The following management's discussion and analysis (MD&A) should be read in
conjunction with our audited consolidated financial statements for the year
ended September 30, 2019 and notes thereto.
This MD&A for the year ending September 30, 2019 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 on the basis of 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
Overview
VOIP-PAL.com Inc. ("Voip-Pal", 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
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, Voip-Pal 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 Voip-Pal's current intellectual
property, now a worldwide portfolio of twenty-six issued and pending patents
primarily designed for the broadband VoIP market.
Voip-Pal's intellectual property value is derived from its issued and pending
patents. Voip-Pal inventions described in these patents, among other things,
provide the means to integrate VoIP services with legacy telecommunications
systems such as the public switched telephone network (PSTN) to create a
seamless service using either legacy telephone numbers or IP addresses, and
enhance the performance and value of VoIP implementations worldwide.
VoIP has been and continues to be a green field for innovation that has spawned
numerous inventions, greatly benefitting consumers large and small across the
globe. VoIP is used in many places and by every modern telephony system vendor,
network supplier, and retail and wholesale carrier.
Liquidity and capital resources
As of September 30, 2019, the Company had an accumulated deficit of $51,721,696
as compared to an accumulated deficit of $42,648,364 at September 30, 2018. As
of September 30, 2019, the Company had a working capital surplus of $940,733 as
compared to a working capital surplus of $3,386,340 at September 30, 2018. The
decrease in the Company's working capital of $2,445,607 was primarily due to a
decrease in cash on hand and other current assets resulting from a decrease in
shares issued for private placement and warrant exercises completed during the
year ending September 30, 2019 as compared to the prior year.
Net cash used by operations for the years ending September 30, 2019 and 2018 was
$2,674,356 and $2,243,694, respectively. The increase in net cash used for
operations for the year ending September 30, 2019 as compared to the year ending
September 30, 2018 was primarily due to an increase in cash expenditures for
professional fees and services for the year and a decrease in cash received from
stock issuances.
Net cash used in investing activities for the years ending September 30, 2019
and 2018 was $(11,917) and $Nil. Net cash provided in financing activities for
the year ending September 30, 2019 and 2018 was $471,240 and $5,407,060,
respectively. The decrease in net cash provided by financing activities of
$4,935,820 was primarily due to a decrease in proceeds from private placement of
common shares and exercise of warrants during the year ending September 30,
2019.
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Liquidity
The Company primarily finances its operations from cash received through the
issuance of common stock and the exercise of warrants to investors and through
the payment of stock-based compensation. The Company believes its resources are
adequate to fund its operations for the next twelve months.
Results of operations
The Company's operating costs consist of expenses incurred to monetizing,
selling and licensing its VoIP patents. Other operating costs include expenses
for legal, accounting and other professional fees, financing costs, and other
general and administrative expenses.
Comparison of Years Ending September 30, 2019 and 2018
Years ending
September 30 Increase /
2019 2018 (Decrease) Percent
Revenue $ - $ - $ - -
Cost of Revenue - - - -
Gross Margin - - - -
General and administrative expenses (8,934,380 ) (8,263,348 ) 671,032 +8.1%
Amortization of intangible assets (138,952 ) (138,200 ) 752 +0.5%
Net loss $ (9,073,332 ) $ (8,401,548 ) $ 671,784 +8.0%
Revenues, Cost of Revenues and Gross Margin
The Company had no revenues, cost of revenues or gross margin for the years
ending September 30, 2019 and 2018.
General and Administrative Expenses
General and administrative expenses for the year ending September 30, 2019
totaled $8,934,380 compared to $8,263,348 during the same period in 2018. The
increase in general and administrative expenses of $671,032, or 8.1% more than
the previous year, was primarily due to increases in legal fees and in
management fees.
Amortization of Intangible Assets
Amortization of intellectual VoIP communications patent properties for the year
ending September 30, 2019 totaled $138,952 compared to $138,200 during the same
period in 2018.
The Company follows GAAP (FAS 142) and is amortizing its intangibles over the
remaining patent life of approximately ten (10) years. The Company evaluates
its intangible assets annually and determines if the fair market value is less
than its historical cost. If the fair market value is less, then impairment
expense is recorded on the Company's financial statements. The intangible
assets on the financial statements of the Company relate primarily to the
Company's acquisition of Digifonica (International) Limited.
Interest Expense
The Company had no interest costs for the years ending September 30, 2019 and
2018.
Net Loss
The Company reported a net loss of $9,073,332 for the year ending September 30,
2019 compared to a net loss of $8,401,548 for the same period in 2018. The net
loss increase of $671,784, or 8.0% over the same period in 2018 was due
primarily to increases in legal fees and in management fees.
Off-Balance Sheet Arrangements
In February 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 what
constitutes such a bonus able 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.
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During the year 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 year ended September 30, 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. 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 September 30, 2019, no bonusable event had occurred and there was no
Performance Bonus payable.
There are no other off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that are material to investors.
Impact of Inflation
We believe that inflation has not had a material impact on our results of
operations for the year ending September 30, 2019. We cannot assure you that
future inflation will not have an adverse impact on our operating results and
financial condition.
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