Nature
and Continuance of Operations (Note 1)
Contingent
Liabilities (Note 12)
The
accompanying notes are an integral part of these consolidated financial statements.
INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
For
the Three and Nine Months Ended June 30, 2016
(Unaudited
– prepared by management)
(Expressed
in U.S. Dollars)
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
Three Months
|
|
Nine Months
|
|
Nine Months
|
|
|
Ended
|
|
Ended
|
|
Ended
|
|
Ended
|
|
|
June 30, 2016
|
|
June 30, 2015
|
|
June 30, 2016
|
|
June 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization (Note 5)
|
|
$
|
25,168
|
|
|
$
|
27,718
|
|
|
$
|
75,540
|
|
|
$
|
83,154
|
|
Officers and Directors Fees (Note 6)
|
|
|
8,571
|
|
|
|
54,500
|
|
|
|
51,000
|
|
|
|
129,528
|
|
Legal fees (Note 6)
|
|
|
59,722
|
|
|
|
136,423
|
|
|
|
290,358
|
|
|
|
261,531
|
|
Office & general
|
|
|
42,024
|
|
|
|
28,077
|
|
|
|
152,163
|
|
|
|
79,760
|
|
Patent application expense
|
|
|
186,975
|
|
|
|
—
|
|
|
|
362,289
|
|
|
|
—
|
|
Professional fees & services (Note 6)
|
|
|
256,630
|
|
|
|
23,420
|
|
|
|
396,002
|
|
|
|
40,669
|
|
Stock-based compensation (Note 10)
|
|
|
398,044
|
|
|
|
|
|
|
|
398,044
|
|
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
977,134
|
|
|
|
270,138
|
|
|
|
1,725,396
|
|
|
|
594,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS AND COMPREHENSIVE LOSS
|
|
$
|
(977,134
|
)
|
|
$
|
(270,138
|
)
|
|
$
|
(1,725,396
|
)
|
|
$
|
(594,642
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
1,050,830,868
|
|
|
|
994,885,711
|
|
|
|
1,050,830,868
|
|
|
|
994,885,711
|
|
The
accompanying notes are an integral part of these consolidated financial statements
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For
the Three and Nine Months Ended June 30, 2016
(Unaudited
– prepared by management)
(Expressed
in U.S. Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30
|
|
|
Nine Months Ended
June 30
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(977,134
|
)
|
|
$
|
(270,138
|
)
|
|
$
|
(1,725,396
|
)
|
|
$
|
(594,642
|
)
|
Add items not affecting cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services
|
|
|
92,400
|
|
|
|
18,150
|
|
|
|
147,400
|
|
|
|
52,588
|
|
Amortization
|
|
|
25,168
|
|
|
|
27,718
|
|
|
|
75,540
|
|
|
|
83,154
|
|
Stock-based compensation
|
|
|
398,044
|
|
|
|
—
|
|
|
|
398,044
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in non-cash working capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
(43,897
|
)
|
|
|
7,424
|
|
|
|
(26,070
|
)
|
|
|
7,425
|
|
Prepaid Expense
|
|
|
(67,500
|
)
|
|
|
—
|
|
|
|
(67,500
|
)
|
|
|
—
|
|
Cash Flows used in Operations
|
|
|
(572,919
|
)
|
|
|
(216,846
|
)
|
|
|
(1,197,982
|
)
|
|
|
(451,475
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in Intangible Assets
|
|
|
—
|
|
|
|
—
|
|
|
|
(144,408
|
)
|
|
|
—
|
|
Cash Flows Used In Investing Activities
|
|
|
—
|
|
|
|
—
|
|
|
|
(144,408
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from convertible debentures
|
|
|
241,974
|
|
|
|
177,000
|
|
|
|
482,975
|
|
|
|
394,250
|
|
Proceeds from common shares issued
|
|
|
269,000
|
|
|
|
—
|
|
|
|
269,000
|
|
|
|
—
|
|
Cash
Flows from Financing Activities
|
|
|
510,974
|
|
|
|
177,000
|
|
|
|
751,975
|
|
|
|
394,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in cash
|
|
|
(61,945
|
)
|
|
|
(39,846
|
)
|
|
|
(590,417
|
)
|
|
|
(57,225
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, beginning of the period
|
|
|
244,801
|
|
|
|
65,371
|
|
|
|
773,275
|
|
|
|
82,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, end of the period
|
|
$
|
182,856
|
|
|
$
|
25,525
|
|
|
$
|
182,856
|
|
|
$
|
25,525
|
|
Supplemental
cash flow information – Note 7
The
accompanying notes are an integral part of these consolidated financial statements
INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited
– prepared by management)
(Expressed
in U.S. dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares to be
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Common
Shares
|
|
|
Issued
|
|
|
Paid-in
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Par Value
|
|
|
Value
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
Balance at September 30, 2014
|
|
|
986,500,570
|
|
|
$
|
863,134
|
|
|
$
|
—
|
|
|
$
|
26,738,696
|
|
|
$
|
(26,550,270
|
)
|
|
$
|
1,051,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for debt conversion
|
|
|
7,382,000
|
|
|
|
7,382
|
|
|
|
—
|
|
|
|
364,718
|
|
|
|
—
|
|
|
|
372,100
|
|
Common shares issued for services
|
|
|
1,003,141
|
|
|
|
1,003
|
|
|
|
—
|
|
|
|
49,535
|
|
|
|
—
|
|
|
|
50,538
|
|
Net loss for the period
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(594,642
|
)
|
|
|
(594,642
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2015
|
|
|
994,885,771
|
|
|
$
|
871,519
|
|
|
$
|
—
|
|
|
$
|
27,152,949
|
|
|
$
|
(27,144,912
|
)
|
|
$
|
879,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for debt conversion
|
|
|
18,648,930
|
|
|
|
18,649
|
|
|
|
91,721
|
|
|
|
902,434
|
|
|
|
—
|
|
|
|
1,012,804
|
|
Common shares issued for services
|
|
|
6,123,727
|
|
|
|
6,124
|
|
|
|
755,000
|
|
|
|
302,227
|
|
|
|
—
|
|
|
|
1,063,351
|
|
Common shares issued for Anti-dilution Clause (Note 4)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net loss for the period
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,017,126
|
)
|
|
|
(1,017,126
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2015
|
|
|
1,019,658,368
|
|
|
$
|
896,292
|
|
|
$
|
846,721
|
|
|
$
|
28,357,610
|
|
|
$
|
(28,162,038
|
)
|
|
$
|
1,938,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued in a private placement
|
|
|
6,725,000
|
|
|
|
6,725
|
|
|
|
—
|
|
|
|
262,275
|
|
|
|
—
|
|
|
|
269,000
|
|
Common shares issued for debt conversion
|
|
|
9,147,500
|
|
|
|
9,147
|
|
|
|
(87,000
|
)
|
|
|
560,828
|
|
|
|
—
|
|
|
|
482,975
|
|
Common shares issued for services
|
|
|
5,300,000
|
|
|
|
5,300
|
|
|
|
—
|
|
|
|
142,100
|
|
|
|
—
|
|
|
|
147,400
|
|
Common shares issued for Anti-dilution Clause (Note 4)
|
|
|
10,000,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Share purchase options granted (Note 10)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
398,044
|
|
|
|
—
|
|
|
|
398,044
|
|
Net loss for the period
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,725,396
|
)
|
|
|
(1,725,396
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2016
|
|
|
1,050,830,868
|
|
|
$
|
917,464
|
|
|
$
|
759,721
|
|
|
$
|
29,720,857
|
|
|
$
|
(29,887,434
|
)
|
|
$
|
1,510,608
|
|
The
accompanying notes are an integral part of these consolidated financial statements
NOTES TO THE INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited – prepared by management)
June 30, 2016
(Expressed in
U.S. Dollars)
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 10900 NE 4
th
Street, Suite 2300, Bellevue, Washington in the United States of America.
Since March 2004, the Company has been developing
technology and patents related to VoIP-related processes. All business activities prior to March 2004 have been abandoned and written
off to deficit.
In December 2013, the Company completed the acquisition
of Digifonica (International) Limited (“Digifonica”), a private company incorporated on September 7, 2004 in Gibraltar.
These interim condensed 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, 2016, had an accumulated deficit of $29,887,434 (September 30, 2015 - $28,162,038). 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 may cast significant 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.
NOTE 2.
|
BASIS OF PRESENTATION
|
The accompanying unaudited interim condensed consolidated
financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission
(“SEC”). Certain information and footnote disclosures normally included in the consolidated financial statements prepared
in accordance with generally accepted accounting principles of the United States of America (“US GAAP”) have been condensed
or omitted pursuant to such SEC rules and regulations. These interim condensed consolidated financial statements should be read
in conjunction with the audited consolidated financial statements for the year ended September 30, 2015. Operating results for
the nine-month period ended June 30, 2016 may not necessarily be indicative of the results for the year ending September 30, 2016.
The accompanying interim condensed consolidated financial statements have been prepared in accordance with US GAAP.
NOTE 3.
|
SIGNIFICANT ACCOUNTING POLICIES
|
Principles of Consolidation
These interim condensed consolidated financial
statements have been prepared on a consolidated basis and include the accounts of the Company and its wholly owned subsidiary Digifonica.
All intercompany transactions and balances have been eliminated. As at June 30, 2016, Digifonica had no activities.
Use of Estimates
The preparation of these interim condensed 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 and monies held in
checking and savings accounts. The Company had $182,856 and $773,275 in cash on June 30, 2016 and September 30, 2015, respectively.
VOIP-PAL.com
Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited – prepared by management)
June 30, 2016
(Expressed
in U.S. Dollars)
NOTE 3.
|
SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
|
Intangible Assets
Intangible assets, consisting of Intellectual VoIP
communication patent properties 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.
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 that are 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, 2016 and September 30, 2015.
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 expenses are classified
as other financial liabilities, and have a fair value approximating their carrying value, due to their short-term nature.
VOIP-PAL.com
Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited – prepared by management)
June 30, 2016
(Expressed in
U.S. Dollars)
|
NOTE 3.
|
SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
|
Income Taxes
Deferred income taxes have been provided for temporary
differences between financial statement and income tax reporting under the asset and liability method, using expected tax rates
and laws that are expected to be in effect when the differences are expected to reverse. A valuation allowance is provided when
realization is not considered more likely than not.
The Company’s policy is to classify income
tax assessments, if any, for interest expense and for penalties in general and administrative expenses. The Company’s income
tax returns are subject to examination by the IRS and corresponding states, generally for three years after they are filed.
Loss per Common Share
Basic loss per share is calculated using the weighted-average
number of common shares outstanding during each period. Diluted income per share includes potentially dilutive securities such
as outstanding options and warrants outstanding during each period. To calculate diluted loss per share the Company uses the treasury
stock method and the If-converted method.
For the period ended June 30, 2016 and September
30, 2015 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 record our interest rate
and foreign currency swaps at fair value based on discounted cash flow analysis and for warrants and other option type instruments
based on option pricing models. The changes in fair value of these instruments are recorded in income or expense.
Stock based compensation
The Company recognizes compensation expense for
all stock-based payments made to employees, directors and others based on the estimated fair values of its common stock on the
date of issuance.
The Company determines the fair value of the share-based
compensation payments granted as either the fair value of the consideration received or the fair value of the equity instruments
issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using
the stock price and other measurement assumptions as of the earlier of either the date at which a commitment for performance to
earn the equity instrument is reached or the date the performance is complete.
The Company recognizes compensation expense for
stock awards with service conditions on a straight-line basis over the requisite service period, which is included in operations.
Concentrations of Credit Risk
The Company maintains cash at financial institutions,
which at times, may be in excess of insured limits. The Company has not experienced any losses to date as a result of this policy
and, in assessing its risk, the Companies’ policy is to maintain cash only with reputable financial institutions. One
of the operating accounts had a cash value of $182,856 as of June 30, 2016 which did not exceed the Federal Deposit Insurance Corporation
insurance limit of $250,000.
Recent Accounting Pronouncements
Management does not believe that any recently issued,
but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying interim consolidated
financial statements.
VOIP-PAL.com
Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited – prepared by management)
June 30, 2016
(Expressed
in U.S. Dollars)
|
NOTE 4.
|
INVESTMENT IN DIGIFONICA
|
The Company acquired Digifonica in December 2013.
Pursuant to the terms in the Share Purchase Agreement (the “SPA”) the Company acquired 100% of Digifonica for cash
and common shares of the Company from the seller (the “Seller”). The SPA included an Anti-Dilution Clause (the “Anti-dilution
Clause”) that requires the Company to maintain the Sellers percentage ownership of the Company at 40% by issuing the Seller
a proportionate number of common shares of any future issuance of the Company’s common shares.
The assets acquired through the acquisition were
VoIP-related patented technology. This patented technology includes patents for Lawful Intercept, routing, billing, rating mobile
gateway, advanced interoperability solutions, intercepting voice over IP communications, and uninterrupted transmission of internet
protocol transmissions during endpoint changes.
Shares issued pursuant to the Anti-dilution Clause
are recorded as a share issuance cost within the Additional Paid-in Capital account. As at September 30, 2015, the Company accrued
18,839,786 common shares to be issued at $0.05 per share, valued at $941,989 to the Seller of Digifonica pursuant to the Anti-Dilution
Clause.
During the nine months ended June 30, 2016 the
Company issued 10,000,000 common shares at $0.05 per share, valued at $500,000 and recorded as share issuance cost within the Additional
Paid-in Capital account. As at June 30, 2016, the Company has accrued 8,839,786 common shares at $0.05 per share, valued at $441,989
to the seller of Digifonica pursuant to the Anti-Dilution Clause.
NOTE 5.
|
INTANGIBLE ASSETS
|
The Company acquired certain patents and technology
from Digifonica in December 2013 (See Note 4). These assets have been recorded in the financial statements as intangible assets.
These assets are being amortized over twelve (12) years on a straight line basis.
A summary of intangible assets as of June 30, 2016 and September 30,
2015 is as follows:
|
|
June 30, 2016
|
|
September 30, 2015
|
VoIP Intellectual property and patents
|
|
$
|
1,582,426
|
|
|
$
|
1,438,018
|
|
Accumulated amortization
|
|
|
(304,647
|
)
|
|
|
(229,107
|
)
|
Net book value
|
|
$
|
1,277,779
|
|
|
$
|
1,208,911
|
|
There were no disposals of any intangible assets in the years presented.
NOTE 6.
|
RELATED PARTY TRANSACTIONS
|
During the nine months ended June 30,
2016 the Company incurred $13,958 (2015 - $46,528) in legal fees paid to a Director in his capacity as legal counsel,
$51,000 (2015 - $27,000) in officer fees, and $120,500 (2015 - $80,500) paid to officers and directors for professional fees
and services.
Included in Shares to be issued as at June 30,
2016 is $650,000 (2015 - $nil) for unpaid Officers and Directors fees and $90,000 (2015 - $nil) for professional fees & services
paid to a director for consulting services provided.
NOTE 7.
|
SUPPLEMENTAL CASH FLOW INFORMATION
|
During the nine months ended June 30, 2016 and
2015, the Company paid $nil income taxes and $nil in interest.
NOTE 8.
|
CONVERTIBLE DEBENTURES
|
The Company routinely issues convertible debentures
with no interest rates that are due on demand. The convertible debentures are convertible at fixed conversion rates. See note 9
for details of common shares issued during the year from the conversion of convertible debentures.
VOIP-PAL.com
Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited – prepared by management)
June 30, 2016
(Expressed
in U.S. Dollars)
Capital Stock Authorized:
1,100,000,000 common voting
shares with a par value of $0.001 each
1,000,000 convertible preferred
shares with a par value of $0.01 each
During the year ended September 30, 2015, the
Company issued 26,030,930 common shares valued between $0.05 and $0.08 per common share to convert $1,384,904 of convertible
debentures, and 7,126,868 common shares valued between $0.05 and $0.06 per common share for services received.
During the nine months ended June 30, 2016, the
Company issued 6,725,000 common shares at a price of $0.04 per common share in a private placement of common stock for gross proceeds
of $269,000, 9,147,000 common shares valued at $0.04 and $0.05 per common share on conversion of debentures totaling $482,975,
5,300,000 common shares at $0.0275 per common share for services received totaling $147,400, and 10,000,000 common shares at $0.05
per common share to the seller of Digifonica pursuant to the Anti-dilution Clause. As at June 30, 2016 the Company has $759,721
to be settled through shares-to-be-issued at $0.05 per common share for services received during the year ended September 30, 2015.
During the nine months ended June 30, 2016, the
Company granted 14,000,000 incentive stock options to purchase common shares of the Company at a price of $0.06 per common share
for a period of five years to several consultants of the Company. The options were granted under the incentive stock option plan
adopted by the Company in June, 2016 (see Note 10 ’
Stock Option Plan
’ below). The incentive stock options were
valued and recorded at $398,044 using the Black Scholes method for pricing options.
NOTE 10.
|
STOCK-BASED COMPENSATION
|
Stock Option Plan
During the nine months ended June 30, 2016, 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, it was determined by the board of directors that the Company requires a stock option plan under which it is able to
grant incentive stock options to such Service Providers. The Company put 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.
During the nine month period ended June 30, 2016,
the Company granted options under the Plan to several of its consultants to purchase 14,000,000 common shares in the capital stock
of the Company at an exercise price of $0.06 per common share for a period of five years from the date of grant. 8,000,000 of the
options granted vest immediately, with the balance to vest within one year of the date of grant.
The following assumptions were used for the Black-Scholes
valuation of stock options granted during the nine-month period ended June 30, 2016: risk-free rate of 0.52%, expected life of
5 years, annualized historical volatility of 68.8% and a dividend rate of 0%. Expected volatilities are based on historical volatility
of the Company’s stock and other factors. The compensation cost that has been charged against income from options issued
under the plan was $398,044 ($nil – 2015).
The weighted-average grant-date fair value of options
granted during the nine-months ended June 30, 2016 was $0.03 (2015 - $nil). The total intrinsic value of options exercised during
the nine months ended June 30, 2016 was $nil (2015 - $nil).
NOTE 11.
|
SEGMENTED INFORMATION
|
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.
VOIP-PAL.com
Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited – prepared by management)
June 30, 2016
(Expressed
in U.S. Dollars)
NOTE 12.
|
CONTINGENT LIABILITIES
|
Litigation
The Company is party to pending litigation cases as follows:
|
i)
|
Locksmith Financial Corporation, Inc. et al. v
Voip-Pal.com Inc. (Case No A-15-717491-C) filed in Clark County District Court (the “State Case”)
|
On March 24, 2014, the Company resolved
to freeze 95,832,000 common shares that were issued to a company controlled by a former director (the “defendant”)
in fiscal 2013 and accounted for at a cost of $1,443,000. The Company believes that the shares were issued as settlement of a line
of credit that the Company believes to have been legally unsupported. The defendant alleges that the freeze and the Company’s
actions constituted fraud and a breach of securities laws. The Company denies any wrongdoing. Currently the State Case is entering
the discovery phase of litigation and the outcome is undeterminable.
|
ii)
|
Voip-Pal.com Inc. v Richard Kipping, et al. (Case
No. 2:15-cv-01258-JAD-VCF) filed in United States District Court (the “Federal Case”)
|
On July 2, 2015, the Company filed suit
against a former director, a shareholder and the company controlled by a former director. The Company alleges that the common shares
issued in the State Case and an additional 7,200,000 common shares were fraudulently obtained and that the shares have been unlawfully
transferred to other entities. The proceedings in the Federal Case have been stayed pending a final determination of the issues
in the State Case. The outcome of the case is undeterminable.
|
iii)
|
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-VC-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 four major telecommunications and
media-related companies, claiming a combined $7,200,000,000 in damages. On May 9, 2016, the lawsuits were officially served to
these companies. The proceedings in these cases have not yet commenced. The outcome of these cases is undeterminable.
Inter Partes Reviews
In other legal actions related to Item iii above,
the Company is involved in three Inter Partes Review (“IPR”) cases before the Patent Trial and Appeal Board of the
United States Patent and Trademark Office, as follows:
|
-
|
Unified Patents Inc. (Petitioner) vs. Voip-Pal.com,
Inc. (Patent Owner) IPR2016-01082, Reviewing Patent No. 8,542,815
|
|
-
|
Apple, Inc. (Petitioner) vs. Voip-Pal.com, Inc.
(Patent Owner) IPR2016-01198, Reviewing Patent No. 9,179,005
|
|
-
|
Apple, Inc. (Petitioner) vs. Voip-Pal.com, Inc.
(Patent Owner) IPR2016-01201, Reviewing Patent No. 5,542,815
|
The Inter Partes Review allows the Patent Trial
and Appeal Board to consider the validity of issued patents. There are no damages awarded, but a portion or all of a patent may
be invalidated. The outcome of these IPRs is undeterminable.
Performance Bonus Payable
During the nine months ended June 30, 2016, the
board of directors of the Company authorized the Company to provide a performance bonus of up to 3% of the capital stock of the
Company (the “Performance Bonus”) 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 successful completion of a purchase and sale of the Company or a major licensing
transaction, defined as a bonusable event. In order to provide maximum flexibility to the Company with respect to determining what
constitutes such a bonusable event, 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. As at June 30, 2016,
no bonusable event has occurred and there is no Performance Bonus currently payable.