "standard" of what digital signage should be.
Typical customers for digital signage were most-often offered expensive hardware
to present digital signage with a very minimalistic content management solution
(CMS), lacking the full package of content with which to build and tailor their
systems for their target customer base.
Those early adopters of digital signage, often had to realize that their
digital signage hardware vendors lacked the acumen to fully provide best
practice of content strategy. The tools to manage content were provided, but not
the content. From our inception, Data Call recognized that early signage
providers and their typical customers lacked that key component - the offering
of a comprehensive content package.
As the cost of platforms supporting infrastructure and digital displays have
fallen significantly, digital signage has become more accessible to a wider
range of potential users. Companies in our industry have come to understand, as
we have preached since our inception, that the cost of Data Call's integrated,
content-flexible subscription service is extremely cost effective - and licensed
for redistribution over their networks. The benefit that Data Call continues to
provide our client base, in the form of ongoing content development, is expected
to continue to provide our customers with desirable user-friendly content and
content services.
The Need for Speed - Active Content
Active and dynamic content is the integral part of digital signage
presentations that must be constantly updated with timely and relevant
information to attract and retain target viewers to the products, services, or
messaging offered by typical Digital Signage clients. For instance, a typical
presentation may contain ten 15-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 constantly throughout the day. Those
seeking to add active and dynamic content to their digital signage presentations
are educated and advised to subscribe to Data Call's dynamic content rather than
attempting to illegally "cut and paste" or "scrape" broadcast content or RSS
Feeds "not for commercial use" of others into their digital signage
presentation.
By integrating Data Call's content as a meaningful component of digital
signage presentations, our clients can legally provide the entertainment and
information content necessary to enhance the target customer's information
retention without disrupting the core message of the presentation. Some of the
Infotainment categories provided by Data Call include news, sports, weather,
financial data, the latest traffic alerts, among many others. With such a broad
range of offerings, our clients have access to this active and dynamic content
they need, regardless of the target customers and market they are addressing.
Our Business Opportunities
Our many opportunities for client development in the digital signage industry
are growing exponentially. While many companies in our industry have
traditionally outsourced all or part of their content creation, Data Call serves
as a provider of dynamic active content to clients on a tailored basis. Whether
a client desires general entertainment information for customers, such as news,
sports, stock market quotes, etc. or location-specific content, such as local
weather, traffic, etc., our research and experience has validated our long-held
mantra that dynamic content draws and retains our clients' target viewers to
their digital signage and keeps viewers engaged throughout the client
presentation.
Since our inception, management has developed and maintains strong
relationships working with the leaders and associations of the digital signage
industry. Collaborative efforts have successfully created, now industry
standard, data formats and methods to facilitate the delivery of our dynamic
content more easily and efficiently for integration into most hardware and
software products.
Partners, Not Customers
Data Call's enduring approach to our clients is to build long-lasting
partnerships by creating client relationships that we believe are unique in the
digital signage industry. We understand that each client has their own content
requirements. In developing dynamic content for individual digital signage
clients, we have identified three content-related factors: (i) reliability; (ii)
objectivity; and (iii) ease of implementation. To address the reliability
requirement, we are engaged in multiple license arrangements with the leading
providers of news, weather, sports and financial information, among other
client-desired content rather than either: (i) downloading and repackaging
content sourced from the Internet (which may be illegal); or (ii) Scraping RSS
feeds from news organizations (which may come and go at the provider's whim -
not to mention this practice is also illegal).
Licensing data from these premier providers has also served us by satisfying
the second criteria, objectivity. Because it is commonly recognized that
Internet content may often be unreliable, unverifiable and biased, early on, we
determined that we could not simply use unfiltered Internet content for delivery
to our clients. Our proper licensing of data facilitates the standard of
delivery and implementation by our client/partners. Data Call does the heavy
lifting by taking care of not just the licensing, but the proper formatting of
that data for consumption by the industry utilizing our multiple formats
offered. Data Call has understood that it's Digital Signage and Kiosk clients
needed a more complete service than to endeavor the sourcing of active content
from multiple vendors. As a result, our flexible content plans permit our
clients to do "one stop shopping" for all dynamic content requirements by
licensing subscriptions through us.
We empower our clients to receive customized dynamic content subscriptions to
be displayed in a multitude of ways (banners, tickers, scrolls or visualizations
integrated with the overall presentations). We have created "Playlist Ready"
offerings and produced and distribute multiple sets of common data layouts in
the industry-standard formats such as XML (extensible markup language), JSON (JavaScript
Object Notation), JPEG (Joint Photographic Experts Group), RSS (Rich Site
Summary, often called Really Simple Syndication), MRSS (Media RSS) and MPEG
(Moving Pictures Expert Group). With the advent of HTML5 (5th version of
Hypertext Markup Language), even more delivery methods have been made available
to our clients, many of whom have found any one or a combination of these
formats to be easily integrated into their products. Nevertheless, we have also
produced customized data formats and visualizations to the exact and specific
requirements of our clients/partners, which, we believe ensures a higher level
of reliability and ease of implementation.
Market demand, opportunity and technology converge at a single point in time,
and Data Call continues hold its position. Our integrity persistently builds our
business. Digital signage platforms steadily evolve to meet mass market
requirements, costs for hardware and software are falling to the point of
becoming commodities and the markets for digital signage are clarifying through
historical trial and error.
Business Operations
In March of 2017, we released our Direct Lynk Manager (DLManager) customer
portal at the Digital Signage Expo in Las Vegas. The DLManager incorporates the
Direct Lynk Media platform with major enhancements and options that enable the
client to self-serve in a webstore environment. This is a moderated space that
allows proper "white glove" treatment by our staff that our clients have come to
expect and appreciate. Once the client is comfortable with navigation of the
portal, they may then set up multiple groups and displays within their account
for testing results in a demo fashion free of charge. Upon completion of their
content selections and distribution points, the client may purchase the proper
number of licenses needed to support their sections through various plans
offered within the portal.
Some of the current types of data and information, for which a client may
subscribe to through the Direct Lynk System, in multiple formats include:
|
-
|
Headline
News top world and national news headlines;
|
|
-
|
Business
News top business headlines;
|
|
-
|
Financial
Highlights world-based financial indicators ;
|
|
-
|
Entertainment
News top entertainment headlines;
|
|
-
|
Health/Science
News top science/health headlines;
|
|
-
|
Strange News - latest off-beat news headlines;
|
|
-
|
Sports
Headlines top sports headlines
|
|
|
- AP News Minute Video
|
|
|
- AP This Day In History
Videos
|
|
|
- AP Entertainment Minute
Videos
|
|
-
|
Latest
Sports Lines - latest sports odds for NFL, NBA, NHL, NCAA Football and NCAA Basketball;
|
|
-
|
National
Football League latest game schedule and in-game updates;
|
|
-
|
National
Basketball Association - latest game schedule and in-game updates;
|
|
-
|
Major
League Baseball - latest game schedule and in-game updates;
|
|
-
|
National
Hockey League - latest game schedule and in-game updates;
|
|
-
|
NCAA
Football - latest game schedule and in-game updates;
|
|
-
|
NCAA Men's
Basketball - latest game schedule and in-game updates;
|
|
-
|
Professional
Golf Association top 10 leaders continuously updated throughout the four-day tournament;
|
|
-
|
NASCAR top
10 race positions updated every 20 laps throughout the race;
|
|
-
|
Traffic
Mapping;
|
|
-
|
Animated
Doppler Radar and Forecast Maps;
|
|
-
|
Listings of
the day's horoscopes;
|
|
-
|
Listings of
the birthdays of famous persons born on each day;
|
|
-
|
Health and Wellness
|
|
-
|
Listings of
historical events which occurred on each day in history; and
|
|
-
|
Localized
Traffic and Weather Forecasts.
|
We continually add different types of content per client requests. We provide
our DLM services to our clients and other potential customers through the
Internet. All DLM Services are real-time information services providing a wide
range of up-to-date information for display. These services are designed to work
concurrently with customers' existing digital signage systems. The Direct Lynk
Messenger product is scheduled to be sunset within the next 12 months, as
DLMedia gradually moves into a legacy status with the DLManager portal taking
the forefront.
Since our inception in 2002, we have come to deeply understand that this
industry provides an exciting platform for advertisers, including our clients,
to promote, inform, educate, and entertain their customers and employees
regarding their business products, services, and corporate communications.
Through Digital Signage, and Digital Out of Home (DOOH) businesses can use a
single display or a complex, networked series of displays and video walls to
market their products and services directly at their facilities and elsewhere to
their customers and employees in real time. Additionally, because the core of
Digital Signage advertising takes place in real time, businesses can change
their marketing and messaging efforts literally from moment to moment and over
the course of a day or such other period as they may determine.
We believe that the ability of our clients to display in real-time, the
information and content we deliver, better allows our clients to tailor their
products, services, advertising and messaging to individual and target-group
customers, thereby advertising and offering, for example, inventory and sales
discounts that may be designed to appeal to those individual customers and
target customer groups, increasing sales and revenues. We believe that the
benefits of on-site, real-time Digital Signage displays compared to regular
print or video advertising are substantial and include, among other advantages,
being able to immediately change digitally-displayed images/advertisements
depending on our client's customers own situation, not simply being restricted
by in-store print circulars produced days, weeks or even months in advance,
which may become stale or obsolete prior to or shortly after publication and
dissemination.
We specialize in enabling our clients to create their own Digital Signage
content feeds which are delivered online directly to their chosen, electronic
digital display devices at their various facilities. The only requirements our
clients must have are: (i) a supported, third-party Digital Signage or Kiosk
equipment solution - through a CMS or a standalone player, or similar device,
which receives the data from our servers online; and (ii) an Internet
connection. Our DLM System is supported by various, readily available
third-party systems, varying in costs from inexpensive monthly cloud-based
licenses to much more extensive and expensive content management/playback
systems. Our Systems allow customers to select from their pre-determined data
and information subscriptions offered. We enable our clients to also select
location specific content they wish to receive based on how and where their
Digital Signage network is configured.
In December of 2017 the company completed the arduous task of reconstructing
our back-end systems architecture. This task was initialized to exploit the
latest technology advances within our space, utilizing our data center
efficiencies to further streamline our processes. One of the greater
culminations of this effort yielded the Data Call API (Application Programming
Interface) allowing our enterprise channel partners to embed our products within
their offerings to further widen our reach.
Data Call continues to grow its client base through relationships that are
gained through industry events such as seminars and trade shows. Our company has
become a leader in syndicated content and custom content development for Digital
Signage. Our licensed content is utilized on thousands of screens in hundreds of
deployments. We are truly excited of our continued growth through our resellers,
CMS manufacturers and end users.
Results of Operations
The following discussion should be read in conjunction with our financial
statements.
During the last twelve months, the Company has implemented cost management
measurements to review monthly expenditures. We will continue these efforts to
streamline operations, as we focus on increasing sales and gross revenues over
the next twelve months. We do not currently have any plans to increase our
monthly expenditures or number of employees. We currently offer our Direct Lynk
Messenger and DLMedia services to our clients and other potential customers
through the Internet. Both DLM Services are Digital Signage products and
real-time information services which provides a wide range of up-to-date
information for display. Both DLM services are able to work concurrently with
customers' existing digital signage systems. The Direct Lynk Messenger product
is slowly becoming a legacy product with the DLMedia product in the forefront.
We continually add subscribers for our technology throughout and intend to
build and increase such subscribers moving forward.
Three Months Ended March 31, 2018 Compared to Three Months Ended March 31,
2017
Our revenues for the three months ended March 31, 2018 were $167,590 compared
to $152,239 for the three-month period ended March 31, 2017, representing an
increase of $15,351or 10.1% during the same period in the prior year. The
increase was mainly due to new business and renewals at the beginning of the
year.
Costs of sales for the three months ended March 31, 2018 were $38,567
compared to $35,911 for the three-month period ended March 31, 2017, which
represents an increase of $2,656. Costs of sales increased due to the
corresponded increase in revenues and the amount of bandwidth required to
provide the subscription services.
Gross margins for the three months ended March 31, 2018 were $129,023
compared to $116,328, or 77.0% for the three-month period ended March 31, 2018
as compared to 76.4% for the three-month period ending March 31, 2017.
Selling, General and Administrative expenses for the three months ended March
31, 2018 were $150,902 compared to $193,696 for the three-month period ended
March 31, 2017, representing a decrease of $42,794 from the same period in the
prior year. The decrease in SG&A expenses is mainly due to a decrease in
expenses and a reduction in the costs of stock. Net loss for the three months
ended March 31, 2018 was $25,522 compared to a net loss of $78,903 for the
three-month period ended March 31, 2017. The Company's net loss was due to the
increase in revenue and the reduction of expenses.
Liquidity and Capital Resources
We had total current assets of $129,595 consisting of $42,347 of cash and
$86,348 in accounts receivable as of March 31, 2018. As of March 31, 2018, we
had total current liabilities of $100,886, which represented $42,077 in accounts
payable, $23,231 in accrued expenses, $8,255 in deferred revenue and $27,233 in
notes payable.
We had a positive working capital of $28,709 and an accumulated deficit of
$9,978,048 on March 31, 2018.
We used $484 of cash for our operating activities during the three-month
period ended March 31, 2018, which was mainly due to a net loss of $25,522,
accounts payable of $20,251, offset by accounts receivables of $12,962, non-cash
compensation related to stock expense valued at $16,110, non-cash expenses
related to options and warrants of $130, prepaid expenses of $5,200,
depreciation expense of $2,279, accrued expenses of $221, and deferred revenue
of $6,191. We had no investing activities during the three-month period ended
March 31, 2018. We used $1,759 in financing activities during the three months
ended March 31, 2018 for the repayment of related party notes payable.
Due to our strong financial position we do not see a need to raise additional
funds. We will continue to generate sufficient revenues and generate new
revenues to support our operations.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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We have not entered
into, and do not expect to enter into, financial instruments for trading or hedging
purposes.
ITEM 4.
CONTROLS AND PROCEDURES
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(a) Evaluation of disclosure controls and
procedures.
Our management, with the participation of our
Principal Executive Officer and our Principal Financial Officer, evaluated the
effectiveness of our disclosure controls and procedures as of March 31, 2018
(the "Evaluation Date"). The term "disclosure controls and procedures," as
defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls
and other procedures of a company that are designed to ensure that information
required to be disclosed by a company in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported, within
the time periods specified in the SEC's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by a company in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the company's management, including its principal executive and principal
financial officers, as appropriate, to allow timely decisions regarding required
disclosure. Management recognizes that any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance of
achieving their objectives and management necessarily applies its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
Based on the evaluation of our disclosure controls and procedures as of March
31, 2018, our Principal Executive Officer and Principal Financial Officer
concluded that, as of such date, our disclosure controls and procedures were not
effective at the reasonable assurance level as described in our Annual Report on
Internal Control Over Financial Reporting filed in our Annual Report on Form
10-K.
Our principal executive officers do not expect
that our disclosure controls or internal controls will prevent all errors and
all fraud. Although our disclosure controls and procedures were designed to
provide reasonable assurance of achieving their objectives and our principal
executive officers have determined that our disclosure controls and procedures
are effective at doing so, a control system, no matter how well conceived and
operated, can provide only reasonable, not absolute assurance that the
objectives of the system are met. Further, the design of a control system must
reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any,
within the Company have been detected. These inherent limitations include the
realities that judgments in decision-making can be faulty, and that breakdowns
can occur because of simple error or mistake. Additionally, controls can be
circumvented if there exists in an individual a desire to do so. There can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions.
(b) Changes in Internal Control over Financial
Reporting
There have been no significant changes in our
internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) or in other factors that occurred during the
three month period ended March 31, 2018 that have significantly affected, or are
reasonably likely to significantly affect, our internal control over financial
reporting.