VPLM 10-Q
Voip-pal.com Inc (VPLM)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended:
or
Commission
File Number:
(Exact name of Registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) | |
| (Address of principal executive offices) | ||
(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.
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).
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 ☐ | |||
| 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 ☐
As of August 14, 2023, the Registrant had shares of Common Stock outstanding.
TABLE OF CONTENTS
| PART I—FINANCIAL INFORMATION | 3 | |
| Item 1. | Financial Statements. | 3 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk. | 21 |
| Item 4. | Controls and Procedures. | 21 |
| PART II—OTHER INFORMATION | 22 | |
| Item 1. | Legal Proceedings. | 22 |
| Item 1A. | Risk Factors. | 23 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 23 |
| Item 3. | Defaults Upon Senior Securities. | 23 |
| Item 4. | Mine Safety Disclosures. | 23 |
| Item 5. | Other Information. | 23 |
| Item 6. | Exhibits. | 23 |
| 2 |
PART I—FINANCIAL INFORMATION
| Item 1. | Financial Statements. |
VOIP-PAL.com Inc.
INTERIM
CONSOLIDATED BALANCE SHEETS
(Unaudited – prepared by management)
As at June 30, 2023
(Expressed in U.S. Dollars)
June 30, 2023 | September 30, 2022 | |||||||
| ASSETS | ||||||||
| CURRENT | ||||||||
| Cash | $ | $ | ||||||
| Retainer (Note 5) | ||||||||
| Prepaid Expense | ||||||||
| NON-CURRENT | ||||||||
| Fixed assets (Note 6) | ||||||||
| Intellectual VoIP communications patent properties, net (Note 7) | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES | ||||||||
| CURRENT | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| TOTAL LIABILITIES | $ | |||||||
| STOCKHOLDERS’ equity | ||||||||
| SHARE CAPITAL (Note 10) | $ | $ | ||||||
| PREFERRED SHARE CAPITAL (Note 10) | ||||||||
| ADDITIONAL PAID-IN CAPITAL (Note 10) | ||||||||
| SHARES TO BE ISSUED (Note 10) | ||||||||
| DEFICIT | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
Nature and Continuance of Operations (Note 1)
Contingent Liabilities (Note 12)
The accompanying notes are an integral part of these interim consolidated financial statements
| 3 |
VOIP-PAL.com Inc.
INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(Unaudited – prepared by management)
(Expressed in U.S. Dollars)
| Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended | |||||||||||||
June 30, 2023 | June 30, 2022 | June 30, 2023 | June 30, 2022 | |||||||||||||
| EXPENSES | ||||||||||||||||
| Amortization (Note 6 & 7) | $ | $ | $ | $ | ||||||||||||
| Officers and Directors fees (Note 8) | ||||||||||||||||
| Legal fees | ||||||||||||||||
| Office & general | ||||||||||||||||
| Patent consulting fees | ||||||||||||||||
| Professional fees & services | ||||||||||||||||
| Stock-based compensation (Note 11) | ||||||||||||||||
| Gain on debt settlement | ( | ) | ||||||||||||||
| Total expenses | $ | $ | $ | $ | ||||||||||||
| LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted loss per common share | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted-average number of common shares outstanding, basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these interim consolidated financial statements
| 4 |
VOIP-PAL.com Inc.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited – prepared by management)
(Expressed in U.S. Dollars)
Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | |||||||
| Cash Flows used in Operating Activities | ||||||||
| Loss for the period | $ | ( | ) | $ | ( | ) | ||
| Add items not affecting cash: | ||||||||
| Shares issued for services | ||||||||
| Amortization | ||||||||
| Stock based compensation | ||||||||
| Gain on Settlement | ( | ) | ||||||
| Changes in non-cash working capital: | ||||||||
| Retainer | ( | ) | ||||||
| Accounts payable and accrued liabilities | ||||||||
| Prepaid expense | ( | ) | ||||||
| Cash Flows Used in Operations | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from private placement | ||||||||
| Cash Flows Provided by Financing Activities | ||||||||
| Increase in cash | ||||||||
| Cash, beginning of the period | ||||||||
| Cash, end of the period | $ | $ | ||||||
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 | Preferred Shares | Shares to be Issued | Additional Paid-in | |||||||||||||||||||||||||||||
| Number | Par Value | Number | Par Value | Value | Capital | Deficit | Total | |||||||||||||||||||||||||
| Balance at September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||
| Shares issued for private placement | - | |||||||||||||||||||||||||||||||
| Shares issued for services | - | |||||||||||||||||||||||||||||||
| Share based compensation | - | |||||||||||||||||||||||||||||||
| Loss for the period | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||
| Shares issued for private placement | - | ( | ) | |||||||||||||||||||||||||||||
| Share-based compensation | - | - | ||||||||||||||||||||||||||||||
| Loss for the period | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Shares issued for private placement | - | |||||||||||||||||||||||||||||||
| Shares issued for services | 121,611 | |||||||||||||||||||||||||||||||
| Share-based compensation | ||||||||||||||||||||||||||||||||
| Exercise of stock options | 25,729,725 | - | ( | ) | ||||||||||||||||||||||||||||
| Gain on settlement, issuance cancelled | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Loss for the period | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
The accompanying notes are an integral part of these interim consolidated financial statements
| 6 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
June 30, 2023
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
interim consolidated financial statements have been prepared on the basis of a going concern, which contemplates the realization of assets
and discharge of liabilities in the normal course of business. The Company is in various stages of product development and continues
to incur losses and, at June 30, 2023, had an accumulated deficit of $
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 some 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 an adverse effect on the Company’s ability to continue as a going concern.
COVID-19
In March 2020, the World Health Organization declared a global pandemic related to the COVID-19 coronavirus. Its impact on global economies has been far-reaching and businesses around the world are being forced to cease or limit operations for long or indefinite periods of time. Measures taken to contain the spread of the COVID-19 virus, including travel bans, quarantines, social distancing, and closures of non-essential services have triggered significant disruptions to businesses worldwide, resulting in an economic slowdown. Global stock markets have also experienced great volatility and significant declines. Governments and central banks have responded with monetary and fiscal interventions to stabilize economic conditions.
The duration and impact of the COVID-19 pandemic, as well as the effectiveness of government and central bank responses, remains unclear at this time. It is not possible to reliably estimate the duration and severity of the COVID-19 pandemic, nor its impact on the financial position and results of the Company in future periods. The Company is proceeding with its business activities as long as the work environment remains safe – at this point there has been minimal disruption to day-to-day operations resulting from health and safety measures. Disruptions and volatility in the global capital markets may increase the Company’s cost of capital and adversely impact access to capital.
| 7 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
June 30, 2023
NOTE 2. BASIS OF PRESENTATION
The accompanying interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).
NOTE 3. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
These interim consolidated financial statements have been prepared on a consolidated basis and include the accounts of the Company and its wholly owned subsidiary, Digifonica (International) Limited. All intercompany transactions and balances have been eliminated. As at June 30, 2023, Digifonica had no activities.
Use of Estimates
The preparation of these interim consolidated financial statements required management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from these estimates. Where estimates have been used, financial results as determined by actual events could differ from those estimates.
Cash
Cash
consists of cash on hand, cash held in trust, and monies held in checking and savings accounts. The Company had $
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 –
Intangible Assets
Intangible assets, consisting of VoIP communication patent intellectual properties (IP) are recorded at cost and amortized over the assets estimated life on a straight-line basis. Management considers factors such as remaining life of the patents, technological usefulness and other factors in estimating the life of the assets.
The carrying value of intangible assets are reviewed for impairment by management of the Company at least annually or upon the occurrence of an event which may indicate that the carrying amount may be less than its fair value. If impaired, the Company will write-down such impairment. In addition, the useful life of the intangible assets will be evaluated by management at least annually or upon the occurrence of an event which may indicate that the useful life may have changed.
Fair Value of Financial Instruments
FASB ASC 820, Fair Value Measurement, defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity.
The Company classifies financial assets and liabilities as held-for-trading, available-for-sale, held-to-maturity, loans and receivables or other financial liabilities depending on their nature. Financial assets and financial liabilities are recognized at fair value on their initial recognition, except for those arising from certain related party transactions which are accounted for at the transferor’s carrying amount or exchange amount.
Financial assets and liabilities classified as held-for-trading are measured at fair value, with gains and losses recognized in net income. Financial assets classified as held-to-maturity, loans and receivables, and financial liabilities other than those classified as held-for-trading are measured at amortized cost, using the effective interest method of amortization. Financial assets classified as available-for-sale are measured at fair value, with unrealized gains and losses being recognized as other comprehensive income until realized, or if an unrealized loss is considered other than temporary, the unrealized loss is recorded in income.
| 8 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
June 30, 2023
NOTE 3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
U.S. GAAP establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined as the amount that would be received for an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes the following fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:
Level 1: Quoted prices in active markets for identical assets and liabilities.
Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3: Unobservable inputs supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The fair value of cash is classified as Level 1 at June 30, 2023 and September 30, 2022.
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 stock options and share purchase 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 June 30, 2023 and the year ended September 30, 2022, there were no potentially dilutive securities included in the calculation of weighted-average common shares outstanding.
Derivatives
We account for derivatives pursuant to ASC 815, Accounting for Derivative Instruments and Hedging Activities. All derivative instruments are recognized in the consolidated financial statements and measured at fair value regardless of the purpose or intent for holding them. We determine fair value of warrants and other option type instruments based on option pricing models. The changes in fair value of these instruments are recorded in income or expense.
The Company recognizes compensation expenses for all stock-based payments made to employees, directors and others based on the estimated fair values of its common stock on the date of issuance.
The Company determines the fair value of the share-based compensation payments granted as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either the date at which a commitment for performance to earn the equity instrument is reached or the date the performance is complete.
The Company recognizes compensation expense for stock awards with service conditions on a straight-line basis over the requisite service period, which is included in operations. Stock option expense is recognized over the option’s vesting period.
| 9 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
June 30, 2023
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
$
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.
NOTE 4. PURCHASE OF DIGIFONICA
The Company acquired Digifonica (International) Limited in December 2013 by way of the Share Transfer Agreement (the “STA”), pursuant to which the Company purchased % of the shares 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
STA included an anti-dilution clause (the “Anti-Dilution Clause”) that required the Company to maintain the Seller’s
percentage ownership of the Company at
During the year ended September 30, 2021, on April 12, 2021, the STA 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, both in exchange for warrants to purchase common shares at a price of $ for a period of ten years from the date of issue.
During
the period ended June 30, 2023, on April 23, 2023, the STA was further amended to: a) retroactively reinstate the Anti-Dilution
Clause that had been nullified by the amendments made to the STA in April 2021 so that the Company is now required to 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
original Anti-Dilution Clause; and b) require the Company to issue Preferred shares with super-voting rights in a sufficient amount
in order for the Seller to maintain his
| 10 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
June 30, 2023
NOTE 5. RETAINER
The
Company has retainers with certain of its professional service providers. The balance due on these prepaid retainers was $
NOTE 6. FIXED ASSETS
A summary of the Company’s fixed assets as of June 30, 2023 and September 30, 2022 is as follows:
June 30, 2023 | September 30, 2022 | |||||||
| Office furniture & computers | $ | $ | ||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Net book value | $ | $ | ||||||
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 (
June 30, 2023 | September 30, 2022 | |||||||
| VoIP Intellectual property and patents | $ | $ | ||||||
| Accumulated amortization | ( | ) | ( | ) | ||||
| Net book value | $ | $ | ||||||
There were no disposal of any intangible assets in the periods presented.
NOTE 8. RELATED PARTY TRANSACTIONS AND KEY MANAGEMENT COMPENSATION
The Company compensates its key management personnel to operate its business in the normal course. Key management includes the Company’s senior officers and members of its Board of Directors.
Compensation paid or accrued to key management for services during the nine-month periods ended June 30, 2023 and 2022 includes:
June 30, 2023 | June 30, 2022 | |||||||
| Management fees paid to the CEO | $ | $ | ||||||
| Management fees paid to the CFO | ||||||||
| Fees paid to Directors | ||||||||
| $ | $ | |||||||
At
June 30, 2023, included in prepaid expense is $
During
the nine-month period ended June 30, 2023, a director of the Company forgave $
NOTE 9. SUPPLEMENTAL CASH FLOW INFORMATION
During the period ended June 30, 2023, the Company paid $ (2022 - $) in interest or income taxes.
There were no non-cash investing or financing transactions during the nine-month periods ended June 30, 2023 and 2022.
| 11 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
June 30, 2023
NOTE 10. SHARE CAPITAL
Capital Stock Authorized and Issued as at June 30, 2023:
Common Voting Shares
Authorized: (September 30, 2022 – ) with a par value of $ each
Issued: (September 30, 2022 – )
Preferred Shares
Authorized: (September 30, 2022 – ) with a par value of $ each
Issued: (September 30, 2022 – )
Issues during the nine-month period ended June 30, 2023
During the nine-month period ended June 30, 2023, the Company issued:
| - |
common shares priced at $ per share for cash proceeds of $ |
| - |
| - | Series A Preferred shares for services with a value of $ | |
| - | Series A Preferred shares pursuant to the Anti-Dilution Clause
of the STA with a value of $ |
| - | common shares for services with a value of $. |
Issues during the year ended September 30, 2022
During the year ended September 30, 2022, the Company:
| - | issued
common shares at $ per share for cash proceeds of $ |
| - | issued
common shares for services with a value of $ |
| - | issued
|
| - | granted
options to purchase common shares to its consultants and advisors,
exercisable at a price of $ |
| - | returned to treasury options to purchase common shares at a price of $ from certain of its consultants and advisors as the option term had expired; and |
| - | issued preferred shares for services with a value of $, which is recorded as stock-based compensation. The preferred shares were issued for super-voting rights and are not convertible, exchangeable for common shares, nor redeemable for cash. The preferred shares cannot be sold, exchanged or transferred to another party. |
Subsequent Issues
Subsequent to the nine-month period ended June 30, 2023 the Company had issued:
| - |
common shares at a price of $ per share for cash proceeds of $ |
| - | common shares at a price of $ per share from an exercise of common share purchase options. |
Shares to be Issued
As
at June 30, 2023, there are (September 30, 2022 – ) common shares to be issued valued at $ (September 30, 2022 – $). During the nine-month period ended June 30, 2023, the Company entered
into settlement agreements with two vendors pursuant to which they relinquished their aggregate shares to be issued in exchange
for cash totaling $
| 12 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
June 30, 2023
Common Share Purchase Warrants
As
of June 30, 2023, there are
The following table summarizes the Company’s warrant transactions:
| Number of warrants | Weighted average exercise price | |||||||
| Balance September 30, 2021 | $ | |||||||
| Issued May 30, 2022 | ||||||||
| Balance September 30, 2022 | ||||||||
| Issued June 30, 2023 | ||||||||
| Balance June 30, 2023 | $ | |||||||
Warrants Outstanding | Exercise Price | Remaining Contractual Life (Yrs) | Number of Warrants Currently Exercisable | |||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
During the nine-month period ended June 30, 2023, the Company:
| - | on
April 23, 2023, re-priced |
| - | on
April 24, 2023, changed the vesting provisions and exercise price of warrants
granted on May 30, 2022, to fully vest and re-price all such warrants from $ |
| - | on
June 30, 2023, issued |
During
the nine-month period ended June 30, 2023, on June 30, 2023, the Company issued
During the year ended September
30, 2022, on May 30, 2022, the Company issued
During
the year ended September 30, 2021, on April 16, 2021, the Company issued
| 13 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
June 30, 2023
NOTE 11. STOCK-BASED COMPENSATION (CONT’D)
Common Share Purchase Options
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 % 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, 2021 | ||||||||
| Granted | ||||||||
| Cancelled / Expired | ( | ) | ||||||
| Balance September 30, 2022 | ||||||||
| Granted | ||||||||
| Exercised | ( | ) | ||||||
| Cancelled / Expired | ( | ) | ||||||
| Balance June 30, 2023 | ||||||||
Options Outstanding | Exercise Price | Remaining Contractual Life (Yrs) | Number of Options Currently Exercisable | |||||||||||
| $ | ||||||||||||||
During the nine-month period ended June 30, 2023, the Company:
| - | on
April 23, 2023, re-priced all its previously issued outstanding options to be exercisable
at $ |
| - | on May 31, 2023, granted options to purchase common shares at a price of $ per share to its directors, consultants and advisors. |
During
the period ended June 30, 2023, on May 31, 2023, the Company granted options to purchase common shares at a price of $to its consultants and advisors. The options
are exercisable for a period of from the date of grant, with options vesting on the date of the option grant,
options vesting on May 31, 2024, and options vesting on May 31, 2025. The following
assumptions were used for the Black-Scholes valuation of stock options on grant date as follows: risk-free rate of %,
expected life of , annualized historical volatility of %
and a dividend rate of %.
Expected volatilities are based on the historical volatility of the Company’s stock and other factors. During the nine-month period
ended June 30, 2023, share-based compensation cost of $
During the year ended
September 30, 2022, on May 30, 2022, the Company granted
options to purchase
common shares at a price of $
to its consultants and advisors. The options are exercisable for a period of from the date of grant, with On April 24, 2023, the stock
options issued on May 30, 2022 were re-priced from $
| 14 |
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
June 30, 2023
NOTE 11. STOCK-BASED COMPENSATION (CONT’D)
Common Share Purchase Options (cont’d)
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 are exercisable for a period of from the date of grant and are all now fully
vested. On April 24, 2023, the stock options issued on April 23, 2021 were re-priced from $
During
the nine months ended June 30, 2023,
During
the nine-month period ended June 30, 2023, total compensation cost of $
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. Facebook, Inc. et al. Case No. 6-20-cv-00267 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 Facebook, Inc. and certain related entities, alleging infringement of U.S. Patent No. 10,218,606. On July 22, 2022, the Western District of Texas granted Facebook’s motion to transfer the case to the Northern District of California. The case number is Case No. 3:22-cv-4279-JD. On June 6, 2023, the parties stipulated to the dismissal of the case. On June 7, 2023, the court dismissed the case.
| ii. | VoIP-Pal.com Inc. v. Google, LLC fka Google, Inc. Case No. 6-20-cv-00269 in 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. On September 21, 2022, the Western District of Texas granted Google’s motion to transfer the case to the Northern District of California. The case number is Case No. 3:22-cv-5419-JD. On June 6, 2023, the parties stipulated to the dismissal of the case. On June 7, 2023, the court dismissed the case.
| iii. | 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.
| iv. | 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 September 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. On May 31, 2022, the Western District of Texas court granted Facebook and WhatsApp’s motion to transfer the case to the Northern District of California. The case number is Case No. 3:22-cv-3202-JD. On June 6, 2023, the parties stipulated to the dismissal of the case. On June 7, 2023, the court dismissed the case.
| v. | VoIP-Pal.com, Inc. v. Google, LLC Case No. 6-21-cv-667 in the United States District Court, Western District of Texas |
On September 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. On May 31, 2022, the Western District of Texas granted Google’s motion to transfer the case to the Northern District of California. The case number is Case No. 3:22-cv-3199-JD. On June 6, 2023, the parties stipulated to the dismissal of the case. On June 7, 2023, the court dismissed the case.
| 15 |
| vi. | 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 September 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. On June 26, 2023, the parties stipulated to the dismissal of the case. On June 29, 2023, the court closed the case.
| vii. | 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 September 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.
| viii. | 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 September 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.
| ix. | VoIP-Pal.com Inc v Samsung Electronics Co. et al Case No. 6-21-cv-1246 in U.S. 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 & related entities alleging infringement of U.S. Patent Nos. 8,630,234 & 10,880,721. On June 21, 2023, the parties stipulated to the dismissal of the case and the court closed the case.
| x. | 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. On January 18, 2023, the Western District of Texas granted Huawei’s motion to transfer the case to the Northern District of Texas. The case no. is 3:23-cv-00151. The case is pending.
| xi. | 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. On June 6, 2023, the parties stipulated to the dismissal of the case. On June 7, 2023, the court dismissed the case.
Non-Patent Litigation
The Company is party to the following non-patent litigation case:
Locksmith Financial Corporation, Inc. et al. (Plaintiff(s)) v VoIP-Pal.com Inc. et al (Defendant(s)) (Case No A-20-807745-C) filed in Clark County District Court.
On January 1, 2020, the Plaintiffs filed suit in Nevada District Court claiming that they were owed 95,832,000 Voip-Pal common shares from a previous case involving the Plaintiff and the Defendant that had been through a jury trial in 2019, in which the jury had made an award to the Plaintiff that was monetary only, and did not include said shares - following the jury’s decision in the 2019 trial, the Plaintiff accepted the award and waived their right to appeal. Voip-Pal vigorously disputed the Plaintiff’s 2020 claims on the basis of claim preclusion (the 2020 claims were addressed in the previous action in 2019 and are now precluded); that Plaintiffs’ claims are untimely, and that the Plaintiffs no longer have standing to bring their claims.
During the year ended September 30, 2022, the Court entered a judgment in favor of VoIP-Pal.com Inc and co-defendants, dismissing the 2020 case. The Plaintiffs filed an appeal with the Nevada Supreme Court.
During the nine-month period ended June 30, 2023, following a hearing of the appeal, the Nevada Supreme Court ruled to reverse the lower court’s judgment in favor of Voip-Pal and has ordered that the case be remanded back to the lower court for further proceedings. The Defendants (Voip-Pal et al) have filed a motion to the Supreme Court for reconsideration. 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
As
at June 30, 2023, no bonusable event has occurred and there was no Performance Bonus payable.
| 16 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following management’s discussion and analysis (MD&A) should be read in conjunction with our interim consolidated financial statements for the nine months ended June 30, 2023 and notes thereto appearing elsewhere in this report, and our audited consolidated financial statements for the year ended September 30, 2022 and notes thereto.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This MD&A for the period ending June 30, 2023 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 benefiting 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.
| 17 |
Comparison of the Three Months Ending June 30, 2023 and 2022
Three months ending June 30 | Increase/ | |||||||||||||||
| 2023 | 2022 | (Decrease) | Percent | |||||||||||||
| General and administrative expenses | (1,345,283 | ) | (289,412 | ) | 1,055,871 | 365 | % | |||||||||
| Amortization & depreciation | (35,115 | ) | (35,115 | ) | - | 0 | % | |||||||||
| Stock based compensation | (19,847,900 | ) | (2,271,022 | ) | 17,576,878 | 774 | % | |||||||||
| Other items | - | - | - | - | ||||||||||||
| Net loss | $ | (21,228,298 | ) | $ | (2,595,549 | ) | $ | 18,632,749 | 718 | % | ||||||
Comparison of the Nine Months Ending June 30, 2023 and 2022
Nine months ending June 30 | Increase/ | |||||||||||||||
| 2023 | 2022 | (Decrease) | Percent | |||||||||||||
| General and administrative expenses | (2,575,587 | ) | (926,706 | ) | 1,648,881 | 178 | % | |||||||||
| Amortization & depreciation | (105,344 | ) | (105,344 | ) | - | 0 | % | |||||||||
| Stock based compensation | (19,998,706 | ) | (2,326,772 | ) | 17,671,934 | 760 | % | |||||||||
| Other items | 59,420 | - | 59,420 | 100 | % | |||||||||||
| Net loss | $ | (22,620,217 | ) | $ | (3,358,822 | ) | $ | 19,261,395 | 573 | % | ||||||
REVENUES, COST OF REVENUES AND GROSS MARGIN
The Company had no revenues, cost of revenues or gross margin for the three or nine months ending June 30, 2023 and 2022.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the three months ending June 30, 2023 totaled $1,345,283 compared to $289,412 during the same period in 2022. The increase in general and administrative expenses of $1,055,871, or 365% more than the previous year, was primarily due to an increase in legal and professional fees and services.
General and administrative expenses for the nine months ending June 30, 2023 totaled $2,575,588 compared to $926,706 during the same period in 2022. The increase in general and administrative expenses of $1,648,881 or 178% more than the previous year, was primarily due to an increase in legal and professional fees and services.
STOCK BASED COMPENSATION
Stock-based compensation for the three months ending June 30, 2023 totaled $19,847,900 compared to $2,271,022 during the same period in 2022. The increase in stock-based compensation of $17,576,878, or 774% more than the previous year, was primarily due to repricing of the outstanding options from $0.025 to $0.005, repricing and vesting of 2022 warrants of 410,000,000 and additional options and warrant issued and vested during the nine months ended June 30, 2023.
Stock-based compensation for the nine months ending June 30, 2023 totaled $19,998,706 compared to $2,326,772 during the same period in 2022. The increase in stock-based compensation of $17,671,934, or 760% more than the previous years, was primarily due to repricing and vesting of 2022 warrants of 410,000,000 and additional options and warrant issued and vested during the nine months ended June 30, 2023.
AMORTIZATION AND DEPRECIATION
Amortization of intellectual VoIP communications patent properties and depreciation of capital equipment for the three months ending June 30, 2023 totaled $35,115 compared to $35,115 during the same period in 2022. There was no material change in the amount of amortization or depreciation expense during the three months ending June 30, 2023 and 2022.
Amortization of the intellectual VoIP communications patent properties and depreciation of fixed assets for the nine months ending June 30, 2023 totaled $105,344 compared to $105,344 during the same period in 2022. There was no material difference between depreciation and amortization expense for the nine months ending June 30, 2023 as compared to the same period in 2022.
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.
| 18 |
OTHER ITEMS
Other items for the three months ending June 30, 2023, totaled $Nil, compared to $Nil during the same periods in 2022.
Other items for the nine months ending June 30, 2023, totaled $59,420, compared to $Nil during the same periods in 2022. The increase in other items of $59,420 was primarily due to the Company entering into settlement agreements with vendors pursuant to which they relinquished debt owed to the Company.
INTEREST EXPENSE
The Company had no financing or interest costs for the three and nine months ending June 30, 2023 and 2022.
NET LOSS
The Company reported a net loss of $21,228,298 for the three months ending June 30, 2023 compared to a net loss of $2,595,549 for the same period in 2022. The increase in net loss of $18,632,749, or 718% more than the same period in 2022, was primarily due to an increase in in stock-based compensation and legal and professional fees.
The Company reported a net loss of $22,620,217 for the nine months ended June 30, 2023 compared to a net loss of $3,358,822 for the same period in 2022. The increase in net loss of $19,261,396, or 573% more than same period in 2022 was due primarily to an increase in legal and professional fees.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2023, the Company had an accumulated deficit of $92,696,796 as compared to an accumulated deficit of $69,742,985 at June 30, 2022. As of June 30, 2023, the Company had working capital of $1,750,063 as compared to working capital of $55,715 at June 30, 2022. The increase in the Company’s working capital of $1,694,348 is due to proceeds received from the private placement of the Company’s stock.
Net cash used by operations for the nine months ending June 30, 2023 and 2022 was $2,515,648 and $816,226 respectively. The increase in net cash used for operations for the nine months ending June 30, 2023 as compared to the nine months ending June 30, 2022 was primarily due to an increase in legal fees and professional services.
Net cash used in investing activities for the nine months ending June 30, 2023 and 2022 was $Nil. Net cash provided from financing activities for the nine months ending June 30, 2023 and 2022 was $4,121,600 and $871,500, respectively. The increase in net cash provided by financing activities was due to equity raised from private placements during the nine months ending June 30, 2023.
Liquidity
The Company primarily finances its operations from cash received through the private placement of its common stock 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, and also 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 members of management, a director and several consultants. 30,000,000 of the issued Bonus Shares continue to be restricted from trading under Rule 144 as well as subject to a voluntary lock-up agreement under which the shares cannot be sold or transferred by the holders until such time as the Company has met the requirements of the bonusable event as described above.
As at June 30, 2023, no bonusable event has occurred and there is no Performance Bonus payable.
| 19 |
Impact of Inflation
We believe that inflation has not had a material impact on our results of operations for the nine months ending June 30, 2023. 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.
| 20 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
As a smaller reporting company, we are not required to provide the information required by this Item.
| Item 4. | Controls and Procedures. |
Evaluation of Disclosure Controls and Procedures
Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of June 30, 2023. 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 June 30, 2023:
| 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 June 30, 2023 that have materially affected or are reasonably likely to materially affect such controls.
| 21 |
PART II—OTHER INFORMATION
| Item 1. | Legal Proceedings. |
Other than noted below, there have been no material developments during the current quarter for our legal proceedings that were disclosed in our registration statement on Form 10 filed on April 22, 2016. For a full disclosure of legal proceedings, please reference our Form 10 registration or Note 12 of the Financial Statements contained in this report.
Patent Litigation
The Company is party to patent litigation cases as follows:
| 1. | VoIP-Pal.com Inc. v. Facebook, Inc. et al. Case No. 6-20-cv-00267 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 Facebook, Inc. and certain related entities, alleging infringement of U.S. Patent No. 10,218,606. On July 22, 2022, the Western District of Texas granted Facebook’s motion to transfer the case to the Northern District of California. The case number is Case No. 3:22-cv-4279-JD. On June 6, 2023, the parties stipulated to the dismissal of the case. On June 7, 2023, the court dismissed the case.
| 2. | VoIP-Pal.com Inc. v. Google, LLC fka Google, Inc. Case No. 6-20-cv-00269 in 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. On September 21, 2022, the Western District of Texas granted Google’s motion to transfer the case to the Northern District of California. The case number is Case No. 3:22-cv-5419-JD. On June 6, 2023, the parties stipulated to the dismissal of the case. On June 7, 2023, the court dismissed the case.
| 3. | 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.
| 4. | 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 September 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. On May 31, 2022, the Western District of Texas court granted Facebook and WhatsApp’s motion to transfer the case to the Northern District of California. The case number is Case No. 3:22-cv-3202-JD. On June 6, 2023, the parties stipulated to the dismissal of the case. On June 7, 2023, the court dismissed the case.
| 5. | VoIP-Pal.com, Inc. v. Google, LLC Case No. 6-21-cv-667 in the United States District Court, Western District of Texas |
On September 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. On May 31, 2022, the Western District of Texas granted Google’s motion to transfer the case to the Northern District of California. The case number is Case No. 3:22-cv-3199-JD. On June 6, 2023, the parties stipulated to the dismissal of the case. On June 7, 2023, the court dismissed the case.
| 6. | 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 September 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. On June 26, 2023, the parties stipulated to the dismissal of the case. On June 29, 2023, the court closed the case.
| 7. | 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 September 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.
| 8. | 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 September 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.
| 9. | VoIP-Pal.com Inc v Samsung Electronics Co. et al Case No. 6-21-cv-1246 in U.S. 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 & related entities alleging infringement of U.S. Patent Nos. 8,630,234 & 10,880,721. On June 21, 2023, the parties stipulated to the dismissal of the case and the court closed the case.
| 10. | 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. On January 18, 2023, the Western District of Texas granted Huawei’s motion to transfer the case to the Northern District of Texas. The case no. is 3:23-cv-00151. The case is pending.
| 11. | 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. On June 6, 2023, the parties stipulated to the dismissal of the case. On June 7, 2023, the court dismissed the case.
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Other Litigation
The Company is party to the following non-patent litigation case:
Locksmith Financial Corporation, Inc. et al. (Plaintiff(s)) v VoIP-Pal.com Inc. et al (Defendant(s)) (Case No A-20-807745-C) filed in Clark County District Court.
On January 1, 2020, the Plaintiffs filed suit in Nevada District Court claiming that they were owed 95,832,000 Voip-Pal common shares from a previous case involving the Plaintiff and the Defendant that had been through a jury trial in 2019, in which the jury had made an award to the Plaintiff that was monetary only, and did not include said shares - following the jury’s decision in the 2019 trial, the Plaintiff accepted the award and waived their right to appeal. Voip-Pal vigorously disputed the Plaintiff’s 2020 claims on the basis of claim preclusion (the 2020 claims were addressed in the previous action in 2019 and are now precluded); that Plaintiffs’ claims are untimely, and that the Plaintiffs no longer have standing to bring their claims.
During the year ended September 30, 2022, the Court entered a judgment in favor of VoIP-Pal.com Inc and co-defendants, dismissing the 2020 case. The Plaintiffs filed an appeal with the Nevada Supreme Court.
During the nine-month period ended June 30, 2023, following a hearing of the appeal, the Nevada Supreme Court ruled to reverse the lower court’s judgment in favor of Voip-Pal and has ordered that the case be remanded back to the lower court for further proceedings. The Defendants (Voip-Pal et al) have filed a motion to the Supreme Court for reconsideration. The case is pending.
| Item 1A. | Risk Factors. |
As a smaller reporting company, we are not required to provide the information required by this Item.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
The transactions described in this section were exempt from securities registration as provided by Section 4(a)(2) of the Securities Act for transactions not involving a public offering for sales within the United States and by Regulation S of the Securities Act for sales made outside of the United States.
During the quarterly period ended June 30, 2023, the Company issued:
| - | 427,950,000 common shares priced at $0.005 per share for cash proceeds of $2,139,750 from a private placement of common shares; |
| - | 12,500,000 common shares priced at $0.005 per share for services valued at $62,500; and |
| - | 138,420 preferred shares with a value of $138. |
| 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) |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| DATED: August 14, 2023 | By: | /s/ Emil Malak |
| Emil Malak | ||
| Chief Executive Officer | ||
| DATED: August 14, 2023 | By: | /s/ Jin Kuang |
| Jin Kuang | ||
| Chief Financial Officer |
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