Nature and Continuance of Operations (Note 1)
Contingent Liabilities (Note 11)
The accompanying notes are an integral
part of these interim consolidated financial statements
VOIP-PAL.com Inc.
INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE
LOSS
(Unaudited – prepared by management)
(Expressed in U.S. Dollars)
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
Six
Months Ended
|
|
|
March
31,
2019
|
|
March
31,
2018
|
|
March
31,
2019
|
|
March
31,
2018
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
(Note 5 and 6)
|
|
$
|
34,737
|
|
|
$
|
34,550
|
|
|
$
|
69,476
|
|
|
$
|
69,100
|
|
Officers
and Directors Fees (Note 7)
|
|
|
155,729
|
|
|
|
53,100
|
|
|
|
446,329
|
|
|
|
106,200
|
|
Legal
fees (Note 6)
|
|
|
288,635
|
|
|
|
284,875
|
|
|
|
526,043
|
|
|
|
628,652
|
|
Office
& general
|
|
|
77,542
|
|
|
|
98,452
|
|
|
|
151,829
|
|
|
|
187,657
|
|
Patent
consulting fees
|
|
|
33,800
|
|
|
|
10,000
|
|
|
|
77,475
|
|
|
|
43,529
|
|
Professional
fees & services (Note 6)
|
|
|
161,551
|
|
|
|
2,916,917
|
|
|
|
272,245
|
|
|
|
3,027,847
|
|
Stock-based
compensation (Note 10 and 11)
|
|
|
—
|
|
|
|
2,651,050
|
|
|
|
5,080,000
|
|
|
|
2,651,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
expenses
|
|
$
|
751,994
|
|
|
$
|
6,048,944
|
|
|
$
|
6,623,397
|
|
|
$
|
6,714,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD
|
|
$
|
(751,994
|
)
|
|
$
|
(6,048,944
|
)
|
|
$
|
(6,623,397
|
)
|
|
$
|
(6,714,035
|
)
|
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
|
|
|
1,950,139,362
|
|
|
|
1,337,628,236
|
|
|
|
1,819,762,248
|
|
|
|
1,251,634,056
|
|
The accompanying notes are an integral
part of these interim consolidated financial statements
VOIP-PAL.com Inc.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited – prepared by management)
(Expressed in U.S. Dollars)
|
|
|
|
|
|
|
|
|
Six Months
Ended
|
|
|
Six Months
Ended
|
|
|
|
March 31,
2019
|
|
|
March 31,
2018
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
$
|
(6,623,397
|
)
|
|
$
|
(6,714,035
|
)
|
Add items not affecting cash:
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
5,080,000
|
|
|
|
2,651,050
|
|
Shares issued for services
|
|
|
404,000
|
|
|
|
2,810,829
|
|
Amortization
|
|
|
69,476
|
|
|
|
69,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in non-cash working capital:
|
|
|
|
|
|
|
|
|
Prepaid expense
|
|
|
(20,000
|
)
|
|
|
—
|
|
Accounts payable and accrued liabilities
|
|
|
(7,103
|
)
|
|
|
(18,469
|
)
|
Legal retainer
|
|
|
(36,386
|
)
|
|
|
—
|
|
Subscriptions receivable
|
|
|
—
|
|
|
|
(50,000
|
)
|
Cash Flows Used in Operating Activities
|
|
|
(1,133,410
|
)
|
|
|
(1,251,525
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
Acquisition of Equipment
|
|
|
(11,917
|
)
|
|
|
—
|
|
Cash Flows Used in Investing Activities
|
|
|
(11,917
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
Proceeds from private placement
|
|
|
219,000
|
|
|
|
2,924,060
|
|
Proceeds from warrant exercise
|
|
|
252,240
|
|
|
|
958,000
|
|
Cash Flows Provided by Financing Activities
|
|
|
471,240
|
|
|
|
3,882,060
|
|
|
|
|
|
|
|
|
|
|
Increase / (Decrease) in cash
|
|
|
(674,087
|
)
|
|
|
2,630,536
|
|
|
|
|
|
|
|
|
|
|
Cash, beginning of the period
|
|
|
3,175,523
|
|
|
|
12,157
|
|
|
|
|
|
|
|
|
|
|
Cash, end of the period
|
|
$
|
2,501,436
|
|
|
$
|
2,642,693
|
|
Supplemental cash flow information (Note 8)
The accompanying notes are an integral
part of these interim consolidated financial statements
VOIP-PAL.com
Inc.
INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
EQUITY
(Unaudited – prepared by management)
(Expressed in U.S. dollars)
|
Common Shares
|
Shares to be
Issued
|
Additional
Paid-in
Capital
|
|
|
|
Number
|
Par Value
|
Value
|
Deficit
|
Total
|
Balance at September 30, 2017
|
1,142,125,534
|
$
|
1,018,760
|
$
|
1,063,041
|
$
|
33,028,389
|
$
|
(34,246,816)
|
$
|
863,374
|
Shares issued for private placement
|
85,037,663
|
85,038
|
—
|
1,845,055
|
—
|
1,930,093
|
Shares issued for warrant exercise
|
1,000,000
|
1,000
|
—
|
39,000
|
—
|
40,000
|
Shares issued for services
|
158,000
|
158
|
—
|
2,212
|
—
|
2,370
|
Net loss for the year
|
—
|
—
|
—
|
—
|
(665,090)
|
(665,090)
|
Balance at December 31, 2017
|
1,228,321,197
|
$
|
1,104,956
|
$
|
1,063,041
|
$
|
34,914,656
|
$
|
(34,911,906)
|
$
|
2,170,747
|
Shares issued for private placement
|
16,766,086
|
16,766
|
—
|
989,201
|
—
|
1,005,967
|
Shares issued for warrant exercise
|
22,650,000
|
22,650
|
—
|
883,350
|
—
|
906,000
|
Shares issued for services
|
86,937,500
|
86,938
|
(1,063,041)
|
3,784,563
|
—
|
2,808,460
|
Shares issued for Anti-Dilution Clause (Notes 4 & 9)
|
118,121,352
|
—
|
—
|
—
|
—
|
—
|
Share purchase options granted (Note 10)
|
—
|
—
|
—
|
2,651,050
|
—
|
2,651,050
|
Net loss for the period
|
—
|
—
|
—
|
—
|
(6,048,945)
|
(6,048,945)
|
Balance at March 31, 2018
|
1,472,796,135
|
$
|
1,231,310
|
$
|
—
|
$
|
43,222,820
|
$
|
(40,960,851)
|
$
|
3,493,279
|
Shares issued for private placement
|
(3,225,000)
|
(3,225)
|
—
|
454,350
|
—
|
451,125
|
Shares issued for warrant exercise
|
41,100,000
|
41,100
|
—
|
1,032,525
|
—
|
1,073,625
|
Shares issued for services
|
17,468,333
|
17,468
|
477,320
|
576,828
|
—
|
1,071,616
|
Shares issued for Anti-Dilution Clause (Notes 4 & 9)
|
56,862,333
|
—
|
—
|
—
|
—
|
—
|
Share purchase options granted (Note 10)
|
—
|
—
|
—
|
(98,242)
|
—
|
(98,242)
|
Shares returned (Note 9)
|
(10,000,000)
|
(10,000)
|
—
|
(21,542)
|
—
|
(31,542)
|
Forgiveness of debt by related party (Note 9)
|
—
|
—
|
—
|
31,542
|
—
|
31,542
|
Net loss for the period
|
—
|
—
|
—
|
—
|
(1,687,513)
|
(1,687,513)
|
Balance at September 30, 2018
|
1,575,001,801
|
$
|
1,276,653
|
$
|
477,320
|
$
|
45,198,281
|
$
|
(42,648,364)
|
$
|
4,303,890
|
Shares issued for private placement
|
2,250,000
|
2,250
|
—
|
87,750
|
—
|
90,000
|
Shares issued for warrant exercise
|
6,306,000
|
6,306
|
—
|
245,934
|
—
|
252,240
|
Shares issued for services
|
12,237,500
|
12,238
|
18,000
|
277,262
|
—
|
307,500
|
Shares issued for bonus compensation
|
127,000,000
|
127,000
|
—
|
4,953,000
|
—
|
5,080,000
|
Shares issued for Anti-Dilution Clause (Notes 4 & 9)
|
225,184,791
|
—
|
—
|
—
|
—
|
—
|
Net loss for the period
|
—
|
—
|
—
|
—
|
(5,871,403)
|
(5,871,403)
|
Balance at December 31, 2018
|
1,947,980,092
|
$
|
1,424,447
|
$
|
495,320
|
$
|
50,762,227
|
$
|
(48,519,767)
|
$
|
4,162,227
|
Shares issued for private placement
|
3,225,000
|
3,225
|
—
|
125,775
|
—
|
129,000
|
Shares issued for services
|
1,062,500
|
1,062
|
54,000
|
41,438
|
—
|
96,500
|
Net loss for the period
|
—
|
—
|
—
|
—
|
(751,994)
|
(751,994)
|
Balance at March 31, 2019
|
1,952,267,592
|
$
|
1,428,734
|
$
|
549,320
|
$
|
50,929,440
|
$
|
(49,271,761)
|
$
|
3,635,733
|
The accompanying notes are an integral
part of these interim consolidated financial statements
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial
Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
March
31, 2019
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 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.
In December 2013, the Company completed
the acquisition of Digifonica (International) Limited, a private company controlled by the CEO of the Company, whose assets included
several patents and technology developed for the VoIP market.
These consolidated financial statements
have been prepared on the basis of a going concern, which contemplates the realization of assets and discharge of liabilities in
the normal course of business. The Company is in various stages of product development and continues to incur losses and, at March
31, 2019, had an accumulated deficit of $49,271,761 (September 30, 2018 - $42,648,364). The ability of the Company to continue
operations as a going concern is dependent upon raising additional working capital, settling outstanding debts and generating profitable
operations. These material uncertainties raise substantial doubt about the Company’s ability to continue as a going concern.
Should the going concern assumption not continue to be appropriate, further adjustments to carrying values of assets and liabilities
may be required. There can be no assurance that capital will be available as necessary to meet these continued developments and
operating costs or, if the capital is available, that it will be on the terms acceptable to the Company. The issuances of additional
stock by the Company may result in a significant dilution in the equity interests of its current shareholders. Obtaining commercial
loans, assuming those loans would be available, will increase the Company’s liabilities and future cash commitments. If the
Company is unable to obtain financing in the amounts and on terms deemed acceptable, its business and future success may be adversely
affected.
Additionally, as the Company’s stated
objective is to monetize its patent suite through the licensing or sale of its intellectual property (“IP”), the Company
being forced to litigate or to defend its IP claims through litigation casts substantial doubt on its future to continue as a going
concern. IP litigation is generally a costly process, and in the absence of revenue the Company must raise capital to continue
its own defense and to validate its claims – in the event of a failure to defend its patent claims, either because of lack
of funding, a court ruling against the Company or because of a protracted litigation process, there can be no assurance that the
Company will be able to raise additional capital to pay for an appeals process or a lengthy trial. The outcome of any litigation
process may have a significant adverse effect on the Company’s ability to continue as a going concern.
NOTE 2.
|
BASIS OF PRESENTATION
|
The accompanying consolidated financial
statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US
GAAP”).
NOTE 3.
|
SIGNIFICANT ACCOUNTING POLICIES
|
Principles of Consolidation
These consolidated financial statements
have been prepared on a consolidated basis and include the accounts of the Company and its wholly owned subsidiary Digifonica.
All intercompany transactions and balances have been eliminated. As at March 31, 2019, Digifonica had no activities.
Use of Estimates
The preparation of these consolidated financial
statements required management to make estimates and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results
could differ from these estimates. Where estimates have been used financial results as determined by actual events could differ
from those estimates.
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial
Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
March
31, 2019
NOTE 3.
|
SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
|
Cash
Cash consists of cash on hand and monies
held in checking and savings accounts. The Company had $2,501,436 and $3,175,523 in cash on March 31, 2019 and September 30, 2018,
respectively.
Fixed Assets
Fixed assets are stated at cost less accumulated
depreciation, and depreciated using the straight-line method over their useful lives; Furniture and equipment – 7 years;
and Computers and Software – 3 years.
Intangible Assets
Intangible assets, consisting of VoIP communication
patent intellectual properties (IP) are recorded at cost and amortized over the assets estimated life on a straight-line basis.
Management considers factors such as remaining life of the patents, technological usefulness and other factors in estimating the
life of the assets.
The carrying value of intangible assets
are reviewed for impairment by management of the Company at least annually or upon the occurrence of an event which may indicate
that the carrying amount may be less than its fair value. If impaired, the Company will write-down such impairment. In addition,
the useful life of the intangible assets will be evaluated by management at least annually or upon the occurrence of an event which
may indicate that the useful life may have changed.
Fair Value of Financial Instruments
FASB ASC 820, Fair Value Measurement, defines
fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction
between market participants at the measurement date and in the principal or most advantageous market for that asset or liability.
The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability,
not on assumptions specific to the entity.
The Company classifies financial assets
and liabilities as held-for-trading, available-for-sale, held-to-maturity, loans and receivables or other financial liabilities
depending on their nature. Financial assets and financial liabilities are recognized at fair value on their initial recognition,
except for those arising from certain related party transactions which are accounted for at the transferor’s carrying amount
or exchange amount.
Financial assets and liabilities classified
as held-for-trading are measured at fair value, with gains and losses recognized in net income. Financial assets classified as
held-to-maturity, loans and receivables, and financial liabilities other than those classified as held-for-trading are measured
at amortized cost, using the effective interest method of amortization. Financial assets classified as available-for-sale are measured
at fair value, with unrealized gains and losses being recognized as other comprehensive income until realized, or if an unrealized
loss is considered other than temporary, the unrealized loss is recorded in income.
U.S. GAAP establishes a framework for measuring
fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is
defined as the amount that would be received for an asset or paid to transfer a liability (i.e., an exit price) in the principal
or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement
date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable
inputs. The standard describes the following fair value hierarchy based on three levels of inputs, of which the first two are considered
observable and the last unobservable, that may be used to measure fair value:
Level 1: Quoted prices in active markets
for identical assets and liabilities.
Level 2: Inputs other than Level 1 that
are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets
that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the
full term of the assets or liabilities.
Level 3: Unobservable inputs supported
by little or no market activity and that are significant to the fair value of the assets or liabilities.
The fair value of cash is classified as
Level 1 at March 31, 2019 and September 30, 2018.
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.
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial
Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
March
31, 2019
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 six-month period ended March 31,
2019 and the year ended September 30, 2018 there were no potentially dilutive securities included in the calculation of weighted-average
common shares outstanding.
Derivatives
We account for derivatives pursuant to
ASC 815,
Accounting for Derivative Instruments and Hedging Activities
. All derivative instruments are recognized in the
consolidated financial statements and measured at fair value regardless of the purpose or intent for holding them. We determine
fair value of warrants and other option type instruments based on option pricing models. The changes in fair value of these instruments
are recorded in income or expense.
Stock-based compensation
The Company recognizes compensation expense
for all stock-based payments made to employees, directors and others based on the estimated fair values of its common stock on
the date of issuance.
The Company determines the fair value of
the share-based compensation payments granted as either the fair value of the consideration received or the fair value of the equity
instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured
using the stock price and other measurement assumptions as of the earlier of either the date at which a commitment for performance
to earn the equity instrument is reached or the date the performance is complete.
The Company recognizes compensation expense
for stock awards with service conditions on a straight-line basis over the requisite service period, which is included in operations.
Stock option expense is recognized over the option’s vesting period.
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 Company’s policy is to maintain cash only with reputable financial institutions.
As of March 31, 2019, the Company’s bank operating account balances exceeded the Federal Deposit Insurance Corporation Insurance
Limit of $250,000 by $2,251,436.
Recent Accounting Pronouncements
In January 2016, FASB issued an ASU, Subtopic
825-10, to amend certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Most prominent
among the amendments is the requirement for changes in fair value of equity investments, with certain exceptions, to be recognized
through profit or loss rather than other comprehensive income. The Company adopted the standard October 1, 2018. There was no impact
on the Company’s financial statements from the adoption of this amendment.
In January 2016, FASB issued ASU 2016-01
to amend certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Most prominent among
the amendments is the requirement for changes in fair value of equity investments, with certain exceptions, to be recognized through
profit or loss rather than other comprehensive income. The new standard was effective for the Company beginning October 1, 2018.
The standard did not have any impact on the Company’s financial statements.
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial
Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
March
31, 2019
NOTE 3.
|
SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
|
Recent Accounting Pronouncements (cont’d)
In February 2016 FASB issued ASU No. 2016-02,
Leases (Topic 842) which supersedes FASB ASC Topic 840, Leases (Topic 840) and provides principles for the recognition, measurement,
presentation, and disclosure of leases for both lessees and the lessors. The new standard requires the lessees to apply a dual
approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively
a financed purchase by the lessee. The classification will determine whether lease expense is recognized based on an effective
interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use
asset and a lease liability for all leases with a term of greater than twelve months regardless of classification. Leases with
a term of twelve months or less will be accounted for similar to existing guidance for operating leases. The standard is effective
for annual periods beginning after December 15, 2018, with early adoption permitted upon issuance. When adopted, the Company does
not expect this guidance to have a material impact on its consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13
to replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses
and requires consideration of a broader range of reasonable and supportable information to inform credit loss credit loss estimates.
For trade and other receivables, loans and other financial instruments, the Company will be required to use a forward-looking expected
loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. Credit losses
relating to available for sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction
in the amortized cost basis of the securities. The new standard will be effective for the Company beginning October 1, 2020, with
early adoption permitted. Application of the amendments is through a cumulative-effect adjustment to deficit as of the effective
date. The Company is currently assessing the impact of the standard on its consolidated financial statements.
NOTE 4.
|
PURCHASE OF DIGIFONICA
|
The Company acquired Digifonica in December
2013. Pursuant to the terms in the Share Purchase Agreement (the “SPA”) the Company acquired 100% of Digifonica from
the seller, the CEO of the Company (the “Seller”), for a cash payment of $800,000 and 389,023,561 common shares of
the Company. The assets acquired through the acquisition were VoIP-related patented technology, including patents for Lawful Intercept,
routing, billing and rating, mobile gateway, advanced interoperability solutions, intercepting voice over IP communications, and
uninterrupted transmission of internet protocol transmissions during endpoint changes.
The SPA included an anti-dilution clause
(the “Anti-Dilution Clause”) that requires the Company to maintain the Seller’s percentage ownership of the Company
at 40% by issuing the Seller a proportionate number of common shares of any future issuance of the Company’s common shares.
Shares issued pursuant to the Anti-Dilution Clause are recorded as a share issuance cost within the Additional Paid-in Capital
account (Notes 7 and 9).
A summary of the Company’s fixed
assets as of March 31, 2019 and September 30, 2018 is as follows:
|
|
March 31,
2019
|
|
|
September 30,
2018
|
|
Office furniture & computers
|
|
$
|
11,917
|
|
|
$
|
—
|
|
Accumulated depreciation
|
|
|
(376
|
)
|
|
|
—
|
|
Net book value
|
|
$
|
11,541
|
|
|
$
|
—
|
|
There were no retirements of any fixed assets in the periods
presented.
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial
Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
March
31, 2019
NOTE 6.
|
INTANGIBLE ASSETS
|
The Company acquired certain patents and
technology from Digifonica in December 2013 (see Note 4). These assets have been recorded in the financial statements as intangible
assets. These assets are being amortized over twelve (12) years on a straight-line basis. A summary of intangible assets as of
March 31, 2019 and September 30, 2018 is as follows:
|
|
March 31,
2019
|
|
|
September 30,
2018
|
|
VoIP Intellectual property and patents
|
|
$
|
1,552,416
|
|
|
$
|
1,552,416
|
|
Accumulated amortization
|
|
|
(703,966
|
)
|
|
|
(634,866
|
)
|
Net book value
|
|
$
|
848,450
|
|
|
$
|
917,550
|
|
There were no disposals of any intangible assets in the periods
presented.
NOTE 7.
|
RELATED PARTY TRANSACTIONS AND KEY MANAGEMENT
COMPENSATION
|
The Company compensates certain of its
key management personnel to operate its business in the normal course. Key management includes the Company’s executive officers
and members of its Board of Directors.
Compensation paid or accrued to key management
for services during the six-month period ended March 31, 2019 includes:
|
|
March 31,
2019
|
|
|
March 31,
2018
|
|
Management fees paid or accrued to the CEO
|
|
$
|
72,000
|
|
|
$
|
45,000
|
|
Management fees paid or accrued to the CFO
|
|
|
43,200
|
|
|
|
43,200
|
|
Management fees paid or accrued to the President
|
|
|
30,000
|
|
|
|
18,000
|
|
Fees paid or accrued to Directors
|
|
|
36,000
|
|
|
|
36,000
|
|
|
|
$
|
181,200
|
|
|
$
|
142,200
|
|
During
the six-month period ended March 31, 2019 the Company issued 1,650,000 (2018 – 825,000) common shares for a value of $96,000
(2018 - $48,000), accrued 1,800,000 (2018 – 900,000) common shares to be issued valued at $72,000 (2018 – $36,000)
and paid cash of $13,200 (2018 - $13,200) for key management compensation as shown in the above table. The Company also issued
90,000,000 (2018 – nil) common shares as bonus compensation to three directors which were recorded as an expense to the
Company of $3,600,000 (2018 – Nil) (Notes 9 and 11), and 10,000,000 (2018 – Nil) common shares at a value of $200,000
to the CEO as additional compensation.
As
at March 31, 2019, included in shares to be issued is $434,000 (September 30, 2018 - $416,000) for unpaid Director fees. As at
March 31, 2019, 2,858,333 (September 30, 2018 – 126,655,791) common shares are accrued to the Seller of Digifonica for the
Anti-Dilution Clause. 225,184,791 common shares were issued during the six-month period ended March 31, 2019 (March 31, 2018 –
Nil) to the Seller of Digifonica pursuant to the Anti-Dilution Clause (Notes 4 and 9).
During
the year ended September 30, 2018, 10,000,000 common shares were returned to the treasury from an officer of the Company at a
per share price of $0.003 ($31,542) on the unwinding of a loan conversion transaction and the associated forgiveness of a loan
to the Company provided by the officer dating from 2014.
NOTE 8.
|
SUPPLEMENTAL CASH FLOW INFORMATION
|
During
the six-month period ended March 31, 2019, the Company paid $nil (March 31, 2018 - $nil) in interest or income taxes.
There
were no non-cash investing or financing transactions during the period ended March 31, 2019. During the period ended March 31,
2018, the Company re-classified $1,063,041 from shares to be issued into Additional paid-in capital upon the issuance of shares.
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial
Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
March
31, 2019
Capital Stock Authorized and Issued:
|
–
|
3,000,000,000 (September 30, 2018 –
2,000,000,000) common voting shares authorized with a par value of $0.001 each, of which 1,952,267,592 (September 30, 2018 –
1,575,001,801) shares are issued.
|
|
–
|
1,000,000 convertible preferred shares
authorized with a par value of $0.01 each, of which nil (2018 – nil) shares are issued.
|
During the six-month period ended March
31, 2019, the board of directors of the Company authorized the increase of the Company’s capital stock to up to 3,000,000,000
common voting shares with a par value of $0.001 per share.
Issues during the six-month period ended
March 31, 2019
During the six-month period ended March
31, 2019, the Company issued:
|
–
|
5,475,000 common shares priced at $0.04
per common share for cash proceeds of $219,000 from a private placement of common shares;
|
|
–
|
6,306,000 common shares priced at $0.04
per common share for cash proceeds of $252,240 from the exercise of 6,306,000 common share purchase warrants;
|
|
–
|
13,300,000
common shares priced between $0.02 and $0.04 per common share for services with an aggregate
value of $332,000 (September 30, 2018 - $477,320), and accrued 1,800,000 shares to be
issued valued at $72,000 for services received;
|
|
–
|
127,000,000 common shares issued as bonus
compensation, recorded as an expense to the Company of $5,080,000 (Note 11); and
|
|
–
|
225,184,791 common shares priced between
$0.003 and $0.04 per common share pursuant to the Anti-Dilution Clause for a value of $5,124,641 (Note 4 and 6).
|
Issues during the year ended September
30, 2018
During the year ended September 30, 2018,
the Company issued:
|
–
|
113,453,749 common shares for cash proceeds
of $3,402,060 from private placements, as follows;
|
|
○
|
107,147,749 common shares priced between $0.015 and $0.06 per common share for cash proceeds of
$3,303,940 from a private placement of common shares; and
|
|
○
|
6,306,000 units at between $0.013 and $0.02 per unit for cash proceeds of $98,120. Each unit consists
of one common share and one common share purchase warrant. Each common share purchase warrant allows the holder to purchase one
common share for $0.04 for a period of twelve months from the date of issuance;
|
|
–
|
50,125,000 common shares at $0.04 per
common share for cash proceeds of $2,005,000 on the exercise of 50,125,000 common share purchase warrants;
|
|
–
|
104,313,833 common shares priced at between
$0.02 and $0.06 per common share for services with an aggregate value of $4,467,917, of which $585,721 (September 30, 2017 - $Nil)
was in settlement of Shares to be issued; and
|
|
–
|
174,983,685 common shares priced at $0.038
per common share pursuant to the Anti-Dilution Clause for a value of $6,649,380 (Note 4 and 6).
|
During the year ended September 30, 2018,
10,000,000 common shares were returned to the treasury at $0.003 per share with an aggregate value of $31,542 (Note 7).
Subsequent Issues
Subsequent to the six-month period ended
March 31, 2019, the Company issued nil common shares.
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial
Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
March
31, 2019
NOTE 9.
|
SHARE CAPITAL (CONT’D)
|
Shares to be Issued
As
at March 31, 2019, there are 15,067,523 (September 30, 2018 – 12,817,523) common shares to be issued that are accrued for
services provided to the Company valued at $549,320 (September 30, 2018– $477,320), of which 13,090,000 (September 30, 2018–
10,840,000) valued at $506,000 (September 30, 2018 - $416,000) are accrued to management and related parties (see Note 7).
As at March 31, 2019, there are 2,858,333
(September 30, 2018 – 126,655,791) common shares to be issued that are accrued to the seller of Digifonica pursuant to the
Anti-Dilution Clause (see Notes 4 and 7), valued at $114,333 (September 30, 2018 - $4,812,920).
Warrants
During the six-month period ended March
31, 2019, the Company issued no new warrants.
During the six-month period ended March
31, 2019, 6,306,000 common share purchase warrants were exercised to purchase 6,306,000 common shares in the capital stock of the
Company at a price of $0.04 per common share.
As of March 31, 2019, there were no outstanding
warrants to be exercised.
The following table summarizes
the Company’s share purchase warrant transactions:
|
|
|
Number of
warrants
|
|
|
Weighted average
exercise price
|
|
Balance September 31, 2017
|
|
|
|
61,500,500
|
|
|
$
|
0.04
|
|
Issued
|
|
|
|
6,306,000
|
|
|
|
0.04
|
|
Exercised
|
|
|
|
(50,125,000
|
)
|
|
|
0.04
|
|
Expired
|
|
|
|
(11,375,500
|
)
|
|
|
0.04
|
|
Balance September 31, 2018
|
|
|
|
6,306,000
|
|
|
$
|
0.04
|
|
Issued
|
|
|
|
Nil
|
|
|
|
N/A
|
|
Exercised
|
|
|
|
(6,306,000
|
)
|
|
|
0.04
|
|
Expired
|
|
|
|
Nil
|
|
|
|
N/A
|
|
Balance March 31, 2019
|
|
|
|
Nil
|
|
|
|
N/A
|
|
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial
Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
March
31, 2019
NOTE 10.
|
STOCK-BASED COMPENSATION
|
Stock Option Plan
In order to provide incentive to directors,
officers, management, employees, consultants and others who provide services to the Company or any subsidiary (the “Service
Providers”) to act in the best interests of the Company, and to retain such Service Providers, the Company has in place an
incentive Stock Option Plan (the “Plan”) whereby the Company is authorized to issue up to 10% of its issued and outstanding
share capital in options to purchase common shares of the Company. The maximum term of options granted under the Plan cannot exceed
ten years, with vesting terms determined at the discretion of the Board of Directors.
The following table summarizes the Company’s stock option
transactions:
|
|
|
Number of options
|
|
|
Weighted average
exercise price
|
|
Balance September 30, 2017
|
|
|
|
39,850,000
|
|
|
$
|
0.058
|
|
Granted
|
|
|
|
18,500,000
|
|
|
|
0.18
|
|
Cancelled
|
|
|
|
(18,500,000
|
)
|
|
|
(0.18
|
)
|
Balance September 30, 2018
|
|
|
|
39,850,000
|
|
|
$
|
0.058
|
|
Granted
|
|
|
|
10,000,000
|
|
|
|
0.065
|
|
Cancelled
|
|
|
|
—
|
|
|
|
—
|
|
Balance March 31, 2019
|
|
|
|
49,850,000
|
|
|
$
|
0.060
|
|
The following table summarizes the stock options outstanding
at March 31, 2019:
Options
Outstanding
|
|
|
Exercise
Price
|
|
|
Remaining
Contractual
Life (Yrs)
|
|
|
Number of Options
Currently
Exercisable
|
|
|
14,000,000
|
|
|
$
|
0.060
|
|
|
|
2.23
|
|
|
|
14,000,000
|
|
|
14,000,000
|
|
|
|
0.060
|
|
|
|
2.43
|
|
|
|
14,000,000
|
|
|
3,450,000
|
|
|
|
0.060
|
|
|
|
2.57
|
|
|
|
3,450,000
|
|
|
8,400,000
|
|
|
|
0.050
|
|
|
|
3.05
|
|
|
|
8,400,000
|
|
|
10,000,000
|
|
|
|
0.065
|
|
|
|
4.73
|
|
|
|
—
|
|
|
49,850,000
|
|
|
$
|
0.058
|
|
|
|
3.0
|
|
|
|
39,850,000
|
|
The following assumptions were used for
the Black-Scholes valuation of stock options granted during the six-month period ended March 31, 2019: risk-free rate of 1.62%
(2018 – 1.62%), expected life of 5 years (2018 – 5 years), annualized historical volatility of 138.8% (2018 –
138.8%) and a dividend rate of 0% (2018 – 0%). Expected volatilities are based on historical volatility of the Company’s
stock and other factors. The compensation cost that has been charged against income from options vested under the Plan was $nil
for the six-month period ended March 31, 2019 (March 31, 2018 – $2,651,050) as none of the options granted were currently
vested.
The weighted-average grant-date fair value
of options granted during the six-month period ended March 31, 2019 was $0.07 (2018 - $0.14). The total intrinsic value of options
exercised during the period ended March 31, 2019 was $nil (2018 - $1,538,525).
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial
Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
March
31, 2019
NOTE 11.
|
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 resolved to freeze the common shares as 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 a case 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 this 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 Apple, Inc, (Case No. 2:16-CV-00260),
Verizon Wireless Services, LLC, Verizon Communications Inc., and AT&T Corp. (Case No. 2:16- VC-00271). These cases are seeking
a combined $7,024,377,876 in damages. On May 9, 2016, the lawsuits were officially served to these companies (collectively, the
“Defendants”). The proceedings in these cases were temporarily stayed, by agreement with the parties thereto, pending
the outcome of two
Inter Partes
Reviews (“IPRs”), which were decided in Voip-Pal’s favor.
In August, 2018, the cases were
consolidated under one lawsuit, and transferred to the U.S. District Court for the Northern District of California, where they
were renamed as Case Nos. 18-cv-06177-LHK, 18-cv-06217-LHK, 18-cv-04523-LHK and 18-cv-06054-LHK. The Defendants filed a Motion
to Dismiss the cases, asserting an “Alice 101” motion that Voip-Pal’s ‘005 and ‘815 patents do not
claim patentable subject matter.
On March 25, 2019, the U.S.
District Court for the Northern District of California granted the Defendants’ “Alice 101” Motion to Dismiss
in all of the cases. The Company has stated it will appeal this Court decision.
|
iv)
|
Voip-Pal.com Inc. v. Twitter, Inc. (Case No. 2:16-CV-02338) in the United States District Court,
District of Nevada
|
During the year ended September
30, 2017, on October 6, 2016, the Company filed a lawsuit in the United States District Court, District of Nevada against Twitter,
Inc, (Case No. 2:16- CV-02338) in which Voip-Pal.com alleges infringement of U.S. Patent No. 8,542,815 and its continuation patent,
U.S. Patent No. 9,179,005, This case is seeking $3,200,000,000 in damages. On December 28, 2016, the lawsuit was officially served
to Twitter, Inc. On February 28, 2018, Twitter filed a motion to transfer its case based on improper venue and the case was subsequently
transferred to the U.S. District Court for the Northern District of California, where it remains pending. The outcome of this case
is undeterminable.
|
v)
|
Voip-Pal.com Inc. v. Amazon.com, Inc. et al. (Case No. 2:18-CV-01076) in the United States District
Court, District of Nevada
|
During the period ended March 31, 2019, in June 2018,
the Company filed a lawsuit in the United States District Court, District of Nevada, against Amazon.com, Inc. and certain related
entities, alleging infringement of U.S. Patent Nos. 9,537,762, 9,813,330, 9,826,002 and 9,948,549. In November 2018, the case was
transferred to the U.S. District Court for the Northern District of California, where it remains pending. The outcome of this case
is undeterminable.
VOIP-PAL.COM INC.
Notes to the Interim Consolidated Financial
Statements
(Unaudited – prepared by management)
(Expressed in United States Dollars)
March
31, 2019
NOTE 11.
|
CONTINGENT LIABILITIES (CONT’D)
|
Litigation
(
cont’d)
Inter Partes
Reviews
In additional legal actions related to
Item iii above, two of the Company’s patents have been subject to challenge in several
Inter Partes
Review (“IPR”)
petitions filed before the Patent Trial and Appeal Board (“PTAB”) of the United States Patent and Trademark Office
(“USPTO”). An IPR is a post-grant patent review process allowing the PTAB to consider the validity of issued patents.
There are no damages awarded, but a portion or all of a patent’s claims instituted for IPR may be invalidated as a result
of the review.
More particularly, a total of eight IPRs,
filed against Patent No. 8,542,815 and No. 9,179,005, were either in process before the PTAB or had been resolved, as follows:
|
–
|
Unified Patents Inc. (Petitioner) vs.
Voip-Pal.com Inc. (Patent Owner), IPR2016-01082, filed May 24, 2016, requesting
inter partes
review of U.S. Patent No. 8,542,815.
On November 18, 2016, the PTAB denied institution of this petition;
|
|
–
|
Apple, Inc. (Petitioner) vs. Voip-Pal.com
Inc. (Patent Owner), IPR2016-01198, reviewing Patent No. 9,179,005 and Voip-Pal.com Inc. (Patent Owner), IPR2016-01201, reviewing
Patent No. 8,542,815, both instituted for IPR on November 21, 2016;
|
|
–
|
AT&T Inc. (Petitioner) filed IPR2017-01382
against Voip-Pal’s Patent No. 8,542,815, IPR2017-01383 against Voip-Pal’s Patent No. 9,179,005, and IPR2017-01384 against
Voip-Pal’s Patent No. 9,179,005 on May 8, 2017, each of which was subsequently denied institution; and
|
|
–
|
Apple Inc. (Petitioner) filed IPR2017-01399
against Voip-Pal’s Patent No. 8,542,815, and IPR2017-01398 against Voip-Pal’s Patent No. 9,179,005 on May 9, 2017,
each of which was subsequently denied institution.
|
During the year ended September 30, 2018,
the PTAB considered the aforesaid IPRs, and on November 20, 2017, the PTAB issued its findings on the seven active IPRs being adjudicated,
denying institution of the IPRs with respect to all claims challenged by the Petitioners (Apple Inc, and AT&T Inc.). Subsequent
to that ruling, in December 2017, Apple filed a post-judgment motion in IPR2016-01198 and IPR2016-01201, seeking invalidation of
the challenged claims as sanctions against the Company.
On December 21, 2018, a new panel of the
PTAB ruled on Apple’s sanctions motion, declining to grant Apple’s request to invalidate the challenged claims and
declining to grant Apple’s request for entirely new proceedings to replace the existing panel of judges with a new panel
or with judges that would consider any request for rehearing by Apple as a sanction against VoIP-Pal.
Performance Bonus Payable
In 2016, the board of directors authorized
the Company to provide a performance bonus (the “Performance Bonus”) of up to 3% of the capital stock of the Company
by way of the issuance of Common shares from its treasury to an as yet undetermined group of related and non-related parties upon
the occurrence of a bonusable event, defined as the successful completion of a sale of the Company or substantially all its assets,
or a major licensing transaction. In order to provide maximum flexibility to the Company with respect to determining the level
of Performance Bonus payable, and who may qualify to receive a pro-rata share of such a Performance Bonus, the Company authorized
full discretion to the Board in making such determinations.
During the period ended September 30, 2018,
the board of directors authorized the increase of the Performance Bonus to up to 10% of the capital stock of the Company.
During the six-month period ended March
31, 2019, the board of directors resolved to reduce the Performance Bonus from 10% to 3.33% of the issued and outstanding capital
stock of the Company. Concurrently, the board of directors authorized the payment of Common shares (“Bonus Shares”)
in an equivalent percentage to the 6.67% reduction to the Performance Bonus to a group of related and non-related parties, which
included members of management, a director and several consultants, who received an aggregate 127,000,000 Bonus Shares (Note 9).
The Bonus Shares are restricted from trading under Rule 144 and are also subject to voluntary lock-up agreements, pursuant to which
they cannot be traded, pledged, hypothecated, transferred or sold by the holders until such time as the Company has met the requirements
of the bonusable event as described above.
As at March 31, 2019, no bonusable event
had occurred and there was no Performance Bonus payable.