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: March 31, 2022
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 May 13, 2022, the Registrant had 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 | 19 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 22 |
| Item 4. | Controls and Procedures | 22 |
| PART II—OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 23 |
| Item 1A. | Risk Factors | 27 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 27 |
| Item 3. | Defaults Upon Senior Securities | 27 |
| Item 4. | Mine Safety Disclosures | 27 |
| Item 5. | Other Information | 27 |
| Item 6. | Exhibits | 27 |
| 2 |
PART I—FINANCIAL INFORMATION
| Item 1. | Financial Statements. |
VOIP-PAL.com Inc.
INTERIM
CONSOLIDATED BALANCE SHEETS
(Unaudited – prepared by management)
As at March 31, 2022
(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 | Six Months Ended | Six Months Ended | |||||||||||||
| March 31, 2022 | March 31, 2021 | March 31, 2022 | March 31, 2021 | |||||||||||||
| EXPENSES | ||||||||||||||||
| Amortization (Note 6 & 7) | $ | 35,114 | $ | 35,115 | $ | 70,228 | $ | 70,230 | ||||||||
| Officers and Directors fees (Note 8) | 13,100 | 65,536 | 29,600 | 123,136 | ||||||||||||
| Legal fees | 172,794 | 99,202 | 343,032 | 248,886 | ||||||||||||
| Office & general | 32,975 | 22,692 | 62,654 | 63,667 | ||||||||||||
| Patent consulting fees | 2,937 | 4,309 | 9,020 | |||||||||||||
| Professional fees & services | 152,000 | 111,900 | 197,700 | 262,400 | ||||||||||||
| Stock-based compensation (Note 11) | 55,750 | 55,750 | ||||||||||||||
| Total expenses | $ | 461,733 | $ | 337,382 | $ | 763,273 | $ | 777,339 | ||||||||
| Gain on settlement of accrued payables (Note 8) | (90,000 | ) | ||||||||||||||
| LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD | $ | (461,733 | ) | $ | (337,382 | ) | $ | (763,273 | ) | $ | (687,339 | ) | ||||
| 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 | 1,951,739,185 | 2,045,047,137 | 1,937,438,145 | 2,102,362,159 | ||||||||||||
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)
Six Months Ended March 31, 2022 | Six Months Ended March 31, 2021 | |||||||
| Cash Flows used in Operating Activities | ||||||||
| Loss for the period | $ | (763,273 | ) | $ | (687,339 | ) | ||
| Add items not affecting cash: | ||||||||
| Stock based compensation | 55,750 | |||||||
| Shares issued for services | 101,600 | 169,900 | ||||||
| Amortization | 70,228 | 70,230 | ||||||
| Gain on settlement of accrued payables | (90,000 | ) | ||||||
| Changes in non-cash working capital: | ||||||||
| Retainer | 3,113 | 22,885 | ||||||
| Accounts payable and accrued liabilities | (311 | ) | 86,316 | |||||
| Prepaid expense | 8,750 | |||||||
| Cash Flows Used in Operations | (532,893 | ) | (419,258 | ) | ||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from private placement | 443,000 | 380,515 | ||||||
| Cash Flows Provided by Financing Activities | 443,000 | 380,515 | ||||||
| Increase / (Decrease) in cash | (89,893 | ) | (38,743 | ) | ||||
| Cash, beginning of the period | 176,503 | 113,538 | ||||||
| Cash, end of the period | $ | 86,610 | $ | 74,795 | ||||
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)
| Common Shares | Shares
to be Issued | Additional
Paid-in | ||||||||||||||||||||||
| Number | Par Value | Value | Capital | Deficit | Total | |||||||||||||||||||
| 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 | 65,601,500 | 65,602 | 314,913 | 380,515 | ||||||||||||||||||||
| Shares issued for services | 10,300,000 | 10,300 | 159,600 | 169,900 | ||||||||||||||||||||
| Shares forgiven on termination of service | - | (416,000 | ) | 416,000 | ||||||||||||||||||||
| Loss for the period | - | (687,339 | ) | (687,339 | ) | |||||||||||||||||||
| Balance at March 31, 2021 | 2,109,883,092 | $ | 1,586,350 | $ | 61,320 | $ | 52,908,970 | $ | (54,336,892 | ) | $ | 219,748 | ||||||||||||
| Shares issued for private placement | 127,600,000 | 127,600 | 510,400 | 638,000 | ||||||||||||||||||||
| Shares issued for services | 7,500,000 | 7,500 | 121,500 | 129,000 | ||||||||||||||||||||
| 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 | - | (1,470,994 | ) | (1,470,994 | ) | |||||||||||||||||||
| Balance at September 30, 2021 | 1,731,447,863 | $ | 1,207,915 | $ | 61,320 | $ | 65,633,848 | $ | (66,384,163 | ) | $ | 518,920 | ||||||||||||
| Shares issued for private placement | 88,600,000 | 88,600 | 354,400 | 443,000 | ||||||||||||||||||||
| Shares issued for services | 9,000,000 | 9,000 | 92,600 | 101,600 | ||||||||||||||||||||
| Share-based compensation | - | 55,750 | 55,750 | |||||||||||||||||||||
| Loss for the period | - | (763,273 | ) | (763,273 | ) | |||||||||||||||||||
| Balance at March 31, 2022 | 1,829,047,863 | $ | 1,305,515 | $ | 61,320 | $ | 66,136,598 | $ | (67,147,436 | ) | $ | 355,997 | ||||||||||||
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)
March 31, 2022
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 March 31, 2022, had an accumulated deficit of $67,147,436 (September 30, 2021 - $66,384,163). 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)
March 31, 2022
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 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 March 31, 2022, Digifonica had no activities.
Use of Estimates
The preparation of these 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 $86,610 in cash on March 31, 2022 (September 30, 2021 - $176,503).
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)
March 31, 2022
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 March 31, 2022 and September 30, 2021.
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.
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 period ended March 31, 2022 and the year ended September 30, 2021 there were 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.
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)
March 31, 2022
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 March 31, 2022, the Company’s bank operating account balances did not exceed the FDIC Insurance Limit.
Recent Accounting Pronouncements and Adoption
ASU 2020-10 – Codification Improvements In October 2020, the FASB issued ASU 2020-10, Codification Improvements. The guidance contains improvements to the Codification by ensuring that all guidance that requires or provides an option for an entity to provide information in the notes to financial statements is codified in the Disclosure Section of the Codification. The guidance also contains Codifications that are varied in nature and may affect the application of the guidance in cases in which the original guidance may have been unclear. For public business entities, the amendments in the ASU are effective for fiscal years beginning after December 15, 2020. For all other entities, the amendments are effective for annual periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022. Early adoption is permitted. We do not expect the adoption of ASU 2020-10 to have a material impact on our condensed consolidated financial statements.
ASU 2021-04 – Earnings per share. In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40). The new ASU addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. This amendment is effective for all entities, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The Company will evaluate the impact of the pronouncement closer to the effective date.
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 % of Digifonica from the seller, the CEO of the Company (the “Seller”), for a cash payment of $ and 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 required the Company to maintain the Seller’s percentage ownership of the Company at % 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 were recorded as a share issuance cost within the Additional Paid-in Capital account (Notes 8 and 10).
During the year ended September 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 common shares to the treasury of the Company and relinquished his right to receive an additional 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).
NOTE 5. RETAINER
The Company has retainers with certain of its professional service providers. The balance due on these prepaid retainers was $11,305 as of March 31, 2022, and $14,418 for the year ended September 30, 2021. 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.
| 10 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
March 31, 2022
NOTE 6. FIXED ASSETS
A summary of the Company’s fixed assets as of March 31, 2022 and September 30, 2021 is as follows:
March 31, 2022 | September
30, 2021 | |||||||
| Office furniture & computers | $ | 11,917 | $ | 11,917 | ||||
| Accumulated depreciation | (6,397 | ) | (5,269 | ) | ||||
| Net book value | $ | 5,520 | $ | 6,648 | ||||
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 March 31, 2022 and September 30, 2021 is as follows:
March 31, 2022 | September
30, 2021 | |||||||
| VoIP Intellectual property and patents | $ | 1,552,416 | $ | 1,552,416 | ||||
| Accumulated amortization | (1,118,566 | ) | (1,049,466 | ) | ||||
| Net book value | $ | 433,850 | $ | 502,950 | ||||
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 six-month periods ended March 31, 2022 and 2021 includes:
March 31, 2022 | March
31, 2021 | |||||||
| Management fees accrued to the CEO | $ | $ | 72,000 | |||||
| Management fees paid to the current CFO | 9,000 | |||||||
| Management fees paid or accrued to the former CFO | 51,136 | |||||||
| Fees paid or accrued to Directors | 20,600 | |||||||
| Total fees paid or accrued | $ | 29,600 | $ | 123,136 | ||||
During the six-month period ended March 31, 2022 the Company accrued $10,600 (2020 - $72,000) and paid cash of $ (2020 - $) for key management compensation totaling $29,600 (2020 - $123,136) as shown in the above table. At March 31, 2022, included in accounts payable and accrued liabilities is $10,600 (September 30, 2021 - $) owed to current officers and directors.
During the year ended September 31, 2021 two members of the Board of Directors resigned and forgave $90,000 of accrued directors’ fees and $ of shares to be issued for unpaid director fees (Note 10).
As at March 31, 2022, there are (September 30, 2021 – ) common shares accrued to the Seller of Digifonica for the Anti-Dilution Clause, as a result of Digifonica returning common shares to the treasury of the Company and relinquishing their right to receive an additional common shares accrued to them 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).
| 11 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
March 31, 2022
NOTE 9. SUPPLEMENTAL CASH FLOW INFORMATION
During the period ended March 31, 2022, the Company paid $ (September 30, 2021 - $) in interest or income taxes.
There were no non-cash investing or financing transactions during the six-month periods ended March 31, 2022 and 2021.
NOTE 10. SHARE CAPITAL
Capital Stock Authorized and Issued as at March 31, 2022:
| – | (September 30, 2021 – ) common voting shares authorized with a par value of $ each, of which (September 30, 2021 – ) shares are issued. | |
| – | convertible preferred shares authorized with a par value of $ each, of which (2021 – ) shares are issued. |
Issues during the six-month period ended March 31, 2022
During the six-month period ended December 31, 2021, the Company:
| – | issued common shares priced at $ per share for cash proceeds of $443,000 from a private placement of common shares; and | |
| – | issued common shares for services with a value of $101,600. |
Issues during the year ended September 30, 2021
During the year ended September 30, 2021, the Company:
| – | issued common shares priced between $ and $ per share for cash proceeds of $1,018,515 from a private placement of common shares; | |
| – | issued common shares for services with a value of $281,100; | |
| – | returned to treasury common shares valued at $ 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 incentive stock options to purchase common shares at a price of $ to its directors, officers, employees, consultants, and advisors, exercisable for a period of five years from the date of grant; and | |
| – | returned to treasury incentive stock options to purchase common shares at a price of $ from certain of its consultants and advisors as the option term had expired. |
Subsequent Issues
Subsequent to the six-month period ended March 31, 2022, the Company issued common shares at a price of $ per share for cash proceeds of $19,000 from a private placement of common shares.
Shares to be Issued
As at March 31, 2022, there are (September 30, 2021 – ) common shares to be issued that are accrued for services provided to the Company valued at $ (September 30, 2021 – $).
As at March 31, 2022, there are (September 30, 2021 – ) 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 year ended September 30, 2021, on April 16, 2021, the seller of Digifonica relinquished their right to receive common shares that were accrued to them pursuant to the Anti-Dilution Clause (Notes 4 and 8).
| 12 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
March 31, 2022
Warrants
As of March 31, 2022, there are 621,470,562 (September 30, 2021 - 621,470,562) outstanding warrants to be exercised.
During the year ended September 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 year ended September 30, 2021: risk-free rate of 1.59% (2020 – 0%), expected life of 10 years (2020 – 0 years), annualized historical volatility of 184.22% (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 (2020– $). The weighted-average fair value of the warrants issued during the year ended September 30, 2021 was $0.018 (2020 - $).
Stock Option Plan
In order to provide incentive to directors, officers, management, employees, consultants and others who provide services to the Company or any subsidiary (the “Service Providers”) to act in the best interests of the Company, and to retain such Service Providers, 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. 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.
| Number of options | Weighted average exercise price | |||||||
| Balance September 30, 2020 | 34,850,000 | $ | 0.037 | |||||
| Granted | 90,000,000 | 0.025 | ||||||
| Cancelled / Expired | (8,000,000 | ) | 0.060 | |||||
| Balance September 30, 2021 | 116,850,000 | $ | 0.026 | |||||
| Cancelled / Expired | (3,450,000 | ) | 0.060 | |||||
| Balance March 31, 2022 | 113,400,000 | $ | 0.025 | |||||
| Options Outstanding | Exercise Price | Remaining Contractual Life (Yrs) | Number of Options Currently Exercisable | |||||||||||
| 8,400,000 | 0.050 | 8,400,000 | ||||||||||||
| 15,000,000 | 0.010 | 15,000,000 | ||||||||||||
| 90,000,000 | 0.025 | 47,500,000 | ||||||||||||
| 113,400,000 | $ | 0.025 | 70,900,000 | |||||||||||
There were no stock options granted or exercised during the six-month period ended March 31, 2022. There were stock options that vested during the six-month period ended March 31, 2022.
During the year ended September 30, 2021, on April 23, 2021 the Company granted options to purchase common shares at a price of $ to its directors, officers, employees, consultants and advisors. The options have varied vesting provisions and are exercisable for a period of from the date of grant.
The following assumptions were used for the Black-Scholes valuation of stock options granted during the year ended September 30, 2021: risk-free rate of % (2020 – %), expected life of years (2020 – years), annualized historical volatility of % (2020 – %) and a dividend rate of % (2020 – %). 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 $ for the six months ended March 31, 2022 (2021– $) as options vested during the period.
The weighted-average grant-date fair value of options granted during the year ended September 30, 2021 was $ (2020 - $).
| 13 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
March 31, 2022
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.
| 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. 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. On June 25, 2021, the Company filed a Petition for Writ of Certiorari with the U.S. Supreme Court. On October 4, 2021, the petition was denied.
| 14 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
March 31, 2022
NOTE 12. CONTINGENT LIABILITIES (CONT’D)
Patent Litigation (cont’d)
| 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. On June 25, 2021, the Company filed a Petition for Writ of Certiorari with the U.S. Supreme Court. On October 4, 2021, the petition was denied.
| v) | VoIP-Pal.com Inc. v. Facebook, Inc. et al. Case No. 6-20-cv-00267 in the United States 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 the U.S. 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 the U.S. 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 United States 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. v. 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. On August 30, 2021, the Court granted the motion. On September 27, 2021, Twitter filed a motion for attorney’s fees. The motion is pending.
| 15 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
March 31, 2022
NOTE 12. CONTINGENT LIABILITIES (CONT’D)
Patent Litigation (cont’d)
| 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. On August 26, 2021, the Court denied the motion. On October 22, 2021, the parties stipulated to dismissal of the case without prejudice.
| xiii) | AT&T Corp., et al. v. VoIP-Pal.com Inc. Case No. 5:20-cv-02995 in the U.S. 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. On August 25, 2021, the Court denied the motion. On October 13, 2021, the parties stipulated to dismissal of the case without prejudice.
| 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. On May 25, 2021, the parties stipulated to dismissal of the case without prejudice. On May 26, 2021, the Court granted the stipulation.
| xv) | Twitter, Inc. v. VoIP-Pal.com Inc. Case No. 3-21-cv-02769 in the United States District Court, Northern District of California |
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.
On December 9, 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 |
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 10,880,721. 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 |
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 10,880,721. The case is pending.
| xviii) | 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 |
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 10,880,721. The case is pending.
| 16 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
March 31, 2022
NOTE 12. CONTINGENT LIABILITIES (CONT’D)
Patent Litigation (cont’d)
| xix) | VoIP-Pal.com, Inc. v. Apple Inc. Case No. 6-21-cv-670 in the U.S. District Court, Western District of Texas |
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 10,880,721. On October 22, 2021, the parties stipulated to dismissal of the case without prejudice.
| xx) | 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 |
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 10,880,721. On October 13, 2021, the parties stipulated to dismissal of the case without prejudice.
| xxi) | VoIP-Pal.com, Inc. v. Verizon Comms., Inc. Case No. 6-21-cv-672 in the U.S. District Court, Western District of Texas |
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 10,880,721. The case is pending.
| xxii) | 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 |
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 10,880,721. The case is pending.
| xxiii) | Apple, Inc. v. VoIP-Pal.com Inc. Case No. 5:21-cv-5110 in the U.S. District Court, Northern District of California. |
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 10,880,721. On October 22, 2021, the parties stipulated to dismissal of the case without prejudice.
| xxiv) | 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. |
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 10,880,721. On October 13, 2021, the parties stipulated to dismissal of the case without prejudice.
| xxv) | 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. |
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 10,880,721. On October 15, 2021, the court stayed the case.
| xxvi) | VoIP-Pal.com Inc v Samsung Electronics Co, Ltd. et al Case No. 6-21-cv-1246 in US District Court, Western District of Texas |
On November 30, 2021, the Company filed a lawsuit in the U.S. District Court, Western District of Texas, against Samsung and related entities alleging infringement of U.S. Patent Nos. 8,630,234 and 10,880,721. The case is pending.
| xxvii) | VoIP-Pal.com Inc v Huawei Technologies Co, Ltd. et al Case No. 6-21-cv-1247 in US District Court, Western District of Texas |
On November 30, 2021, the Company filed a lawsuit in the U.S. District Court, Western District of Texas, against Huawei and related entities alleging infringement of U.S. Patent Nos. 8,630,234 and 10,880,721. The case is pending.
| xxviii) | Twitter, Inc. v. VoIP-Pal.com Inc. Case No. 3:21-cv-9773 in the U.S. District Court, Northern District of California |
On December 17, 2021, Twitter filed a declaratory judgment lawsuit against the Company in the United States District Court, Northern District of California, alleging non-infringement of U.S. Patent Nos. 8,630,234 and 10,880,721.
During the period ending March 31, 2022, on February 11, 2022, VoIP-Pal moved to dismiss this case for lack of jurisdiction. 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)
March 31, 2022
NOTE 12. CONTINGENT LIABILITIES (CONT’D)
Non-Patent Litigation
The Company is party to non-patent litigation cases as follows:
1. 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, 2021, 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.
During the six-month period ended March 31, 2022, the Court entered a judgment in favor of VoIP-Pal.com Inc and co-defendants, dismissing the case. It is uncertain if the Plaintiffs will appeal.
2. T K Investments, Inc. et al. (Plaintiff(s)) v VoIP-Pal.com Inc. et al (Defendant(s)) (Case No A-20-807835-C) filed in Clark County District Court.
During the year ended September 30, 2021, 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.
During the six-month period ended March 31, 2022, the Court entered a judgment in favor of VoIP-Pal.com Inc and co-defendants, dismissing the case. It is uncertain if the Plaintiffs will appeal.
3. Kashwise Global Funding, Inc. (Plaintiff) v VoIP-Pal.com Inc. (Defendant) (Case No CACE-20-005215) filed in Circuit Court in and for Broward County, Florida.
During the year ended September 30, 2020, the Plaintiff filed suit claiming that the Defendant had failed to pay the Plaintiff a fee for a third-party funding that did not close. The Defendant has filed a Response indicating that the complaint has no merit. 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.
In 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 Common shares (“Bonus Shares”) to a group of related and non-related parties, which included members of management, a director and several consultants. of the Bonus Shares are restricted from trading under Rule 144 and subject to voluntary lock-up agreements under 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 March 31, 2022, no bonusable event had occurred and there was no Performance Bonus payable.
| 18 |
| 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 six months ended March 31, 2022 and notes thereto appearing elsewhere in this report, and our audited consolidated financial statements for the year ended September 30, 2021 and notes thereto.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This MD&A for the period ending March 31, 2022 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.
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.
| 19 |
Comparison of the Three Months Ending March 31, 2022 and 2021
Three months ending March 31 | Increase/ | |||||||||||||||
| 2022 | 2021 | (Decrease) | Percent | |||||||||||||
| Revenue | $ | - | $ | - | $ | - | - | |||||||||
| Cost of Revenue | - | - | - | - | ||||||||||||
| Gross Margin | - | - | - | - | ||||||||||||
| General and administrative expenses | (370,869 | ) | (302,267 | ) | 68,601 | 23 | % | |||||||||
| Amortization & depreciation | (35,114 | ) | (35,115 | ) | (1 | ) | 0 | % | ||||||||
| Stock based compensation | (55,750 | ) | - | 55,750 | 100 | % | ||||||||||
| Net gain (loss) | $ | (461,733 | ) | $ | (337,382 | ) | $ | 124,351 | 36 | % | ||||||
Comparison of the Six Months Ending March 31, 2022 and 2021
Six months ending March 31 | Increase/ | |||||||||||||||
| 2022 | 2021 | (Decrease) | Percent | |||||||||||||
| Revenue | $ | - | $ | - | $ | - | - | |||||||||
| Cost of Revenue | - | - | - | - | ||||||||||||
| Gross Margin | - | - | - | - | ||||||||||||
| General and administrative expenses | (637,295 | ) | (707,109 | ) | (69,815 | ) | -10 | % | ||||||||
| Amortization & depreciation | (70,228 | ) | (70,230 | ) | (1 | ) | 0 | % | ||||||||
| Stock based compensation | (55,750 | ) | - | 55,750 | 100 | % | ||||||||||
| Other items | - | 90,000 | 90,000 | -100 | % | |||||||||||
| Net gain (loss) | $ | (707,523 | ) | $ | (687,339 | ) | $ | 75,934 | 11 | % | ||||||
REVENUES, COST OF REVENUES AND GROSS MARGIN
The Company had no revenues, cost of revenues or gross margin for the three or six months ending March 31, 2022 and 2021.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the three months ending March 31, 2021 totaled $370,869 compared to $302,267 during the same period in 2021. The increase in general and administrative expenses of $68,601, or 23% more than the previous year, was primarily due to an increase in legal and professional fees and services. Stock-based compensation for the three months ending March 31, 2022 totaled $55,750 compared to $Nil during the same period in 2021. The increase in stock-based compensation was due to the vesting of 2,500,000 stock options during the three months ending March 31, 2022.
General and administrative expenses for the six months ending March 31, 2021 totaled $637,295 compared to $707,109 during the same period in 2021. The decrease in general and administrative expenses of $69,815 or 10% less than the previous year, was primarily due to a decrease in legal and professional fees and services. Stock-based compensation for the six months ending March 31, 2022 totaled $55,750 compared to $Nil during the same period in 2021. The increase in stock-based compensation was due to the vesting of 2,500,000 stock options during the six months ending March 31, 2022.
AMORTIZATION AND DEPRECIATION
Amortization of intellectual VoIP communications patent properties and depreciation of capital equipment for the three months ending March 31, 2022 totaled $35,115 compared to $35,114 during the same period in 2021. There was no material change in the amount of amortization or depreciation expense during the three months ending March 31, 2022 and 2021.
Amortization of the intellectual VoIP communications patent properties and depreciation of fixed assets for the six months ending March 31, 2022 totaled $70,228 compared to $70,230 during the same period in 2021. There was no material difference between depreciation and amortization expense for the three and six months ending March 31, 2022 as compared to the same periods in 2021.
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.
INTEREST EXPENSE
The Company had no financing or interest costs for the three and six months ending March 31, 2022 and 2021.
| 20 |
NET GAIN (LOSS)
The Company reported a net loss of $461,733 for the three months ending March 31, 2022 compared to a net loss of $337,382 for the same period in 2021. The increase in net loss of $124,351, or 37% more than the same period in 2021, was primarily due to an increase in legal and professional fees and stock-based compensation.
The Company reported a net loss of $763,273 for the six months ended March 31, 2022 compared to a net loss of $687,339 for the same period in 2021. The increase in net loss of $75,934, or 11% over the same period in 2021 was due primarily to an increase in legal and professional fees and stock-based compensation.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2022, the Company had an accumulated deficit of $67,147,436 as compared to an accumulated deficit of $54,336,892 at March 31, 2021. As of March 31, 2022, the Company had a working capital deficit of $83,373 as compared to a working capital deficit of $360,079 at March 31, 2021. The increase in the Company’s working capital of $276,706 is due proceeds received from the private placement of the Company’s stock.
Net cash used by operations for the six months ending March 31, 2022 and 2021 was $532,893 and $419,258 respectively. The increase in net cash used for operations for the six months ending March 31, 2022 as compared to the six months ending March 31, 2021 was primarily due to a increase in legal fees and professional services.
Net cash used in investing activities for the six months ending March 31, 2022 and 2021 was $Nil. Net cash provided from financing activities for the six months ending March 31, 2022 and 2021 was $443,000 and $380,515, respectively. The increase in net cash provided by financing activities of $62,485 was due to equity raised from private placements during the six months ending March 31, 2022.
Liquidity
The Company primarily finances its operations from cash received through the private placement 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.
In 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. 60,000,000 of the Bonus Shares are restricted from trading under Rule 144 and subject to voluntary lock-up agreements under 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 March 31, 2022, 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 six months ending March 31, 2022. 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 March 31, 2022. 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 its 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 March 31, 2022:
| 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, 2022 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
| vi) | 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.
| vii) | 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.
| viii) | 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. 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. On June 25, 2021, the Company filed a Petition for Writ of Certiorari with the U.S. Supreme Court. On October 4, 2021, the petition was denied.
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| ix) | 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. On June 25, 2021, the Company filed a Petition for Writ of Certiorari with the U.S. Supreme Court. On October 4, 2021, the petition was denied.
| x) | VoIP-Pal.com Inc. v. Facebook, Inc. et al. Case No. 6-20-cv-00267 in the United States 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.
| ix) | VoIP-Pal.com Inc. v. Google, LLC fka Google, Inc. Case No. 6-20-cv-00269 in the U.S. 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.
| x) | VoIP-Pal.com Inc. v. Amazon.com, Inc. et al. Case No. 6-20-cv-00272 in the U.S. 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.
| xi) | VoIP-Pal.com Inc. v. Apple, Inc. Case No. 6-20-cv-00275 in the United States 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. v. 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. On August 30, 2021, the Court granted the motion. On September 27, 2021, Twitter filed a motion for attorney’s fees. 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. On August 26, 2021, the Court denied the motion. On October 22, 2021, the parties stipulated to dismissal of the case without prejudice.
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| xiii) | AT&T Corp., et al. v. VoIP-Pal.com Inc. Case No. 5:20-cv-02995 in the U.S. 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. On August 25, 2021, the Court denied the motion. On October 13, 2021, the parties stipulated to dismissal of the case without prejudice.
| 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. On May 25, 2021, the parties stipulated to dismissal of the case without prejudice. On May 26, 2021, the Court granted the stipulation.
| xv) | Twitter, Inc. v. VoIP-Pal.com Inc. Case No. 3-21-cv-02769 in the United States District Court, Northern District of California |
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.
On December 9, 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 |
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 10,880,721. 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 |
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 10,880,721. The case is pending.
| xviii) | 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 |
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 10,880,721. The case is pending.
| xix) | VoIP-Pal.com, Inc. v. Apple Inc. Case No. 6-21-cv-670 in the U.S. District Court, Western District of Texas |
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 10,880,721. On October 22, 2021, the parties stipulated to dismissal of the case without prejudice.
| xx) | 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 |
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 10,880,721. On October 13, 2021, the parties stipulated to dismissal of the case without prejudice.
| xxi) | VoIP-Pal.com, Inc. v. Verizon Comms., Inc. Case No. 6-21-cv-672 in the U.S. District Court, Western District of Texas |
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 10,880,721. The case is pending.
| xxii) | 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 |
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 10,880,721. The case is pending.
| 25 |
| xxiii) | Apple, Inc. v. VoIP-Pal.com Inc. Case No. 5:21-cv-5110 in the U.S. District Court, Northern District of California. |
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 10,880,721. On October 22, 2021, the parties stipulated to dismissal of the case without prejudice.
| xxiv) | 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. |
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 10,880,721. On October 13, 2021, the parties stipulated to dismissal of the case without prejudice.
| xxv) | 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. |
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 10,880,721. On October 15, 2021, the court stayed the case.
| xxvi) | VoIP-Pal.com Inc v Samsung Electronics Co, Ltd. et al Case No. 6-21-cv-1246 in US District Court, Western District of Texas |
On November 30, 2021, the Company filed a lawsuit in the U.S. District Court, Western District of Texas, against Samsung and related entities alleging infringement of U.S. Patent Nos. 8,630,234 and 10,880,721. The case is pending.
| xxvii) | VoIP-Pal.com Inc v Huawei Technologies Co, Ltd. et al Case No. 6-21-cv-1247 in US District Court, Western District of Texas |
On November 30, 2021, the Company filed a lawsuit in the U.S. District Court, Western District of Texas, against Huawei and related entities alleging infringement of U.S. Patent Nos. 8,630,234 and 10,880,721. The case is pending.
| xxviii) | Twitter, Inc. v. VoIP-Pal.com Inc. Case No. 3:21-cv-9773 in the U.S. District Court, Northern District of California |
On December 17, 2021, Twitter filed a declaratory judgment lawsuit against the Company in the United States District Court, Northern District of California, alleging non-infringement of U.S. Patent Nos. 8,630,234 and 10,880,721.
During the period ending March 31, 2022, on February 11, 2022, VoIP-Pal moved to dismiss this case for lack of jurisdiction. The case is pending.
Other Litigation
The Company is party to non-patent litigation cases as follows:
1. 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, 2021, 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.
During the six-month period ended March 31, 2022, the Court entered a judgment in favor of VoIP-Pal.com Inc and co-defendants, dismissing the case. It is uncertain if the Plaintiffs will appeal.
2. T K Investments, Inc. et al. (Plaintiff(s)) v VoIP-Pal.com Inc. et al (Defendant(s)) (Case No A-20-807835-C) filed in Clark County District Court.
During the year ended September 30, 2021, 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.
During the six-month period ended March 31, 2022, the Court entered a judgment in favor of VoIP-Pal.com Inc and co-defendants, dismissing the case. It is uncertain if the Plaintiffs will appeal.
3. Kashwise Global Funding, Inc. (Plaintiff) v VoIP-Pal.com Inc. (Defendant) (Case No CACE-20-005215) filed in Circuit Court in and for Broward County, Florida.
During the year ended September 30, 2020, the Plaintiff filed suit claiming that the Defendant had failed to pay the Plaintiff a fee for a third-party funding that did not close. The Defendant has filed a Response indicating that the complaint has no merit. The case is pending.
| 26 |
| 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 March 31, 2022, the Company issued 60,800,000 common shares priced at $0.005 per share for cash proceeds of $304,000 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 |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| 27 |
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: May 16, 2022 | By: /s/Emil Malak |
| Emil Malak | |
| Chief Executive Officer | |
| DATED: May 16, 2022 | By: /s/Kevin Williams |
| Kevin Williams | |
| Chief Financial Officer |
| 28 |
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: May 16, 2022
| /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: May 16, 2022
| /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 March 31, 2022 (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: May 16, 2022
| By: /s/Emil Malak | |
| Emil Malak | |
| Chief Executive Officer | |
| By: /s/Kevin Williams | |
| Kevin Williams | |
| Chief Financial Officer | |