UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
For the quarterly period ended: June 30, 2021
or
☐ Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
Commission File Number: 000-55613
VoIP-PAL.COM INC.
(Exact name of Registrant as specified in its charter)
| Nevada | 98-0184110 | |
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
|
7215 Bosque Boulevard, Suite 102 Waco, TX 76710-4020 |
| (Address of principal executive offices) |
954-495-4600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered |
| N/A | N/A | N/A |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for at least the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ 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, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | Non-accelerated filer ☐ | ||
| Smaller reporting company ☒ | Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 13, 2021, the Registrant had 1,653,747,863 shares of Common Stock outstanding.
TABLE OF CONTENTS
| PART I—FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements. | 3 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 20 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk. | 24 |
| Item 4. | Controls and Procedures. | 24 |
| PART II—OTHER INFORMATION | ||
| Item 1. | Legal Proceedings. | 25 |
| Item 1A. | Risk Factors. | 29 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 29 |
| Item 3. | Defaults Upon Senior Securities. | 29 |
| Item 4. | Mine Safety Disclosures. | 29 |
| Item 5. | Other Information. | 29 |
| Item 6. | Exhibits. | 29 |
| 2 |
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
VOIP-PAL.com Inc.
INTERIM CONSOLIDATED BALANCE SHEETS
(Unaudited – prepared by management)
As at June 30, 2021
(Expressed in U.S. Dollars)
Nature and Continuance of Operations (Note 1)
Contingent Liabilities (Note 12)
The accompanying notes are an integral part of these interim consolidated financial statements
| 3 |
VOIP-PAL.com Inc.
INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(Unaudited – prepared by management)
(Expressed in U.S. Dollars)
| Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended | |||||||||||||
|
June 30, 2021 |
June 30,
2020 |
June 30, 2021 |
June 30,
2020 |
|||||||||||||
| EXPENSES | ||||||||||||||||
| Amortization (Note 6 & 7) | $ | 35,115 | $ | 35,384 | $ | 105,344 | $ | 104,967 | ||||||||
| Officers and Directors fees (Note 8) | 4,500 | 67,013 | 127,636 | 216,260 | ||||||||||||
| Stock-based compensation (Note 11) | 1,003,166 | - | 1,003,166 | - | ||||||||||||
| Legal fees (Note 8) | 120,899 | 79,893 | 369,786 | 622,445 | ||||||||||||
| Office & general | 46,335 | 62,617 | 109,993 | 124,316 | ||||||||||||
| Patent consulting fees | 446 | 3,813 | 9,465 | 16,773 | ||||||||||||
| Professional fees & services (Note 8) | 114,289 | 69,310 | 376,689 | 607,636 | ||||||||||||
| Gain on write off of AP | (318,531 | ) | - | (408,531 | ) | - | ||||||||||
| Total expenses | $ | 1,006,219 | $ | 318,030 | $ | 1,693,548 | $ | 1,692,397 | ||||||||
| NET LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD | $ | (1,006,219 | ) | $ | (318,030 | ) | $ | (1,693,548 | ) | $ | (1,692,397 | ) | ||||
| Basic and diluted loss per common share | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||
| Weighted-average number of common shares outstanding: | ||||||||||||||||
| Basic and diluted | 1,649,490,868 | 1,969,994,259 | 1,919,092,280 | 1,970,516,760 | ||||||||||||
The accompanying notes are an integral part of these interim consolidated financial statements
| 4 |
VOIP-PAL.com Inc.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited – prepared by management)
(Expressed in U.S. Dollars)
|
Nine Months Ended June 30, 2021 |
Nine Months Ended
June 30, 2020 |
|||||||
| Cash Flows used in Operating Activities | ||||||||
| Loss for the period | $ | (1,693,548 | ) | $ | (1,692,397 | ) | ||
| Add items not affecting cash: | ||||||||
| Shares issued for services | 169,900 | 342,500 | ||||||
| Amortization | 105,344 | 104,967 | ||||||
| Gain on settlement of accrued payables | (408,531 | ) | - | |||||
| Stock-based compensation | 1,003,166 | - | ||||||
| Changes in non-cash working capital: | ||||||||
| Retainer | 31,214 | 713,446 | ||||||
| Accounts payable and accrued liabilities | 83,978 | (407,262 | ) | |||||
| Prepaid expense | 8,750 | 5,750 | ||||||
| Cash Flows Used in Operations | (699,727 | ) | (932,996 | ) | ||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from private placement | 641,015 | 116,310 | ||||||
| Cash Flows Provided by Financing Activities | 641,015 | 116,310 | ||||||
| Decrease in cash | (58,712 | ) | (816,686 | ) | ||||
| Cash, beginning of the period | 113,538 | 960,490 | ||||||
| Cash, end of the period | $ | 54,826 | $ | 143,804 | ||||
Supplemental cash flow information (Note 9)
The accompanying notes are an integral part of these interim consolidated financial statements
| 5 |
VOIP-PAL.com Inc.
INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited – prepared by management)
(Expressed in U.S. dollars)
| Number | Par Value | Value | Capital | Deficit | Total | |||||||||||||||||||
| Common Shares | Shares to be Issued |
Additional Paid-in |
||||||||||||||||||||||
| Number | Par Value | Value | Capital | Deficit | Total | |||||||||||||||||||
| Balance at September 30, 2019 | 1,956,377,592 | $ | 1,432,844 | $ | 477,320 | $ | 51,542,780 | $ | (51,721,696 | ) | $ | 1,731,248 | ||||||||||||
| Shares issued for private placement | 7,754,000 | 7,754 | - | 108,556 | - | 116,310 | ||||||||||||||||||
| Shares issued for services | 14,250,000 | 14,250 | - | 328,250 | - | 342,500 | ||||||||||||||||||
| Shares forgiven on termination of service | ||||||||||||||||||||||||
| Shares returned to treasury on amendment of Anti-Dilution Clause | ||||||||||||||||||||||||
| Share purchase warrants granted on amendment of Anti-Dilution Clause, shares | ||||||||||||||||||||||||
| Share purchase options granted | ||||||||||||||||||||||||
| Share based compensation | ||||||||||||||||||||||||
| Loss for the period | - | - | - | - | (1,692,397 | ) | (1,692,397 | ) | ||||||||||||||||
| Balance at June 30, 2020 | 1,978,381,592 | $ | 1,454,848 | $ | 477,320 | $ | 51,979,586 | $ | (53,414,093 | ) | $ | 497,661 | ||||||||||||
| Balance at June 30, 2020 | 1,978,381,592 | $ | 1,454,848 | $ | 477,320 | $ | 51,979,586 | $ | (53,414,093 | ) | $ | 497,661 | ||||||||||||
| Shares issued for private placement | 36,600,000 | 36,600 | - | 146,400 | - | 183,000 | ||||||||||||||||||
| Shares issued for services | 19,000,000 | 19,000 | - | 173,000 | - | 192,000 | ||||||||||||||||||
| Share based compensation | - | - | - | 135,471 | - | 135,471 | ||||||||||||||||||
| Loss for the period | - | - | - | - | (651,460 | ) | (651,460 | ) | ||||||||||||||||
| Balance at September 30, 2020 | 2,033,981,592 | $ | 1,510,448 | $ | 477,320 | $ | 52,434,457 | $ | (54,065,553 | ) | $ | 356,672 | ||||||||||||
| Shares issued for private placement | 114,001,500 | 114,002 | 18,500 | 508,513 | - | 641,015 | ||||||||||||||||||
| Shares issued for services | 10,300,000 | 10,300 | - | 159,600 | - | 169,900 | ||||||||||||||||||
| Shares forgiven on termination of service | - | - | (416,000 | ) | - | 416,000 | - | |||||||||||||||||
| Shares returned to treasury on amendment of Anti-Dilution Clause | (513,535,229 | ) | (513,535 | ) | - | 11,089,812 | (10,576,277 | ) | - | |||||||||||||||
| Share-based compensation | - | - | - | 1,003,166 | 1,003,166 | |||||||||||||||||||
| Loss for the period | - | - | - | - | (1,693,548 | ) | (1,693,548 | ) | ||||||||||||||||
| Balance at June 30, 2021 | 1,644,747,863 | $ | 1,121,215 | $ | 79,820 | $ | 65,195,548 | $ | (65,919,378 | ) | $ | 477,205 | ||||||||||||
The accompanying notes are an integral part of these interim consolidated financial statements
| 6 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
June 30, 2021
| NOTE 1. | NATURE AND CONTINUANCE OF OPERATIONS |
VOIP-PAL.com, Inc. (the “Company”) was incorporated in the state of Nevada in September 1997 as All American Casting International, Inc. The Company’s registered office is located at 7215 Bosque Blvd., Suite 102, Waco, Texas in the United States of America.
Since March 2004, the Company has developed technology and patents related to Voice-over-Internet Protocol (VoIP) processes. All business activities prior to March 2004 have been abandoned and written off to deficit. The Company operates in one reportable segment being the acquisition and development of VoIP-related intellectual property including patents and technology. All intangible assets are located in the United States of America
In December 2013, the Company completed the acquisition of Digifonica (International) Limited, a private company controlled by the CEO of the Company, whose assets included several patents and technology developed for the VoIP market.
These consolidated financial statements have been prepared on the basis of a going concern, which contemplates the realization of assets and discharge of liabilities in the normal course of business. The Company is in various stages of product development and continues to incur losses and, at June 30, 2021, had an accumulated deficit of $65,919,378 (September 30, 2020 - $54,065,553). The ability of the Company to continue operations as a going concern is dependent upon raising additional working capital, settling outstanding debts and generating profitable operations. These material uncertainties raise substantial doubt about the Company’s ability to continue as a going concern. Should the going concern assumption not continue to be appropriate, further adjustments to carrying values of assets and liabilities may be required. There can be no assurance that capital will be available as necessary to meet these continued developments and operating costs or, if the capital is available, that it will be on the terms acceptable to the Company. The issuances of additional stock by the Company may result in a significant dilution in the equity interests of its current shareholders. Obtaining commercial loans, assuming those loans would be available, will increase the Company’s liabilities and future cash commitments. If the Company is unable to obtain financing in the amounts and on terms deemed acceptable, its business and future success may be adversely affected.
Additionally, as the Company’s stated objective is to monetize its patent suite through the licensing or sale of its intellectual property (“IP”), the Company being forced to litigate or to defend its IP claims through litigation casts substantial doubt on its future to continue as a going concern. IP litigation is generally a costly process, and in the absence of revenue the Company must raise capital to continue its own defense and to validate its claims – in the event of a failure to defend its patent claims, either because of lack of funding, a court ruling against the Company or because of a protracted litigation process, there can be no assurance that the Company will be able to raise additional capital to pay for an appeals process or a lengthy trial. The outcome of any litigation process may have a significant adverse effect on the Company’s ability to continue as a going concern.
COVID-19
In March 2020, the World Health Organization declared a global pandemic related to the COVID-19 coronavirus. Its impact on global economies has been far-reaching and businesses around the world are being forced to cease or limit operations for long or indefinite periods of time. Measures taken to contain the spread of the COVID-19 virus, including travel bans, quarantines, social distancing, and closures of non-essential services have triggered significant disruptions to businesses worldwide, resulting in an economic slowdown. Global stock markets have also experienced great volatility and significant declines. Governments and central banks have responded with monetary and fiscal interventions to stabilize economic conditions.
The duration and impact of the COVID-19 pandemic, as well as the effectiveness of government and central bank responses, remains unclear at this time. It is not possible to reliably estimate the duration and severity of the COVID-19 pandemic, nor its impact on the financial position and results of the Company in future periods. The Company is proceeding with its business activities as long as the work environment remains safe – at this point there has been minimal disruption to day-to-day operations resulting from health and safety measures. Disruptions and volatility in the global capital markets may increase the Company’s cost of capital and adversely impact access to capital.
| 7 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
June 30, 2021
| NOTE 2. | BASIS OF PRESENTATION |
The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).
| NOTE 3. | SIGNIFICANT ACCOUNTING POLICIES |
Principles of Consolidation
These interim consolidated financial statements have been prepared on a consolidated basis and include the accounts of the Company and its wholly owned subsidiary Digifonica. All intercompany transactions and balances have been eliminated. As at June 30, 2021, Digifonica had no activities.
Use of Estimates
The preparation of these interim consolidated financial statements required management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from these estimates. Where estimates have been used, financial results as determined by actual events could differ from those estimates.
Cash
Cash consists of cash on hand, cash held in trust, and monies held in checking and savings accounts. The Company had $54,826 in cash on June 30, 2021 (September 30, 2020 - $113,538).
Fixed Assets
Fixed assets are stated at cost less accumulated depreciation, and depreciated using the straight-line method over their useful lives; Furniture and computers – 5 years.
Intangible Assets
Intangible assets, consisting of VoIP communication patent intellectual properties (IP) are recorded at cost and amortized over the assets estimated life on a straight-line basis. Management considers factors such as remaining life of the patents, technological usefulness and other factors in estimating the life of the assets.
The carrying value of intangible assets are reviewed for impairment by management of the Company at least annually or upon the occurrence of an event which may indicate that the carrying amount may be less than its fair value. If impaired, the Company will write-down such impairment. In addition, the useful life of the intangible assets will be evaluated by management at least annually or upon the occurrence of an event which may indicate that the useful life may have changed.
Fair Value of Financial Instruments
FASB ASC 820, Fair Value Measurement, defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity.
The Company classifies financial assets and liabilities as held-for-trading, available-for-sale, held-to-maturity, loans and receivables or other financial liabilities depending on their nature. Financial assets and financial liabilities are recognized at fair value on their initial recognition, except for those arising from certain related party transactions which are accounted for at the transferor’s carrying amount or exchange amount.
Financial assets and liabilities classified as held-for-trading are measured at fair value, with gains and losses recognized in net income. Financial assets classified as held-to-maturity, loans and receivables, and financial liabilities other than those classified as held-for-trading are measured at amortized cost, using the effective interest method of amortization. Financial assets classified as available-for-sale are measured at fair value, with unrealized gains and losses being recognized as other comprehensive income until realized, or if an unrealized loss is considered other than temporary, the unrealized loss is recorded in income.
| 8 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
June 30, 2021
| NOTE 3. | SIGNIFICANT ACCOUNTING POLICIES (CONT’D) |
U.S. GAAP establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined as the amount that would be received for an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes the following fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:
Level 1: Quoted prices in active markets for identical assets and liabilities.
Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3: Unobservable inputs supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The fair value of cash is classified as Level 1 at June 30, 2021 and September 30, 2020.
The Company classifies its financial instruments as follows: Cash is classified as held for trading and is measured at fair value. Accounts payable and accrued liabilities are classified as other financial liabilities, and have a fair value approximating their carrying value, due to their short-term nature.
Income Taxes
Deferred income taxes have been provided for temporary differences between financial statement and income tax reporting under the asset and liability method, using expected tax rates and laws that are expected to be in effect when the differences are expected to reverse. A valuation allowance is provided when realization is not considered more likely than not.
The Company’s policy is to classify income tax assessments, if any, for interest expense and for penalties in general and administrative expenses. The Company’s income tax returns are subject to examination by the IRS and corresponding states, generally for three years after they are filed.
Loss per Common Share
Basic loss per share is calculated using the weighted-average number of common shares outstanding during each period. Diluted income per share includes potentially dilutive securities such as outstanding options and warrants outstanding during each period. To calculate diluted loss per share the Company uses the treasury stock method and the If-converted method.
For the nine-month period ended June 30, 2021 and the year ended September 30, 2020 there were no potentially dilutive securities included in the calculation of weighted-average common shares outstanding.
Derivatives
We account for derivatives pursuant to ASC 815, Accounting for Derivative Instruments and Hedging Activities. All derivative instruments are recognized in the consolidated financial statements and measured at fair value regardless of the purpose or intent for holding them. We determine fair value of warrants and other option type instruments based on option pricing models. The changes in fair value of these instruments are recorded in income or expense.
Stock-based compensation
The Company recognizes compensation expense for all stock-based payments made to employees, directors and others based on the estimated fair values of its common stock on the date of issuance.
The Company determines the fair value of the share-based compensation payments granted as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either the date at which a commitment for performance to earn the equity instrument is reached or the date the performance is complete.
The Company recognizes compensation expense for stock awards with service conditions on a straight-line basis over the requisite service period, which is included in operations. Stock option expense is recognized over the option’s vesting period.
| 9 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
June 30, 2021
| NOTE 3. | SIGNIFICANT ACCOUNTING POLICIES (CONT’D) |
Concentrations of Credit Risk
The Company’s policy is to maintain cash with reputable financial institutions or in retainers with trusted vendors. The Company has at times had cash balances at financial institutions in excess of the Federal Deposit Insurance Corporation (FDIC) Insurance Limit of $250,000, but has not experienced any losses to date as a result. As of June 30, 2021, the Company’s bank operating account balances did not exceed the FDIC Insurance Limit.
Recent Accounting Pronouncements and Adoption
In January 2016, FASB issued an ASU, Subtopic 825-10, to amend certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Most prominent among the amendments is the requirement for changes in fair value of equity investments, with certain exceptions, to be recognized through profit or loss rather than other comprehensive income. The Company adopted the standard October 1, 2018. There was no impact on the Company’s financial statements from the adoption of this amendment.
In February 2016 FASB issued ASU No. 2016-02, Leases (Topic 842) which supersedes FASB ASC Topic 840, Leases (Topic 840) and provides principles for the recognition, measurement, presentation, and disclosure of leases for both lessees and the lessors. The new standard requires the lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. The classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of classification. Leases with a term of twelve months or less will be accounted for similar to existing guidance for operating leases. The standard is effective for annual periods beginning after December 15, 2018, with early adoption permitted upon issuance. The adoption of this guidance had no material impact on the financial statements.
In June 2016, the FASB issued ASU 2016-13 to replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss credit loss estimates. For trade and other receivables, loans and other financial instruments, the Company will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. Credit losses relating to available for sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. The new standard was effective for the Company beginning October 1, 2020. Application of the amendments is through a cumulative-effect adjustment to deficit as of the effective date. The adoption of this guidance had no material impact on the financial statements.
| NOTE 4. | PURCHASE OF DIGIFONICA |
The Company acquired Digifonica in December 2013. Pursuant to the terms in the Share Purchase Agreement (the “SPA”) the Company acquired 100% of Digifonica from the seller, the CEO of the Company (the “Seller”), for a cash payment of $800,000 and 389,023,561 common shares of the Company. The assets acquired through the acquisition were VoIP-related patented technology, including patents for Lawful Intercept, routing, billing and rating, mobile gateway, advanced interoperability solutions, intercepting voice over IP communications, and uninterrupted transmission of internet protocol transmissions during endpoint changes.
The SPA included an anti-dilution clause (the “Anti-Dilution Clause”) that requires the Company to maintain the Seller’s percentage ownership of the Company at 40% by issuing the Seller a proportionate number of common shares of any future issuance of the Company’s common shares. Shares issued pursuant to the Anti-Dilution Clause are recorded as a share issuance cost within the Additional Paid-in Capital account (Notes 8 and 10).
During the nine-month period ended June 30, 2021, on April 12, 2021, the SPA was amended to provide that: a) from its inception until March 31, 2021, the Company would issue warrants to purchase common shares of the Company in an equivalent amount to and instead of the required shares being issued pursuant to the Anti-Dilution Clause; and b) the Anti-Dilution Clause would be null and void from April 1, 2021 forward. As a result of this amendment, the Seller returned 513,535,229 common shares to the treasury of the Company and relinquished his right to receive an additional 107,935,333 common shares in exchange for 621,470,562 warrants to purchase common shares at a price of $0.021 for a period of ten years from the date of issue (Notes 8 and 10).
| 10 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
June 30, 2021
| NOTE 5. | RETAINER |
The Company has retainers with several of its professional service providers. The balance due on these prepaid retainers was $20,871 as of June 30, 2021 and $52,085 for the year ended September 30, 2020. The Company recognizes the expense from these retainers as they are invoiced and the invoiced charges are deducted from the various providers’ prepaid retainer balances.
| NOTE 6. | FIXED ASSETS |
A summary of the Company’s fixed assets as of June 30, 2021 and September 30, 2020 is as follows:
SCHEDULE OF FIXED ASSETS
|
June 30, 2021 |
September 30,
2020 |
|||||||
| Office furniture & computers | $ | 11,917 | $ | 11,917 | ||||
| Accumulated depreciation | (4,704 | ) | (3,010 | ) | ||||
| Net book value | $ | 7,213 | $ | 8,907 | ||||
There were no retirements of any fixed assets in the periods presented.
| NOTE 7. | INTANGIBLE ASSETS |
The Company acquired certain patents and technology from Digifonica in December 2013 (see Note 4). These assets have been recorded in the financial statements as intangible assets. These assets are being amortized over twelve (12) years on a straight-line basis. A summary of intangible assets as of June 30, 2021 and September 30, 2020 is as follows:
SCHEDULE OF INTANGIBLE ASSETS
|
June 30, 2021 |
September 30,
2020 |
|||||||
| VoIP Intellectual property and patents | $ | 1,552,416 | $ | 1,552,416 | ||||
| Accumulated amortization | (1,014,916 | ) | (911,266 | ) | ||||
| Net book value | $ | 537,500 | $ | 641,150 | ||||
There were no disposals of any intangible assets in the periods presented.
| NOTE 8. | RELATED PARTY TRANSACTIONS AND KEY MANAGEMENT COMPENSATION |
The Company compensates certain of its key management personnel to operate its business in the normal course. Key management includes the Company’s executive officers and members of its Board of Directors.
Compensation paid or accrued to key management for services during the nine-month period ended June 30, 2021 includes:
SCHEDULE OF COMPENSATION PAID OR ACCRUED TO KEY MANAGEMENT FOR SERVICES
|
June 30, 2021 |
June 30,
2020 |
|||||||
| Management fees paid or accrued to the CEO | $ | - | $ | 108,000 | ||||
| Management fees paid to the current CFO | 6,000 | - | ||||||
| Management fees paid or accrued to the former CFO | 49,636 | 90,260 | ||||||
| Fees paid or accrued to Directors | - | 18,000 | ||||||
| $ | 55,636 | $ | 216,260 | |||||
During the nine-month period ended June 30, 2021 the Company accrued $Nil (2020 - $126,000) and paid cash of $55,636 (2020 - $90,260) for key management compensation totaling $55,636 (2020 - $216,260) as shown in the above table. At June 30, 2021, included in accounts payable and accrued liabilities is $Nil (September 30, 2020 - $358,131) owed to current officers and directors, as a result of the Company’s CEO forgiving $318,531 in unpaid management compensation to the Company. Additionally, during the nine-month period ended June 30, 2021, two members of the Board of Directors resigned and forgave $90,000 of accrued director fees and $416,000 of shares to be issued for unpaid director fees (Note 10). Included in shares to be issued is $Nil (September 30, 2020 - $416,000) for unpaid director fees.
| 11 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
June 30, 2021
| NOTE 8. | RELATED PARTY TRANSACTIONS AND KEY MANAGEMENT COMPENSATION (CONT’D) |
As at June 30, 2021, nil (September 30, 2020 – 57,334,333) common shares are accrued to the Seller of Digifonica for the Anti-Dilution Clause, as a result of the Seller of Digifonica returning 513,535,229 common shares to the treasury of the Company and relinquishing his right to receive an additional 107,935,333 common shares accrued to him pursuant to the Anti-Dilution Clause in exchange for 621,470,562 warrants to purchase common shares at a price of $0.021 for a period of ten years from the date of issue (Note 4). Nil common shares were issued during the nine-month period ended June 30, 2021 (June 30, 2020 – nil) to the Seller of Digifonica pursuant to the Anti-Dilution Clause (Notes 4 and 10).
| NOTE 9. | SUPPLEMENTAL CASH FLOW INFORMATION |
During the nine-month period ended June 30, 2021, the Company paid $Nil (2020 - $Nil) in interest or income taxes.
Non-cash transactions during the nine-month period included the settlement of shares to be issued to the directors for $416,000 (2020 - $Nil), and the return of 513,335,229 common shares to the treasury (Note 4).
| NOTE 10. | SHARE CAPITAL |
Capital Stock Authorized and Issued:
| – | 3,000,000,000 (September 30, 2020 – 3,000,000,000) common voting shares authorized with a par value of $0.001 each, of which 1,644,747,863 (September 30, 2020 – 2,033,981,592) shares are issued. | |
| – | 1,000,000 convertible preferred shares authorized with a par value of $0.01 each, of which nil (2020 – nil) shares are issued. |
Issues during the nine-month period ended June 30, 2021
During the nine-month period ended June 30, 2021, the Company:
| – | issued 114,001,500 common shares priced between $0.005 and $0.01 per share for cash proceeds of $622,515 from a private placement of common shares; | |
| – | issued 10,300,000 common shares for services with a value of $169,900; | |
| – | returned 513,535,229 common shares valued at $Nil to its treasury from the seller of Digifonica pursuant to an amendment to the Digifonica Purchase Agreement (Notes 4 and 8); | |
| – | issued 621,470,562 warrants to purchase common shares at a price of $0.021 per share for a period of ten years from the date of issue to the seller of Digifonica (Notes 4 and 8); and | |
| – | granted 90,000,000 incentive stock options to purchase 90,000,000 common shares at a price of $0.025 to its directors, officers, employees, consultants, and advisors, exercisable for a period of five years from the date of grant. |
Issues during the year ended September 30, 2020
During the year ended September 30, 2020, the Company issued:
| – | 44,354,000 common shares priced between $0.005 and $0.015 per common share for cash proceeds of $299,310 from private placements of common shares; and | |
| – | 33,250,000 common shares priced between $0.005 and $0.03 per common share for services with an aggregate value of $534,500. |
Subsequent Issues
| – | Subsequent to the nine-month period ended June 30, 2021, the Company issued 9,000,000 common shares priced at $0.005 per share for cash proceeds of $45,000 from a private placement of common shares. |
| 12 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
June 30, 2021
| NOTE 10. | SHARE CAPITAL (CONT’D) |
Shares to be Issued
As at June 30, 2021, there are 1,977,523 (September 30, 2020 – 12,817,523) common shares to be issued that are accrued for services provided to the Company valued at $61,320 (September 30, 2020 – $477,320). During the nine-month period ended June 30, 2021, shares to be issued of $416,000 to two former directors was forgiven (see Note 8). As at June 30, 2021, nil (September 30, 2020 – 10,840,000) common shares valued at $Nil (September 30, 2020 - $416,000) are accrued to management and related parties.
As at June 30, 2021, there are nil (September 30, 2020 – 57,334,333) common shares to be issued that are accrued to the seller of Digifonica pursuant to the Anti-Dilution Clause (see Notes 4 and 8). During the nine-month period ended June 30, 2021, on April 16, 2021, the seller of Digifonica relinquished his right to receive 107,935,333 common shares that were accrued to him pursuant to the Anti-Dilution Clause (Notes 4 and 8).
| NOTE 11. | STOCK-BASED COMPENSATION |
Warrants
As of June 30, 2021, there are 621,470,562 (September 30, 2020 – nil) outstanding warrants to be exercised.
During the nine-month period ended June 30, 2021, on April 16, 2021, the Company issued 621,470,562 warrants to purchase common shares at a price of $0.021 per share for a period of ten years from the date of issue to the seller of Digifonica (Notes 4 and 8).
The following assumptions were used for the Black-Scholes valuation of warrants issued during the nine-month period ended June 30, 2021: risk-free rate of 1.59% (2020 – 0%), expected life of 10 years (2020 – 0 years), annualized historical volatility of 184.223% (2020 – 0%) and a dividend rate of 0% (2020 – 0%). Expected volatilities are based on historical volatility of the Company’s stock and other factors. The fair market value that has been recorded as additional paid-in capital from the issuance of these warrants under the Plan was $11,089,812 for the nine-month period ended June 30, 2021 (2020– $nil).
The weighted-average fair value of the warrants issued granted during the nine-month period ended June 30, 2021 was $0.02 (2020 - $Nil). The total intrinsic value of warrants issued during the period ended June 30, 2021 was $0.0189 (2020 - $nil) per share.
Stock Option Plan
The Company has in place an incentive Stock Option Plan (the “Plan”) whereby the Company is authorized to issue up to 10% of its issued and outstanding share capital in options to purchase common shares of the Company to its directors, officers, employees, consultants and advisors. The maximum term of options granted under the Plan cannot exceed ten years, with vesting terms determined at the discretion of the Board of Directors.
The following table summarizes the Company’s stock option transactions:
SCHEDULE OF STOCK OPTIONS TRANSACTIONS
| Number of options |
Weighted average exercise price |
|||||||
| Balance September 30, 2019 | 49,850,000 | $ | 0.059 | |||||
| Granted | 15,000,000 | 0.010 | ||||||
| Cancelled | (30,000,000 | ) | 0.062 | |||||
| Balance September 30, 2020 | 34,850,000 | $ | 0.036 | |||||
| Granted | 90,000,000 | 0.025 | ||||||
| Cancelled | - | N/A | ||||||
| Balance June 30, 2021 | 124,850,000 | $ | 0.028 | |||||
| 13 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
June 30, 2021
| NOTE 11. | STOCK-BASED COMPENSATION (CONT”D) |
Stock Option Plan (cont’d)
The following table summarizes the stock options outstanding at June 30, 2021:
SCHEDULE OF STOCK OPTIONS OUTSTANDING
| Options Outstanding | Exercise Price | Remaining Contractual Life | Number of Options Currently Exercisable | |||||||||
| 4,000,000 | $ | 0.060 | 0 Years | 4,000,000 | ||||||||
| 4,000,000 | 0.060 | 0.19 Years | 4,000,000 | |||||||||
| 3,450,000 | 0.060 | 0.32 Years | 3,450,000 | |||||||||
| 8,400,000 | 0.050 | 0.80 Years | 8,400,000 | |||||||||
| 15,000,000 | 0.010 | 4.23 Years | 15,000,000 | |||||||||
| 90,000,000 | 0.025 | 4.82 Years | 45,000,000 | |||||||||
| 124,850,000 | $ | 0.028 | 4.05 Years (Avg) | 79,850,000 | ||||||||
During the nine-month period ended June 30, 2021, on April 23, 2021 the Company granted 90,000,000 options to purchase 90,000,000 common shares at a price of $0.025 to its directors, officers, employees, consultants and advisors. The options have varied vesting provisions and are exercisable for a period of five years from the date of grant.
The following assumptions were used for the Black-Scholes valuation of stock options granted during the nine-month period ended June 30, 2021: risk-free rate of 0.83% (2020 – 0%), expected life of 5 years (2020 – 0 years), annualized historical volatility of 160% (2020 – 0%) and a dividend rate of 0% (2020 – 0%). Expected volatilities are based on historical volatility of the Company’s stock and other factors. The compensation cost that has been charged against income from options vested under the Plan was $1,003,166 for the nine-month period ended June 30, 2021 (2020– $nil) as 45,000,000 options of the 90,000,000 options granted, vested during the nine-month period ended June 30, 2021.
The weighted-average grant-date fair value of options granted during the nine-month period ended June 30, 2021 was $0.022 (2020 - $Nil). The total intrinsic value of options exercised during the period ended June 30, 2021 was $nil (2020 - $nil).
| NOTE 12. | CONTINGENT LIABILITIES |
Patent Litigation
The Company is party to patent and patent-related litigation cases as follows:
| i) | VoIP-Pal.com Inc. v. Apple, Inc. (Case No. 2:16-CV-00260) & Verizon Wireless Services, LLC, Verizon Communications Inc., AT&T Corp. (Case No. 2:16-CV-00271) in the United States District Court, District of Nevada |
| In February 2016 the Company filed patent infringement lawsuits in the United States District Court, District of Nevada against Apple, Inc, (Case No. 2:16-CV-00260), Verizon Wireless Services, LLC, Verizon Communications Inc., and AT&T Corp. (Case No. 2:16-CV-00271). These cases are seeking a combined $7,024,377,876 in damages. On May 9, 2016, the lawsuits were officially served to these companies (collectively, the “Defendants”). | |
| In August, 2018, the cases were consolidated under one lawsuit, and transferred to the U.S. District Court for the Northern District of California, where they were renamed as Case Nos. 5:18-cv-06217-LHK, 5:18-cv-06054-LHK and 5:18-cv-06177-LHK. The Defendants filed a Motion to Dismiss the cases, asserting that Voip-Pal’s ‘005 and ‘815 patents do not claim patentable subject matter. | |
| On March 25, 2019, the U.S. District Court for the Northern District of California granted the Defendants’ Motion to Dismiss in all of the cases. The Company appealed the district court decision to the US Court of Appeals for the Federal Circuit. The Federal Circuit affirmed the district court’s decision. | |
| On April 15, 2020, the Company filed a combined petition for rehearing and rehearing en banc, which was denied by the Court. |
| 14 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
June 30, 2021
| NOTE 12. | CONTINGENT LIABILITIES (CONT’D) |
Patent Litigation (cont’d)
| ii) | VoIP-Pal.com Inc. v. Twitter, Inc. (Case No. 2:16-CV-02338) in the United States District Court, District of Nevada |
| On October 6, 2016, the Company filed a lawsuit in the United States District Court, District of Nevada against Twitter, Inc, (Case No. 2:16- CV-02338) in which Voip-Pal.com alleges infringement of U.S. Patent No. 8,542,815 and its continuation patent, U.S. Patent No. 9,179,005, This case is seeking $3,200,000,000 in damages. On December 28, 2016, the lawsuit was officially served to Twitter, Inc. On February 28, 2018, Twitter filed a motion to transfer its case based on improper venue and the case was subsequently transferred to the U.S. District Court for the Northern District of California, where it was renamed as Case No. 5:18-cv-4523 and consolidated with Case Nos. 5:18-cv-06217-LHK and 5:18-cv-066054-LHK. The Defendants filed a Motion to Dismiss the cases, asserting that Voip-Pal’s ‘005 and ‘815 patents do not claim patentable subject matter. On March 25, 2019, the U.S. District Court for the Northern District of California granted the Defendants’ Motion to Dismiss. The Company appealed the district court decision to the U.S. Court of Appeals for the Federal Circuit. The Federal Circuit affirmed the district court’s decision. | |
| On April 15, 2020, the Company filed a combined petition for rehearing and rehearing en banc, which was denied by the Court. | |
| iii) | VoIP-Pal.com Inc. v. Amazon.com, Inc. et al. (Case No. 2:18-CV-01076) in the United States District Court, District of Nevada |
| In June 2018, the Company filed a lawsuit in the United States District Court, District of Nevada, against Amazon.com, Inc. and certain related entities, alleging infringement of U.S. Patent Nos. 9,537,762, 9,813,330, 9,826,002 and 9,948,549. In November 2018, the case was transferred to the U.S. District Court for the Northern District of California, where it was renamed Case No. 5:18-cv-07020-LHK and consolidated with Case No. 5:18-cv-06216-LHK. The Defendants filed a Motion to Dismiss the cases, asserting that Voip-Pal’s ‘762, ’330, ’002, and ‘549 patents do not claim patentable subject matter. On November 1, 2019, the U.S. District Court for the Northern District of California granted the Defendants’ Motion to Dismiss in all of the cases. The Company appealed the district court decision to the U.S. Court of Appeals for the Federal Circuit, who affirmed the district court’s decision. During the period ended December 31, 2020, the Company filed a petition for rehearing of this case, which petition was subsequently denied by the court in January 2021. | |
| In January, 2021 the Company filed a petition for rehearing of this case, which was denied by the Federal Circuit on January 26, 2021. | |
| During the period ended June 30, 2021, on June 25, 2021, the Company filed a Petition for Writ of Certiorari with the U.S. Supreme Court. The petition is pending. | |
| iv) | VoIP-Pal.com Inc. v. Apple, Inc. et al. (Case No. 2:18-CV-00953) in the United States District Court, District of Nevada |
| In May 2018, the Company filed a lawsuit in the United States District Court, District of Nevada, against Apple, Inc., alleging infringement of U.S. Patent Nos. 9,537,762, 9,813,330, 9,826,002 and 9,948,549. In November 2018, the case was transferred to the U.S. District Court for the Northern District of California, where it was renamed Case No. 5:18-cv-06216-LHK and consolidated with Case No. 5:18-cv-07020. The Defendants filed a Motion to Dismiss the cases, asserting that Voip-Pal’s ‘762, ’330, ’002, and ‘549 patents do not claim patentable subject matter. On November 1, 2019, the U.S. District Court for the Northern District of California granted the Defendants’ Motion to Dismiss in all of the cases. The Company appealed the district court decision to the U.S. Court of Appeals for the Federal Circuit, who affirmed the district court’s decision. | |
| In January, 2021, the Company filed a petition for rehearing of this case, which was denied by the Federal Circuit on January 26, 2021. | |
| During the period ended June 30, 2021, on June 25, 2021, the Company filed a Petition for Writ of Certiorari with the U.S. Supreme Court. The petition is pending. | |
| v) | VoIP-Pal.com Inc. v. Facebook, Inc. et al. Case No. 6-20-cv-00267 in the US District Court, Western District of Texas |
| In April 2020, the Company filed a lawsuit in the United States District Court, Western District of Texas, against Facebook, Inc. and certain related entities, alleging infringement of U.S. Patent No. 10,218,606. The case is pending. |
| 15 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
June 30, 2021
| NOTE 12. | CONTINGENT LIABILITIES (CONT’D) |
Patent Litigation (cont’d)
| vi) | VoIP-Pal.com Inc. v. Google, LLC fka Google, Inc. Case No. 6-20-cv-00269 in US District Court, Western District of Texas. |
| In April 2020, the Company filed a lawsuit in the United States District Court, Western District of Texas, against Google, alleging infringement of U.S. Patent No. 10,218,606. The case is pending. | |
| vii) | VoIP-Pal.com Inc. v. Amazon.com, Inc. et al. Case No. 6-20-cv-00272 in US District Court, Western District of Texas. |
| In April 2020, the Company filed a lawsuit in the United States District Court, Western District of Texas, against Amazon.com, Inc. and certain related entities, alleging infringement of U.S. Patent No. 10,218,606. The case is pending. | |
| viii) | VoIP-Pal.com Inc. v. Apple, Inc. Case No. 6-20-cv-00275 in the US District Court, Western District of Texas. |
| In April 2020, the Company filed a lawsuit in the United States District Court, Western District of Texas, against Apple, Inc. alleging infringement of U.S. Patent No. 10,218,606. | |
| On March 24, 2021, VoIP-Pal voluntarily dismissed this case. | |
| ix) | VoIP-Pal.com Inc. v. AT&T, Inc. et al. Case No. 6-20-cv-00325 in the US District Court, Western District of Texas. |
| In April 2020, the Company filed a lawsuit in the United States District Court, Western District of Texas, against AT&T, Inc. and certain related entities, alleging infringement of U.S. Patent No. 10,218,606. | |
| On March 25, 2021, the Court dismissed this case without prejudice. | |
| x) | VoIP-Pal.com Inc. v. Verizon Comm, Inc. et al. Case No. 6-20-cv-00327 in the US District Court, Western District of Texas. |
| In April 2020, the Company filed a lawsuit in the US District Court, Western District of Texas, against Verizon Communications, Inc. and certain related entities, alleging infringement of U.S. Patent No. 10,218,606. | |
| On April 1, 2021, the Court dismissed this case without prejudice. | |
| xi) | Twitter, Inc. VoIP-Pal.com Inc. Case No. 5-20-cv-02397 in the United States District Court, Northern District of California. |
| In April 2020, Twitter filed a declaratory judgment lawsuit against the Company in the United States District Court, Northern District of California, alleging non-infringement and invalidity of U.S. Patent No. 10,218,606. The case is pending. | |
| On March 24, 2021, VoIP-Pal moved to dismiss this case for lack of subject-matter jurisdiction. The motion is pending. | |
| xii) | Apple, Inc. v. VoIP-Pal.com Inc. Case No. 5:20-cv-02460 in the United States District Court, Northern District of California. |
| In April 2020, Apple filed a declaratory judgment suit against the Company in the United States District Court, Northern District of California, alleging non-infringement and invalidity of U.S. Patent Nos. 9,935,872 and 10,218,606. The case is pending. | |
| On January 13, 2021, VoIP-Pal filed a Petition for Writ of Mandamus with the U.S. Court of Appeals for the Federal Circuit (Case No. 2021-00112) seeking to reverse the district court’s denial of VoIP-Pal’s motion to dismiss this action under the first-to-file rule. On February 19, 2021, the Mandamus petition was denied by the Court. | |
| On March 24, 2021, VoIP-Pal moved to dismiss this case for lack of subject-matter jurisdiction. The motion is pending. |
| 16 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
June 30, 2021
| NOTE 12. | CONTINGENT LIABILITIES (CONT’D) |
Patent Litigation (cont’d)
| xiii) | AT&T Corp., et al. v. VoIP-Pal.com Inc. Case No. 5:20-cv-02995 in the United States District Court, Northern District of California. |
| In April 2020, AT&T filed a declaratory judgment lawsuit against the Company in the United States District Court, Northern District of California, alleging non-infringement and invalidity of U.S. Patent No. 10,218,606. The case is pending. | |
| On January 13, 2021, VoIP-Pal filed a Petition for Writ of Mandamus with the U.S. Court of Appeals for the Federal Circuit (Case No. 2021-00112) seeking to reverse the district court’s denial of VoIP-Pal’s motion to dismiss this action under the first-to-file rule. On February 19, 2021, the Mandamus petition was denied by the Court. | |
| On March 24, 2021, VoIP-Pal moved to dismiss this case for lack of subject-matter jurisdiction. The motion is pending. | |
| xiv) | Cellco Partnership dba Verizon Wireless, v. VoIP-Pal.com Inc. Case No. 5:20-cv-03092 in the United States District Court, Northern District of California. |
| In April 2020, Verizon filed a declaratory judgment lawsuit against the Company in the United States District Court, Northern District of California, alleging non-infringement and invalidity of U.S. Patent No. 10,218,606. The case is pending. | |
| On January 13, 2021, VoIP-Pal filed a Petition for Writ of Mandamus with the U.S. Court of Appeals for the Federal Circuit (Case No. 2021-00112) seeking to reverse the district court’s denial of VoIP-Pal’s motion to dismiss this action under the first-to-file rule. On February 19, 2021, the Mandamus petition was denied by the Court. | |
| On March 24, 2021, VoIP-Pal moved to dismiss this case for lack of subject-matter jurisdiction. The motion is pending. | |
| xv) | Twitter, Inc. v. VoIP-Pal.com Inc. Case No. 3-21-cv-02769 in the United States District Court, Northern District of California |
| Subsequent to the period ended March 31, 2021, on April 16, 2021, Twitter Inc. filed a declaratory judgment lawsuit against the Company in the United States District Court, Northern District of California, alleging non-infringement and invalidity of U.S. Patent No. 9,935,872. The case is pending. | |
| During the period ended June 30, 2021, on June 21, 2021, VoIP-Pal moved to dismiss this case for lack of jurisdiction. The motion is pending. | |
| xvi) | VoIP-Pal.com, Inc. v. Facebook, Inc. et al Case No. 6-21-cv-665 in the United States District Court, Western District of Texas |
| During the period ended June 30, 2021, on June 25, 2021, the Company filed a lawsuit in the US District Court, Western District of Texas, against Facebook, Inc. and WhatsApp, Inc. alleging infringement of U.S. Patent Nos. 8,630,234 and 10,880,720. The case is pending. | |
| xvii) | VoIP-Pal.com, Inc. v. Google, LLC Case No. 6-21-cv-667 in the United States District Court, Western District of Texas |
| During the period ended June 30, 2021, on June 25, 2021, the Company filed a lawsuit in the US District Court, Western District of Texas, against Google LLC alleging infringement of U.S. Patent Nos. 8,630,234 and 10,880,720. The case is pending. | |
| xvii) | VoIP-Pal.com, Inc. v. Amazon.com, Inc. et al. Case No. 6-21-cv-668 in the U.S. District Court, Western District of Texas |
| During the period ended June 30, 2021, on June 25, 2021, the Company filed a lawsuit in the U.S. District Court, Western District of Texas, against Amazon and related entities alleging infringement of U.S. Patent Nos. 8,630,234 and 10,880,720. The case is pending. |
| 17 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
June 30, 2021
| NOTE 12. | CONTINGENT LIABILITIES (CONT’D) |
Patent Litigation (cont’d)
| xviii) | VoIP-Pal.com, Inc. v. Apple Inc. Case No. 6-21-cv-670 in the U.S. District Court, Western District of Texas |
| During the period ended June 30, 2021, on June 25, 2021, the Company filed a lawsuit in the U.S. District Court, Western District of Texas, against Apple alleging infringement of U.S. Patent Nos. 8,630,234 and 10,880,720. On July 19, 2021, the Company filed a motion for a temporary restraining order and preliminary injunction. The motion is pending. | |
| xix) | VoIP-Pal.com, Inc. v. AT&T Corp. et al. Case No. 6-21-cv-671 in the U.S. District Court, Western District of Texas |
| During the period ended June 30, 2021, on June 25, 2021, the Company filed a lawsuit in the U.S. District Court, Western District of Texas, against AT&T and related entities alleging infringement of U.S. Patent Nos. 8,630,234 and 10,880,720. On July 19, 2021, the Company filed a motion for a temporary restraining order and preliminary injunction. The motion is pending. | |
| xx) | VoIP-Pal.com, Inc. v. Verizon Comms., Inc. Case No. 6-21-cv-672 in the U.S. District Court, Western District of Texas |
| During the period ended June 30, 2021, on June 25, 2021, the Company filed a lawsuit in the U.S. District Court, Western District of Texas, against Verizon and related entities alleging infringement of U.S. Patent Nos. 8,630,234 and 10,880,720. On July 19, 2021, the Company filed a motion for a temporary restraining order and preliminary injunction. The motion is pending. | |
| xxi) | VoIP-Pal.com, Inc. v. T-Mobile US, Inc. et al. Case No. 6-21-cv-668 in the U.S. District Court, Western District of Texas |
|
During the period ended June 30, 2021, on June 25, 2021, the Company filed a lawsuit in the U.S. District Court, Western District of Texas, against T-Mobile and related entities alleging infringement of U.S. Patent Nos. 8,630,234 and 10,880,720. The case is pending. |
|
| xxii) | Apple, Inc. v. VoIP-Pal.com Inc. Case No. 5:21-cv-5110 in the U.S. District Court, Northern District of California. |
| Subsequent to the period ended June 30, 2021, on July 1, 2021, Apple filed a declaratory judgment suit against the Company in the United States District Court, Northern District of California, alleging non-infringement and invalidity of U.S. Patent Nos. 8,630,234 and 10,880,720. The case is pending. | |
| xxiii) | AT&T Corp., et al. v. VoIP-Pal.com Inc. Case No. 5:21-cv-5078 in the U.S. District Court, Northern District of California. |
| During the period ended June 30, 2021, on June 30, 2021, AT&T filed a declaratory judgment lawsuit against the Company in the United States District Court, Northern District of California, alleging non-infringement and invalidity of U.S. Patent Nos. 8,630,234 and 10,880,720. The case is pending. | |
| xxiv) | Cellco Partnership dba Verizon Wireless, v. VoIP-Pal.com Inc. Case No. 5:21-cv-5275 in the U.S. District Court, Northern District of California. |
| Subsequent to the period ended June 30, 2021, on July 8, 2021, Verizon filed a declaratory judgment lawsuit against the Company in the United States District Court, Northern District of California, alleging non-infringement and invalidity of U.S. Patent Nos. 8,630,234 and 10,880,720. The case is pending. |
| 18 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
June 30, 2021
| NOTE 12. | CONTINGENT LIABILITIES (CONT’D) |
Non-Patent Litigation
The Company is party to a non-patent litigation case Locksmith Financial Corporation, Inc. et al. (Plaintiff(s)) v VoIP-Pal.com Inc. et al (Defendant(s)) (Case No A-20-807745-C) filed in Clark County District Court.
During the year ended September 30, 2020, the Plaintiff filed suit in Nevada District Court claiming that the Defendants had prevented the Plaintiffs from re-registering and/or transferring certain share certificates. The Defendants filed a Motion to Dismiss the claims, which was granted on June 1, 2020. It is unclear whether Plaintiffs will appeal the ruling. The case is pending.
Performance Bonus Payable
In 2016, the board of directors authorized the Company to provide a performance bonus (the “Performance Bonus”) of up to 3% of the capital stock of the Company by way of the issuance of Common shares from its treasury to an as yet undetermined group of related and non-related parties upon the occurrence of a bonusable event, defined as the successful completion of a sale of the Company or substantially all its assets, or a major licensing transaction. In order to provide maximum flexibility to the Company with respect to determining the level of Performance Bonus payable, and who may qualify to receive a pro-rata share of such a Performance Bonus, the Company authorized full discretion to the Board in making such determinations.
During the year ended September 30, 2019, the board of directors authorized the increase of the Performance Bonus to up to 10% of the capital stock of the Company. Concurrently, the directors authorized 66.67% of the Performance Bonus to be issued in an advance payment of an aggregate 127,000,000 Common shares (“Bonus Shares”) (Note 10) to a group of related and non-related parties, which included members of management, a director and several consultants. 94,000,000 of the Bonus Shares are restricted from trading under Rule 144, 60,000,000 of which are also subject to voluntary lock-up agreements, pursuant to which they cannot be traded, pledged, hypothecated, transferred or sold by the holders until such time as the Company has met the requirements of the bonusable event as described above.
As at June 30, 2021, no bonusable event had occurred and there was no Performance Bonus payable.
| 19 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following management’s discussion and analysis (MD&A) should be read in conjunction with our interim consolidated financial statements for the nine-month period ended June 30, 2021 and notes thereto appearing elsewhere in this report, and our audited consolidated financial statements for the year ended September 30, 2020 and notes thereto.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This MD&A for the period ending June 30, 2021 contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amending, and Section 21E of the Securities Exchange Act of 1934, as amending. Forward-looking statements may be identified by the use of forward-looking terminology, such as “may”, “shall”, “could”, “expect”, “estimate”, “anticipate”, “predict”, “probable”, “possible”, “should”, “continue”, or similar terms, variations of those terms or the negative of those terms. The forward-looking statements specified in the following information have been compiled by our management based on assumptions made by management and are considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements.
The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements
CORPORATE HISTORY, OVERVIEW AND PRINCIPAL BUSINESS
VoIP-PAL.com Inc. (the “Company”) was incorporated in the state of Nevada in September 1997 as All American Casting International, Inc. and changed its name to VOIP MDI.com in 2004 and subsequently to Voip-Pal.Com Inc. in 2006. Since March 2004, the Company has been in the development stage of becoming a Voice-over-Internet Protocol (“VoIP”) re-seller, a provider of a proprietary transactional billing platform tailored to the points and air mile business, and a provider of anti-virus applications for smartphones. All business activities prior to March 2004 have been abandoned and written off to deficit.
In 2013, the Company acquired Digifonica International (DIL) Limited (“Digifonica”), to fund and co-develop Digifonica’s patent suite. Digifonica had been founded in 2003 with the vision that the internet would be the future of all forms of telecommunications - a team of twenty top engineers with expertise in Linux and Internet telephony developed and wrote a software suite with applications that provided solutions for several core areas of internet connectivity. In order to properly test the applications, Digifonica built and operated three production nodes in Vancouver, Canada (Peer 1), London, UK (Teliasonera), and Denmark. Upon successfully developing the technology, Digifonica filed for patents with the United States Patent and Trademark Office (“USPTO”).
The Digifonica patents formed the basis for the Company’s current intellectual property, now a worldwide portfolio of twenty-six issued and pending patents primarily designed for the broadband VoIP market.
The Company’s intellectual property value is derived from its issued and pending patents. The inventions described in these patents, among other things, provide the means to integrate VoIP services with legacy telecommunications systems such as the public switched telephone network (PSTN) to create a seamless service using either legacy telephone numbers or IP addresses, and enhance the performance and value of VoIP implementations worldwide.
VoIP has been and continues to be a green field for innovation that has spawned numerous inventions, greatly benefitting consumers large and small across the globe. VoIP is used in many places and by every modern telephony system vendor, network supplier, and retail and wholesale carrier.
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Results of Operations
The Company’s operating costs consist of expenses incurred to monetizing, selling and licensing its VoIP patents. Other operating costs include expenses for legal, accounting and other professional fees, financing costs, and other general and administrative expenses.
Comparison of the Three Months Ending June 30, 2021 and 2020
|
Three months ending June 30 |
Increase/ | |||||||||||||||
| 2021 | 2020 | (Decrease) | Percent | |||||||||||||
| Revenue | $ | - | $ | - | $ | - | - | |||||||||
| Cost of Revenue | - | - | - | - | ||||||||||||
| Gross Margin | - | - | - | - | ||||||||||||
| General and administrative expenses | (286,469 | ) | (282,646 | ) | 3,823 | -1 | % | |||||||||
| Stock based compensation | (1,003,166 | ) | - | 1,003,166 | -100 | % | ||||||||||
| Amortization & depreciation | (35,115 | ) | (35,384 | ) | (269 | ) | -100 | % | ||||||||
| Other items | 318,531 | - | (318,531 | ) | -100 | % | ||||||||||
| Net gain (loss) | $ | (1,006,219 | ) | $ | (318,030 | ) | $ | 688,189 | -216 | % | ||||||
Comparison of the Nine Months Ending June 30, 2021 and 2020
|
Nine months ending June 30 |
Increase/ | |||||||||||||||
| 2021 | 2020 | (Decrease) | Percent | |||||||||||||
| Revenue | $ | - | $ | - | $ | - | - | |||||||||
| Cost of Revenue | - | - | - | - | ||||||||||||
| Gross Margin | - | - | - | - | ||||||||||||
| General and administrative expenses | (993,569 | ) | (1,587,430 | ) | (593,861 | ) | 37 | % | ||||||||
| Stock based compensation | (1,003,166 | ) | - | 1,003,166 | -100 | % | ||||||||||
| Amortization & depreciation | (105,334 | ) | (104,967 | ) | 377 | 0 | % | |||||||||
| Other items | 408,531 | - | (408,531 | ) | -100 | % | ||||||||||
| Net gain (loss) | $ | (1,693,548 | ) | $ | (1,692,397 | ) | $ | 1,151 | 0 | % | ||||||
REVENUES, COST OF REVENUES AND GROSS MARGIN
The Company had no revenues, cost of revenues or gross margin for the three or nine months ending June 30, 2021 and 2020.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the three months ending June 30, 2021 totaled $286,469 compared to $282,646 during the same period in 2020. The increase in general and administrative expenses of $3,823, or 1% more than the previous year, was primarily due to an increase in legal and professional fees and services.
General and administrative expenses for the nine months ending June 30, 2021 totaled $993,568 compared to $1,587,430 during the same period in 2020. The decrease in general and administrative expenses of $593,862 or 37% less than the previous year, was primarily due to a decrease in legal and professional fees and services.
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STOCK BASED COMPENSATION
Stock based compensation expense for the three months ending June 30, 2021 totaled $1,003,166 compared to $Nil during the same period in 2020. The increase in stock-based compensation expense of $1,003,166, or 100% more than the previous year, was primarily due to new stock options granted during the period
Stock based compensation expense for the nine months ending June 30, 2021 totaled $1,003,166 compared to $Nil during the same period in 2020. The increase in stock-based compensation expense of $1,003,166, or 100% more than the previous year, was primarily due to stock options granted during the period.
AMORTIZATION AND DEPRECIATION
Amortization of intellectual VoIP communications patent properties and depreciation of capital equipment for the three months ending June 30, 2021 totaled $35,115 compared to $35,384 during the same period in 2020. There was no material change in the amount of amortization or depreciation expense during the three months ending June 30, 2021 and 2020.
Amortization of the intellectual VoIP communications patent properties and depreciation of fixed assets for the nine months ending June 30, 2021 totaled $105,334 compared to $104,967 during the same period in 2020. There was no material difference between depreciation and amortization expense for the three and nine months ending June 30, 2021 as compared to the same periods in 2020.
The Company follows GAAP (FAS 142) and is amortizing its intangibles over the remaining patent life of twelve (12) years. The Company evaluates its intangible assets annually and determines if the fair market value is less than its historical cost. If the fair market value is less, then impairment expense is recorded on the Company’s financial statements. The intangible assets on the financial statements of the Company relate primarily to the Company’s acquisition of Digifonica (International) Limited.
OTHER ITEMS
Other items for the three months ending June 30, 2021 totaled $318,531 compared to $Nil during the same period in 2020. The decrease in other items of $318,531, or 100% less than the previous year, was primarily due to forgiveness of director and executive compensation for the last three years.
Other items for the nine months ending June 30, 2021 totaled $408,531 compared to $Nil during the same period in 2020. The decrease in other items of $408,531, or 100% less than the previous year, was primarily due to forgiveness of director and executive compensation for the last three years.
INTEREST EXPENSE
The Company had no financing or interest costs for the three and nine months ending June 30, 2021 and 2020.
NET GAIN (LOSS)
The Company reported a net loss of $1,006,219 for the three months ending June 30, 2021 compared to a net loss of $318,030 for the same period in 2020. The increase of $688,189 or 216% as compared to the same period in 2020, was primarily due to an increase in stock based compensation expenses.
The Company reported net loss of $1,693,548 for the nine months ended June 30, 2021 compared to a net loss of $1,692,397 for the same period in 2020. The increase of $1,151 or 0% as compared to the same period in 2020 was primarily due to an increase in stock based compensation expenses.
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LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2021, the Company had an accumulated deficit of $65,919,378 as compared to an accumulated deficit of $53,414,093 at June 30, 2020. As of June 30, 2021, the Company had a working capital deficit of $67,508 as compared to a working capital deficit of $187,887 at June 30, 2020. The increase in the Company’s working capital of $120,379 is due to additional equity raised from private placements during the period.
Net cash used by operations for the nine months ending June 30, 2021 and 2020 was $699,727 and $932,996, respectively. The decrease in net cash used for operations for the nine months ending June 30, 2021 as compared to the nine months ending June 30, 2020 was primarily due to a decrease in legal fees and professional services.
Net cash used in investing activities for the nine months ending June 30, 2021 and 2020 was $Nil and $Nil, respectively. Net cash provided from financing activities for the nine months ending June 30, 2021 and 2020 was $641,015 and $116,310, respectively. The increase in net cash provided by financing activities of $524,705 was due to equity raised from private placements during the nine months ending June 30, 2021.
Liquidity
The Company primarily finances its operations from cash received through the private placements of its common stock and the exercise of warrants from investors and through the payment of stock-based compensation. The Company believes its resources are adequate to fund its operations for the next 12 months.
Off Balance Sheet Arrangements
Performance Bonus Payable
In 2016, the board of directors authorized the Company to provide a performance bonus (the “Performance Bonus”) of up to 3% of the capital stock of the Company by way of the issuance of Common shares from its treasury to an as yet undetermined group of related and non-related parties upon the occurrence of a bonusable event, defined as the successful completion of a sale of the Company or substantially all its assets, or a major licensing transaction. In order to provide maximum flexibility to the Company with respect to determining the level of Performance Bonus payable, and who may qualify to receive a pro-rata share of such a Performance Bonus, the Company authorized full discretion to the Board in making such determinations.
During the year ended September 30, 2019, the board of directors authorized the increase of the Performance Bonus to up to 10% of the capital stock of the Company. Concurrently, the directors authorized 66.67% of the Performance Bonus to be issued in an advance payment of an aggregate 127,000,000 Common shares (“Bonus Shares”) to a group of related and non-related parties, which included members of management, a director and several consultants. 94,000,000 of the Bonus Shares are restricted from trading under Rule 144 and are also subject to voluntary lock-up agreements, pursuant to which they cannot be traded, pledged, hypothecated, transferred or sold by the holders until such time as the Company has met the requirements of the bonusable event as described above.
As at June 30, 2021, no bonusable event had occurred and there was no Performance Bonus payable.
Impact of Inflation
We believe that inflation has not had a material impact on our results of operations for the nine months ending June 30, 2021. We cannot assure you that future inflation will not have an adverse impact on our operating results and financial condition.
Impact of COVID-19
In March 2020, the World Health Organization declared a global pandemic related to the COVID-19 coronavirus. Its impact on global economies has been far-reaching and businesses around the world are being forced to cease or limit operations for long or indefinite periods of time. Measures taken to contain the spread of the COVID-19 virus, including travel bans, quarantines, social distancing, and closures of non-essential services have triggered significant disruptions to businesses worldwide, resulting in an economic slowdown. Global stock markets have also experienced great volatility and significant declines. Governments and central banks have responded with monetary and fiscal interventions to stabilize economic conditions.
The duration and impact of the COVID-19 pandemic, as well as the effectiveness of government and central bank responses, remains unclear at this time. It is not possible to reliably estimate the duration and severity of the COVID-19 pandemic, nor its impact on the financial position and results of the Company in future periods. The Company is proceeding with its business activities as long as the work environment remains safe – at this point there has been minimal disruption to day-to-day operations resulting from health and safety measures. Disruptions and volatility in the global capital markets may increase the Company’s cost of capital and adversely impact access to capital.
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| Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
As a smaller reporting company, we are not required to provide the information required by this Item.
| Item 4. | Controls and Procedures. |
Evaluation of Disclosure Controls and Procedures
Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of June 30, 2021. In making this assessment, management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. In management’s assessment of the effectiveness of internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) as required by Exchange Act Rule 13a-15(c), our management concluded as of the end of the fiscal period covered by this Quarterly Report on Form 10-Q that our internal control over financial reporting has not been effective. The company intends, as the company’s finances improve, to hire additional accounting staff and implement additional controls.
As defined by Auditing Standard No. 5, “An Audit of Internal Control Over Financial Reporting that is Integrated with an Audit of Financial Statements and Related Independence Rule and Conforming Amendments,” established by the Public Company Accounting Oversight Board (“PCAOB”), a material weakness is a deficiency or combination of deficiencies that results more than a remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected. In connection with the assessment described above, management identified the following control deficiencies that represent material weaknesses as of June 30, 2021:
| 1) | Lack of segregation of duties. At this time, our resources and size prevent us from being able to employ sufficient resources to enable us to have adequate segregation of duties within our internal control system. Management will periodically reevaluate this situation. |
| 2) | Lack of a completely independent audit committee. Although it is majority independent, the audit committee is not comprised solely of independent directors. We may establish an audit committee comprised solely of independent directors when we have sufficient capital resources and working capital to attract qualified independent directors and to maintain such a committee. |
| 3) | Insufficient number of independent directors. At the present time, our Board of Directors does not consist of a majority of independent directors, a factor that is counter to corporate governance practices as set forth by the rules of various stock exchanges. |
Our management determined that these deficiencies constituted material weaknesses. Due to a lack of financial resources, we are not able to, and do not intend to, immediately take any action to remediate these material weaknesses. We will not be able to do so until we acquire sufficient financing to do so. We will implement further controls as circumstances, cash flow, and working capital permit. Notwithstanding the assessment that our ICFR was not effective and that there were material weaknesses as identified in this report, we believe that our financial statements fairly present our financial position, results of operations and cash flows for the years covered thereby in all material respects.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure.
Limitations on the Effectiveness of Internal Controls
Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving our objectives and our Chief Executive Officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level. 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 our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal 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, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal controls over financial reporting during the quarter ended March 31, 2021 that have materially affected or are reasonably likely to materially affect such controls.
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PART II—OTHER INFORMATION
| Item 1. | Legal Proceedings. |
Other than noted below, there have been no material developments during the current quarter for our legal proceedings that were disclosed in our registration statement on Form 10 filed on April 22, 2016. For a full disclosure of legal proceedings, please reference our Form 10 registration or Note 12 of the Financial Statements contained in this report.
Patent Litigation
The Company is party to patent and patent-related litigation cases as follows:
| i) | VoIP-Pal.com Inc. v. Apple, Inc. (Case No. 2:16-CV-00260) & Verizon Wireless Services, LLC, Verizon Communications Inc., AT&T Corp. (Case No. 2:16-CV-00271) in the United States District Court, District of Nevada |
| In February 2016 the Company filed patent infringement lawsuits in the United States District Court, District of Nevada against Apple, Inc, (Case No. 2:16-CV-00260), Verizon Wireless Services, LLC, Verizon Communications Inc., and AT&T Corp. (Case No. 2:16-CV-00271). These cases are seeking a combined $7,024,377,876 in damages. On May 9, 2016, the lawsuits were officially served to these companies (collectively, the “Defendants”). | |
| In August, 2018, the cases were consolidated under one lawsuit, and transferred to the U.S. District Court for the Northern District of California, where they were renamed as Case Nos. 5:18-cv-06217-LHK, 5:18-cv-06054-LHK and 5:18-cv-06177-LHK. The Defendants filed a Motion to Dismiss the cases, asserting that Voip-Pal’s ‘005 and ‘815 patents do not claim patentable subject matter. | |
| On March 25, 2019, the U.S. District Court for the Northern District of California granted the Defendants’ Motion to Dismiss in all of the cases. The Company appealed the district court decision to the US Court of Appeals for the Federal Circuit. The Federal Circuit affirmed the district court’s decision. | |
| On April 15, 2020, the Company filed a combined petition for rehearing and rehearing en banc, which was denied by the Court. | |
| ii) | VoIP-Pal.com Inc. v. Twitter, Inc. (Case No. 2:16-CV-02338) in the United States District Court, District of Nevada |
| On October 6, 2016, the Company filed a lawsuit in the United States District Court, District of Nevada against Twitter, Inc, (Case No. 2:16- CV-02338) in which Voip-Pal.com alleges infringement of U.S. Patent No. 8,542,815 and its continuation patent, U.S. Patent No. 9,179,005, This case is seeking $3,200,000,000 in damages. On December 28, 2016, the lawsuit was officially served to Twitter, Inc. On February 28, 2018, Twitter filed a motion to transfer its case based on improper venue and the case was subsequently transferred to the U.S. District Court for the Northern District of California, where it was renamed as Case No. 5:18-cv-4523 and consolidated with Case Nos. 5:18-cv-06217-LHK and 5:18-cv-066054-LHK. The Defendants filed a Motion to Dismiss the cases, asserting that Voip-Pal’s ‘005 and ‘815 patents do not claim patentable subject matter. On March 25, 2019, the U.S. District Court for the Northern District of California granted the Defendants’ Motion to Dismiss. The Company appealed the district court decision to the U.S. Court of Appeals for the Federal Circuit. The Federal Circuit affirmed the district court’s decision. | |
| On April 15, 2020, the Company filed a combined petition for rehearing and rehearing en banc, which was denied by the Court. | |
| iii) | VoIP-Pal.com Inc. v. Amazon.com, Inc. et al. (Case No. 2:18-CV-01076) in the United States District Court, District of Nevada |
| In June 2018, the Company filed a lawsuit in the United States District Court, District of Nevada, against Amazon.com, Inc. and certain related entities, alleging infringement of U.S. Patent Nos. 9,537,762, 9,813,330, 9,826,002 and 9,948,549. In November 2018, the case was transferred to the U.S. District Court for the Northern District of California, where it was renamed Case No. 5:18-cv-07020-LHK and consolidated with Case No. 5:18-cv-06216-LHK. The Defendants filed a Motion to Dismiss the cases, asserting that Voip-Pal’s ‘762, ’330, ’002, and ‘549 patents do not claim patentable subject matter. On November 1, 2019, the U.S. District Court for the Northern District of California granted the Defendants’ Motion to Dismiss in all of the cases. The Company appealed the district court decision to the U.S. Court of Appeals for the Federal Circuit, who affirmed the district court’s decision. During the period ended December 31, 2020, the Company filed a petition for rehearing of this case, which petition was subsequently denied by the court in January 2021. | |
| In January, 2021 the Company filed a petition for rehearing of this case, which was denied by the Federal Circuit on January 26, 2021. | |
| During the period ended June 30, 2021, on June 25, 2021, the Company filed a Petition for Writ of Certiorari with the U.S. Supreme Court. The petition is pending. |
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| iv) | VoIP-Pal.com Inc. v. Apple, Inc. et al. (Case No. 2:18-CV-00953) in the United States District Court, District of Nevada |
| In May 2018, the Company filed a lawsuit in the United States District Court, District of Nevada, against Apple, Inc., alleging infringement of U.S. Patent Nos. 9,537,762, 9,813,330, 9,826,002 and 9,948,549. In November 2018, the case was transferred to the U.S. District Court for the Northern District of California, where it was renamed Case No. 5:18-cv-06216-LHK and consolidated with Case No. 5:18-cv-07020. The Defendants filed a Motion to Dismiss the cases, asserting that Voip-Pal’s ‘762, ’330, ’002, and ‘549 patents do not claim patentable subject matter. On November 1, 2019, the U.S. District Court for the Northern District of California granted the Defendants’ Motion to Dismiss in all of the cases. The Company appealed the district court decision to the U.S. Court of Appeals for the Federal Circuit, who affirmed the district court’s decision. | |
| In January, 2021, the Company filed a petition for rehearing of this case, which was denied by the Federal Circuit on January 26, 2021. | |
| During the period ended June 30, 2021, on June 25, 2021, the Company filed a Petition for Writ of Certiorari with the U.S. Supreme Court. The petition is pending. | |
| v) | VoIP-Pal.com Inc. v. Facebook, Inc. et al. Case No. 6-20-cv-00267 in the US District Court, Western District of Texas |
| In April 2020, the Company filed a lawsuit in the United States District Court, Western District of Texas, against Facebook, Inc. and certain related entities, alleging infringement of U.S. Patent No. 10,218,606. The case is pending. | |
| vi) | VoIP-Pal.com Inc. v. Google, LLC fka Google, Inc. Case No. 6-20-cv-00269 in US District Court, Western District of Texas. |
| In April 2020, the Company filed a lawsuit in the United States District Court, Western District of Texas, against Google, alleging infringement of U.S. Patent No. 10,218,606. The case is pending. | |
| vii) | VoIP-Pal.com Inc. v. Amazon.com, Inc. et al. Case No. 6-20-cv-00272 in US District Court, Western District of Texas. |
| In April 2020, the Company filed a lawsuit in the United States District Court, Western District of Texas, against Amazon.com, Inc. and certain related entities, alleging infringement of U.S. Patent No. 10,218,606. The case is pending. | |
| viii) | VoIP-Pal.com Inc. v. Apple, Inc. Case No. 6-20-cv-00275 in the US District Court, Western District of Texas. |
| In April 2020, the Company filed a lawsuit in the United States District Court, Western District of Texas, against Apple, Inc. alleging infringement of U.S. Patent No. 10,218,606. | |
| On March 24, 2021, VoIP-Pal voluntarily dismissed this case. | |
| ix) | VoIP-Pal.com Inc. v. AT&T, Inc. et al. Case No. 6-20-cv-00325 in the US District Court, Western District of Texas. |
| In April 2020, the Company filed a lawsuit in the United States District Court, Western District of Texas, against AT&T, Inc. and certain related entities, alleging infringement of U.S. Patent No. 10,218,606. | |
| On March 25, 2021, the Court dismissed this case without prejudice. | |
| x) | VoIP-Pal.com Inc. v. Verizon Comm, Inc. et al. Case No. 6-20-cv-00327 in the US District Court, Western District of Texas. |
| In April 2020, the Company filed a lawsuit in the US District Court, Western District of Texas, against Verizon Communications, Inc. and certain related entities, alleging infringement of U.S. Patent No. 10,218,606. | |
| On April 1, 2021, the Court dismissed this case without prejudice. | |
| xi) | Twitter, Inc. VoIP-Pal.com Inc. Case No. 5-20-cv-02397 in the United States District Court, Northern District of California. |
| In April 2020, Twitter filed a declaratory judgment lawsuit against the Company in the United States District Court, Northern District of California, alleging non-infringement and invalidity of U.S. Patent No. 10,218,606. The case is pending. | |
| On March 24, 2021, VoIP-Pal moved to dismiss this case for lack of subject-matter jurisdiction. The motion is pending. | |
| xii) | Apple, Inc. v. VoIP-Pal.com Inc. Case No. 5:20-cv-02460 in the United States District Court, Northern District of California. |
| In April 2020, Apple filed a declaratory judgment suit against the Company in the United States District Court, Northern District of California, alleging non-infringement and invalidity of U.S. Patent Nos. 9,935,872 and 10,218,606. The case is pending. |
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| On January 13, 2021, VoIP-Pal filed a Petition for Writ of Mandamus with the U.S. Court of Appeals for the Federal Circuit (Case No. 2021-00112) seeking to reverse the district court’s denial of VoIP-Pal’s motion to dismiss this action under the first-to-file rule. On February 19, 2021, the Mandamus petition was denied by the Court. | |
| On March 24, 2021, VoIP-Pal moved to dismiss this case for lack of subject-matter jurisdiction. The motion is pending. | |
| xiii) | AT&T Corp., et al. v. VoIP-Pal.com Inc. Case No. 5:20-cv-02995 in the United States District Court, Northern District of California. |
| In April 2020, AT&T filed a declaratory judgment lawsuit against the Company in the United States District Court, Northern District of California, alleging non-infringement and invalidity of U.S. Patent No. 10,218,606. The case is pending. | |
| On January 13, 2021, VoIP-Pal filed a Petition for Writ of Mandamus with the U.S. Court of Appeals for the Federal Circuit (Case No. 2021-00112) seeking to reverse the district court’s denial of VoIP-Pal’s motion to dismiss this action under the first-to-file rule. On February 19, 2021, the Mandamus petition was denied by the Court. | |
| On March 24, 2021, VoIP-Pal moved to dismiss this case for lack of subject-matter jurisdiction. The motion is pending. | |
| xiv) | Cellco Partnership dba Verizon Wireless, v. VoIP-Pal.com Inc. Case No. 5:20-cv-03092 in the United States District Court, Northern District of California. |
| In April 2020, Verizon filed a declaratory judgment lawsuit against the Company in the United States District Court, Northern District of California, alleging non-infringement and invalidity of U.S. Patent No. 10,218,606. The case is pending. | |
| On January 13, 2021, VoIP-Pal filed a Petition for Writ of Mandamus with the U.S. Court of Appeals for the Federal Circuit (Case No. 2021-00112) seeking to reverse the district court’s denial of VoIP-Pal’s motion to dismiss this action under the first-to-file rule. On February 19, 2021, the Mandamus petition was denied by the Court. | |
| On March 24, 2021, VoIP-Pal moved to dismiss this case for lack of subject-matter jurisdiction. The motion is pending. | |
| xv) | Twitter, Inc. v. VoIP-Pal.com Inc. Case No. 3-21-cv-02769 in the United States District Court, Northern District of California |
| Subsequent to the period ended March 31, 2021, on April 16, 2021, Twitter Inc. filed a declaratory judgment lawsuit against the Company in the United States District Court, Northern District of California, alleging non-infringement and invalidity of U.S. Patent No. 9,935,872. The case is pending. | |
| During the period ended June 30, 2021, on June 21, 2021, VoIP-Pal moved to dismiss this case for lack of jurisdiction. The motion is pending. | |
| xvi) | VoIP-Pal.com, Inc. v. Facebook, Inc. et al Case No. 6-21-cv-665 in the United States District Court, Western District of Texas |
| During the period ended June 30, 2021, on June 25, 2021, the Company filed a lawsuit in the US District Court, Western District of Texas, against Facebook, Inc. and WhatsApp, Inc. alleging infringement of U.S. Patent Nos. 8,630,234 and 10,880,720. The case is pending. | |
| xvii) | VoIP-Pal.com, Inc. v. Google, LLC Case No. 6-21-cv-667 in the United States District Court, Western District of Texas |
| During the period ended June 30, 2021, on June 25, 2021, the Company filed a lawsuit in the US District Court, Western District of Texas, against Google LLC alleging infringement of U.S. Patent Nos. 8,630,234 and 10,880,720. The case is pending. | |
| xvii) | VoIP-Pal.com, Inc. v. Amazon.com, Inc. et al. Case No. 6-21-cv-668 in the U.S. District Court, Western District of Texas |
| During the period ended June 30, 2021, on June 25, 2021, the Company filed a lawsuit in the U.S. District Court, Western District of Texas, against Amazon and related entities alleging infringement of U.S. Patent Nos. 8,630,234 and 10,880,720. The case is pending. |
| 27 |
| xviii) | VoIP-Pal.com, Inc. v. Apple Inc. Case No. 6-21-cv-670 in the U.S. District Court, Western District of Texas |
| During the period ended June 30, 2021, on June 25, 2021, the Company filed a lawsuit in the U.S. District Court, Western District of Texas, against Apple alleging infringement of U.S. Patent Nos. 8,630,234 and 10,880,720. On July 19, 2021, the Company filed a motion for a temporary restraining order and preliminary injunction. The motion is pending. | |
| xix) | VoIP-Pal.com, Inc. v. AT&T Corp. et al. Case No. 6-21-cv-671 in the U.S. District Court, Western District of Texas |
| During the period ended June 30, 2021, on June 25, 2021, the Company filed a lawsuit in the U.S. District Court, Western District of Texas, against AT&T and related entities alleging infringement of U.S. Patent Nos. 8,630,234 and 10,880,720. On July 19, 2021, the Company filed a motion for a temporary restraining order and preliminary injunction. The motion is pending. | |
| xx) | VoIP-Pal.com, Inc. v. Verizon Comms., Inc. Case No. 6-21-cv-672 in the U.S. District Court, Western District of Texas |
| During the period ended June 30, 2021, on June 25, 2021, the Company filed a lawsuit in the U.S. District Court, Western District of Texas, against Verizon and related entities alleging infringement of U.S. Patent Nos. 8,630,234 and 10,880,720. On July 19, 2021, the Company filed a motion for a temporary restraining order and preliminary injunction. The motion is pending. | |
| xxi) | VoIP-Pal.com, Inc. v. TMobile US, Inc. et al. Case No. 6-21-cv-668 in the U.S. District Court, Western District of Texas |
| During the period ended June 30, 2021, on June 25, 2021, the Company filed a lawsuit in the U.S. District Court, Western District of Texas, against TMobile and related entities alleging infringement of U.S. Patent Nos. 8,630,234 and 10,880,720. The case is pending. | |
| xxii) | Apple, Inc. v. VoIP-Pal.com Inc. Case No. 5:21-cv-5110 in the U.S. District Court, Northern District of California. |
| During the period ended June 30, 2021, on July 1, 2021, Apple filed a declaratory judgment suit against the Company in the United States District Court, Northern District of California, alleging non-infringement and invalidity of U.S. Patent Nos. 8,630,234 and 10,880,720. The case is pending. | |
| xxiii) | AT&T Corp., et al. v. VoIP-Pal.com Inc. Case No. 5:21-cv-5078 in the U.S. District Court, Northern District of California. |
| During the period ended June 30, 2021, on June 30, 2021, AT&T filed a declaratory judgment lawsuit against the Company in the United States District Court, Northern District of California, alleging non-infringement and invalidity of U.S. Patent Nos. 8,630,234 and 10,880,720. The case is pending. | |
| xxiv) | Cellco Partnership dba Verizon Wireless, v. VoIP-Pal.com Inc. Case No. 5:21-cv-5275 in the U.S. District Court, Northern District of California. |
| Subsequent to the period ended June 30, 2021, on July 8, 2021, Verizon filed a declaratory judgment lawsuit against the Company in the United States District Court, Northern District of California, alleging non-infringement and invalidity of U.S. Patent Nos. 8,630,234 and 10,880,720. The case is pending. |
Other Litigation
The Company is party to a non-patent litigation case Locksmith Financial Corporation, Inc. et al. (Plaintiff(s)) v VoIP-Pal.com Inc. et al (Defendant(s)) (Case No A-20-807745-C) filed in Clark County District Court.
During the year ended September 30, 2020, the Plaintiff filed suit in Nevada District Court claiming that the Defendants had prevented the Plaintiffs from re-registering and/or transferring certain share certificates. The Defendants filed a Motion to Dismiss the claims, which Motion was granted on June 1, 2020. It is unclear whether Plaintiffs will appeal the ruling. The case is pending.
| 28 |
| Item 1A. | Risk Factors. |
As a smaller reporting company, we are not required to provide the information required by this Item.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
The transactions described in this section were exempt from securities registration as provided by Section 4(a)(2) of the Securities Act for transactions not involving a public offering for sales within the United States and by Regulation S of the Securities Act for sales made outside of the United States.
During the quarterly period ended June 30, 2021, the Company issued 48,400,000 common shares priced at $0.005 per share for cash proceeds of $242,000 from a private placement of common shares.
| Item 3. | Defaults Upon Senior Securities. |
None.
| Item 4. | Mine Safety Disclosures. |
Not applicable.
| Item 5. | Other Information. |
None.
| Item 6. | Exhibits. |
| Exhibit Number | Description of Exhibits | |||
| 31.1 | Rule 13a-14(a) Certification of CEO | Filed herewith | ||
| 31.2 | Rule 13a-14(a) Certification of CFO | Filed herewith | ||
| 32.1 | Section 1350 Certification | Filed herewith |
| 29 |
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| DATED: August 16, 2021 | By: | /s/Emil Malak |
| Emil Malak | ||
| Chief Executive Officer | ||
| DATED: August 16, 2021 | By: | /s/Kevin Williams |
| Kevin Williams | ||
| Chief Financial Officer |
| 30 |
Exhibit 31.1
CERTIFICATION
PURSUANT TO SECTION 13a-14
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Emil Malak, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of VoIP-Pal.com Inc.; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; and | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. | |
| 4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have: | |
| (a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of the financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles; | |
| (c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. | |
| 5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): | |
| (a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | |
Date: August 16, 2021
| /s/ Emil Malak | |
| Emil Malak | |
| Chief Executive Officer |
Exhibit 31.2
CERTIFICATION
PURSUANT TO SECTION 13a-14
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Kevin Williams, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of VoIP-Pal.com Inc.; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; and | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. | |
| 4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have: | |
| (a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of the financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles; | |
| (c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. | |
| 5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): | |
| (a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | |
Date: August 16, 2021
| /s/ Kevin Williams | |
| Kevin Williams | |
| Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. 1350
(As adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002)
For the Quarterly Report of VoIP-Pal.com Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2021 (the “Report”), the undersigned, in the capacities and on the date indicated below, hereby certifies that:
(i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in the Report.
Date: August 16, 2021
| By: | /s/Emil Malak | |
| Emil Malak | ||
| Chief Executive Officer | ||
| By: | /s/Kevin Williams | |
| Kevin Williams | ||
| Chief Financial Officer |