Unified Signal, Inc. - FORM 10-Q

Attached files

file	filename
EXCEL - IDEA: XBRL DOCUMENT - Unified Signal, Inc.	Financial_Report.xls
EX-32.1 - EXHIBIT 32.1 - Unified Signal, Inc.	exhibit32-1.htm
EX-31.1 - EXHIBIT 31.1 - Unified Signal, Inc.	exhibit31-1.htm

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

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2013

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

For the transition period from ________ to ________

DATAJACK, INC.
(Formerly known as Quamtel, Inc.)
(Exact name of small business issuer as specified in its charter)

Nevada	000-31757	90-0781437
(State of Other Jurisdiction of	(Commission File Number)	(I.R.S. Employer Identification
Incorporation)		No.)

14911 Quorum Drive, Suite 370, Dallas, Texas 75254
(Address of Principal Executive Office) (Zip Code)

(972) 361-1980
(Issuer’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X] No [ ]

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12-b2 of the Exchange Act. (Check One):

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 Act).
Yes [ ] No [X]

APPLICABLE ONLY TO CORPORATE ISSUERS

The number of shares outstanding of each of the issuer's classes of common equity as of May 20, 2013 is 128,868,156.

DATAJACK, INC.
(Formerly known as Quamtel, Inc.)
Table of Contents

		Page

Part I – FINANCIAL INFORMATION

ITEM 1.	FINANCIAL INFORMATION	3

ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	20

ITEM 3.	QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK	23

ITEM 4.	CONTROLS AND PROCEDURES	23

Part II – OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	24

ITEM 1A	RISK FACTORS	25

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	25

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	25

ITEM 4.	MINE SAFETY DISCLOSURES	26

ITEM 5.	OTHER INFORMATION	26

ITEM 6.	EXHIBITS	26

SIGNATURES		27

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL INFORMATION

INDEX TO FINANCIAL STATEMENTS

	Page

Condensed Consolidated Balance Sheets as of March 31, 2013 (unaudited) and December 31, 2012	4

Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2013 and 2012	5

Unaudited Condensed Consolidated Statement of Stockholders’ Deficit for the three months ended March 31, 2013	6

Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2013 and 2012	7

Notes to the Unaudited Condensed Consolidated Financial Statements	8

DATAJACK, INC.
(Formerly known as Quamtel, Inc.)
CONDENSED CONSOLIDATED BALANCE SHEETS

		March 31,			December 31,
		2013			2012
		(unaudited)
ASSETS

Current assets:
Cash and cash equivalents	$	9,922		$	23,886
Accounts receivable, net		8,412			13,022
Inventory		3,534			5,148
Prepaid expenses and deposits		107,727			100,424
Total current assets		129,595			142,480

Restricted cash		150,000			150,000
Property and equipment, net		202,520			223,260
Deferred cost, net		1,379,630			1,565,741
Other intangibles, net		43,239			44,809

TOTAL ASSETS	$	1,904,984		$	2,126,290

LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities:
Accounts payable	$	971,049		$	780,849
Accrued expenses		222,080			223,946
Unearned revenue		157,920			153,930
Advances from related parties		162,461			175,729
Stock-based payable		985,153			985,153
Current portion of notes payable		1,275,306			1,146,027
Derivative liability		541,796			916,646
Other current liabilities		75,000			-
Total current liabilities		4,390,765			4,382,280

Noncurrent portion of notes payable		388,580			441,317

TOTAL LIABILITIES		4,779,345			4,823,597

Shareholders' deficit:
Common stock - $0.001 par value; 200,000,000 shares authorized; 113,368,156 and 109,780,656 shares issued and 113,268,156 and 109,680,656 shares outstanding at March 31, 2013 and December 31, 2012, respectively		113,368			109,781
Preferred stock - $0.001 par value; 50,000,000 shares authorized; no shares issued and outstanding		-			-
Additional paid-in capital		20,558,353			20,489,589
Treasury stock, 100,000 shares		(100,000	)		(100,000	)
Accumulated (deficit)		(23,446,082	)		(23,196,677	)
Total shareholders' deficit		(2,874,361	)		(2,697,307	)

TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	$	1,904,984		$	2,126,290

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

DATAJACK, INC.
(Formerly known as Quamtel, Inc.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

		Three months ended March 31,
		2013			2012

Revenues	$	576,520		$	653,380

Cost of sales		480,620			495,582

Gross profit		95,900			157,798

Operating expenses:
Compensation, consulting and related expenses		405,179			2,286,170
General and administrative expenses		192,772			520,945
Depreciation and amortization		22,309			39,254
Total operating expenses		620,260			2,846,369

Loss from operations		(524,360	)		(2,688,571	)

Other (income) expense:
Interest and financing expense		177,156			45,337
Amortization of debt discount		18,334			-
Gain from change in derivative liability		(470,445	)		-
Gain on disposition assets		-			(100,000	)
Total other (income) expense, net		(274,955	)		(54,663	)

Loss before income taxes		(249,405	)		(2,633,908	)

Income tax expense		-			-

Net loss	$	(249,405	)	$	(2,633,908	)

Basic and diluted loss per share:

Net loss per share	$	(0.00	)	$	(0.04	)

Weighted average number of shares outstanding		111,038,795			62,961,553

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

DATAJACK, INC.
(Formerly known as Quamtel, Inc.)
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS DEFICIT
For Three Months Ended March 31, 2013
(unaudited)

													Total
	Common Stock				Additional Paid-		Treasury			Accumulated			Shareholders
	Shares		Amount		in Capital		Stock			Deficit			Deficit
Balance as of December 31, 2012	109,780,656		109,781		20,489,589		(100,000	)		(23,196,677	)		(2,697,307	)

Common stock issued for settlement of obligation due to related party	62,500		62		1,813		-			-			1,875
Common stock issued for cash	3,445,000		3,445		64,455		-			-			67,900
Common stock issued for debt conversion	80,000		80		2,496		-			-			2,576
Net loss for three month ended March 31, 2013	-		-		-		-			(249,405	)		(249,405	)

Balances as of March 31, 2013	113,368,156	$	113,368	$	20,558,353	$	(100,000	)	$	(23,446,082	)	$	(2,874,361	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

DATAJACK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

		Three months ended March 31,
		2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(249,405	)	$	(2,633,908	)

Adjustments to reconcile net loss to net cash used in operating activities:
Gain on disposition of assets		-			(100,000	)
Gain from change in derivative liability		(470,445	)		-
Depreciation and amortization		22,309			39,254
Noncash interest expense		157,712			-
Noncash consulting expense		111,111			1,535,550
Amortization of debt discount		18,334			-

Changes in operating assets and liabilities:
Accounts receivable		4,610			-
Inventory		1,614			22,319
Prepaid expenses and deposits		(7,304	)		7,499
Accounts payable		190,201			42,760
Accrued expenses		2,166			34,538
Related party advances		(11,393	)		128,667
Stock payable		-			178,000
Unearned revenue		3,990			(20,360	)
Net cash used in operating activities		(226,500	)		(765,681	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		-			(5,764	)
Proceeds from sale of assets		75,000			100,000
Net cash provided by investing activities		75,000			94,236

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from common stock issuances		67,900			378,333
Proceeds from promissory note issuances		124,320			200,113
Repayment of notes payable		(54,684	)		-
Net cash provided by financing activities		137,536			578,446

Net decrease in cash and cash equivalents		(13,964	)		(92,999	)
Cash and cash equivalents at beginning of period		23,886			92,999
Cash and cash equivalents at end of period	$	9,922		$	-

Supplemental cash flow information:
Cash paid for taxes	$	-		$	-
Cash paid for interest	$	19,386		$	181

Noncash investing and financing activities:
Issuance of common stock for settlement of stock based payable	$	-		$	390,000
Issuance of common stock for accounts payable, debt settlement and debt conversions	$	2,576		$	240,664
Issuance of common stock for settlement of obligation due related party	$	1,875		$	240,664

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

DATAJACK, INC.
(Formerly known as Quamtel, Inc.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013

NOTE 1 – BUSINESS

Description of Business

DataJack, Inc. (formerly Quamtel, Inc.) and its subsidiaries (the “Company”) was incorporated in 1999 under the laws of Nevada as a communications company offering, a comprehensive range of mobile broadband and communications products.

The Company offers secure nationwide mobile broadband wireless data transmission services primarily under the DataJack brand. Through DataJack, the Company offers low cost, no contract, mobile broadband with various data plans. The Company’s DataJack service is offered primarily through two devices - the DataJack WiFi Mobile Hotspot that can connect up to 5 Wi-Fi enabled devices and the DataJack USB, a Plug and Play USB Device.

The Company’s communication products included an international calling service delivered under the brand WQN, through the Company’s subsidiary, WQN, Inc. (“WQN”), and an enhanced toll free service delivered under the brand “800.com.” The Company also sold a prepaid international calling service, “EasyTalk,” that delivered low cost international calls to consumers and businesses from anywhere in the United States or Canada to over 196 countries globally.

Effective January 17, 2013, DataJack, Inc. sold substantially all of the intangible assets of WQN to Business Telecommunications Services, Inc., a Florida corporation. The assets included in the sale included all intellectual rights of WQN, including trade names and trademarks. and all rights and interests to and in all of the customers of the International Long Distance division of DataJack, Inc., including but without limitation all the customers and/or subscribers of the following products: My WQN, Easy Talk, Premium, Value, EasyTalk Mexico, EasyTalk Cuba, ValuTalk and IndiaTalk and also including all current and previously registered Customers as well as all databases. The purchase price of $250,000 will be paid to DataJack in four installment payments. As of May 20, 2013, the asset sale transaction is pending FCC approval, however the Company has recorded a $75,000 cash deposit as other current liabilities as of March 31, 2013. The WQN intangible assets sold had no remaining net book value at December 31, 2012.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

Interim Financial Statements

The unaudited condensed consolidated interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

The condensed consolidated balance sheet as of December 31, 2012 contained herein have been derived from audited financial statements.

Operating results for the three months ended March 31, 2013 are not necessarily indicative of results that may be expected for the year ending December 31, 2013. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2012 included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on April 16, 2013.

DATAJACK, INC.
(Formerly known as Quamtel, Inc.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of DataJack, Inc. and its wholly owned subsidiaries WQN Inc., Data Jack, Inc. (incorporated in the State of Texas), and Novotel, Inc. All significant intercompany transactions and balances have been eliminated. The Company makes operating decisions, assesses performance and manages the business as one reportable segment

Revenue Recognition

The Company follows the guidance in Staff Accounting Bulletin (SAB) No. 104, which provides guidance on the recognition, presentation and disclosure of revenue in financial statements. SAB 104 states that revenue is realized or realizable and earned when all of the following criteria are met: persuasive evidence of an arrangement exists, services have been rendered, the seller’s price to the buyer is fixed or determinable, and collectability is reasonably assured.

Revenues are primarily derived from fees charged to terminate voice services over the Company’s network and from related monthly recurring charges. Variable revenue is earned based on the number of minutes during a call and is recognized upon completion of a call. Revenue from each customer is calculated from information received through the Company’s network switches. The Company tracks the information received from the switch and analyzes the call detail records and applies the respective revenue rate for each call. Fixed revenue is earned from monthly recurring services provided to customers that are fixed and recurring in nature, and are connected for a specified period of time. Revenues are recognized as the services are provided and continue until the expiration of the contract or until cancellation of the service by the customer. Cash fees received prior to call completion are recorded on the Company’s consolidated balance sheets as unearned revenue. As of March 31, 2013 and December 31, 2012, the Company recorded unearned revenue of $157,920 and $153,930, respectively.

Economic Dependency

The Company utilizes a limited number of suppliers. The Company is vulnerable to the risk of renewing favorable supplier contracts and timeliness of the supplier in processing the Company’s orders for customers, and is at risk related to regulation and regulatory developments that govern the rates to be charged to the Company and, in some instances, whether certain facilities are required to be made available to the Company.

Stock-Based Compensation

Compensation costs related to share-based payment transactions are recognized in the statement of operations. With limited exceptions, the amount of compensation cost will be measured based on the grant-date fair value of the equity or liability instruments issued. In addition, liability awards will be remeasured each reporting period. The Company’s common shares issued as additional compensation and for consulting services have been valued at the shares’ exchange-quoted market prices at their respective dates of issuance or commitment. Compensation cost will be recognized over the period that an employee provides service in exchange for the award.

Net Loss per Common Share, basic and diluted

The Company has adopted Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”) specifying the computation, presentation and disclosure requirements of earnings per share information. Basic loss per share has been calculated based upon the weighted average number of common shares outstanding. Potential shares issuable upon conversion of convertible debt of 15,281,105 have been excluded as common stock equivalents in the diluted loss per share because their effect is anti-dilutive on the computation as of March 31. 2013.

DATAJACK, INC.
(Formerly known as Quamtel, Inc.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013

Use of Estimates

The preparation of consolidated 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 those estimates.

Cash and Cash Equivalents

For purposes of reporting cash flows, the Company considers all cash on hand, in banks, certificates of deposit and other highly liquid debt instruments with a maturity of three months or less at the date of purchase, to be cash and cash equivalents.

Restricted Cash

Restricted cash represents collateral on a standby letter of credit related to an agreement with one of the Company’s telecommunications service providers, effectively providing a guarantee of the Company’s payment of its account payable to this service provider.

Accounts Receivable

Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts based on its assessment of the current status of the individual receivables and after using reasonable collection efforts. The allowance for doubtful accounts as of March 31, 2013 and December 31, 2012 was zero.

Inventories

Inventories consist of Data Jack’s proprietary USB devices which provide customers the ability to deliver nationwide mobile 3G data coverage. Inventories are stated at the lower of cost or market determined by the first in, first out (FIFO) method.

Prepaid Expenses and Deposits

At March 31, 2013 and December 31, 2012, prepaid expenses and deposits consisted primarily of cash deposit payments made to several of the Company’s service providers.

Income Taxes

The Company accounts for income taxes under the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. If it is more likely than not that some portion of a deferred tax asset will not be realized, a valuation allowance is recognized.

DATAJACK, INC.
(Formerly known as Quamtel, Inc.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013

The Company accounts for uncertain tax positions in accordance with ASC 740-10. ASC 740-10-25 prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company does not believe it has any material unrecognized income tax positions.

Fair Value Measurements

ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

Items recorded or measured at fair value on a recurring basis in the accompanying consolidated financial statements consisted of the following items as of March 31, 2013:

		Level 1		Level 2		Level 3		Total
Long-term investments	$	-	$	-	$	-	$	-
Total	$	-	$	-	$	-	$	-

Derivative liability	$	-	$	-	$	541,796	$	541,796
Total	$	-	$	-	$	541,796	$	541,796

The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities (derivative liability) for the three months ended March 31, 2013.

		Derivative
		Liability
Balance, December 31, 2012	$	916,646

Fair value of embedded derivative in connection with convertible notes at inception		95,595

Mark-to-market at March 31, 2013		(470,445	)

Balance, March 31, 2013	$	541,796

DATAJACK, INC.
(Formerly known as Quamtel, Inc.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013

Derivative Instrument Liability

The Company accounts for derivative instruments in accordance with ASC 815, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedge relationships and the types of relationships designated are based on the exposures hedged. At March 31, 2013 and December 31, 2012, the Company did not have any derivative instruments that were designated as hedges.

Recent Accounting Pronouncements

There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s unaudited condensed consolidated financial position, results of operations or cash flows.

NOTE 3 - GOING CONCERN

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has reported a recurring net loss of $279,405 and $2,633,908 for the three months ended March 31, 2013 and 2012, respectively. As of March 31, 2013, the Company has reported an accumulated deficit of $23,446,082 and a working capital deficit of $4,261,170, and has been dependent on issuances of debt and equity instruments to fund its operations.

The Company intends to increase its future profitability and seek new sources or methods of revenue to pursue its business strategy. If the Company’s financial resources from operations are insufficient, the Company will require additional financing in order to execute its operating plan and continue as a going concern. The Company cannot predict whether this additional financing will be in the form of equity or debt, or be in another form. The Company may not be able to obtain the necessary additional capital on a timely basis, on acceptable terms, or at all. In any of these events, the Company may be unable to implement its current plans for expansion, repay its debt obligations as they become due, or respond to competitive pressures, any of which circumstances would have a material adverse effect on its business, prospects, financial condition and results of operations.

The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

NOTE 4 – PROPERTY AND EQUIPMENT, NET

At March 31, 2013 and December 31, 2012, respectively, property and equipment consisted of the following:

DATAJACK, INC.
(Formerly known as Quamtel, Inc.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013

		March 31,			December 31,
		2013			2012

Computers and equipment	$	539,999		$	539,999
Furniture & Fixtures		16,346			16,346
Total		556,345			556,345
Less accumulated depreciation		(353,825	)		(333,085	)
Total	$	202,520		$	223,260

Depreciation expense for the three months ended March 31, 2013 and 2012 amounted to $20,740 and $27,138, respectively.

NOTE 5 – OTHER INTANGIBLES

At March 31, 2013 and December 31, 2012, respectively, intangible assets consisted of the following:

		March 31,			December 31,
		2013			2012
Acquisition of M2M domain names		88,827			88,827
Acquisition of DataJack.com domain name		56,000			56,000
Acquisition of Sparkfly.com		25,000			25,000
Sub total		169,827			169,827
Less accumulated amortization		(46,903	)		(45,333	)
Less impairment charges		(79,685	)		(79,685	)

Other intangibles, net of accumulated amortization	$	43,239		$	44,809

Amortization expense for the three months ended March 31, 2013 and 2012 amounted to $1,570 and $12,116, respectively.

NOTE 6 – RELATED PARTY TRANSACTIONS

From time to time, Steven Ivester, the Company’s former sole shareholder, who is currently the Assistant Secretary of and also a consultant to the Company through a Consulting Services Agreement with iTella, Inc., has made personal advances to the Company under an Unsecured Revolving Promissory Note (the “Unsecured Note”). The Unsecured Note has a maximum amount of $1,000,000, is repayable upon demand, is non-interest bearing and is unsecured. Advances under the Unsecured Note amounted to $4,757 and $53,650 at March 31, 2013 and December 31, 2012, respectively, which are included in advances from related parties in the Company’s consolidated balance sheets.

Effective August 1, 2009 and subsequently amended, the Company executed a Restated Consulting Services Agreement with iTella, Inc., whereby iTella, Inc. provides, at the reasonable request of the Company’s management, advanced business strategy, financing, product development and marketing advice including but not limited to day to day operations. The initial term of this agreement is for five years, and renews for additional one year terms if approved by both parties. During this agreement’s term and at the Company’s expense, iTella, Inc.will be provided an office and administrative support in Weston, Florida. iTella, Inc.’s compensation consists of the following:

DATAJACK, INC.
(Formerly known as Quamtel, Inc.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013

1.	Annual cash payments of $250,000, payable monthly;
2.	Nine percent of the Company’s consolidated gross revenue, payable quarterly (except the first two months, in which the rate is one percent of gross revenues), and subject to an annual calendar year cap of $800,000
3.	Employees of Consultant may be eligible for grants of stock options pursuant to the Company’s 2009 Equity Incentive Plan, in such amounts as may from time to time be determined by the Company, at its sole discretion; and
4.	Reimbursement of reasonable, related business expenses.

Effective April 1, 2012 and subsequently amended on June 7, 2012, the Company executed a Restated Consulting Services Agreement with iTella, Inc., whereby iTella, Inc. provides, at the reasonable request of the Company’s management, advanced business strategy, financing, product development and marketing advice including but not limited to day to day operations.

The annual payout of the contract was reduced from $250,000 to $150,000. Also, the revenue sharing provision of the previous consulting agreement was terminated. In consideration of the reductions of compensation, the Company accrued a $280,000 payable to the Consultant. Also, in consideration of the reduction of compensation the Company issued 8,000,000 of restricted shares. The shares were recorded on the Company’s balance sheet at a value of $720,000.The $1,000,000 combined total of the $280,000 payable and the $720,000 of restricted stock issuance are recorded on the Company’s balance sheet as a deferred cost. The Consultant can call the $280,000 payable on demand. For the three months ended March 31, 2013, the Company amortized $111,111 of this deferred cost to consulting expense.

The initial term of this agreement is for five years, and renews for additional one year terms if approved by both parties. During this agreement’s term and at the Company’s expense, iTella, Inc. will be provided an office and administrative support in Weston, Florida. iTella, Inc.’s compensation consists of the following:

	1.	Annual cash payments of $150,000, payable monthly;
	2.	Employees of Consultant may be eligible for grants of stock options pursuant to the Company’s 2009 Equity Incentive Plan, in such amounts as may from time to time be determined by the Company, at its sole discretion; and
	3.	Reimbursement of reasonable, related business expenses.

As of March 31, 2013 and December 31, 2012, advances from iTella (a related party) were $157,704 and $122,079, respectively, which are included in advances from related parties in the Company’s consolidated balance sheets.

During the three months ended March 31, 2013, the Company issued 62,500 shares of its common stock in settlement of related party obligations of $1,875.

NOTE 7 – NOTES PAYABLE

At March 31, 2013 and December 31, 2012, notes payable consisted of the following:

DATAJACK, INC.
(Formerly known as Quamtel, Inc.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013

		March 31,			December 31,
		2013			2012
Promissory notes payable - shareholders	$	597,803		$	497,803
Secured note payable - Gilbert/Sperling		603,063			648,510
Convertible note payable - St George		337,237			327,414
Convertible note payable - JMJ Financial		82,500			55,000
Note payable - Vanderbur		40,000			40,000
Note payable - AFS/IBEX Bank		6,295			12,463
Note payable - Dell Computer		42,821			42,821
Original issue discounts		(45,833	)		(36,667	)
Total notes payable		1,663,886			1,587,344
Less current portion of notes payable		(1,275,306	)		(1,146,027	)
Noncurrent portion of notes payable	$	388,580		$	441,317

The noncurrent portion of notes payable is scheduled to be paid in the amounts of $249,244 and $139,336 as of March 31, 2014 and 2015, respectively.

Promissory Notes Payable - Shareholders

As of March 31, 2013 and December 31, 2012, the Company had short-term unsecured promissory notes from various shareholders totaling $597,803 and $497,803, respectively. $75,000 and $50,000 of these unsecured advances bear interest at 6% and 12% per year, respectively. The remaining unsecured advances are non-interest bearing.

Secured Note Payable – Gilbert/Sperling

Effective October 1, 2012, the Company issued and sold $700,000 in secured notes to two accredited investors in a private placement, for a cash purchase price of $700,000. The investors also received 15,000,000 shares of the Company's common stock. These notes are secured by substantially all of the Company's assets, bear interest at 12% per year, and are due in equal weekly installments through October 1, 2015. The 15,000,000 shares were recorded at a value of $900,000, and are classified on the Company’s balance sheets as a deferred cost. For the three months ended March 31, 2013, the Company amortized $75,000 of this deferred cost to interest expense.

Convertible Notes Payable – St George Investments

On March 30, 2012, the Company entered into a convertible promissory note with St George Investments (the “St George Note”) for a principal balance of $465,000. The note was originally a short-term note payable to Warren Gilbert, one of the primary shareholders of the Company. On March 30, 2012, Warren Gilbert sold the note to St. George Investments for an amount which was not disclosed to the Company. The St George Investments note conversion notice contains a Beneficial Conversion Feature (BCF). The Company accordingly recorded a BCF of $298,077, as a credit to additional paid in capital with offsetting amounts of $187,500 to other expense and $110,577 to debt discount, a contra liability account, which was written off by September 30, 2012, the maturity date of the St George Note. The Company also recognized an additional original-issue debt discount of $135,127, which was charged to other expense by September 30, 2012.

DATAJACK, INC.
(Formerly known as Quamtel, Inc.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013

The St George Note bears interest at the rate of 8% per annum, compound daily. All interest and principal was due on September 30, 2012. The St George Note was convertible into common stock, at St George Investments’ option, at a fixed conversion price of $0.375 per share from March 30, 2012 until September 1, 2012, and commencing September 2, 2012 the conversion price is 65% of the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion. Upon the occurrence of an event of default, (i) the outstanding balance shall increase to 112.5% of the outstanding balance immediately prior to the occurrence of such event of default; provided, however, that such increase may not be applied more than twice, and (ii) this St George Note shall accrue interest until the outstanding balance is repaid in full at the rate of 1% per month (or 12% per annum), compounding daily, whether before or after judgment.

St George Investments shall have the option, in its sole discretion, to return all or any part of the conversion shares or cancelled shares to the Company by providing one or more written notices thereof to the Company but not exceed 953,846 shares. The St George Investments converted total of $426,206 of accrued interest, penalty and principal amount during the year ended December 31, 2012 and returned $58,486 or 953,846 shares of conversion made in September 2012. See Note 10 for related litigation.

The Company has identified embedded derivatives related to the St George Note. These embedded derivatives include certain conversion features and reset provisions. See Note 8.

Convertible Notes Payable – JMJ Financial

The Company entered into a convertible promissory notes with JMJ Financial (the “JMJ Note”) for an aggregate principal balance of $220,000. The principal sum of the notes consisted of $200,000 of consideration paid, plus a $20,000 original issue discount (OID) or 10% OID. The note has a provision which allows the Company to draw down the available principal over time. At March 31, 2013 and December 31, 2012 the Company had drawn down $82,500 and $55,000, respectively.

The JMJ Note bears a one-time interest charge of 10% of the principal amount. The maturity date is one year from the Effective Date of each payment received by the Company and is the date upon which the principal sum of this JMJ Note, as well as any unpaid interest and other fees, shall be due and payable. The JMJ Note is convertible into common stock, at JMJ Financial’s option at any time after the Effective Date, at the conversion price of lesser of $0.07 per share or 70% of the lowest trade price in the 25 trading days prior to the conversion. In the event of any default, the outstanding principal amount of this JMJ Note, plus accrued but unpaid interest, liquidated damages, fees and other amounts owing in respect thereof through the date of acceleration, shall become, at JMJ Financial’s election, immediately due and payable in cash at the Mandatory Default Amount.

The Company has identified embedded derivatives related to the JMJ Note. These embedded derivatives include certain conversion features and reset provisions. See Note 8.

Note Payable – Vanderbur

On June 22, 2012, the Company entered into a $25,000, zero percent, note payable with Gene and Lois Vanderbur. The principal of the note was due and payable on December 22, 2012. The Company was required to pay a $5,000 participation fee to execute the note and the Company issued the bearer 62,500 shares of DataJack common stock as additional cost of entering the note. The terms of the note will allow the Company to add additional $25,000 tranches of debt up to a maximum of $100,000. The total loan cost of $8,750 was capitalized to deferred cost, all of which amortized to non-interest expenses by December 31, 2012.

DATAJACK, INC.
(Formerly known as Quamtel, Inc.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013

On September 7, 2012, the Company entered into a $15,000, zero percent, note payable with Gene and Lois Vanderbur. The principal of the note was due and payable on October 20, 2012, and remains unpaid. The Company has committed to pay a $5,000 participation fee to execute the note and the Company has committed to issue the bearer 20,000 shares of DataJack common stock as additional cost of entering the note. The total loan cost of $7,400 was capitalized to deferred cost, all of which amortized to non-interest expenses by December 31, 2012.

Other Note Obligations

The AFS/IBEX note is associated with an insurance policy, is repayable in equal monthly payments of $2,128 through June 2013, is unsecured, and bears interest at 8.3% per year.

The Dell Financial note is related to a disputed computer purchase in 2007.

NOTE 8– DERIVATIVE LIABILITIES

The Company’s St George Note and JMJ Note can be converted into the Company’s common shares, at the holders’ option, at the conversion rates of: (a) 65% of the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion for the St George Note; and (b) at the lesser of $0.07 per share or 70% of the lowest trade price in the 25 trading days prior to the conversion for the JMJ Note.

The Company has identified the embedded derivatives related to these convertible notes. These embedded derivatives included certain conversion features and reset provisions, requiring the Company to record the fair value of the derivatives as of the inception date of these convertible notes, and to fair value as of each subsequent reporting date.

At the inception of these convertible notes, the Company determined the aggregate fair value of $395,722 of embedded derivatives. The fair values of the embedded derivatives were determined using the Black Scholes Option Pricing Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 151% to 266%, (3) weighted average risk-free interest rate of 0.14 % to 0.19%, (4) expected life of 0.08 to 0.99 year, and (5) estimated fair value of the Company’s common stock of $0.065 to $0.125 per share.

The determined fair value of these debt derivatives of $395,722 at inception dates were charged as a debt discount up to the net proceeds of the convertible note with the remainder $115,000 and $70,595 charged to the operations during 2012 and 2013, respectively, as non-cash interest expense.

At December 31, 2012, the Company marked to market the fair values of these debt derivatives and determined a fair value of $916,646. The Company recorded a loss from change in fair value of debt derivatives of $616,519. The fair values of the embedded derivatives were determined using Black Scholes Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 185% to 216%, (3) weighted average risk-free interest rate of 0.12% to 0.15%, (4) expected life of 0.00 to 0.64 year, and (5) estimated fair value of the Company’s common stock of $0.035 to $0.041 per share.

At March 31, 2013, the Company marked to market the fair values of these debt derivatives and determined a fair value of $541,796. The Company recorded a gain from change in fair value of debt derivatives of $470,445. The fair values of the embedded derivatives were determined using Black Scholes Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 234% to 282%, (3) weighted average risk-free interest rate of 0.11% to 0.14%, (4) expected life of 0.00 to 0.83 year, and (5) estimated fair value of the Company’s common stock of $0.032 to $0.052 per share.

DATAJACK, INC.
(Formerly known as Quamtel, Inc.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013

NOTE 9– STOCKHOLDERS’ EQUITY

During the three months ended March 31, 2013, the Company issued 62,500 shares of common stock in settlement of a related party obligation.

During the three months ended March 31, 2013, the Company issued 3,445,000 shares of common stock for cash.

During the three months ended March 31, 2013, the Company issued 80,000 shares of common stock in settlement of $2,576 notes payable due to JMJ.

NOTE 10 – COMMITMENTS AND CONTINGENCIES

Litigation

In the ordinary course of business, the Company is involved in numerous lawsuits. The costs that may result from these lawsuits are only accrued for when it is more likely than not that a liability, resulting from past events, will be incurred and the amount of that liability can be quantified or estimated within a reasonable range.

DataJack, Inc. is a defendant in litigation titled St George Investments LLC v. Quamtel, Inc. (subsequently renamed DataJack, Inc.) and Transfer Online, Inc., Case No. 1:12-cv-09186, pending in the United States District Court for the Northern District of Illinois, Eastern Division (the “St George Litigation”). The St. George Litigation was commenced on November 15, 2012, and amended on January 29, 2013. Generally, the Amended Complaint alleges that DataJack failed to pay a purported debt to Plaintiff as and when due and that DataJack and its transfer agent failed to honor a notice from the Plaintiff to exercise its claimed contractual right to convert $20,000 of the alleged debt to shares of stock in DataJack. The Amended Complaint alleges that DataJack is indebted to the Plaintiff in the amount of $391,704, plus penalties, interest, attorney’s fees and costs. The Amended Complaint also seeks injunctive relief and unspecified amounts of compensatory, consequential, indirect and punitive damages. DataJack has disputed its alleged liability to the Plaintiff. On May 7, 2013, DataJack, together with its transfer agent, filed a motion to dismiss Counts II, III, and V, and strike portions of Counts I and IV, of the Amended Complaint. Briefing on the motion to dismiss is due to be completed on June 30, 2013, and rulings are expected within few months thereafter.

The Company is a defendant in an action styled Robert Picow vs. Quamtel, Inc. (subsequently renamed DataJack, Inc.) and Steven Ivester, in the Circuit Court of the 15th Judicial Circuit in and for Palm Beach County, Florida. Picow asserts he is entitled to unspecified damages as a consequence of an alleged breach of a consulting agreement and for an alleged interference with his ability to trade his Quamtel shares. The Company believes the claims to be without merit and will aggressively defend same. The case is now in discovery, and settlement negotiations are underway.

The Company is a defendant in an action styled The Balancing Act TV, LLC vs. Quamtel, Inc. (subsequently renamed DataJack, Inc.), filed on July 24, 2012 in the Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida. The Balancing Act TV, LLC asserts that it is entitled to damages in the amount of approximately $50,000 as a consequence of an alleged breach by us of a contract with us. We believe the claims to be without merit and have moved to dismiss this matter. We will aggressively defend the Company against these claims.

The ultimate outcome of these lawsuits cannot determined as of the filing date of this report. However, management believes that the outcome of the above litigation will not have a material impact on the Company’s financial position or results of operations.

DATAJACK, INC.
(Formerly known as Quamtel, Inc.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013

NOTE 11 – SUBSEQUENT EVENTS

On April 18, 2013, the Company issued an aggregate of 350,000 shares of its common stock in settlement of $7,000 related party debt.

On April 29, 2013, the Company issued an aggregate of 15,000,000 shares of its common stock in settlement of accrued stock payable (see Note 7).

On April 29, 2013, the Company issued 100,000 shares of its common stock for settlement of $3,000 due to Itella.

On May 10, 2013, the Company issued 50,000 shares of its common stock in settlement of $1,000 notes payable.

During the month of April, the Company received an aggregate of $240,000 short term related party loans.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis contains various “forward-looking statements” within the meaning of the federal securities laws, regarding future events or the future financial performance of the Company that involve risks and uncertainties. Certain statements included in this Form 10-Q, including, without limitation, statements related to anticipated cash flow sources and uses, and words including but not limited to “anticipates”, “believes”, “plans”, “expects”, “future” and similar statements or expressions, identify forward-looking statements. Any forward-looking statements herein are subject to certain risks and uncertainties in the Company’s business, including but not limited to, reliance on key customers and competition in its markets, market demand, product performance, technological developments, maintenance of relationships with key suppliers, difficulties of hiring or retaining key personnel and any changes in current accounting rules, all of which may be beyond the control of the Company. The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth herein and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed with the Securities and Exchange Commission, the ("SEC") on April 16, 2013.

When used in this quarterly report, the terms the “Company,” “DataJack,” “we,” “our,” and “us” refers to DataJack, Inc. formerly known as Quamtel, Inc., a Nevada corporation. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the unaudited condensed consolidated financial statements included herein. Further, this quarterly report on Form 10-Q should be read in conjunction with the Company’s Consolidated Financial Statements and Notes to Consolidated Financial Statements included in its Annual Report on Form10-K for the fiscal year ended December 31, 2012, filed with the SEC on April 16, 2013.

Overview

We were incorporated in 1999 under the laws of Nevada as a communications company offering, through our subsidiaries, a comprehensive range of mobile broadband and communications products and services that are designed to meet the needs of individual consumers, businesses, government subscribers and resellers. Our operations are organized to meet the needs of our targeted subscriber groups through focused communications solutions that incorporate the capabilities of our mobile broadband and communications services.

We offer secure nationwide mobile broadband wireless data transmission services primarily under the DataJack brand. Through DataJack, we offer low cost, no contract, mobile broadband with various data plans. Our DataJack service is offered primarily through two devices - the DataJack MiFi Mobile Hotspot that can connect up to 5 Wi-Fi enabled devices and the DataJack USB, a Plug and Play USB Device.

Our communication products include an international calling service delivered under the brand WQN, through our subsidiary, WQN, Inc. (“WQN”). Our prepaid international calling service, “EasyTalk,” focuses on convenient features and the delivery of low cost international calls to consumers and businesses. WQN global network offers customers secure, instant activation and immediate access to the service while eliminating the need to use a PIN or switch long distance carriers. Other features include 24 hour online and over the phone recharge, speed dial, PIN- less dialing and online access to account balance, call history and purchase history. EasyTalk can be accessed using your mobile, home or business phone from anywhere in the United States or Canada and can be used to place calls to over 196 countries globally.

Results of Operations for the Three Months ended March 31, 2013 Compared to the Same Period in 2012

Revenues

Our revenues for the three months ended March 31, 2013 and 2012 were $576,520 and $653,380, respectively. Revenues for the three months ended March 31, 2013 decreased over the same period in 2012 by 12% due to a decrease in calling card PIN revenue in the current quarter over the same quarter last year. We have been directing more marketing resources into growing the DataJack business. The calling card PIN revenue decreased due to increased competition and the Company’s focus on growing the DataJack business. We plan to increase marketing resources to WQN to stabilize our calling card PIN revenues.

Cost of Sales and Gross Profit

Cost of sales totaled $480,620 and $495,582 for the three months ended March 31, 2013 and 2012, respectively. This resulted in gross profit of $95,900 (17%) and $157,798 (24%) for the respective 2013 and 2012 periods. Gross profit has declined in 2013 compared to 2012 primarily due to declining profit margins in those core markets that the WQN calling card division services, and generates a substantial portion of its revenue from, which is a major reason why we are looking to exit the calling card division operations entirely. Additionally, we incurred one-time costs associated with the DataJack division’s updating its infrastructure from 3G to 4G.

Operating Expenses

Operating expenses were $620,260 and $2,846,369 for the three months ended March 31, 2013 and 2012, respectively.

Compensation and consulting expenses decreased to $405,179 for the three months ended March 31, 2013 compared to $2,286,170 for the same period in 2012. Compensation and consulting expenses are primarily a result of the issuance of common shares for consulting services. During 2012, the Company reduced the number of consultants under contract, which in turn reduced compensation expense.

General and administrative (“G&A”) expenses were $192,772 and $520,945 for the three months ended March 31, 2013 and 2012, respectively. The decrease primarily attributable to a decrease in public relations costs of $230,000 in the current period as compared to the same period, last year.

Other Income and Expense

Other income and expenses increased to a net other income of $274,955 for the three months ended March 31, 2013 compared to a net other income of $54,663 for the three months ended March 31, 2012. The $220,292 increase is directly attributable to the gain from change in fair value of derivative liability of $470,445 during the three months ended March 31, 2013 as compared to nil for the same period last year, net with an increase in interest and finance expenses of $131,819 from $45,337 for the three months ended March 31, 2012 to $177,156 for the current period. In the three months ended March 31, 2013, the Company amortized $18,334 of debt discount and recorded a $157,712 non-cash interest relating our convertible debt as compared to nil the same period, last year.

Net Loss

A decrease in compensation and consulting expenses, gain on derivative liability; off-set by increased financing expenses resulted in a net loss of $249,405 for the three months ended March 31, 2013, compared to a net loss of $2,633,908 for the same period in 2012.

Liquidity and Capital Resources

Cash and cash equivalents were $9,922 at March 31, 2013. Our net cash used in operating activities for the three months ended March 31, 2013 was $226,500, due primarily to our net loss during this period.

Cash provided by investing activities for the three months ended March 31, 2013 was comprised of a $75,000 deposit received for the sale of our of the intangible assets of WQN to Business Telecommunications Services, Inc.

Our primary sources of funding for the three months ended March 31, 2013 have been (I) gross proceeds of $67,900 from the sale of our common stock to accredited investors, (ii) gross proceeds in the amount of $124,320 from the issuance of notes, net of (iii) repayments of notes of $54,684.

At March 31, 2013, restricted cash consisted of a $150,000 security deposit in the form of an irrevocable letter of credit held in escrow related to our performance under a service contract with one of our telecommunication service providers.

Our accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate our continuation as a going concern. We have incurred operating losses and negative cash flows from operations during the past two years, have incurred an accumulated deficit of $23,446,082 through March 31, 2013, and have been dependent on issuances of debt and equity instruments to fund our operations. We intend to generate future profitability and seek new sources or methods of financing or revenue to pursue our business strategy. However, there can be no certainty that we will be successful in this strategy. These factors raise substantial doubt about our ability to continue as a going concern. Accordingly, our independent auditors added an explanatory paragraph to their opinion on our consolidated financial statements for the year ended December 31, 2012, based on substantial doubt about our ability to continue as a going concern.

Our unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. We expect to raise any necessary additional funds through loans and additional sales of our common stock or debt instruments. There can be no assurance that we will be successful in raising additional capital in amounts or on terms acceptable to us, if at all.

Capital Expenditure Commitments

We did not have any substantial outstanding commitments to purchase capital equipment at March 31, 2013.

Capital Needs

We do not currently have sufficient capital resources to meet projected cash flow requirements. We will need to continue to raise capital through the issuance of new shares or by issuing new debt securities. However, any failure in generating sufficient liquidity from operations or in raising sufficient capital resources, on terms acceptable to us, could have a material adverse effect on our business, results of operations, liquidity and financial condition.

Our future cash requirements include those associated with maintaining our status as a reporting entity. We believe that on an annual basis those costs would not exceed an average of $25,000 per month.

We presently do not have any available credit, bank financing or other external sources of liquidity. Due to our brief operating history and lack of substantial historical operating profits, our operations have not been a source of liquidity. We will need to obtain additional capital in order to fund our operations and become profitable. In order to obtain capital, we may need to sell additional shares of our common stock or borrow funds from private lenders. There can be no assurance that we will be successful in obtaining additional funding in amounts or on terms acceptable to us, if at all.

Critical Accounting Policies

Revenue Recognition

Derivative Instrument Liability

ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures.

As required by Rule 13a-15(b) under the Exchange Act, as of March 31, 2013, our management conducted an evaluation with the participation of our President who also serves as our principal financial and accounting officer (the “Certifying Officer”) regarding the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).

A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis.

Based on this evaluation, our Certifying Officer concluded that our disclosure controls and procedures were ineffective as of March 31, 2013. Our President, who is our sole executive officer, is not a financial or accounting professional, and we do not have a chief financial officer or sufficient accounting staff. Until we are able to engage a qualified financial officer, and/or accounting staff, we may continue to experience material weaknesses in our disclosure controls that may adversely affect our ability to timely file our quarterly and annual reports.

Our management, including the Certifying Officer, does not expect that our disclosure controls and procedures will prevent all errors and all improper conduct. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, a design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of improper conduct, if any, have been detected. These inherent limitations include the realities that judgments and decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more persons, or by management override of the control. Further, the design of any system of controls is also based in part upon assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations and a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

The Company has an insufficient quantity of dedicated resources and experienced personnel involved in reviewing and designing internal controls. As a result, a material misstatement of the interim and annual consolidated financial statements could occur and not be prevented or detected on a timely basis. We have not achieved the optimal level of segregation of duties relative to key financial reporting functions and we do not have an audit committee or an independent audit committee financial expert. While not being legally obligated to has an audit committee or independent audit committee financial expert, it is management’s view that an audit committee, comprised of independent board members, and an independent financial expert is an important entity-level control over the Company's financial statements. We have not achieved an optimal segregation of duties for executive officers of the Company.

(b) Changes in Internal Control over Financial Reporting.

During the quarter ended March 31, 2013, there was no change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. However, as of June 11, 2012, Leo Hinckley joined our Board of Directors as an independent director. We expect that the appointment of Mr. Hinkley will enhance our controls and procedures capabilities.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently aware of and a party to the following legal proceedings or claims that we believe will not have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results:

ITEM 1A. RISK FACTORS

See the risk factors set forth in our Annual Report on Form 10-K filed with the SEC on April 16, 2013.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the three months of 2013, the Company issued 3,587,500 shares of common stock valued at $72,351 as follows:

•	3,445,000 shares were issued and sold to one accredited investor for net proceeds of $67,900;

•	80,000 shares valued at $2,576 were issued to one debt holder in settlement of debt;

•	62,500 shares valued at $1,875 were issued to reduce related party balances;

These securities were offered and sold pursuant to the exemption from the registration requirements of the federal securities laws provided by Section 4(2) of the Securities Act of 1933, as amended.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

Exhibit		Description
No.

31.1/31.2		Certification of Principal Executive Officer and Principal Financial Officer, pursuant to SEC Rules 13a-14(a) and 15d-14(a), adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002*

32.1/32.2		Certification of Chief Executive Officer and Interim Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002**

101 INS		XBRL Instance Document***
101 SCH		XBRL Schema Document***
101 CAL		XBRL Calculation Linkbase Document***
101 LAB		abels Linkbase Document***
101 PRE		XBRL Presentation Linkbase Document***
101 DEF		Definition Linkbase Document***

_________________
* Filed herewith.

** This certification is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.

*** The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

DATAJACK, INC.

Dated: May 20, 2013	By:	/s/ Stuart Ehrlich
		Stuart Ehrlich
		President and Chief Executive Officer,
		Principal Financial Officer

Unified Signal, Inc. - FORM 10-Q - May 20, 2013

Attached files

Unified Signal, Inc. Reports