Unified Signal, Inc. - FORM 10-Q

Attached files

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EX-32.1 - Unified Signal, Inc.	ex32-1.htm
EX-31.1 - Unified Signal, Inc.	ex31-1.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, 2015

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

For the transition period from ________ to ________

Unified Signal, Inc.

(Exact name of small business issuer as specified in its charter)

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

5400 Carillon Point, Building 5000, 4th Floor, Kirkland, Washington		98033
(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 [ ] No [X]

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, 2015 is 67,587,643.

UNIFIED SIGNAL, INC.

INDEX

PART I. FINANCIAL INFORMATION

	ITEM 1	Financial Statements	3

		Condensed consolidated balance sheets as of March 31, 2015 (unaudited) and December 31, 2014	3

		Condensed consolidated statements of operations for the three months ended March 31, 2015 and 2014 (unaudited)	4

		Condensed consolidated statement of stockholders’ deficit for the three months ended March 31, 2015 (unaudited)	5

		Condensed consolidated statements of cash flows for the three months ended March 31, 2015 and 2014 (unaudited)	6

		Notes to condensed consolidated financial statements (unaudited)	7

	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
	ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	25
	ITEM 4.	Controls and Procedures	25

PART II. OTHER INFORMATION

	ITEM 1.	Legal Proceedings	27
	ITEM 1A.	Risk Factors	27
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
	ITEM 3.	Defaults Upon Senior Securities	27
	ITEM 4.	Mine Safety Disclosures	27
	ITEM 5.	Other Information	27
	ITEM 6.	Exhibits	27

	SIGNATURES		28

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL INFORMATION

UNIFIED SIGNAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
	2015			2014
	(unaudited)
ASSETS

Current assets:
Cash and cash equivalents	$	90,109		$	108,803
Accounts receivable		211,280			219,017
Total current assets		301,389			327,820

Property and equipment, net		324,111			348,750

Restricted cash		150,000			150,000
Customer lists, net		144,444			161,111
Total other assets		294,444			311,111

Total assets	$	919,944		$	987,681

LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities:
Accounts payable	$	419,377		$	429,414
Advances from related parties		163,500			200,000
Notes payable, current portion		276,216			356,287
Legal Settlement Reserves		31,500			31,500
Derivative liability		255,635			461,785
Total current liabilities		1,146,228			1,478,986

Shareholders' deficit:
Preferred stock- $0.001 par value; 50,000,000 shares authorized; no shares issued and outstanding		-			-
Common stock-$0.001 par value; 100,000,000 shares authorized; 65,646,928 and 65,366,928 shares
issued and 64,771,928 and 64,491,928 shares outstanding as of March 31, 2015 and December 31, 2014, respectively		65,647			65,367
Additional paid in capital		8,398,761			8,187,081
Common stock subscription		452,000			272,500
Treasury stock, 5,000 shares		(26,000	)		(26,000	)
Accumulated deficit		(9,116,692	)		(8,990,253	)
Total shareholders' deficit		(226,284	)		(491,305	)

Total liabilities and shareholders' deficit	$	919,944		$	987,681

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

UNIFIED SIGNAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three months ended March 31,
	2015			2014

Revenues	$	453,182		$	1,883,196

Operating expenses:
Software licenses		16,469			1,258,368
Hosting and other software costs		33,362			18,471
Carrier costs		188,203			228,624
Customer service		16,513			1,031
General and administrative expenses		309,529			104,817
Depreciation and amortization		41,306			-
Total operating expenses		605,382			1,611,311

(Loss) income from operations		(152,200	)		271,885

Other income (expense):
Interest expense		(37,429	)		-
Gain on change in derivative liability		47,390			-
Gain on settlement of debt		15,800			-
Total other income, net		25,761			-

(Loss) Income before income taxes		(126,439	)		271,885

Income taxes		-			-

Net (loss) income	$	(126,439	)	$	271,885

(Loss) income per common share, basic	$	(0.00	)	$	0.01

(Loss) income per common share, diluted	$	(0.00	)	$	0.01

Weighted average number of shares outstanding-basic		65,632,372			30,600,000

Weighted average number of shares outstanding-diluted		65,632,372			30,600,000

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

UNIFIED SIGNAL, INC.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT

THREE MONTHS ENDED MARCH 31, 2015

					Additional		Common
	Common stock				Paid in		Stock		Treasury			Accumulated
	Shares		Amount		Capital		Subscriptions		Stock			Deficit			Total

Balance, December 31, 2014		65,366,928	$	65,367	$	8,187,081	$	272,500	$	(26,000	)	$	(8,990,253	)	$	(491,305	)
Common stock issued in settlement of debt		280,000		280		52,920		-		-			-			53,200
Reclass derivative liability to equity upon convertible note payoff		-		-		158,760		-		-			-			158,760
Proceeds from common stock subscriptions		-		-		-		179,500		-			-			179,500
Net loss		-		-		-		-		-			(126,439	)		(126,439	)
Balance, March 31, 2015 (unaudited)		65,646,928	$	65,647	$	8,398,761	$	452,000	$	(26,000	)	$	(9,116,692	)	$	(226,284	)

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

UNIFIED SIGNAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(unaudited)

	Three months ended March 31,
	2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income	$	(126,439	)	$	271,885
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		41,306			-
Bad debt expense		128,124
Non-cash interest		37,429
Gain on settlement of debt		(15,800	)
Change in fair value of derivative liability		(47,390	)		-
Changes in operating assets and liabilities:					-
Accounts receivable		(120,387	)		(1,516,663	)
Accounts payable		(10,037	)		1,233,598
Net cash used in operating activities		(113,194	)		(11,180	)

CASH FLOWS FROM INVESTING ACTIVITIES		-			-

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from common stock subscription		179,500			-
Repayments of notes payable		(85,000	)		(9,638	)
Distributions		-			(37,498	)
Net cash provided by (used in) financing activities		94,500			(47,136	)

Net decrease in cash and cash equivalents		(18,694	)		(58,316	)

Cash and cash equivalents at beginning of period		108,803			161,498
Cash and cash equivalents at end of period	$	90,109		$	103,182

Supplement cash flow information:
Cash paid for income taxes	$	-		$	-
Cash paid for interest	$	-		$	-

Noncash investing and financing activities:
Issuance of common stock for accounts payable, debt settlement and debt conversions	$	53,200		$	-

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

UNIFIED SIGNAL, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

NOTE 1 – ORGANIZATION AND BUSINESS

Unified Signal, Inc. (together with its consolidated subsidiaries, TelBill Holdings, LLC. (“TelBill” and WQN, Inc. (“WQN”) or the “Company”) is an MVNO enabler and mobile payment solutions provider in the wireless and banking industries. The Company is a SaaS (software as a service) based billing and back office platform, which enables companies in virtually any industry sector to launch cellular, as well as other telecom services using their existing brand. The Company’s SaaS platform and infrastructure allows clients to implement faster, have more control over the system with feature rich tools, while being more cost efficient than other solution providers. The Company’s turnkey telecom billing platform allows its clients to sell, provision, fulfill, and care for multiple telecom services, including pre and post-paid cellular, local, long distance, Internet, and mobile banking. The platform also enables clients to private label mobile banking services including a full mobile wallet linked to a prepaid debit card.

On November 27, 2014, the Company changed its name to Unified Signal from DataJack, Inc. In addition, effective November 27, 2014 and in conjunction with the name change, the Company’s quotation symbol on the Over-the-Counter Bulletin Board was changed from DJAK.OB to UNSI.OB.

Basis of Presentation (Reverse-Acquisition)

On June 4, 2014, TelBill Holdings, LLC completed an acquisition (the "Merger") of TelBill Holdings, Inc. (“TelBill”) (dba Unified Signal) pursuant to the terms of the Membership Interest Purchase Agreement (the “Merger Agreement”) with TelBill and Unified Signal, Inc. (formerly DataJack, Inc.) dated as of June 4, 2014. For accounting purposes, TelBill was identified as the acquiring entity and Unified Signal (formerly DataJack Inc.) as the acquired entity. The merger was accounted for using the purchase method of accounting for financial reporting purposes. The purchase method requires the identification of the acquiring entity based on the criteria of Accounting Standards Codification (“ASC”) 805-10-55-12, “Accounting for Business Combinations”. Under the purchase method of accounting the purchase price is preliminarily allocated to the acquiree’s assets and liabilities at fair value and any excess purchase price is then attributed to identifiable intangible assets and goodwill. The preliminary purchase price allocation may be modified as more information is obtained for a period of no more than one year. Accordingly, the consolidated financial statements and related footnote disclosures presented for the period prior to the Merger are those of TelBill and its subsidiaries alone. The financial statements for the three months ended March 31, 2014 include the operations and cash flows of TelBill and its subsidiaries.

The accompanying financial statements give retroactive effect to the recapitalization as if it had occurred at the earliest reporting period. Certain other reclassifications have been made to prior periods’ consolidated financial statements to be consistent with the current period’s presentation.

The accompanying unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the Company has condensed or omitted certain information and footnote disclosures that are included in our annual financial statements. Interim results of operations are not necessarily indicative of the results that may be achieved for the full year.

These unaudited condensed consolidated financial statements reflect, in the opinion of management, all adjustments (which consist of normal, recurring adjustments) necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented.

The accompanying financial statements present on a consolidated basis the accounts of Unified Signal, Inc. and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

UNIFIED SIGNAL, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of the unaudited condensed 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. Significant estimates include the fair value of goodwill, customer lists, equity based compensation, derivative liabilities and revenue recognition.

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. Cash overdraft positions may occur from time to time due to the timing of making bank deposits and releasing checks, in accordance with the Company’s cash management policies. Cash overdraft positions are recorded as accounts payable in the balance sheet.

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, 2015 and December 31, 2014 was $164,508 and $42,000, respectively.

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.

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.

UNIFIED SIGNAL, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing the net income (loss) for the year by the weighted-average number of shares of common stock outstanding. The calculation of fully diluted earnings per share is computed using the weighted average number of common shares outstanding and common stock equivalents with the assumption that all common stock equivalents were converted at the beginning of the year. Options, warrants, convertible debt and unvested shares are considered to be common stock equivalents and are only included in the calculation of diluted earnings per common share when their effect is dilutive. Common stock equivalents such as shares issuable on debt conversion are excluded from the computation if their effect is anti-dilutive. There were no common stock equivalents for the three months ended March 31, 2014.

Fair Value of Financial Instruments

The carrying amount of cash, accounts receivable, accounts payable and notes payable, as applicable, approximates fair value due to the short term nature of these items and/or the current interest rates payable in relation to current market conditions.

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, 2015 and December 31, 2014:

	Level 1		Level 2		Level 3		Total

Derivative liability	$	-	$	-	$	-	$	-
As of December 31, 2014	$	-	$	-	$	461,785	$	461,785

Derivative liability	$	-	$	-	$		$
As of March 31, 2015	$	-	$	-	$	255,635	$	255,535

UNIFIED SIGNAL, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

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, 2015:

	Derivative
	Liability

Balance, December 31, 2014	$	461,785
Transfers out Level 3 upon payoff of notes		(158,760	)
Mark-to-market at March 31, 2015		(47,390	)

Balance, March 31, 2015	$	255,635

Level 3 Liabilities were comprised of our bifurcated convertible debt features on our convertible notes.

Fluctuations in the Company’s stock price are a primary driver for the changes in the derivative valuations during each reporting period. The Company’s stock price decreased by 20% from December 31, 2014 to March 31, 2015. As the stock price decreases for each of the related derivative instruments, the value to the holder of the instrument generally decreases, therefore decreasing the liability on the Company’s balance sheet. Additionally, stock price volatility is one of the significant unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments.

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, 2015 and December 31, 2014, the Company did not have any recorded unearned revenue.

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided over the estimated useful lives of the related assets using the straight line method. The useful lives of assets range from three to five years. The company reviews the recoverability of its property and equipment when events or changes in circumstances occur that indicate that the carrying value of the asset group may not be recoverable.

UNIFIED SIGNAL, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

Long-Lived Assets

Property, equipment and definite lived intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell, and depreciation ceases.

Intangible Assets and Goodwill

As a result of the acquisition of TelBill Holdings, LLC on June 4, 2014, the Company acquired intangible assets in the aggregate amount of $7,982,644.

The Company allocated $200,000 in identifiable intangible assets for customer relationships. The remaining $7,782,644 was allocated to goodwill.

The Company amortized its identifiable intangible assets using the straight-line method over their estimated period of benefit. The estimated useful lives of the customer relationships was determined to be three years. The Company periodically evaluates the recoverability of intangible assets and takes into account events or circumstances that warrant revised estimates of useful lives or indicate that impairment exists.

The Company accounts for and reports acquired goodwill and other intangible assets under Accounting Standards Codification subtopic 350-10, Intangibles, Goodwill and Other (“ASC 350-10”). In accordance with ASC 350-10, the Company tests its intangible assets for impairment on an annual basis and when there is reason to suspect that their values have been diminished or impaired. Any write-downs will be included in results from operations.

In 2014, the Company management performed an evaluation of its goodwill and other acquired intangible assets for purposes of determining the implied fair value of the assets at each respective dates. The tests indicated that the recorded book value of its acquired goodwill from the acquisition of TelBill Holdings, LLC exceeded its fair value for the period ended December 31, 2014. As a result, upon completion of the assessment, management recorded an aggregate non-cash impairment charge of $7,782,644, net of tax, or $0.16 per share during the year ended December 31, 2014 to reduce the carrying value to $-0-.

The impairment charge is reflected as part of the loss from operations in the accompanying financial statements. Considerable management judgment is necessary to estimate the fair value. Accordingly, actual results could vary significantly from management’s estimates.

Segment Information

Accounting Standards Codification subtopic Segment Reporting 280-10 (“ASC 280-10”) establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders. ASC 280-10 also establishes standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how to allocate resources and assess performance. The information disclosed herein materially represents all of the financial information related to the Company’s only principal operating segment.

UNIFIED SIGNAL, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

Convertible Instruments

GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under applicable GAAP. The Company has identified embedded derivatives related to certain of its notes payable. These embedded derivatives include certain conversion features and reset provisions.

When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.

Concentrations and Credit Risk

At March 31, 2015, three clients represented receivables of $106,276 (32%), $34,592 (10%) and $51,039 (15%). At December 31, 2014, one client represented receivables of $99,506 (21%). As of March 31, 2015 and December 31, 2013, allowance for doubtful accounts was $164,508 and $42,000, respectively.

The Company had three clients accounting for 16.19%, 21.54% and 21.27%; (total of 59.00%) of total revenues for the three months ended March 31, 2015, respectively, and had one client accounting for 78.61% of total revenues for the three months ended March 31, 2014.

Recent Accounting Pronouncements

In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs” this Update as part of its initiative to reduce complexity in accounting standards (the Simplification Initiative). The Board received feedback that having different balance sheet presentation requirements for debt issuance costs and debt discount and premium creates unnecessary complexity. Recognizing debt issuance costs as a deferred charge (that is, an asset) also is different from the guidance in International Financial Reporting Standards (IFRS), which requires that transaction costs be deducted from the carrying value of the financial liability and not recorded as separate assets. Additionally, the requirement to recognize debt issuance costs as deferred charges conflicts with the guidance in FASB Concepts Statement No. 6, Elements of Financial Statements, which states that debt issuance costs are similar to debt discounts and in effect reduce the proceeds of borrowing, thereby increasing the effective interest rate. Concepts Statement 6 further states that debt issuance costs cannot be an asset because they provide no future economic benefit. To simplify presentation of debt issuance costs, the amendments in this Update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this Update. For public business entities, the amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. For all other entities, the amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016. The Company is currently evaluating the effects of adopting this ASU, if it is deemed to be applicable.

UNIFIED SIGNAL, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

There are various other 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 financial position, results of operations or cash flows.

NOTE 3 –BUSINESS COMBINATION

On June 4, 2014, Unified Signal, Inc. (formerly DataJack, Inc.) completed an acquisition (the "Merger") of TelBill Holdings, LLC. (“TelBill”) pursuant to the terms of the Membership Interest Purchase Agreement (the “Merger Agreement”) with TelBill Holdings, LLC (dba Unified Signal) dated as of June 4, 2014.

The Company acquired TelBill in exchange for the following: (i) 30,600,000 shares of Registrant's common stock, par value $0.001("Common Stock") to Mr. Holt, (ii) the reservation of an additional 5,400,000 shares of the Company’s Common Stock to be allocated as warrants to the employees of the Company and (iii) a one-time "true-up" to Mr. Holt for the period of eighteen months after the Closing Date in the event the Registrant raises additional capital such that Seller shall own not less than 51% of the Registrant on a fully-diluted basis (collectively, the "Purchase Price").

The merger was accounted for using the purchase method of accounting for financial reporting purposes. The acquisition method requires the identification of the acquiring entity based on the criteria of ASC 805-10-55-12, “Accounting for Business Combinations”. Based on an analysis of the relative voting rights in the combined entity after the business combination and the composition of the board of directors and the relative size (measured in assets, revenues, or earnings), the Merger was accounted for as a reverse acquisition. For accounting purposes, TelBill Holdings, LLC. was identified as the acquiring entity and Unified Signal, Inc. (formerly DataJack Inc.) as the acquired entity. Under the purchase method of accounting the purchase price is preliminarily allocated to the acquiree’s assets and liabilities at fair value and any excess purchase price is then attributed to identifiable intangible assets and goodwill. The preliminary purchase price allocation may be modified as more information is obtained for a period of no more than one year. Accordingly, the financial statements and related footnote disclosures presented for the period prior to the Merger are those of TelBill Holdings, LLC. and its subsidiaries alone. The financial statements for the three months ended March 31, 2014 include the operations and cash flows of TelBill and its subsidiaries.

In accordance with the Merger, each TelBill Holdings, LLC member received, in exchange for each membership interest of TelBill Holdings, LLC. common stock held or deemed to be held by such member immediately prior to the closing of the merger on June 4, 2014, one membership interest of TelBill Holdings, LLC, resulting in TelBill Holdings, LLC. members owning approximately 55.5% of the shares of the combined company. A total of 24,491,728 shares of common stock were issued in connection with this exchange.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition. The total acquisition price of $6,217,849 has been allocated as follows:

UNIFIED SIGNAL, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

Cash	$	351
Accounts receivable		1,204
Prepaid expenses and other current assets		40,508
Restricted cash		150,000
Property and equipment		415,674
Deferred costs, related party		74,074
Customer list		200,000
Goodwill		7,782,644
Other intangible assets		35,366
Treasury stock		26,000
Accounts payable		(586,922	)
Advances from related parties		(517,115	)
Notes payable		(535,481	)
Legal reserves		(433,799	)
Derivative liability		(403,155	)
Common stock subscription		(31,500	)

Total purchase price	$	6,217,849

Goodwill and customer lists represent the excess of the purchase price over the fair value of the net tangible assets acquired. For income tax reporting purposes, the goodwill and other intangibles assets identified above are non-deductible.

Pro forma results

The following tables set forth the unaudited pro forma results of the Company as if the acquisition of Datajack, Inc. had taken place on the first day of the periods presented. These combined results are not necessarily indicative of the results that may have been achieved had the companies always been combined.

	Three months ended, 2014

Total revenues	$	2,168,437
Net loss		(1,787,638	)
Basic and diluted net loss per common share	$	(0.06	)

At December 31, 2014, the Company management performed an evaluation of its goodwill and other acquired intangible assets for purposes of determining the implied fair value of the assets at each respective dates. The tests indicated that the recorded book value of its acquired goodwill from the acquisition of TelBill Holdings, LLC exceeded its fair value for the period ended December 31, 2014. As a result, upon completion of the assessment, management recorded an aggregate non-cash impairment charge of $7,782,644, net of tax, or $0.16 per share during the year ended December 31, 2014 to reduce the carrying value to $-0-. The impairment charge is reflected as part of the loss from operations in the accompanying financial statements. Considerable management judgment is necessary to estimate the fair value. Accordingly, actual results could vary significantly from management’s estimates.

UNIFIED SIGNAL, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

The Company has presented its preliminary estimates of the fair values of the assets acquired and liabilities assumed in the Merger as of December 31, 2014. The Company is in the process of finalizing its review and evaluation of the appraisal and related valuation assumptions supporting its fair value estimates for all of the assets acquired and liabilities assumed in the Merger and, therefore, the estimates used herein are subject to change. This may result in adjustments to the values presented above for assets and liabilities and a corresponding adjustment to goodwill in addition to the impairment charge. As such, the Company has not completed the assignment of goodwill to reporting units or its determination of the amount of goodwill that is expected to be deductible for tax purposes at this time.

NOTE 4 – 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 $126,439 for the three months ended March 31, 2015, respectively. As of March 31, 2015, the Company has reported an accumulated deficit of $9,116,692 and a working capital deficit of $844,839, 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 unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

NOTE 5 – PROPERTY AND EQUIPMENT, NET

At March 31, 2015 and December 31, 2014, respectively, property and equipment consisted of the following:

	March 31,			December 31,
	2015			2014

Computers and equipment	$	18,696		$	18,696
Software		396,978			396,978
Total		415,674			415,674
Less accumulated depreciation		(91,563	)		(66,924	)
Total	$	324,111		$	348,750

Depreciation expense for the three months ended March 31, 2015 and 2014 amounted to $24,639 and $-0-, respectively.

NOTE 6 – CUSTOMER LISTS

In connection with the merger with TelBill Holdings, LLC. the Company acquired a customer listing with an allocated fair value at the date of the merger of $200,000. The customer list is amortized ratably over its estimated useful life of 3 years. During the three months ended March 31, 2015, the Company amortized $16,667 current period operations.

UNIFIED SIGNAL, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

NOTE 7 – RELATED PARTY TRANSACTIONS

As of March 31, 2015 and December 31, 2014, related party advances were $163,500 and $200,000, respectively.

On January 7, 2015, the Company issued 150,000 shares of its common stock in settlement of $36,500 outstanding debt assigned by related party. In connection with the settlement, the Company recognized $8,000 gain on settlement of debt.

NOTE 8 – NOTES PAYABLE

At March 31, 2015 and December 31, 2014, notes payable consisted of the following:

	March 31,			December 31,
	2015			2014

Promissory notes payable - shareholders	$	65,000		$	65,000
Convertible note payable-JMJ Financial		43,174			78,174
Convertible note payable-St George		-			50,000
CGL Interests Note		98,696			108,696
Note payable-Jensen		-			32,500
Note payable – LG Capital		69,346			21,917
Total notes payable		276,216			356,287
Less current portion of notes payable		(276,216	)		(356,287	)

Noncurrent portion of notes payable	$	-		$

Promissory Notes Payable - Shareholders

As of March 31, 2015 and December 31, 2015, the Company had short-term unsecured promissory notes from various shareholders totaling $65,000. These unsecured advances do not accrue interest.

Convertible Note Payable – JMJ Financial

On August 22, 2012, the Company’s acquired subsidiary entered into a convertible promissory note 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’s acquired subsidiary to draw down the available principal over time. 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’s acquired subsidiary 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. On December 11, 2013, the Company entered an amended Debt Settlement agreement with JMJ for settlement of the outstanding $88,174 balance on the promissory note. The Company has signed various amendments to the Debt Settlement agreement extending the final payment date to March 14, 2014.

UNIFIED SIGNAL, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

On February 11, 2015, the Company entered into a new settlement agreement in court in response to the litigation between the Company’s acquired subsidiary and JMJ Note. Per the terms of the settlement agreement the Company is required to make a payment of $25,000 prior to February 28, 2015 followed by five (5) monthly payments of $10,000 due on the last day of each month thereafter and a final payment of $3,174 due on the last day of the sixth month.

The Company has identified embedded derivatives related to the JMJ Note. These embedded derivatives include certain conversion features and reset provisions. See Note 10.

Convertible Note Payable – St George Investments

On March 30, 2012, the Company’s acquired subsidiary 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’s acquired subsidiary. The St George Investments note conversion notice contains a Beneficial Conversion Feature (BCF). The Company’s acquired subsidiary 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’s acquired subsidiary also recognized an additional original-issue debt discount of $135,127, which was charged to other expense by September 30, 2012.

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’s acquired subsidiary by providing one or more written notices thereof to the Company but not exceed 47,692 shares. The St George Investments converted a total of $426,206 of accrued interest, penalty and principal amount during the year ended December 31, 2012 and returned $58,486 or 47,692 shares of conversion made in September 2012.

Final settlement was reached whereby the Company will pay St. George Investments a series of 14 payments, on the 15th and 30th of each month for the next 7 months beginning in August 2014. As of March 31, 2015, the St George note was paid in full.

CGL Interest Note

On September 9, 2013, the Company entered into a loan agreement for up to $200,000, at the holder’s option. CGL agreed to loan up to $200,000 to assist in covering costs for various parties to implement their mobile virtual network operators (“MVNO”) in exchange for a new MVNO for CGL at no cost. Payments are at 15% of the Company’s MVNO royalty fee for each subscriber with no cap or time limitation.

UNIFIED SIGNAL, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

If CGL advances funds to the Company on a particular MVNO, the Company must pay back these funds at 100% monthly royalty fee until tranche is repaid. If a particular advance is note repaid within 12 months, the Company must pay back over 12 months from general profits.

The Company’s Chief Executive Officer, Paris Holt, has provided a personal guarantee

Note payable-Jenson

On March 19, 2013, the Company issued a promissory note for $50,000, initially due April 1, 2014 with interest at 7% per annum. The remaining unpaid balance at December 31, 2014 was $32,500.

On January 2, 2015, the Company issued 130,000 shares of its common stock in settlement of the remaining balance. In connection with the settlement, the Company recognized a gain on settlement of debt of $7,800.

Note Payable – LG Capital

On January 17, 2012, the Company’s acquired subsidiary (See Note 3) entered into a $55,000, 8% note payable with Mr. Anthony Gallo. On June 19, 2013, this note was assigned to LG Capital. The principal and interest of the note is due and payable on March 19, 2014. LG Capital Funding can convert the loan for common stock at a conversion price of 45% of the market price which is calculated utilizing the two lowest trading places. LG Capital has converted a total of $17,654, leaving a balance of $37,346 including accrued interest of $10,083.

On June 19, 2013, the Company’s acquired subsidiary (See Note 3) entered into a $32,000, 8% note payable with LG Capital Funding. The principal and interest of the note is due and payable on March 19, 2014. The note has a conversion feature which commences 180 days prior to the maturity date. LG Capital Funding can convert the loan for common stock at a conversion price of 51% of the market price which is calculated utilizing the two lowest trading places. LG Capital converted a total of $12,090 of accrued interest and principal amounts during the year ended December 31, 2013 for 109,649 shares. At March 31, 2015, the outstanding balance due on this note is $21,917.

The total outstanding principal balances due to LG Capital on both notes as of March 31, 2015 is $69,346 inclusive of default costs.

NOTE 9 – LEGAL SETTLEMENT OBLIGATIONS

The Company has entered into settlement agreements with note holders, former employees and vendors. As of March 31, 2015 and December 31, 2014, the legal settlement obligation was $31,500. These settlement agreements have yet to be fully consummated and are recorded at full value until the transaction is completed.

NOTE 10 – DERIVATIVE LIABILITIES

The Company’s LG Capital and JMJ Financial Note (the “JMJ Note”) can be converted into the Company’s common shares, at the holders’ option, at the conversion rates of: (a) 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 and (b) at a conversion price of 51% and 45% of the market price which is calculated utilizing the two lowest trading places for the LG Capital 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.

UNIFIED SIGNAL, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

At December 31, 2014, the Company marked to market the fair values of these debt derivatives and determined a fair value of $461,785. The Company recorded a loss from change in fair value of debt derivatives of $1,537 for the year ended December 31, 2014. 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 396.18%, (3) weighted average risk-free interest rate of 0.25%, (4) expected life of 1 year, and (5) estimated fair value of the Company’s common stock of $0.15 per share.

At March 31, 2015, the Company marked to market the fair values of these debt derivatives and determined a fair value of $255,635. The Company recorded a gain from change in fair value of debt derivatives of $47,390 for the three months ended March 31, 2015. 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 345.38%, (3) weighted average risk-free interest rate of 0.26%, (4) expected life of 1 year, and (5) estimated fair value of the Company’s common stock of $0.12 per share.

NOTE 11 – STOCKHOLDERS’ DEFICIT

In January 2015, 150,000 shares were issued to convert approximately $32,500 of debt into restricted stock

In February 2015, 130,000 shares were issued to convert approximately $36,500 of debt into restricted stock

As of March 31, 2015 the Company has $452,000 in common stock subscriptions in connection with approximately 1,940,715 shares to be issued.

NOTE 12 – COMMITMENTS AND CONTINGENCIES

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. As of the date of this filing, the Company is not currently involved in or aware of any pending or threatened litigation.

NOTE 13 – SUBSEQUENT EVENTS

In April 2015, the Company issued an aggregate of 1,123,215 shares of its common stock in connection with previously received common stock subscriptions.

In May 2015, the Company issued an aggregate of 817,500 shares of its common stock in connection with previously received common stock subscriptions.

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.

When used in this quarterly report, the terms the “Company,” “Unified Signal,” “we,” “our,” and “us” refers to Unified Signal, 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.

Overview

Unified Signal, Inc., (formerly DataJack, Inc. and formerly Quamtel, Inc.) (“DataJack,” “we,” “us,” “our” or the “Company”), incorporated in 1999 under the laws of Nevada, is a communications company offering, through its subsidiaries, a comprehensive range of mobile broadband 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 services. Our common stock trades on the OTC Bulletin Board (OTCBB) under the symbol “UNSI.”

On June 4, 2014, we completed an acquisition (the "Merger") of TelBill Holdings, LLC. (“TelBill”) pursuant to the terms of the Membership Interest Purchase Agreement (the “Merger Agreement”) with TelBill and Unified Signal Inc. dated as of June 4, 2014. For accounting purposes, TelBill was identified as the acquiring entity and Unified Signal, Inc. as the acquired entity. The merger was accounted for using the purchase method of accounting for financial reporting purposes.

Unified Signal’s aim is allow its customers to cost efficiently enable its clients (MVNOs, MVNEs, wireless carriers, CLECS, Cable companies, LD companies, and spectrum holders) the ability to resell and launch a variety of telecom services to their customers. Unified Signal also aggregates US and international wireless carriers, US and International ILD termination, and other service offerings to provide its clients a telecom buying consortium. Unified Signal clients have ONE SOURCE and one API suite for access to all Unified Signal technology offerings.

Unified Signal is a consortium of over 50 key industry technology innovators that have come together to create a complete telecom resale solution. The Unified Signal partner consortium has succeeded in becoming leaders in their respective market segments. Each consortium partner brings a key technology and infrastructure to Unified Signal. The founders of Unified Signal have used feedback from over 100 MVNOs and 5 MVNEs to refine its product offerings and create a platform that provides core Billing and CRM (customer relations management) functionality that rivals any in the industry.

Unified Signal’s turnkey SaaS (software as a service) system allows its clients to provision services with all its technology partners including carrier audit and carrier CDR remediation for Pre and Post-Paid Cellular, VOIP, Internet, Long Distance, and now even mobile commerce. The system is completely rules based, which allows for much greater speed of integration and customization than other competitors. Unified Signal can enable its clients to access any of its carriers in only 4-6 weeks so it can sell privately branded telecommunications services to its customers. The Unified Signal’s billing and operating (BSS/OSS) infrastructure has activated over 2 million customers and has been used in the industry for over 15 years

Products and Services

Unified Signal (www.unifiedsignal.com) is a SaaS (software as a service) based billing and back office solution which enables companies in virtually any industry sector to resell cellular service as well as other telecom services using their existing brand. Unified Signal’s turnkey telecom billing solution allows its clients to sell, provision, fulfill, and care for multiple telecom services, including pre and post-paid cellular, local, long distance, Internet, and now even mobile commerce. Unified Signal’s technology infrastructure allows its clients to implement faster, have much more control of the system, and is far more cost efficient than other competing billing and back office systems. Unified Signal has successfully integrated with all major U.S. carriers, which has never been completed by any other U.S. billing company. Unified Signal also enables its clients to private label their own “PayPal” type services including a full mobile wallet linked to a prepaid debit card.

In 2nd quarter of 2014, Unified Signal completed its 4th carrier integration. The company also launched the first of its kind cross carrier family, friend, business share plans.

In June 2014, we completed an acquisition (the "Merger") of TelBill Holdings, LLC., which allowed the two companies to combine and merge technologies. Unified Signal was an industry enabler for data only mobile virtual network operators, commonly known as MVNOs. There was strong synergy between TelBill Holdings, LLC and Unified Signal as historically Unified Signal has not offered data only enablement services; however, the telecom industry as a whole is becoming very data centric.

Unified Signal’s strengths, were immediately enhanced by the acquisition of the DataJack software back office infrastructure and much of the team it had assembled. The synergies between the two companies would benefit from the merger of the two technologies and the integration of both teams. Unified Signal brought the billing system, supplier eco system, as well as 19 live revenue producing clients. It also brought a significant sales pipeline of fortune 500 companies that also need combined voice and data only services.

From June to December 2014, there was substantial clean-up work we had to complete. The legacy acquired company was losing over $100,000 per month. Our first objective post acquisition, was to restructure the public company and turn the division into a profitable entity. We officially changed the name of the public company to Unified Signal (ticker symbol: UNSI). The company, from an operations standpoint, is currently cash flow positive. In addition, the company has paid down most of its outstanding debt, and expects to be debt free by end of Q3 2015. The combined companies then went about integrating the acquired company’s code, into the Unified Signal code base, and re-launched the system into Unified Signal’s hosting facility as well as sold the acquired subscriber base to provide additional working capital to make the changes necessary to reorganize the company.

The combined entity then went about straightening out the financial health of the books and the outstanding debt held on the books. The company converted approximately 85% of the acquired company’s $3.8 million in debt into equity and created payment plan(s) with many of the remaining debt holders.

The company has since been paying down on the remaining unconverted debt and currently has less than $400,000 of debt remaining on the books. The company expects to pay off all of the debt by end of Q3 2015.

The company now has over 22 MVNO clients which we believe could substantially increase our customer base and revenue stream.

Mobile Virtual Network Enabler (enabling multiple services through its secure infrastructure)

Unified Signal is a SaaS (software as a service) based billing and back office solution which enables companies in virtually any industry sector to resell cellular service, as well as other telecom services, using their existing brand. Unified Signal’s turnkey telecom billing solution allows its clients to sell, provision, fulfill, and care for multiple telecom services, including pre and post-paid cellular, local, long distance, Internet, and now even mobile commerce.

Unified Signal’s technology infrastructure allows its clients to implement faster, have much more control of the system, and is far more cost efficient than other competing billing and back office systems. Unified Signal has successfully integrated with all major U.S. carriers, which has never been completed by any other U.S. billing company. Unified Signal also enables its clients to private label their own “PayPal” type services including a full mobile wallet linked to a prepaid debit card.

The Product and Services Line Up

Unified Signal’s main business is its rating and billing solution(s) which provides pre-paid & post-paid software solutions for all four major wireless carriers as well as full termination services for VOIP resellers. Unified Signal helps its clients build a profitable and executable telecom reseller strategy and ensures that its clients come to market quickly and efficiently. Unified Signal’s software suite allows its clients to perform all the necessary functions needed to become a successful reseller of communications and mobile commerce services.

The Unified Signal system provides its clients with all the tools necessary to manage and grow their business including: carrier activations, credit checks, phone procurement and fulfillment, rating and billing (both online or paper bills), customer service, strategic and tactical reporting, taxing, carrier wholesale bill QA, and a feedback / development loop that helps telecom resellers stay on the cutting edge of technology. In addition, Unified Signal's consulting side of the house helps create rate plans, branding and logos, marketing materials and helps to procure and provision inventory. Unified Signal also offers an internal highly trained customer service team to support its clients

Unified Signal has been able to successfully automate the client provisioning process and customer procurement process and can cost efficiently bring to market and support its clients. Unified Signal’s level of automation dramatically increases the profitability for its clients and more importantly dramatically increases customer satisfaction by virtually eliminating billing errors and other back office issues solution that would fill the gaping hole in the billing / CRM space for a cost effective, fully automated, customizable billing system to support the resale of all communications services from activation through customer service.

MVNOs alone now account for over 25% of wireless customers in the US including companies like Tracfone, Virgin Mobile, Boost, Qwest, Wal-Mart Mobile and a 100 plus others, which make up the 20 year old industry. Due to increased spectrum, decreasing wholesale rates and increased competition, the MVNO industry is expanding and Unified Signal is now positioned into becoming one of the leading technology enablers in the US with plans to expand that internationally. VNO (Virtual Network Operator) clients can achieve profits of $15-$20 per customer per month with an average customer life cycle of 18-24 months. This creates customer profitability ranging from $270-$480 per subscriber and ASP MVNEs can generate $2-$3 per customer per month netting $36 to $72 per subscriber

Mobile Commerce Product Suite

Additionally, Unified Signal plans to launch its Mobile Commerce Platform Services which will provide enablement software which allows its clients to offer highly secure mobile commerce and payment solutions to their end customers. The strategy is to create software to more efficiently link people across the US and around the world to have easy access, and transact, with their money, through their mobile phones.

MCN (Mobile Clearinghouse Network): The MCN software technology has been established to create interoperability between any and all mobile payment technologies, with the sole purpose of moving money easily and cost efficiently to anyone, anywhere in the world. The strategy of the MCN software is to allow its clients the ability to become a clearinghouse for international money movement, offering distinct competitive advantages vs. the existing dominant companies in this space.

Our customer care professionals continue to improve customer experience, providing quality service with the goal of resolving customer issues and retaining a loyal customer base. We proactively address customers' needs, and we offer live, in-house call center phone support, online chat support, and email support.

Results of Operations for the Three Months ended March 31, 2015 as compared to the three months ended March 31, 2014

Revenues

Our revenues for the three months ended March 31, 2015 and 2014 were $453,182 and $1,883,196, respectively. During the three months ended March 31, 2014, we reported revenue of $1,450,480 from one large contract of $1,450,480. Excluding revenue from last year’s Go4Yu contract, our revenues are up $20,466 or 5% year over year. We also continue to grow and expand our core business lines and in the process of implementing the 7 MVNOs that we brought on in 4th Qtr 2014.

Operating Expenses

Operating expenses were $605,382 and $1,611,311 for the three months ended March 31, 2015 and 2014, respectively.

Software costs were $16,469 and $1,258,369 for the three months ended March 31, 2015 and 2014, respectively. Embedded in the 2014 number was approximately $1,130,000 costs associated with the above described revenue.

Hosting and software costs are up by $14,891 or 81% to $33,362 over last year’s costs of $18,471. The differences in costs are related to increased growth.

Carrier costs were $188,203 and $228,624 for the three months ended March 31, 2015 and 2014, respectively, down $40,421 or 18% due to additional wholesale cost optimization strategies that the company has deployed.

Customer service is up by $15,482 to $16,513 for the current period as compared to $1,031 for the three months ended March 31, 2014 primarily due to the companies increased subscriber base.

General and administrative (“G&A”) expenses were $309,529 and $104,817 for the three months ended March 31, 2015 and 2014, respectively. The increase primarily from added support and costs associated with the growth of our core business.

Depreciation and amortization were $41,306 for the three months ended March 31, 2015 as compared to $-0- for the same period last year. The associated assets depreciating/amortizing were acquired with our reverse merger in June 2014.

Other Income and Expense

Other income and expenses were comprised of gain on change in derivative liabilities of $47,390 and gain on settlement of debt of $15,800, net with non-cash interest of $37,429 for the three months ended March 31, 2015 compared to $-0- for the three months ended March 31, 2014.

Net Loss

The increases in operating expenses since our completed merger attributed to our net loss of $126,439 for the three months ended March 31, 2015, compared to a net income of $271,885 for the same period in 2014.

Liquidity and Capital Resources

Cash and cash equivalents were $90,109 at March 31, 2015. Our net cash used in operating activities for the three months ended March 31, 2015 was $113,194 due primarily to our net loss during this period, offset by non-cash adjustments.

Our primary sources of funding for the three months ended March 31, 2015 have been proceeds of $179,500 from common stock subscriptions, net of note repayments of $85,000.

At March 31, 2015, 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.

The Company had net working capital deficit of $844,839 as of March 31, 2015. This deficit was due to legacy DataJack AP and debt . The Company intends to continue to focus on increasing its subscriber base and cash flow from operations by focusing its sales activities on converting and migrating existing MVNOs onto the company’s billing and operating system. Because of the legacy liabilities assumed from the DataJack acquisition, our anticipated cash flows from operations for 2nd quarter will be slightly insufficient to satisfy our ongoing capital requirements. The company is however cash flow positive from normal operations.

We are currently seeking additional capital to grow our business and settle the past obligations assumed from the acquisition. We cannot predict whether this additional financing will be in the form of equity or debt, or be in another form. We 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, we may be unable to implement our current plans which circumstances would have a material adverse effect on our business, prospects, financial condition and results of operations.

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 intend to generate future profitability and seek new sources or methods of financing or revenue to pursue our business strategies and pay off all legacy debt holders. However, there can be no certainty that we will be successful in this strategy.

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, 2015.

Critical Accounting Policies

The application of our accounting policies, which are important to our financial position and results of operations, requires significant judgments and estimates on the part of management. These estimates bear the risk of change due to the inherent uncertainty attached to the estimate and are likely to differ to some extent from actual results. A description of our critical accounting policies follows:

Derivative financial instruments

Accounting Standards Codification subtopic 815-40, Derivatives and Hedging, Contracts in Entity’s own Equity (“ASC 815-40”) became effective for the Company on October 1, 2009. The Company has identified the embedded derivatives related to the issued Notes. These embedded derivatives included in our debt contain certain conversion features and reset provision. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of certain notes and to fair value as of each subsequent reporting date.

Revenue Recognition

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 re-measured 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.

ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

The Company’s management, under the supervision and with the participation of the Company's Chief Executive Officer and Principal Financial (and principal accounting) Officer, carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as of March 31, 2015. Based upon that evaluation and the identification of the material weakness in the Company’s internal control over financial reporting as described below under “Management’s Report on Internal Control over Financial Reporting,” the Chief Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were ineffective as of the end of the period covered by this report.

Management is responsible for establishing and maintaining adequate internal control over financial reporting of the Company. Management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our internal control over financial reporting as of March 31, 2015 based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, the Chief Executive Officer principal Financial Officer concluded that, as of March 31, 2015, our internal control over financial reporting is not effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles because of the Company’s limited resources, lack of qualified accounting personnel and limited number of employees. To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of legal and accounting professionals. As we grow, we expect to increase our number of employees, which will enable us to implement adequate segregation of duties within the internal control framework.

Limitations on Effectiveness of Controls and Procedures

Our management, including our Chief Executive Officer and principal Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. 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, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain 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 in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Control over Financial Reporting

There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None

ITEM 1A. RISK FACTORS

Not required under Regulation S-K for “smaller reporting companies.”

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

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

Exhibit No.		Description

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		XBRL Labels Linkbase Document ***
101 PRE		XBRL Presentation Linkbase Document ***
101 DEF		XBRL 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.
***		To be filed ny amendment.

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, 2015	By:	/s/ Paris Holt
		Paris Holt
		President and Chief Executive Officer,
		Principal Financial Officer

Unified Signal, Inc. - FORM 10-Q - May 20, 2015

Attached files

Unified Signal, Inc. Reports