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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________

FORM 10-K
________________________________

ý                                             ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the year ended December 31, 2011

 

¨                               TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from          to

 

Commission file number 333-131948
 

DATA CALL TECHNOLOGIES, INC.
(Exact Name Of Registrant As Specified In Its Charter)

Nevada 30-0062823
(State of Incorporation) (I.R.S. Employer Identification No.)
   
600 Kenrick, Suite B-12, Houston, TX 77060
(Address of Principal Executive Offices) (ZIP Code)

 Registrant's Telephone Number, Including Area Code: (832) 230-2376

Securities Registered Pursuant to Section 12(g) of The Act: Common Stock, $0.001

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
¨

On December 31, 2011, the aggregate market value of the 13,108,920 shares of common stock held by non-affiliates of the registrant was approximately $262,178 based on the asked price of the Registrants common stock on December 31, 2011. On December 31, 2011, the Registrant had 19,976,421 shares of common stock outstanding.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act) or a smaller reporting company .

Large accelerated filer ¨ Accelerated filer ¨  Non-Accelerated filer ¨  Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x






TABLE OF CONTENTS

Item
____
   Description
   _________
Page
____

PART I

 
ITEM 1.    DESCRIPTION OF BUSINESS 3
ITEM 1A.    RISK FACTORS RELATED TO OUR BUSINESS 6
ITEM 1B.    UNRESOLVED STAFF COMMENTS 10
ITEM 2.    DESCRIPTION OF PROPERTY 10
ITEM 3.    LEGAL PROCEEDINGS 10
ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 

PART II

 
ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 10
ITEM 6.    SELECTED FINANCIAL DATA 11
ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS 12
ITEM 7A.    QUANTITATIVEAND QUALITATIVE DISCLOSURE ABOUT MARKET RISK 13
ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 14
ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 24
ITEM 9A.    CONTROLS AND PROCEDURES 24
ITEM 9B.    OTHER INFORMATION 24
 

PART III

 
ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT AND CORPORATE GOVERNANCE 24
ITEM 11.    EXECUTIVE COMPENSATION 26
ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS 26
ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE 27
ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES 27
ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 28



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-pollenated 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:

- 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;
- Quirky News Bits latest off-beat news headlines;
- Sports Headlines top sports headlines;
- 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;
- Major league soccer;
- Traffic Mapping;
- Animated Doppler Radar and Forest Maps;
- Listings of the day's horoscopes;
- Listings of the birthdays of famous persons born on each day;
- Amber alerts;
- Listings of historical events which occurred on each day in history; and
- Localized Traffic and Weather Forecasts.

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 through out 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, 2011, 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 includes: Leightronix, Inc., Zero in Media, LLC and York Telecom. During 2010, our three largest customers accounted for over 50% of our revenues.

Employees

At December 31, 2011, 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, 2011 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 2012, 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 including: James Ammons, our Chairman and Director; Timothy Vance, our Chief Executive Officer, Chief Operating Officer and Director; and James Tevis our Chief Technology Officer. 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. Ammons, 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, 2011 compared to December 31, 2010, 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 $218,731 and an accumulated deficit of $9,002,713 as of December 31, 2011, 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, 2011, 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 40,000,000 shares of common stock and 10,000,000 shares of preferred stock. As of the December 31, 2011, 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 officers and directors do not own a majority of our issued and outstanding shares of common stock and as a result we could experience a change in control

Our current officers and directors can vote an amount of common stock equal to approximately twenty-five percent of our outstanding common stock. As a result, our officers and directors do not have majority voting control over us and our shareholders who are not officers and directors may be able to obtain a sufficient number of votes to choose who serves as our members of our Board of Directors. As a result, the current composition of our Board of Directors may change in the future, which could in turn have an effect on those individuals who currently serve in management positions with us. In such event, our new management could affect a change in our business focus and/or curtail or abandon our business operations, which in turn could cause the value of our securities to decline.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 2. DESCRIPTION OF PROPERTY.

On October 1, 2011, we entered into a year to year 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.

ITEM 3. LEGAL PROCEEDINGS.

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Market Information

Our common stock is currently quoted on the OTCQB under the symbol DCLT, an inter-dealer automated quotation system for equity securities not included on The Nasdaq Stock Market. Quotation of the Company's securities on the OTCQB limits the liquidity and price of the Company's common stock more than if the Company's shares of common stock were listed on The Nasdaq Stock Market or a national exchange. For the periods indicated, the following table sets forth the high and low bid prices per share of common stock. The below prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions.

Fiscal 2011

Fiscal 2010

Fiscal 2009

High

Low

High

Low

High

Low

First Quarter ended March 31

$

0.009

$

0.009

$

0.03

$

0.007

$

0.026

 

$

0.005

Second Quarter ended June 30

$

0.0065

$

0.0065

$

0.02

$

0.005

$

0.023

 

$

0.006

Third Quarter ended September 30

$

0.019

$

0.0055

$

0.02

$

0.002

$

0.035

$

0.01

Fourth Quarter ended December 31

$

0.0035

$

0.0035

$

0.015

$

0.002

$

0.025

$

0.01

As of December 31, 2011, our shares of common stock were held by approximately 176 stockholders of record.

Dividends

Holders of our preferred stock have dividends at 12 percent annually, subject to conversion into common stock. The undeclared dividends of this stock are calculated, but have not been recorded.

Holders of common stock are entitled to dividends when, as, and if declared by the Board of Directors, out of funds legally available therefore. We have never declared cash dividends on its common stock and our Board of Directors does not anticipate paying cash dividends in the foreseeable future as it intends to retain future earnings to finance the growth of our businesses. There are no restrictions in our articles of incorporation or bylaws that restrict us from declaring dividends.

Securities Authorized for Issuance Under Equity Compensation Plans

No equity compensation plan or agreements under which our common stock is authorized for issuance has been adopted during the fiscal year ended December 31, 2011.

Recent Sales Of Unregistered Securities

Date

Title

Shares Issued/to be Issued

Persons

Cash or Non Cash Consideration
10/04/2011 Common 100,000 Jim Scigliano At $0.10 per share or a total of $10,000

The Company believes that the issuances and sale of the restricted shares were exempt from registration pursuant to Section 4(2) of the Act as privately negotiated, isolated, non-recurring transactions not involving any public solicitation. The recipients in each case represented their intention to acquire the securities for investment only and not with a view to the distribution thereof. Appropriate restrictive legends are affixed to the stock certificates issued in such transactions. This offering was done with no general solicitation or advertising by the Registrant. The investors was a business acquaintances of management and and the private sale transactions were negotiated between the investors and management individually. All recipients of restricted shares either received adequate information about the Company or had access, through employment, relation and/or business relationships with the Company to such information. Based on an analysis of the above factors, the Registrant has met the requirements to qualify this offering and sale for exemption under Section 4(2) of the Securities Act of 1933.

ITEM 6. SELECTED FINANCIAL DATA.

N.A.


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATION.

We believe that we can continue our business operations for the foreseeable future, assuming expenses do not increase significantly. The Company has implemented cost management measurements to reduce 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 currently have no plans to increase the number of employees. However, as new opportunities present themselves, we may find it necessary to bring human resources on staff to accommodate the preparations for those opportunities.

We plan to continue to grow our business and market our Direct Lynk System to potential customers over the course of the next twelve months by marketing our technology to digital signage manufacturers, trade magazines, trade shows and call centers. We will also continue on a limited basis our practice of providing potential customers free trials of the Direct Lynk System, for which we will receive no revenue, in an attempt to build both product awareness for the Direct Lynk System and to potentially lead to sales down the road, which in the opinion of our management has been successful both in building brand awareness for the Direct Lynk System and in bringing in new clients for subscriptions. We added subscribers for our technology throughout 2011 and hope to build and increase such subscribers moving forward. However, as of the date of this filing, we have generated only limited revenues through paying subscriptions for the Direct Lynk System, and we can provide no assurances that we will generate any meaningful revenues in the future, that we will be successful in marketing our Direct Lynk System to potential customers. If we are unable to generate sufficient revenues to support our operating expenses moving forward, we may be forced to scale back our marketing efforts (please see "Risk Factors" above for more detailed descriptions of these and other risks to which we are subject).

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 7 to the financial statements, the Company has limited capital. Successful development and marketing of the Company’s products and the procurement of additional financing will be necessary for the Company to continue. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

THE YEAR ENDED DECEMBER 31, 2011 COMPARED TO THE YEAR ENDED DECEMBER 31, 2010

We had $548,689 of sales revenue for the year ended December 31, 2011, compared to sales revenue of $450,345 for the year ended December 31, 2010, an increase in sales revenue of $98,344 or 21.8% from the prior period. We generate revenues through subscription fees received in connection with our Direct Lynk System. In accordance with accounting regulations, we have deferred $82,800 to 2012.

We had total costs of sales for the year ended December 31, 2011 of $121,297 compared to total costs of sales of $101,940 for the year ended December 31, 2010, which resulted in a gross margin of $427,392 for the year ended December 31, 2011, compared to a gross margin of $348,405 for the year ended December 31, 2010, an increase in gross margin of $78,987 from the prior year, our increase in cost of sales was due our server hosting fees, which included the cost of additional servers and bandwidth necessary for anticipated new applications.

Cost of sales as a percentage of sales was 22.1% for the year ended December 31, 2011, compared to 23.9% for the year ended December 31, 2010. As we gain more customers and enter into more service agreements, we anticipate our cost of sales will decrease further as we expect to take advantage of applicable economies of scale which reduced our expenses of $536,701 for the year ended December 31, 2011, compared to total expenses of $690,249 for the year ended December 31, 2010, a decrease in expenses of $153,548 or 22.2% from the prior period. The decrease in expenses was mainly due to decrease in product development costs, decrease in professional fees and decrease in advertising and marketing expenses. The expenses of $536,701 included the completion of the amortization of stock for $82,499 and the write off of the PrioServ investment of $30,000.

We had a net loss of $109,309 for the year ended December 31, 2011, compared to a net loss of $341,844 for the year ended December 31, 2010, a decrease in the net loss of $232,535 as compared to the prior year. The net loss of $109,309 includes the final amortization of stock $82,499 and the write off of PrioServ $30,000.

LIQUIDITY AND CAPITAL RESOURCES

We had current assets of $92,075 as of December 31, 2011, which consisted of $44,851 in cash and accounts receivable of $47,224, as compared to $79,524 as of December 31, 2010, which consisted of $23,052 in cash, $26,472 in accounts receivable and $30,000 in prepaid expenses, an increase of $12,551 or 15.8% in current assets from December 31, 2010.

We had total assets of $101,383 as of December 31, 2011, compared to $90,912 as of December 31, 2010 or a increase of $10,471, which consisted of current assets of $92,075, total property and equipment (net of accumulated depreciation) of $4,053, which included high end flat screen televisions, computers and software equipment responsible for running our Direct Lynk System which is stored in our Houston office; and other assets of $5,255, which included our deposit on our Houston office space.

We had total liabilities of $310,806 as of December 31, 2011, compared to $283,525 as of December 31, 2010, an increase of $27,281 or 9.6%, primarily consisting of accounts payable of $40,889 accrued salaries of $116,617, accrued interest of $5,500, short term note of $65,000 and deferred revenue of $82,800. We had negative working capital of $218,731 and an accumulated deficit of $9,002,713 as of December 31, 2011.

We used $1,798 of cash in our operating activities for the year ended December 31, 2011, which was mainly due to a net loss of $109,309, which included $82,499 in amortization of deferred stock-based compensation, increase in accounts receivables of $20,752, the write off of PrioServ in the amount of $30,00 and change in deferred revenue of $14,126.

We had no investing activities during 2011. Financing activities for the year ended December 31, 2011 representied proceeds from the short term borrowings of $10,000.and the proceeds from the sale of stock in the amount of $10,000

Although we hope to generate meaningful revenues sufficient to support our operations in the next eight to twelve months, if we are unsuccessful in generating such revenues, we will likely need to take steps to raise equity capital or to borrow additional funds, to continue our operations and meet our upcoming liabilities, as described above. We have no commitments from officers, Directors or affiliates to provide funding. Our failure to obtain adequate additional financing may require us to delay, curtail or scale back some or all of our operations.

ITEM 7A. QUANTITATIVEAND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

We have not entered into, and do not expect to enter into, financial instruments for trading or hedging purposes.



McConnell & Jones LLP
Certified Public Accountants

Report of Independent Registered Public Accounting Firm

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

We have audited the accompanying balance sheets of Data Call Technologies, Inc. (the Company) as of December 31, 2011, and the related statements of operations, shareholders' equity (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Data Call Technologies, Inc as of December 31, 2011 and the results of its operations and cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 8 of the financial statements, the Company has incurred losses, has negative operational cash flows and does not have the resources at this time to repay credit and debt obligations, make payments in the form of dividends to its shareholders or fully implement its business plan.. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan in regard to these matters is also described in Note 8 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ McConnell & Jones, LLP

Houston, Texas

April 10, 2012


John A. Braden, P.C.

12941 Interstate 45 N., Ste. 422
Houston, Texas 77060

P: 281-873-5005
F: 281-873-5383

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Data Call Technologies:

We have audited the accompanying balance sheet of Data Call Technologies, Inc. (the Company) as of December 31, 2010 and 2009, and related statements of operations, stockholders’ equity, and cash flows for the years ended December 31, 2010 and 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Data Call Technologies, Inc. as of December 31, 2010 and 2009, and the results of its operations and its cash flows for the years ended December 31, 2010 and 2009, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 8 to the financial statements, the Company has limited capital. Successful development and marketing of the Company’s products and procurement of additional financing is necessary for the company to continue as a going concern. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

John A. Braden, P.C.

Houston, Texas
April 6, 2011


DATA CALL TECHNOLOGIES, INC.
Balance Sheets
December 31, 2011 and 2010
 

Assets

  2011 2010
Current assets:
   Cash $ 44,851 $ 23,052
   Accounts receivable 47,224 26,472
   Prepaid expenses - 30,000
     Total current assets 92,075 79,524
 
Property and equipment 121,175 121,176
   Less accumulated depreciation and amortization 117,122 115,043
     Net property and equipment 4,053 6,133
 
Other assets 5,255 5,255
       Total assets $ 101,383 $ 90,912
 

Liabilities and Stockholders' Equity (Deficit)

 
Current liabilities:
   Accounts payable 40,889 35,059
   Accrued salaries 116,617 124,782
   Accrued interest 5,500 -
   Deferred revenue 82,800 68,674
   Short-term note payable to shareholder 65,000 55,000
     Total current liabilities 310,806 283,525
  
       Total liabilities 310,806 283,525
 
Stockholders' equity:
   Preferred stock, $.001 par value. Authorized 10,000,000 shares:
     Series A 12% Convertible - 800,000 shares issued and outstanding
     at December 31, 2011 and none at December 31, 2010 800 800
   Common stock, $.001 par value. Authorized 200,000,000 shares:
     19,976,421 shares issued and outstanding at December 31, 2011,
     19,876,420 shares issued and outstanding at December 31, 2010 19,976 19,876
   Additional paid-in capital 8,772,514 8,762,514
   Accumulated deficit (9,002,713) (8,893,404)
  (209,423) (110,114)
   Deferred stock compensation - (82,499)
     Total stockholders' equity (deficit) (209,423) (192,613)
       Total liabilities and stockholders' equity $ 101,383 $ 90,912
 
The accompanying notes are an integral part of these financial statements.


DATA CALL TECHNOLOGIES, INC.
Statements of Operations
Years ended December 31, 2011 and 2010
 
2011 2010
 
Revenues
   Sales $ 548,689 $ 450,345
   Cost of sales 121,297 101,940
     Gross margin 427,392 348,405
 
   Selling, general and administrative expenses 534,621 678,058
   Depreciation and amortization expense 2,080 12,191
     Total operating expenses 536,701 690,249
 
       Net loss before income taxes (109,309) (341,844)
 
Provision for income taxes - -
       Net loss $ (109,309) $ (341,844)
 
Net loss per common share - basic and diluted:
Net loss applicable to common shareholders $ (0.00) $ (0.02)
   
Weighted average common shares:
   Basic and Diluted 19,909,753 19,876,421
 
The accompanying notes are an integral part of these financial statements.


DATA CALL TECHNOLOGIES, INC.
Statements of Stockholders' Equity
Years ended December 31, 2011 and 2010
 
Preferred Stock Common Stock Additional Accumulated Unearned Stockholders' equity
shares amount shares amount paid in capital deficit compensation (deficit)
 
Balance, December 31, 2009 - $ - 17,176,521 $ 17,176 $ 8,407,571 $ (8,551,560) $ (50,281) $ (108,388)
Issuance of preferred shares under
   private placement 800,000 800 - - 39,200 - - 40,000
Stock-based compensation expense 2,700,000 2,700 214,000 - (110,000) 106,700
Amortization of deferred stock compensation - - - - - - 77,782 77,782
Compensation for stock options and warrants - - - - 22,337 - - 22,337
Net loss - - - - - (341,844) - (341,844)
Balance, December 31, 2010 800,000 800 19,876,421 19,876 8,683,108 (8,893,404) (82,499) (192,619)
Balance, December 31, 2010
restated after 1:5 stock split 800,000 800 19,876,421 19,876 8,762,414 (8,893,404) (82,499) (192,619)
Issuance of common stock 100,000 100 9,900 - - 10,000
Amortization of deferred stock compensation - - - - - - 82,499 82,499
Net loss - - - - - (109,309) - (109,309)
Balance, December 31, 2011 800,000 $ 800 19,976,421 $ 19,976 $ 8,772,514 $ 9,002,713 $ 0 $ (209,423)
 
The accompanying notes are an integral part of these financial statements.


DATA CALL TECHNOLOGIES INC.
Statements of Cash Flows
Years ended December 31, 2011 and 2010
 
  2011 2010
Cash flows from operating activities:
   Net loss $ (109,309) $ (341,844)
   Adjustments to reconcile net loss to net cash used in operating activities:
    Depreciation and amortization of property and equipment 2,079 12,191
    Amortization of deferred stock-based compensation 82,499 100,119
    Compensation for stock options and warrants - 117,500
   (Increase) decrease in operating assets: 
      Accounts receivable (20,752) (9,869)
      Prepaid expenses 30,000 -
   Increase (decrease) in operating liabilities: 
    Accounts payable 5,819 10,983
     Accrued salaries (2,764) 58,746
     Deferred revenues 14,126 -
       Net cash used in operating activities  1,798 (52,176)
 
Cash flows from investing activities
   Capital expenditure for equipment - (2,303)
       Net cash used in investing activities - (2,303)
 
Cash flows from financing activities:
   Proceeds from issuance of common shares under private placement - 40,000
   Procceds from sale of common stock 10,000 -
   Proceeds from sale of short-term borrowing from shareholder 10,000 -
       Net cash provided by financing activities 20,000 40,000
 
       Net increase (decrease) in cash  21,799 (14,479)
Cash at beginning of year 23,052 37,531
Cash at end of year $ 44,851 $ 23,052
 
The accompanying notes are an integral part of these financial statements.


DATA CALL TECHNOLOGIES, INC.
Notes to Financial Statements
December 31, 2011 and 2010

(1) Summary of Significant Accounting Policies

Organization, Ownership and Business

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

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

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid investment instruments purchased with original maturities of three months or less to be cash equivalents.

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. We believe all of our receivables are fully collectable.

Property, Equipment and Depreciation

Property and equipment are recorded at cost less accumulated depreciation. Upon retirement or sale, the cost of the assets disposed of and the related accumulated depreciation are removed from the accounts, with any resultant gain or loss being recognized as a component of other income or expense. Depreciation is computed over the estimated useful lives of the assets (3-5 years) using the straight-line method for financial reporting purposes and accelerated methods for income tax purposes. Maintenance and repairs are charged to operations as incurred.

Advertising Costs

The cost of advertising is expensed as incurred.

Research and Development

Research and development costs are expensed as incurred.

Product Development Costs

Product development costs consist of cost incurred to develop the Company's website and software for internal and external use. All product development costs are expensed as incurred.

Income Taxes

The Company is a taxable entity and recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to be in effect when the temporary differences reverse. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the year that includes the enactment date of the rate change. A valuation allowance is used to reduce deferred tax assets to the amount that is more likely than not to be realized.

Management's Estimates and Assumptions

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

Earnings (Loss) Per Share

The basic net loss per common share is computed by dividing the net loss by the weighted average number of shares outstanding during a period. Diluted net loss per common share is computed by dividing the net loss, adjusted on an as if converted basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For the years ended December 31, 2011 and 2010, potential dilutive securities that had an anti-dilutive effect were not included in the calculation of diluted net loss per common share. These securities include options and warrants to purchase shares of common stock. On October 5, 2011 the Board of Directors unanimously approved an amendment to the Company’s Articles of Incorporation to effect a reverse stock split whereby all outstanding shares of the Company’s common stock will be subject to a reverse split on a One for Five (1:5) basis (the “Reverse Split”). Subsequently the Company obtained 52.2% of shareholders’ vote to ratify the reverse stock split. The Reverse Split which was approved by FINRA effective, February 24,2012 reduces the number of outstanding shares of common stock from approximately 99,382,100 shares to approximately 19,876,421 shares. The Reverse Split does not have any effect on the percentage ownership of any holders of the Company’s common stock. The Company has retroactively shown the impact of the reverse stock split for all periods presented.

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.

New Pronouncements

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

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

(2) Related Party Transactions

During 2010, the Company received cash in the sum of $50,000 from a shareholder for a Note Payable at a 10% interest rate. The interest for the note payable has been calculated annually and has been accrued for 2011. During the quarter ended September 30, 2011, the Company received a short term convertible loan from two shareholders in the amount of $20,000. The notes are due in one year and bear interest at 10%. During the fourth quarter $10,000 was converted to common stock.

(3) Prepaids

The Company entered into a contract on March 20, 2009 with PrioServ and agreed to pay $150,000 and 2,500,000 shares of stock for the client base, information technology, corporate knowledge and infrastructure related to PrioServ’s existing operations. The Company made a deposit of $30,000 at that time. Completion of this contract was anticipated to occur in 2009, but has been delayed due to lack of funding. Both parties have agreed to discontinue the extension of the agreement and because of this event the Company has written off the prepayment of $30,000 at year end 2011.

(4) Property and Equipment

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

December 31

Years

2011

2010

Equipment

3-5

$

92,680

$

92,680

Office furniture

7

20,483

20,483

Leasehold improvements

3

8,013

8,013

121,176

121,176

Less accumulated depreciation and amortization

(117,121)

(115,043)

Net property and equipment

$

4,053

$

6,133

(5) Income Taxes

December 31

2011

2010

Tax expense/(benefit) computed at statutory rate for continuing operations

$

(37,165)

$

(119,645)

Tax effect (benefit) of operating loss carryforwards

37,165

119,645

Tax expense/(benefit) for continuing operations

$

-

$

-

The Company has current net operating loss carryforwards in excess of $8,893,404 as of December 31, 2011, to offset future taxable income, which expire 2029.

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

December 31

2011

2010

Deferred tax assets:

$

$

Net operating loss

3,326,557

3,248,000

Valuation allowance

(3,326,557)

(3,248,000)

Net deferred asset

$

-

$

-

At December 31, 2011, the Company provided a 100% valuation allowance for the deferred tax asset because it could not be determined whether it was more likely than not that the deferred tax asset/(liability) would be realized.

(6) Lease Agreements

The Company leases office space under noncancellable operating leases which expire on October 31, 2012. Future minimum lease payments under the operating lease are as follows:

Year December 31,

Amount

2012

11,648

$

11,648

(7) Capital Stock, Options and Warrants

The Company is authorized to issue up to 10,000,000 shares of Preferred Stock, $.001 par value per share, of which 800,000 are presently outstanding. The Preferred Stock may be issued in one or more series, the terms of which may be determined at the time of issuance by the Board of Directors, without further action by stockholders, and may include voting rights (including the right to vote as a series on particular matters), preferences as to dividends and liquidation, conversion, redemption rights and sinking fund provisions.

The Company is authorized to issue up to 200,000,000 shares of Common Stock, of which 99,382,100 shares were issued and outstanding at December 31, 2010. As of December 31, 2011, after the 1:5 stock split, the Company is authorized 40,000,000 shares of Common Stock, of which 19,876,421 shares were issued and outstanding.

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

On October 5, 2011 the Board of Directors unanimously approved an amendment to the Company’s Articles of Incorporation to effect a reverse stock split whereby all outstanding shares of the Company’s common stock will be subject to a reverse split on a One for Five (1:5) basis (the “Reverse Split”). Subsequently the Company obtained 52.2% shareholders’ vote to ratify the reverse stock split. The Reverse Split which was approved by FINRA effective February 24, 2012 reduces the number of outstanding shares of common stock from approximately 99,382,100 shares to approximately 19,876,421 shares. The Reverse Split does not have any effect on the percentage ownership of any holders of the Company’s common stock. The Company has retroactively shown the impact of the reverse stock split for all periods presented.

(8) Going Concern

The Company sustained a loss of approximately $109,309 for the year ended December 31, 2011, has an accumulated deficit of $9 million, and does not have the resources at this time to repay credit and debt obligations, make payments in the form of dividends to its shareholders or fully implement its business plan. Without additional capital, the Company will not be able to continue as a going concern.

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

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

(9) Commitments and Contingencies

The Company may from time to time be involved in legal proceedings arising from the normal course of business. The Company received an informal claim from a former officer who resigned from of his position with the Company in 2003. The officer claims that the Company owes him an unresolved amount of shares of the Company's common stock. Management feels that the former officer's claim is without merit and no liability has been established for this contingent liability. The Company has reached a settlement with the former officer as of December 31, 2011, which called for the issuance of 3,500,000 shares of common stock. In anticipation of this contingency the Company recorded and expensed $67,500 in the third quarter of 2010.

(10) Subsequent Events

On October 5, 2011, the Board of Directors unanimously approved an amendment to the Company’s Articles of Incorporation to effect a reverse stock split whereby all outstanding shares of the Company’s common stock will be subject to a reverse split on a One for Five (1:5) basis (the “Reverse Split”). Subsequently the Company obtained 52.2% shareholders’ vote to ratify the reverse stock split. The Reverse Split which was approved by FINRA effective, February 24, 2012 reduces the number of outstanding shares of common stock from approximately 99,382,100 shares to approximately 19,876,421 shares. The Reverse Split does not have any effect on the percentage ownership of any holders of the Company’s common stock. The Company has retroactively shown the impact of the reverse stock split for all periods presented.


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

None.

ITEM 9A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

As of December 31, 2011, the Company's chief executive officer and chief financial officer conducted an evaluation regarding the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the  Exchange Act. Based upon the evaluation of these controls and procedures, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective as of the end of the fiscal year 2011.

Management’s Annual Report on Internal Control Over Financial Reporting

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

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

Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2011. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment and those criteria, we have concluded that our internal control over financial reporting had material weaknesses including lack of sufficient internal accounting personnel in order to ensure complete documentation of complex transactions during the year ended December 31, 2011. Management has identified corrective actions for the weakness and has begun implementation during the first quarter of 2012.

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

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting or in other factors identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the fourth quarter ended December 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

None.

PART III

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

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

Name  Age  Position 
Jim Ammons 59 Chairman of the Board
Timothy Vance 45 Chief Executive Officer and Director
Larry Mosley 61 Chief Financial Officer and Director

JIM AMMONS - CHAIRMAN OF THE BOARD

Jim Ammons, a co-founder, has been a board member since June of 2003 and was previously the Company’s Chief Executive Officer since our inception. From January 2000 through January 2001 Mr Ammons was a consultant for QVS Wireless Corporation. Prior to his consulting, Mr. Ammons was highly respected as a Hotel/F&B director in the Hospitality Sector. Effective January 1, 2006, we entered into a five year renewable employment contract with Mr. Ammons, as described below under “Employment Agreements.” Mr. Ammons works full time for Data Call.

TIMOTHY VANCE - CHIEF EXECUTIVE OFFICER AND DIRECTOR

Timothy Vance, a co-founder, has served as one of our Directors since June 2003 and as our Chief Operating Officer since January 2007. However, Mr. Vance has been part of the Data Call Technologies, Inc. management team since our inception. From January 2000 through January 2001 Mr. Vance was employed at QVS Wireless Corporation, where his employment consisted of general office duties. On January 1, 2006, we entered into a three year renewable employment contract with Mr. Vance, as described below under "Employment Agreements." Mr. Vance works full time for Data Call.

LARRY MOSLEY - CHIEF FINANCIAL OFFICER AND DIRECTOR

Mr. Mosley has served as our Chief Financial Officer and Director since October 11, 2004. Since November 1986, Mr. Mosley has been self employed as a Certified Public Accountant. From September 1985 to November 1986, Mr. Mosley was Vice President for Fiscal Affairs of Hargest College in Houston Texas. From July 1983 to September 1985, Mr. Mosley worked as a Management Consultant at Alexander Grant & Co. (now Grant Thornton) in Houston, Texas. From January 1981 to July 1983, he served as an auditor at Ernst & Whitney (Now Ernst & Young) in Houston, Texas. Mr. Mosley received a degree in Business Administration and Accounting from Texas Southern University in 1980. He has been a Certified Public Accountant since 1984. Effective January 1, 2006, we entered into a three year renewable employment contract with Mr. Mosley, as described below under "Employment Agreements." Since January 1, 2006, Mr. Mosley has worked approximately twenty-five hours per week for Data Call.

Our Directors are elected annually and hold office until our annual meeting of the shareholders and until their successors are elected and qualified. Officers will hold their positions at the pleasure of the Board of Directors, absent any employment agreement. There are no family relationships among our officers and Directors. Our officers and Directors may receive compensation as determined by us from time to time by vote of the Board of Directors. Such compensation might be in the form of stock options. Vacancies in the Board are filled by majority vote of the remaining Directors. Directors may be reimbursed by us for expenses incurred in attending meetings of the Board of Directors.

EMPLOYMENT AGREEMENTS

On January 1, 2009 the Board of Directors met and after reviewing the operations and financial condition of the Company pasted a resolution which ratifies and approves the amendment of the employment agree ments by and between the Corporation and all of its executive officers, directors and employees (the “Employment Agreements”), effective January 1,2008, as follows: i) the automatic renewal provision in each Employment Agreement is null and void; and (ii) the right of the officers, directors, and employees to the accrued compensations as stands, as of January 1, 2008; and (ii) there will be no accrued compensation for any officer, director or employee moving forward as of January 1, 2008. Effective October 1, 2005, we entered into employment agreements with Timothy Vance to serve as our Director of Customer Support and Larry Mosley to serve as our Chief Financial Officer. On February 13, 2006, we entered into Addendums to those agreements.

While under their employment agreements, Messer's Vance and Mosley are entitled to receive a salary of $80,000 and $75,000 per year, respectively, the full amount of these salaries have not been paid to Messer's Vance and Mosley to date, and the majority of such salaries is being accrued by Data Call until such time as Data Call has sufficient resources and revenues to pay such salaries (and accrued and unpaid amount).

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

The executive employment agreements terminate:

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

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

In the event Mr. Vance's or Mr. Mosley's employment is terminated under (a) through (d) above, either of them is entitled to all compensation earned by him through the date of his termination. Additionally, Mr. Vance may be terminated at any time without cause, provided that we pay him a one-time lump sum payment payable within 30 days of his termination without cause of the total amount of salary remaining to be paid under his employment agreement. Mr. Mosley cannot be terminated without cause. The employment agreements of Mr. Vance and Mr Mosley were deemed to be null and void effective January 1, 2008.

Mr. Ammons employment agreement provides that Mr. Ammons may be provided a car allowance by us, not to exceed $600 per month. In consideration for Mr. Ammons entering into his employment agreement, we agreed to grant him options to purchase 3,000,000 shares of our common stock at $0.10 per share. The options vested immediately upon Mr. Ammons entry into his employment agreement, and expire on February 8, 2011. The options also contain a cashless exercise provision, whereby Mr. Ammons can pay for the exercise of the options in shares of our common stock. The employment agreement of Mr. Ammons has deemed to be null and void effective January 1, 2008

ITEM 11. EXECUTIVE COMPENSATION.

The following table sets forth information concerning the total compensation during the fiscal years ending December 31, 2011, 2010 and 2009.

Summary Compensation Table

           

Long Term

 
     

Annual Compensation

Compensation Awards *

 
     

 
          Other Restricted Securities  
          Annual Stock Underlying Total
     

Salary

Bonus

Compensation Award(s) Options Compensation
  Name and Principal Position (a)  

Year

($)

($)

($)

($)

($)

($)


 






Tim Vance, CEO, COO (1) 2011 77,050 --- 6,000 --- --- 83,050
2010 72,300 --- 6,000 --- --- 78,300
2009 75,000 --- --- --- --- 75,000
James Ammons, Chairman 2011 72,300 --- 6,000 --- --- 78,300
  2010 78,300 --- 6,000 --- --- 84,300
2009 75,200 --- 6,000 --- --- 81,200
Larry Mosley, CFO and Director 2011 2,500 --- --- --- --- 2,500
2010 8,500 --- --- --- --- 8,500
2009 9,375 --- --- --- --- 9,375

 






*Estimated. The individuals listed above have not received any LTIP payouts or nonqualified deferred compensation earnings, over the past three completed fiscal years as compensation from us. Salary amounts listed above do not include perquisites and other personal benefits in amounts less than $10,000.

(a) Other than the individuals listed above, we have no other executive employees who have received more than $100,000 in compensation, including bonuses and options, during each of the last three (3) fiscal years.
(1) In June 2008, Timothy E. Vance was appointed CEO of the Registrant

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

The following table sets forth information regarding the beneficial ownership of our common stock as of December 31, 2011. The information in this table provides the ownership information for: each person known by us to be the beneficial owner of more than 5% of our common stock; each of our directors; each of our executive officers; and our executive officers and directors as a group. Beneficial ownership has been determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to the shares. Unless otherwise indicated, the persons named in the table below have sole voting and investment power with respect to the number of shares indicated as beneficially owned by them.

Name of Beneficial Owner   Common Stock Beneficially Owned (1)   Percentage of Common Stock  Owned (1)
James Ammons, Chairman 1,830,000 9.16%
600 Kenrick, Suite 12-B
Houston, TX 77060
 
Milford and Ruth Mast 2,203,300(2)(3) 10.03%
466 N. Manor Rd.
Elverson, PA 19520
 
Timothy Vance, CEO, COO and Director 670,000 3.35%
600 Kenrick, Suite B-12
Houston, Texas 77060
 
Larry Mosley, CFO and Director 317,500 1.59%
600 Kenrick, Suite B-12
Houston, Texas 77060
Director and Officer (3 person) 2,817,500 14.10%

(1) Applicable percentage ownership is based on 19,679,421 shares of common stock outstanding as of December 31, 2011. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock that are currently exercisable or exercisable within 60 days of December 31, 2010 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
(2) Includes 3,000,000 shares held by an unincorporated entity, Regional Marketing Co., which is controlled by Milford Mast.
(3) Milford and Ruth Mast are deemed to beneficially own the shares of common stock held by each other since they are husband and wife.

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

None.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Independent Public Accountants

 

Our auditor, McConnell & Jones, LLP. has served as the Company’s independent registered public accountants for the fiscal year 2011. Our auditor, John A. Braden, P.C. has served as the Company’s independent registered public accountants for the fiscal year 2010.

 

Principal Accounting Fees
The following table presents the fees for professional audit services rendered by
McConnell & Jones, LLP and John A. Braden, P.C. for the audit of the Registrant's annual financial statements for the years ended December 31, 2011 and 2010, and fees billed for other services rendered by McConnell & Jones, LLP and John A. Braden, P.C. during those periods.

 

Year Ended  Year Ended 
December 31, 2011 December 31, 2010

Audit fees (1)

$ 15,150 $ 18,713

Audit-related fees (2)

---   ---

Tax fees (3)

---   ---

All other fees

---   ---
(1) Audit fees consist of audit and review services, consents and review of documents filed with the SEC.
(2) Audit-related fees consist of assistance and discussion concerning financial accounting and reporting standards and other accounting issues.
(3) Tax fees consist of preparation of federal and state tax returns, review of quarterly estimated tax payments, and consultation concerning tax compliance issues.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

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

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

SIGNATURES

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

SIGNATURE TITLE  DATE 
/s/ Tim Vance Chief Executive Officer and Director April 13, 2012
Tim Vance
 
/s/ Larry Mosley  Chief Financial Officer and Director April 13, 2012
Larry Mosley