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FIXED ASSETS 6 Months Ended
Mar. 31, 2019
Property, Plant and Equipment [Abstract]
FIXED ASSETS NOTE 5. FIXED ASSETS 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,
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.
PURCHASE OF DIGIFONICA 6 Months Ended
Mar. 31, 2019
Business Combinations [Abstract]
PURCHASE OF DIGIFONICA 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).
SIGNIFICANT ACCOUNTING POLICIES 6 Months Ended
Mar. 31, 2019
Accounting Policies [Abstract]
SIGNIFICANT ACCOUNTING POLICIES 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. 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. 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 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. 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.
BASIS OF PRESENTATION 6 Months Ended
Mar. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]
BASIS OF PRESENTATION 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).
NATURE AND CONTINUANCE OF OPERATIONS 6 Months Ended
Mar. 31, 2019
Nature And Continuance Of Operations
NATURE AND CONTINUANCE OF OPERATIONS 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 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.
INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($) Common Stock [Member] Shares to be Issued [Member] Additional Paid-In Capital [Member] Deficit [Member] Total
Beginning balance at Sep. 30, 2017 $ 1,018,760 $ 1,063,041 $ 33,028,389 $ (34,246,816) $ 863,374
Beginning balance (in shares) at Sep. 30, 2017 1,142,125,534
Shares issued for private placement $ 85,038 1,845,055 1,930,093
Shares issued for private placement (in shares) 85,037,663
Shares issued for warrant exercise $ 1,000 39,000 40,000
Shares issued for warrant exercise (in shares) 1,000,000
Shares issued for services $ 158 2,212 2,370
Shares issued for services (in shares) 158,000
Net loss for the period (665,090) (665,090)
Ending balance at Dec. 31, 2017 $ 1,104,956 1,063,041 34,914,656 (34,911,906) 2,170,747
Ending balance (in shares) at Dec. 31, 2017 1,228,321,197
Beginning balance at Sep. 30, 2017 $ 1,018,760 1,063,041 33,028,389 (34,246,816) 863,374
Beginning balance (in shares) at Sep. 30, 2017 1,142,125,534
Net loss for the period (6,714,035)
Ending balance at Mar. 31, 2018 $ 1,231,310 43,222,820 (40,960,851) 3,493,279
Ending balance (in shares) at Mar. 31, 2018 1,472,796,135
Beginning balance at Sep. 30, 2017 $ 1,018,760 1,063,041 33,028,389 (34,246,816) 863,374
Beginning balance (in shares) at Sep. 30, 2017 1,142,125,534
Ending balance at Sep. 30, 2018 $ 1,276,653 477,320 45,198,281 (42,648,364) 4,303,890
Ending balance (in shares) at Sep. 30, 2018 1,575,001,801
Beginning balance at Dec. 31, 2017 $ 1,104,956 1,063,041 34,914,656 (34,911,906) 2,170,747
Beginning balance (in shares) at Dec. 31, 2017 1,228,321,197
Shares issued for private placement $ 16,766 989,201 1,005,967
Shares issued for private placement (in shares) 16,766,086
Shares issued for warrant exercise $ 22,650 883,350 906,000
Shares issued for warrant exercise (in shares) 22,650,000
Shares issued for services $ 86,938 (1,063,041) 3,784,563 2,808,460
Shares issued for services (in shares) 86,937,500
Shares issued for Anti-Dilution Clause (Notes 4 & 9) (in shares) 118,121,352
Share purchase options granted (Note 10) 2,651,050 2,651,050
Net loss for the period (6,048,945) (6,048,944)
Ending balance at Mar. 31, 2018 $ 1,231,310 43,222,820 (40,960,851) 3,493,279
Ending balance (in shares) at Mar. 31, 2018 1,472,796,135
Shares issued for private placement $ (3,225) 454,350 451,125
Shares issued for private placement (in shares) (3,225,000)
Shares issued for warrant exercise $ 41,100 1,032,525 1,073,625
Shares issued for warrant exercise (in shares) 41,100,000
Shares issued for services $ 17,468 477,320 576,828 1,071,616
Shares issued for services (in shares) 17,468,333
Shares issued for Anti-Dilution Clause (Notes 4 & 9) (in shares) 56,862,333
Share purchase options granted (Note 10) (98,242) (98,242)
Shares returned (Note 9) $ (10,000) (21,542) (31,542)
Shares returned (Note 9) (in shares) (10,000,000)
Forgiveness of debt by related party (Note 9) 31,542 31,542
Net loss for the period (1,687,513) (1,687,513)
Ending balance at Sep. 30, 2018 $ 1,276,653 477,320 45,198,281 (42,648,364) 4,303,890
Ending balance (in shares) at Sep. 30, 2018 1,575,001,801
Shares issued for private placement $ 2,250 87,750 90,000
Shares issued for private placement (in shares) 2,250,000
Shares issued for warrant exercise $ 6,306 245,934 252,240
Shares issued for warrant exercise (in shares) 6,306,000
Shares issued for services $ 12,238 18,000 277,262 307,500
Shares issued for services (in shares) 12,237,500
Shares issued for bonus compensation $ 127,000 4,953,000 5,080,000
Shares issued for bonus compensation (in shares) 127,000,000
Shares issued for Anti-Dilution Clause (Notes 4 & 9) (in shares) 225,184,791
Net loss for the period (5,871,403) (5,871,403)
Ending balance at Dec. 31, 2018 $ 1,424,447 495,320 50,762,227 (48,519,767) 4,162,227
Ending balance (in shares) at Dec. 31, 2018 1,947,980,092
Beginning balance at Sep. 30, 2018 $ 1,276,653 477,320 45,198,281 (42,648,364) 4,303,890
Beginning balance (in shares) at Sep. 30, 2018 1,575,001,801
Net loss for the period (6,623,397)
Ending balance at Mar. 31, 2019 $ 1,428,734 549,320 50,929,440 (49,271,761) 3,635,733
Ending balance (in shares) at Mar. 31, 2019 1,952,267,592
Beginning balance at Dec. 31, 2018 $ 1,424,447 495,320 50,762,227 (48,519,767) 4,162,227
Beginning balance (in shares) at Dec. 31, 2018 1,947,980,092
Shares issued for private placement $ 3,225 125,775 129,000
Shares issued for private placement (in shares) 3,225,000
Shares issued for services $ 1,062 54,000 41,438 96,500
Shares issued for services (in shares) 1,062,500
Net loss for the period (751,994) (751,994)
Ending balance at Mar. 31, 2019 $ 1,428,734 $ 549,320 $ 50,929,440 $ (49,271,761) $ 3,635,733
Ending balance (in shares) at Mar. 31, 2019 1,952,267,592
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) 6 Months Ended
Mar. 31, 2019 Mar. 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
INTERIM CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) Mar. 31, 2019 Sep. 30, 2018
CURRENT
Cash $ 2,501,436 $ 3,175,523
Legal retainer 360,138 323,752
Prepaid expense 20,000
TOTAL CURRENT ASSETS 2,881,574 3,499,275
NON-CURRENT
Fixed assets (Note 5) 11,541
Intellectual VoIP communications patent properties, net (Note 6) 848,450 917,550
TOTAL ASSETS 3,741,565 4,416,825
CURRENT
Accounts payable and accrued liabilities 105,832 112,935
TOTAL LIABILITIES 105,832 112,935
STOCKHOLDERS' EQUITY
SHARE CAPITAL (Note 9) 1,428,734 1,276,653
ADDITIONAL PAID-IN CAPITAL (Note 9) 50,929,440 45,198,281
SHARES TO BE ISSUED (Note 9) 549,320 477,320
DEFICIT (49,271,761) (42,648,364)
TOTAL EQUITY 3,635,733 4,303,890
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,741,565 $ 4,416,825
Document Type
Trading Symbol
Document and Entity Information - shares 6 Months Ended
Mar. 31, 2019 May 14, 2019
Document And Entity Information
Entity Registrant Name Voip-pal.com Inc
Entity Central Index Key 0001410738
Document Type 10-Q
Trading Symbol VPLM
Document Period End Date Mar. 31,
2019
Amendment Flag false
Current Fiscal Year End Date --09-30
Entity's Reporting Status Current Yes
Entity Filer Category Non-accelerated Filer
Entity Small Business true
Entity Emerging Growth Company false
Entity Common Stock, Shares Outstanding 1,952,267,592
Document Fiscal Period Focus Q2
Document Fiscal Year Focus 2019
Voip-pal.com Inc (Filer) CIK: 0001410738
Print Document View Excel Document
Cover
Document and Entity Information
Financial Statements
Notes to Financial Statements
Accounting Policies
Notes Tables
Notes Details
ReportsAll Reports
Document and Entity Information - shares
6 Months Ended
Mar. 31, 2019
May 14, 2019
Document And Entity Information
Entity Registrant Name
Voip-pal.com Inc
Entity Central Index Key
0001410738
Document Type
10-Q
Trading Symbol
VPLM
Document Period End Date
Mar. 31, 2019
Amendment Flag
false
Current Fiscal Year End Date
--09-30
Entity's Reporting Status Current
Yes
Entity Filer Category
Non-accelerated Filer
Entity Small Business
true
Entity Emerging Growth Company
false
Entity Common Stock, Shares Outstanding
1,952,267,592
Document Fiscal Period Focus
Q2
Document Fiscal Year Focus
2019
Mailing Address
10900 NE 4TH STREET
SUITE 2300
BELLEVUE WA 98004
Business Address
10900 NE 4TH STREET
SUITE 2300
BELLEVUE WA 98004
253-219-9512
Voip-pal.com Inc (Filer) CIK: 0001410738 (see all company filings)
IRS No.: 980184110 | State of Incorp.: NV | Fiscal Year End: 0930
Type: 10-Q | Act: 34 | File No.: 000-55613 | Film No.: 19829042
SIC: 3661 Telephone & Telegraph Apparatus
Assistant Director 11
https://www.sec.gov/cgi-bin/viewer
CERTIFICATION PURSUANT TO 18 U.S.C. 1350
(As adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002)
For the Quarterly Report of VoIP-Pal.com Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2019 (the “Report”), the undersigned, in the capacities and on the date indicated below, hereby certifies that:
(i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in the Report.
Date: May 15, 2019
By: /s/ Emil Malak
Emil Malak
Chief Executive Officer
By: /s/D. Barry Lee
D. Barry Lee
Chief Financial Officer
CERTIFICATION
PURSUANT TO SECTION 13a-14
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, D. Barry Lee, certify that:
1. I have reviewed this quarterly report on Form 10-Q of VoIP-Pal.com Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; and
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of the financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 15, 2019
/s/ D. Barry Lee
D. Barry Lee
Chief Financial Officer
Filing Detail
SEC Home » Search the Next-Generation EDGAR System » Company Search » Current Page
Form 10-Q - Quarterly report [Sections 13 or 15(d)]: SEC Accession No. 0001580695-19-000195
Filing Date
2019-05-15
Accepted
2019-05-15 16:42:03
Documents
53
Period of Report
2019-03-31
Interactive Data
Document Format Files
Seq Description Document Type Size
1 QUARTERLY REPORT vplm-10q_033119.htm 10-Q 368663
2 CERTIFICATION OF CHIEF EXECUTIVE OFFICER ex31-1.htm EX-31.1 12236
3 CERTIFICATION OF CHIEF FINANCIAL OFFICER ex31-2.htm EX-31.2 12266
4 CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL ex32-1.htm EX-32.1 5188
Complete submission text file 0001580695-19-000195.txt 2560009
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Mailing Address
10900 NE 4TH STREET
SUITE 2300
BELLEVUE WA 98004
Business Address
10900 NE 4TH STREET
SUITE 2300
BELLEVUE WA 98004
253-219-9512
Voip-pal.com Inc (Filer) CIK: 0001410738 (see all company filings)
IRS No.: 980184110 | State of Incorp.: NV | Fiscal Year End: 0930
Type: 10-Q | Act: 34 | File No.: 000-55613 | Film No.: 19829042
SIC: 3661 Telephone & Telegraph Apparatus
Assistant Director 11
CERTIFICATION
PURSUANT TO SECTION 13a-14
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Emil Malak, certify that:
1. I have reviewed this quarterly report on Form 10-Q of VoIP-Pal.com Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; and
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of the financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 15, 2019
/s/ Emil Malak
Emil Malak
Chief Executive Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
? Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
For the quarterly period ended: March 31, 2019
or
? Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
Commission File Number: 000-55613
VoIP-PAL.COM INC.
(Exact name of Registrant as specified in its charter)
Nevada 980184110
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
10900 NE 4th Street, Suite 2300
Bellevue, WA, 98004
(Address of principal executive offices)
1-888-605-7780
(Registrant’s telephone number, including area code)
Check whether the Registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days.
Yes ? No ?
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ? No ?
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer ? Accelerated filer ? Non-accelerated filer ?
Smaller reporting company ? Emerging growth company ?
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ?
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ? No ?
Securities registered pursuant to Section 12(b) of the Exchange Act: None
As of May 14, 2019, there were 1,952,267,592 shares of Common Stock outstanding.
TABLE OF CONTENTS
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 17
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
Item 4. Controls and Procedures 20
PART II—OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 1A. Risk Factors 22
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 22
Item 3. Defaults Upon Senior Securities 22
Item 4. Mine Safety Disclosures 22
Item 5. Other Information 22
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
(Expressed in U.S. Dollars)
March 31,
2019
September 30,
2018
ASSETS
CURRENT
Cash $ 2,501,436 $ 3,175,523
Legal retainer 360,138 323,752
Prepaid expense 20,000 —
2,881,574 3,499,275
NON-CURRENT
Fixed assets (Note 5) 11,541 —
Intellectual VoIP communications patent properties, net (Note 6) 848,450 917,550
TOTAL ASSETS $ 3,741,565 $ 4,416,825
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 105,832 $ 112,935
TOTAL LIABILITIES $ 105,832 $ 112,935
STOCKHOLDERS’ EQUITY
SHARE CAPITAL (Note 9) $ 1,428,734 $ 1,276,653
ADDITIONAL PAID-IN CAPITAL (Note 9) 50,929,440 45,198,281
SHARES TO BE ISSUED (Note 9) 549,320 477,320
DEFICIT (49,271,761 ) (42,648,364 )
3,635,733 4,303,890
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 3,741,565 $ 4,416,825
Nature and Continuance of Operations (Note 1)
Contingent Liabilities (Note 11)
The accompanying notes are an integral part of these interim consolidated financial statements
3
VOIP-PAL.COM INC.
INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(Unaudited – prepared by management)
(Expressed in U.S. Dollars)
Three Months Ended Three Months Ended Six Months Ended Six Months Ended
March 31,
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
4
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
5
VOIP-PAL.COM INC.
INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited – prepared by management)
(Expressed in U.S. dollars)
Common Shares Shares to be
Issued
Additional
Paid-in
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
6
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 4th 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.
7
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.
8
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.
9
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).
NOTE 5. FIXED ASSETS
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.
10
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.
11
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
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.
12
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
13
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).
14
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.
15
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.
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 six-month period ended March 31, 2019 and notes thereto appearing elsewhere in this report, and our audited consolidated financial statements for the year ended September 30, 2018 and notes thereto.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This MD&A for the three- and six-month period ending March 31, 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
CORPORATE HISTORY, OVERVIEW AND PRINCIPAL BUSINESS
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 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, 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.
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 and Six Months Ending March 31, 2019 and 2018
Three months ending
March 31
Increase/
2019 2018 (Decrease) Percent
Revenue $ — $ — $ — —
Cost of Revenue — — — —
Gross Margin — — — —
General and administrative expenses (717,256 ) (6,014,395 ) (5,297,139 ) -88 %
Amortization and depreciation (34,738 ) (34,550 ) 188 0.54 %
Net loss $ (751,994 ) $ (6,048,945 ) $ (5,296,951 ) -88 %
Six months ending
March 31
Increase/
2019 2018 (Decrease) Percent
Revenue $ — $ — $ — —
Cost of Revenue — — — —
Gross Margin — — — —
General and administrative expenses (6,553,920 ) (6,644,936 ) (91,015 ) -1 %
Amortization and depreciation (69,476 ) (69,100 ) 376 0.54 %
Net loss $ (6,623,397 ) $ (6,714,036 ) $ (90,639 ) -1 %
REVENUES, COST OF REVENUES AND GROSS MARGIN
The Company had no revenues, cost of revenues or gross margin for the three and six month periods ending March 31, 2019 and 2018.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the three months ending March 31, 2019 totaled $717,256 compared to $6,014,395 during the same period in 2018. The decrease in general and administrative expenses of $5,297,139, or 88% less than the previous year, was primarily due to lower legal fees and stock-based compensation expenses incurred during the current period as compared to the same period in the previous year.
General and administrative expenses for the six months ending March 31, 2019 totaled $6,553,920 compared to $6,644,936 during the same period in 2018. The decrease in general and administrative expenses of $91,015 or 1% less than the previous year, was primarily due to lower legal fees and a decrease in stock-based compensation.
AMORTIZATION AND DEPRECIATION
Amortization of intellectual VoIP communications patent properties and depreciation of fixed assets for the three months ending March 31, 2019 totaled $34,738 compared to $34,550 during the same period in 2018. There was a small increase of $188 for depreciation on computers and furniture purchased during the first fiscal quarter of 2018. There was no material difference between the amortization expenses for the three months ending March 31, 2019 as compared to the same period in 2018.
Amortization of the intellectual VoIP communications patent properties and depreciation of fixed assets for the six months ending March 31, 2019 totaled $69,476 compared to $69,100 during the same period in 2018. There was a small increase of $376 for depreciation on computers and furniture purchased during the six-month period. There was no material difference between the amortization expenses for the six months ending March 31, 2019 as compared to the same period in 2018.
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
INTEREST EXPENSE
The Company had no financing or interest costs for the three or six month periods ending March 31, 2019 and 2018.
NET LOSS
The Company reported a net loss of $751,994 for the three months ended March 31, 2019 compared to a net loss of $6,048,945 for the same period in 2018. The net loss decrease of $5,296,951, or 88% over the same period in 2018 was due primarily to a decrease in legal fees and stock-based compensation.
The Company reported a net loss of $6,623,397 for the six months ended March 31, 2019 compared to a net loss of $6,714,036 for the same period in 2018. The net loss decrease of $91,015, or 1% over the same period in 2018 was due primarily to a decrease in legal fees and stock-based compensation.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2019, the Company had an accumulated deficit of $49,271,761 as compared to an accumulated deficit of $40,960,851 at March 31, 2018. As of March 31, 2019, the Company had a working capital surplus of $2,775,744 as compared to a working capital surplus of $2,506,629 at March 31, 2018. The increase in the Company’s working capital surplus of $269,115 was primarily due to an increase in cash proceeds from private placements and warrant exercises.
Net cash used by operations for the six months ending March 31, 2019 and 2018 was $1,110,726 and $1,251,525, respectively. The decrease in net cash used for the six months ending March 31, 2019 as compared to the six months ending March 31, 2018 was primarily due to a decrease in cash expenditures for legal expenses during the period.
Net cash used in investing activities for the six months ending March 31, 2019 and 2018 was $11,917 and $Nil, respectively.
Net cash provided in financing activities for the six months ending March 31, 2019 and 2018 was $471,240 and $3,882,060 respectively. The decrease in net cash provided by financing activities of $3,410,820 was primarily due to a decrease in cash proceeds from private placements and warrant exercises.
Liquidity
The Company primarily finances its operations from cash received through equity private placements of 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.
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 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.
Impact of Inflation
We believe that inflation has not had a material impact on our results of operations for the three months ending December 31, 2018. We cannot assure you that future inflation will not have an adverse impact on our operating results and financial condition.
19
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a smaller reporting company, we are not required to provide the information required by this Item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of March 31, 2019. 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 the company’s 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 December 31, 2018:
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 an independent audit committee. Although the Board of Directors serves as an audit committee it is not comprised solely of independent directors. We may establish an audit committee comprised solely of independent directors when we have sufficient capital resources and working capital to attract qualified independent directors and to maintain such a committee.
3) Insufficient number of independent directors. At the present time, our Board of Directors does not consist of a majority of independent directors, a factor that is counter to corporate governance practices as set forth by the rules of various stock exchanges.
Our management determined that these deficiencies constituted material weaknesses. Due to a lack of financial resources, we are not able to, and do not intend to, immediately take any action to remediate these material weaknesses. We will not be able to do so until we acquire sufficient financing to do so. We will implement further controls as circumstances, cash flow, and working capital permit. Notwithstanding the assessment that our ICFR was not effective and that there were material weaknesses as identified in this report, we believe that our financial statements fairly present our financial position, results of operations and cash flows for the years covered thereby in all material respects.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure.
Limitations on the Effectiveness of Internal Controls
Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving our objectives and our Chief Executive Officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal controls over financial reporting during the quarter ended March 31, 2019 that have materially affected or are reasonably likely to materially affect such controls.
20
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 11 of the Financial Statements contained in this report.
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.
21
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.
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 period ended December 31, 2018, the Company issued 1,062,500 common shares priced at $0.04 per common share for services with an aggregate value of $42,500.
During the period ended December 31, 2018, the Company issued 3,225,000 common shares priced at $0.04 per common share for cash proceeds of $129,000 from private placements of common shares.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
22
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
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DATED: May 15, 2019 By: /s/ Emil Malak
Emil Malak
Chief Executive Officer
DATED: May 15, 2019 By: /s/ D. Barry Lee
D. Barry Lee
Chief Financial Officer
23
SHE.WANTS.TO.CANCEL.AND.DOESNT.WANT.ANY.POSSIBLE.REASONS.TO.HAVE TO.OK.THE.PATENTS.OR TRIAL!!!!
THIS HEARING WAS CANCELLED.......
[color=red]ADDED NOTE IT WASNT A CANCEL IT WAS A TERMINATE HEARING[/color]
I.HOPE.NOT.BUT.SHE'S.DOING.IT.AGAIN! WE.NEED.TRUMP'S HELP. BUT.HE'S.AN.APPLE.FAN.....
A.GREAT.POST.YOU.FOUND!!!... WE.MAY.BE.BURNT.TOAST BUT HE'S AT LEAST TRYING TO SAVE OUR ..
Voip-Pal.com, Inc. v. Amazon.com, Inc. et al
California Northern District Court
Judge: Lucy H Koh
Referred: Virginia K Demarchi
Case #: 5:18-cv-07020
Nature of Suit 830 Property Rights - Patent
Cause 28:1338 Patent Infringement
Case Filed: Nov 19, 2018
Docket
Parties (4)
Docket last updated: 5 hours ago
Friday, May 10, 2019
57 oth_evt Clerk's Notice 1 - Terminate Hearings Fri 8:23 AM
**CLERK'S NOTICE** VACATING May 16, 2019 Hearing for48 Motion to Amend/Correct Complaint. Matter to be determined on the papers. (This is a text-only entry generated by the court. There is no document associated with this entry.) (kedS, COURT STAFF)
——
THIS IS PLAYING OUT SIMILAR TO HOW KOH HANDLED THE OTHER CONSOLIDATED CASES.
I agree, it would be nice to know more details on the actual date
What price per share would that have been for Emil?
People are encouraged to closely monitor VPLM and the weather this weekend in the South as the forecast for severe storms poses a significant risk to lives and property.
The anticipated severe weather and tornado event is coming only a couple of days after an attention-grabbing massive storm blasted the central United States through Thursday night.
Ultimately, the amount of sunshine that occurs in the region ahead of the thunderstorms that erupt may determine the magnitude of the event.
HOW.LONG.AT.THE.02.LEVEL?..WILL.CHRISTMAS.PERHAPS.BE.THE.TIME.TO.BUY AGAIN??
WRONG.TIMEFRAME.NOTED.SHOULD.BE WITHIN .2. YEARS.UNFORTUNATELY
A SAD SCENE...........
HOW.MANY.$.DID.THIS.ORDER.JUST.COST.VPLM?.THE.RECENT.4.CENT.PP.PEOPLE. MUST.BE.REALLY.TICKED.OFF.......
THANKS FOR THE READ
HMMMMMM.SHE.DIDNT.EVEN.KNOW WHAT A STOCK.CHILL.WAS!!!
HOW MUCH WILL BE VPLM'S AFTER COURT CASE???
APPLE
HOW APPLE MAKES BILLIONS OF DOLLARS SELLING SERVICES
Breaking down Apple’s new focus — from Apple Music to accounting tricks
By Chaim Gartenberg@cgartenberg Mar 20, 2019, 9:00am EDT
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Apple’s focus is shifting. In recent years, iPhone sales have begun to plateau, and now Apple’s services business — which encompasses everything from the App Store to licensing deals — is being positioned as its next big frontier for revenue growth. More than ever, Apple wants to sell people constant, ongoing subscriptions for things they can do on their phones.
That new direction is going to be thrust into the spotlight next week at Apple’s “It’s Show Time” event, where the company is expected to unveil two big new subscription services: a TV service for original shows and movies, and an Apple News service that will bundle together premium news sources and magazines.
Apple’s services business brought in over $10.9 billion during the most recent quarter, setting records in “every geographic segment” in the process, according to Apple CEO Tim Cook. Cook also said that Apple is on track to double its services business from 2016 to 2020. Last quarter saw a 19 percent increase year over year.
It’s a substantial figure compared to Apple’s other business segments: services already brings in more per quarter than the Mac ($7.4 billion last quarter), iPad ($6.7 billion), or the collected “Wearables, Home, and Accessories” group of products ($7.3 billion). And that balance will likely only continue to shift as Apple starts to push services harder and introduces new services to which people can subscribe.
So what’s already bringing in all that services revenue, and how healthy are those businesses? Apple doesn’t break down how much money individual services make, so there’s a large extent to which we just can’t say. But we do know what businesses the segment is composed of, how much they charge, and whether they’re any good. With the services business entering a new era, here’s an overview of where it stands today.
Photo by Amelia Holowaty Krales / The Verge
APPLE MUSIC
Apple Music is arguably the highest-profile entry in Apple’s new services business, due to it being one of the most modern (it launched in 2015, after Apple bought and rebranded Beats Music) and one of the most interesting (sorry, extended warranty programs).
The music subscription service had 56 million customers as of December 2018, according to the Financial Times. For comparison, Spotify had 96 million paid customers as of February 2019.
It’s unclear how many of Apple Music’s customers are actively paying. The company offers free trials, and its service also comes bundled with some Verizon wireless plans.
Assuming all customers are paying $10 per month (with family plans, annual discounts, bundles, and student deals, they’re not, but this is ballpark numbers here), that puts Apple Music at a high-ball estimate of $6.7 billion per year brought in.
Cost: $10 per month ($5 per month for student plans, $15 per month for family plans)
How Apple makes money: Subscription fees, carrier partnerships.
APP STORE / MAC APP STORE
THE APP STORE PAID OUT $100 BILLION OVER A DECADE; BUT EVERY TOP GROSSING APP ON THE PLATFORM IS A SUBSCRIPTION OR A FREE-TO-PLAY GAME
Probably one of the biggest contributors to Apple’s revenue is the massively popular App Store, which was estimated as of May 2018 to have seen upward of 170 billion downloads in its 10-year history.
Most of those aren’t straight-up paid purchases — a massive percentage of the App Store’s revenue comes from in-app purchases in free-to-play games like Fortnite and Candy Crush and subscription apps like Netflix, Tinder, and YouTube. According to App Annie’s latest estimates, every single one of the 50 top grossing apps on the platform is either a major service that relies on subscription fees or a free-to-play game. Even the most popular paid apps like Minecraft or Facetune just don’t make the same kind of money as free apps that rely on in-app purchases, even with in-app purchases to help bolster their numbers. And Apple takes a cut of each of those in-app purchases and subscriptions.
Those “free” apps have resulted in some pretty big sales: as of June 2018, Apple had paid out $100 billion to developers from the App Store. If you work off of Apple’s 70 / 30 revenue split (which is usually, but not always, the cut it takes from purchases), you get total sales of roughly $142 billion, with $42 billion of that going to Apple in the decade it’s been running the App Store.
That said, Apple has recently come under fire for the App Store model in the past few months: the Supreme Count is hearing an iOS App Store antitrust lawsuit that alleges Apple has an unfair monopoly on iPhone apps. And Spotify has filed another antitrust complaint over Apple’s 30 percent cut with the European Union, complaining that it gives Apple an unfair advantage when promoting its own streaming service, Apple Music.
Cost: Depends on content purchased.
How Apple makes money: in-app purchases in games, app sales, app subscriptions.
ICLOUD
Theoretically, every single Apple customer who owns an iPhone, iPad, or Mac is an iCloud user, because Apple gives a paltry 5GB of storage to all customers for free. But for revenue, the important part here is the paid plans, which give users additional storage for a monthly cost.
iCloud may not have the same brand recognition as Dropbox or Google Drive when it comes to storing and sharing files, but it does have some big advantages in getting users to subscribe: it’s the only way to back up iPhones and iPads to the internet. And that storage pool counts toward nearly everything on your phone. Take too many pictures, for example, and your phone stops backing up, which creates a real incentive to shell out for more than the scant 5GB Apple gives for free.
Apple seems to know that, too: the cheapest iCloud plan is just 99 cents per month for 50GB of storage, making it an easy sell to users, but that $12 per customer per year starts to add up across the billion-plus iOS devices out in the world, even if only a fraction of them subscribe. A 2016 interview with Apple SVP Eddy Cue revealed that at the time, there were 782 million iCloud users, but Cue’s comments referred to all users — Apple has never broken out how many paid subscribers it has.
Cost: $0.99 per month (50GB), $2.99 per month (200GB), $9.99 per month (2TB). The 200GB and 2TB plans can be shared as a family plan.
How Apple makes money: subscription fees.
Mac-apps-report-verge-Amelia Krales-03
ITUNES / APPLE BOOKS
The iTunes store isn’t the juggernaut it once was — with streaming services like Spotify, Apple Music, Netflix, and Hulu, people just tend to buy fewer songs, TV shows, and movies nowadays. But it still does bring in money: it’s a one-stop-shop for a huge range of content, and like all of Apple’s other services, it’s front and center on all its devices. Want to rent a movie on your Apple TV for a movie night? iTunes is right there, ready and waiting. And with Apple expanding iTunes to other devices, like Samsung smart TVs, it seems like iTunes is still a big part of Apple’s revenue strategy going forward.
Also included here is Apple Books, which is basically iTunes, but for books. Apple Books has the issue of Amazon and its massive Kindle library as competition, which Apple infamously tried to solve in a price fixing scandal that cost the company $450 million. Even so, it’s still one of the biggest ebook stores around, and is another easy source of service revenue.
Lastly, iTunes also includes Apple’s less popular iTunes Match subscription service, which costs $25 per year and syncs users’ iTunes music across their devices, sort of like a private cloud music service where you have to buy all the music.
Cost: Depends on content purchased; $24.99 per year for iTunes Match (iTunes Match is included with Apple Music).
How Apple makes money: Purchased content, subscription fees.
APPLE PAY
Apple Pay is Apple’s overarching payments system — it includes using Apple Pay to make purchases on websites and inside apps, conducting contactless payments at retail stores, and sending money using Apple Pay Cash (Apple’s Venmo-style person-to-person payment system).
THERE WERE 1.8 BILLION APPLE PAY TRANSACTIONS LAST QUARTER, MORE THAN DOUBLE THE YEAR BEFORE
Apple says it doesn’t charge “users, merchants, or developers” to use Apple Pay, but reports indicate that it still receives a small fee from each transaction. That cut appears to come from the bank that issued the card with which Apple Pay is being used. Reports from 2014, when Apple Pay launched, said the fee for US banks was 0.15 percent, or 15 cents on every $100 spent.
Last quarter, Apple said there were 1.8 billion Apple Pay transactions, more than twice as many as the same quarter a year earlier. We don’t know how much those transactions are worth, and it’s likely that the vast majority of them happened outside the US, in countries where mobile payments are more popular. But that’s still a large volume of transactions where Apple takes a cut.
Apple also makes money off of Apple Pay Cash. The service is free to use when sending money with a debit card, but it charges a 3 percent fee for any funds sent using a credit card.
Cost: Three percent of any funds sent using Apple Pay Cash tied to a credit card.
How Apple makes money: Transaction fees from users, banks.
Photo by Chris Welch / The Verge
APPLECARE
AppleCare+ is Apple’s extended warranty service: it lets customers get longer and more comprehensive warranties for their Apple products, usually with things like discounted screen or device replacements, depending on the device.
AppleCare+ is also included as part of the monthly cost of Apple’s iPhone Upgrade Program. Like many of the other Apple services, the company hasn’t said how many users opt to buy the extended warranty.
Cost: Depends on product, ranges from $129 to $199 for iPhones, $249 to $369 for MacBook laptops, and $99 to $249 for iMac and Mac desktops.
How Apple makes money: Warranty fees.
LICENSING
This isn’t quite a consumer-facing service like everything else on this list, but it’s a big business. Apple sells licenses to companies to get their services built into iOS, like how Google is the default search engine or The Weather Channel provides weather data. That kind of front row real estate on all of Apple’s devices is worth a lot, and it provides a big chunk of Apple’s services revenue.
Licensing agreements are a particularly opaque area of Apple’s business. The last clear numbers we have are from 2014, when court documents revealed that Google paid Apple $1 billion to stay the default search bar on iOS as part of the company’s revenue sharing agreement. But recent estimates from analysts have put Apple’s fee at roughly $9 billion — a number that, if true, would make it one of the biggest parts of Apple’s entire service group all on its own.
Cost: Nothing, unless you prefer Bing for search.
How Apple makes money: Licensing payments from companies like Google to be featured on Apple products.
MAPS, SIRI, FREE ICLOUD
This is where things get weird: As of its most recent quarter, Apple now takes part of the sale price of every iPhone, iPad, and Mac and converts it into money for services, which it then spreads out across multiple quarters. Basically, Apple counts “free” services like Maps, Siri, and parts of iCloud (like iMessage), and considers them to be built into the cost of its devices.
It’s a meaningful shift, too: when Apple started factoring in payments for these free services, its total service revenue for Q1 2018 jumped 7.7 percent, from the originally reported $8.47 billion to $9.13 billion.
Cost: Free? But also you’re technically paying for it when you buy your iPhone.
How Apple makes money: Hardware purchases.
Correction: Only Samsung smart TVs will have the iTunes app, not LG TVs (although those will have AirPlay 2 and HomeKit).
IS.THIS.VPLMS.PATENT.WORLD.TO.BE?.So.close.to.the.truth.it’s.frightening!!!!!!.......
..........
CALLER:
Is this Gordon's Pizza?
GOOGLE:
No sir, it's Google Pizza.
CALLER:
I must have dialed a wrong number. Sorry.
GOOGLE:
No sir, Google bought Gordon’s Pizza last month.
CALLER:
OK. I would like to order a pizza.
GOOGLE:
Do you want your usual, sir?
CALLER:
My usual? You know me?
GOOGLE:
According to our caller ID data sheet, the last 12 times you called you ordered an extra-large pizza with three cheeses, sausage, pepperoni, mushrooms and meatballs on a thick crust.
CALLER:
OK! That’s what I want …
GOOGLE:
May I suggest that this time you order a pizza with ricotta, arugula, sun-dried tomatoes and olives on a whole wheat gluten-free thin crust?
CALLER:
What? I detest vegetable!.
GOOGLE:
Your cholesterol is not good, sir.
CALLER:
How the hell do you know!
GOOGLE:
Well, we cross-referenced your home phone number with your medical records. We have the result of your blood tests for the last 7 years.
CALLER:
Okay, but I do not want your rotten vegetable pizza! I already take medication for my cholesterol.
GOOGLE: Excuse me sir, but you have not taken your medication regularly. According to our database, you only purchased a box of 30 cholesterol tablets once, at Drug RX Network, 4 months ago.
CALLER:
I bought more from another drugstore.
GOOGLE:
That doesn’t show on your credit card statement.
CALLER:
I paid in cash.
GOOGLE:
But you did not withdraw enough cash according to your bank statement.
CALLER:
I have other sources of cash.
GOOGLE: That doesn’t show on your last tax return unless you bought them using an undeclared income source, which is against the law.
CALLER:
WHAT THE HELL!!!
GOOGLE:
I'm sorry, sir, we use such information only with the sole intention of helping you.
CALLER:
Enough already! I'm sick to death of Google, Facebook, Twitter, WhatsApp and all the others. I'm going to an island without internet, cable TV, where there is no cell phone service and no one to watch me or spy on me.
GOOGLE:
I understand sir, but you need to renew your passport first. It expired 6 weeks ago…
GOOGLE:
Do you want your usual, sir?
Will VPLM WIN ALSO AS APPLE dealt legal blow as jury awards Qualcomm $31 million
The verdict gives Qualcomm momentum as it heads into a bigger showdown with Apple next month.
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BY RICHARD NIEVA
MARCH 15, 2019 11:21 AM PDT
LEER EN ESPAÑOL
16
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Apple and Qualcomm have been in a heated legal battle.
James Martin/CNET
Apple violated three Qualcomm patents and should pay the chipmaker $31 million for infringing on its technology, a jury decided Friday, giving Qualcomm momentum as it heads into another legal skirmish with the iPhone maker next month.
Qualcomm, which filed the suit in July 2017, alleged that Apple had used its technology without permission in some versions of its popular iPhone. The jury awarded Qualcomm the full amount it had requested at the start of the two-week trial, which took place in San Diego.
One disputed Qualcomm patent covers technology that lets a smartphone quickly connect to the internet once the device is turned on. Another deals with graphics processing and battery life. The third addresses technology that shifts traffic between a phone's apps processor and modem.
The $31 million in damages -- or $1.41 per infringing iPhone -- is a drop in the bucket for Apple, a company that briefly became a $1 trillion company last year. But it marks an important victory for Qualcomm, burnishing its reputation as a mobile components innovator. The win also lends credibility to the notion that much of the company's innovation is reflected in iPhones.
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00:0004:06
Video: Apple vs. Qualcomm: Court battles explained
The verdict sets the stage for a highly anticipated trial between the two companies scheduled for next month in San Diego. The dispute, over Qualcomm's patent royalties with Apple, involves billions of dollars and will be a crescendo in the tech giants' wide-ranging legal saga.
The clash between Apple and Qualcomm began two years ago, when the Federal Trade Commission, with help from Apple and Intel, accused Qualcomm of being a monopoly power in modem chips. The FTC argued that Qualcomm's royalty rates stopped competitors from entering the market and drove up phone prices. That trial took place in January, and the parties are currently awaiting a decision.
The trial next month will examine Qualcomm's licensing business, too.
The patent case decided Thursday, presided over by US District Judge Dana Sabraw, is more technical and less high-profile than the other parts of the legal battle. Still, it could have implications for how your phone is made and how much it costs.
Qualcomm general counsel Don Rosenberg applauded the decision.
"Today's unanimous jury verdict is the latest victory in our worldwide patent litigation directed at holding Apple accountable for using our valuable technologies without paying for them," Rosenberg said in a statement. "The technologies invented by Qualcomm and others are what made it possible for Apple to enter the market and become so successful so quickly."
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Apple said it was "disappointed" with the verdict.
"Qualcomm's ongoing campaign of patent infringement claims is nothing more than an attempt to distract from the larger issues they face with investigations into their business practices in US federal court, and around the world," a spokesman said in a statement.
The witness twist
The two sides spent a big portion of the trial fighting over the boot-up patent. Apple argued that one of its then-engineers, Arjuna Siva, made key contributions to the technology and should be named on the patent as well. Apple said Qualcomm stole the idea when the two companies were working together to bring Qualcomm's chips into iPhones. The trial took a striking twist last week when Siva, who now works for Google, seemingly backed out of appearing, then reversed the decision to testify on Monday.
The jury struck down Apple's argument that Siva should have been named as an inventor.
Apple argued the trial wasn't solely about patents. During closing arguments Wednesday, Apple counsel Juanita Brooks said the "real motivation" for the lawsuit was retaliation for Apple bringing on Intel as a second chip supplier in 2016. She said Qualcomm was upset because the two companies had previously had an exclusive relationship, since 2011.
Now Intel has replaced Qualcomm in iPhones altogether.
"Qualcomm went into a drawer, dusted off some old patents, and threw them against the wall to see if they'd stick," Brooks said. In response, Qualcomm counsel David Nelson said, "We're entitled to get return on our intellectual property."
Correction, March 15, 4:10 p.m. PT: An earlier version of this story misstated the day of the verdict. It was Friday.
VERY INTERESTING INFO... THANKS
Voip-Pal.Com Inc. (OTCMKTS:VPLM) SHORT INTEREST
VOIP-PAL.COM INC (OTCMKTS:VPLM) had an increase of 84.91% in short interest. VPLM’s SI was 121,300 shares in March as released by FINRA. Its up 84.91% from 65,600 shares previously. With 1.26M avg volume, 0 days are for VOIP-PAL.COM INC (OTCMKTS:VPLM)’s short sellers to cover VPLM’s short positions. The stock decreased 0.08% or $0.0001 during the last trading session, reaching $0.0589. About 63,624 shares traded. Voip-Pal.Com Inc. (OTCMKTS:VPLM) has 0.00% since March 13, 2018 and is . It has underperformed by 4.37% the S&P500.
Update on kipping trial.that.was.supposed.to.happen.yesterday? Was unable to find anything on pacer besides a dismissal in 2016.
where did all this come from?
INTEREST COST ON BORROWED MONEY, PERHAPS??????
It is better written but still as.empty.as.the.original.alice.motion filing.
UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION
VOIP-PAL.COM, INC., a Nevada corporation,
Plaintiff,
v.
TWITTER, INC., a Delaware corporation,
Defendant.
Case No. 5:18-cv-04523-LHK [Lead Case]
DEFENDANTS’ CONSOLIDATED REPLY IN SUPPORT OF DEFENDANTS’ CONSOLIDATED MOTION TO DISMISS PLAINTIFF’S COMPLAINTS; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT
ORAL ARGUMENT REQUESTED
JURY TRIAL DEMANDED
Date: March 21, 2019 Time: 1:30 p.m. Courtroom: 8 - 4th Floor Judge Lucy H. Koh
Case No. 5:18-cv-06054-LHK
VOIP-PAL.COM, INC., a Nevada corporation,
Plaintiff,
v.
CELLCO PARTNERSHIP d/b/a/ Verizon Wireless, a Delaware corporation
Defendant.
Case 5:18-cv-06177-LHK Document 70 Filed 02/28/19 Page 1 of 24
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VOIP-PAL.COM, INC., a Nevada corporation,
Plaintiff,
v.
AT&T CORP, a Delaware corporation,
Defendant.
Case No. 5:18-cv-06177-LHK
Case No. 5:18-cv-06217-LHK
VOIP-PAL.COM, INC., a Nevada corporation,
Plaintiff,
v.
APPLE INC., a California corporation,
Defendant.
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TABLE OF CONTENTS I. INTRODUCTION .............................................................................................................. 1 II. UNDER ALICE STEP ONE, THE ASSERTED CLAIMS ARE DIRECTED TO ABSTRACT IDEAS. .......................................................................................................... 3 A. The Asserted Claims Are Written In Functional, Results-Oriented Language That A Person Could Carry Out As Mental Steps Or With A Pen And Paper. ............................................................................................................... 3 B. The Purported Benefits Of “User-Specific Calling” And “Transparent Routing” Are Insufficient. ....................................................................................... 5 C. The Asserted Means-Plus-Function Claims Are Similarly Ineligible. ................... 6 D. Defendants’ “Brick and Mortar” Analogy Is Properly Tied To The Claim Language And Confirms The Abstract Nature Of The Claims............................... 8 E. VoIP-Pal’s Cited District Court Decisions Involving Communication Routing Are Of No Avail To VoIP-Pal................................................................. 10 III. UNDER ALICE STEP 2, THE ASSERTED CLAIMS LACK ANY INVENTIVE CONCEPT. ....................................................................................................................... 11 A. None Of The Purported Benefits Lauded By VoIP-Pal Exist In The Claims, And Therefore Cannot Supply An Inventive Concept. ......................................... 11 B. The Asserted Claims Recite Functional Descriptions Of Conventional Call Routing Technology, Not Unconventional Computer Network Systems. ............ 12 IV. NO FACTUAL ISSUES STAND IN THE WAY OF DISMISSAL. ............................... 14 V. CONCLUSION ................................................................................................................. 15
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TABLE OF AUTHORITIES
Cases Page(s) Affinity Labs of Tex., LLC v. DIRECTV, LLC, 838 F.3d 1253 (Fed. Cir. 2016) ...........................................................................................10, 13
Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014) ...................................................................................................... passim
Berkheimer v. HP Inc., 881 F.3d 1360 (Fed. Cir. 2018) ...........................................................................................11, 14
British Telecomms. PLC v. IAC/InterActiveCorp, No. 18-366-WCB, 2019 U.S. Dist. LEXIS 17269 (D. Del. Feb. 4, 2019) ................................14
BroadSoft, Inc. v. CallWave Commc’ns., LLC, 282 F. Supp. 3d 771 (D. Del. 2017), aff’d, 739 F. App’x 985 (Fed. Cir. 2018) ...................4, 12
BSG Tech LLC v. Buyseasons, Inc., 899 F.3d 1281 (Fed. Cir. 2018) ...................................................................................................2
Content Extraction & Transmission LLC v. Wells Fargo Bank, 776 F.3d 1343 (Fed. Cir. 2014) .................................................................................................12
Core Wireless Licensing S.A.R.L. v. LG Elecs., Inc., 880 F.3d 1356 (Fed. Cir. 2018) ...................................................................................................5
Credit Acceptance Corp. v. Westlake Servs., 859 F.3d 1044 (Fed. Cir. 2017) ...................................................................................................6
Diamond v. Diehr, 450 U.S. 175 (1981) ....................................................................................................................3
Evolutionary Intelligence, LLC v. Sprint Nextel Corp., 137 F. Supp. 3d 1157 (N.D. Cal. 2015), aff’d, 677 F. App’x 679 (Fed. Cir. 2017) .........................................................................................................................................15
Finjan, Inc. v. Blue Coat Sys., 879 F.3d 1299 (Fed. Cir. 2018) .................................................................................................14
Genband US LLC v. Metaswitch Networks Corp., No. 2:14-cv-33-JRG-RSP, 2016 U.S. Dist. LEXIS 37946 (E.D. Tex. Jan. 6, 2016) ............................................................................................................10
Glasswall Sols., Ltd. v. Clearswift Ltd., No. 2018-1407, 2018 U.S. App. LEXIS 35818 (Fed. Cir. Dec. 20, 2018) ...............................15
Intellectual Ventures II LLC v. BITCO Gen. Ins. Corp., No. 6:18-CV-00298-JRG, 2019 U.S. Dist. LEXIS 11355 (E.D. Tex. Jan. 24, 2019) .........................................................10
Intellectual Ventures I LLC v. Symantec Corp., 838 F.3d 1307 (Fed. Cir. 2016) .............................................................................................4, 11
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Interval Licensing LLC v. AOL, Inc., 896 F.3d 1335 (Fed. Cir. 2018) .............................................................................................2, 15
McRO, Inc. v. Bandai Namco Games Am., Inc., 837 F.3d 1299 (Fed. Cir. 2016) ...................................................................................................5
Messaging Gateway Sols., LLC v. Amdocs, Inc., No. 14-732-RGA, 2015 U.S. Dist. LEXIS 49408 (D. Del. Apr. 15, 2015) ..............................13
Phoenix Licensing, L.L.C. v. Consumer Cellular, Inc., No. 2:16-CV-0152-JRG-RSP, 2017 U.S. Dist. LEXIS 47790 (E.D. Tex. Mar. 7, 2017) .............................................................................................................8
Procter & Gamble Co. v. QuantifiCare Inc., 288 F. Supp. 3d 1002 (N.D. Cal. 2017) ..................................................................................7, 8
Pure Data Sys., LLC v. Ubisoft, Inc., 329 F. Supp. 3d 1054 (N.D. Cal. 2018) ................................................................................9, 10
Ronald A. Katz Tech. Licensing, L.P. v. FedEx Corp., No. 2:15-cv-02329-JPM-tmp, 2016 U.S. Dist. LEXIS 38479 (W.D. Tenn. Mar. 24, 2016)......................................................................................................11
Secured Mail Sols. LLC v. Universal Wilde, Inc., 873 F.3d 905 (Fed. Cir. 2017) .....................................................................................................8
Stanacard v. Rubard, LLC, No. 12CIV5176CMMHD, 2015 U.S. Dist. LEXIS 157345 (S.D.N.Y. Nov. 18, 2015) .....................................................................................................9, 12
Synopsys, Inc. v. Mentor Graphics Corp., 839 F.3d 1138 (Fed. Cir. 2016) .............................................................................................6, 15
Twilio, Inc. v. Telesign Corporation, No. 16-cv-06925-LHK, 2017 WL 1208588 (N.D. Cal. Mar. 31, 2017) ...................................11
Two-Way Media Ltd. v. Comcast Cable Commc’ns, LLC, 874 F.3d 1329 (Fed. Cir. 2017) .............................................................................................4, 10
Uniloc US, Inc. v. Med. Info. Tech., Inc., 2017 U.S. Dist. LEXIS 192677 (E.D. Tex. Mar. 30, 2017), aff’d, Uniloc USA, Inc. v. Picis, Inc., No. 2017-2171, 2019 U.S. App. LEXIS 3922 (Fed. Cir. Feb. 8, 2019) ...............................................................................................................3
Uniloc USA, Inc. v. Apple Inc., No. C 18-00358-WHA, 2018 U.S. Dist. LEXIS 84239 (N.D. Cal. May 18, 2018) .........................................................................................................15
Univ. of Florida Research Found., Inc. v. GE Co., No. 2018-1284, 2019 U.S. App. LEXIS 5568 (Fed. Cir. Feb. 26, 2019) ...................................4
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Visual Memory LLC v. NVIDIA Corp., 867 F.3d 1253 (Fed. Cir. 2017) .................................................................................................14
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This Reply responds to Plaintiff VoIP-Pal’s Opposition to Defendants’ Consolidated
Motion to Dismiss Plaintiff’s Complaint (e.g., VoIP-Pal’s Corrected Opposition (“Opp.”) is AT&T
ECF No. 69 and Defendants’ Motion to Dismiss (“Mot.”) is AT&T ECF No. 63).
MEMORANDUM OF POINTS AND AUTHORITIES
I. INTRODUCTION VoIP-Pal’s arguments commit the cardinal error of Section 101 analysis—they focus on the
patent specification and alleged “benefits” instead of the purported invention as set forth in the
asserted claims. The claims recite high-level steps written in functional language, such as
“determining a match” between information about the caller and callee, “classifying the call,” and
“producing a routing message.” Although VoIP-Pal attempts to paint its claims in a more specific
light as particular to “integrating public and private networks,” its infringement theories—that the
claims “are used with almost all cellular and WiFi voice and message communications” and are
met by such broad activities as making a video call, sending a text message from an app, and
replying to a tweet—flatly contradict VoIP-Pal’s argument. See AT&T ECF No. 3-21 at 2.
VoIP-Pal’s claims are directed to nothing more than the abstract idea of determining where
to route a communication as between two [networks/network portions] using information about
the participants. And, significantly, VoIP-Pal does not dispute Defendants’ identification of
claim 1 of the ’815 patent as representative of the multi-network claims and claim 74 of the ’005
patent as representative of the single-network claims.
Regarding Alice step one, VoIP-Pal argues that the claims are not directed to an abstract
idea because the claims allegedly “improve call router controller technology” by providing
purported benefits that VoIP-Pal calls “user specific calling” and “transparent routing.” But those
purported benefits appear nowhere in the claims. Contrary to VoIP-Pal’s assertions, the claims are
explicitly directed to concepts long held abstract: acquiring information (e.g., “locating a caller
dialing profile”); analyzing information (e.g., “determining a match [of] attributes [to an]
identifier” and “classifying the call . . . when said match meets . . . classification criteria”); and
producing information (e.g., “producing a . . . routing message for receipt by a call controller”).
Given the claims exhibit these hallmarks of an abstract idea, Defendants’ reference to the analogy
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of telephone operators merely confirms the other reasons for finding that the asserted claims are
directed to an abstract idea. Defendants’ Motion does not depend on the Court’s acceptance of this
analogy. Nonetheless, it is common knowledge that, for example, telephone operators would
conventionally classify telephone calls as long distance relative to the caller’s area code if the
callee’s area code was different than the caller’s area code.
Regarding Alice step two, VoIP-Pal argues that its claims contain an inventive concept
because “using caller attributes to utilize callee identifiers and caller attributes to transparently route
calls between private/public networks is unconventional.” Opp. at 18. But again, VoIP-Pal fails
to tie its arguments to the language of the claims. The claims do not specify “transparency.” VoIP
Pal identifies nothing in the claims that amounts to “significantly more” than the abstract idea itself.
Indeed, the asserted single-network claims refer to one network and not to two networks or public
and private networks.
In an apparent attempt to fill holes in the intrinsic record, VoIP-Pal’s Opposition introduces
an improper expert declaration, which this Court should exclude as outside the pleadings. VoIP
Pal also argues that a factual dispute exists as to whether the claims are necessarily rooted in
computer technology because VoIP-Pal would “show that a VoIP system is inherently a computer
network.” Opp. at 24. In addition to the fact that almost no asserted claim recites “VoIP,” VoIP
Pal’s argument is irrelevant to a Section 101 analysis. As a matter of law, merely limiting an
abstract idea to a particular technological environment (a computer network, the Internet, a VoIP
system, etc.) does not demonstrate an inventive concept. See, e.g., Interval Licensing LLC v. AOL,
Inc., 896 F.3d 1335, 1346 (Fed. Cir. 2018) (“It is well-settled that placing an abstract idea in the
context of a computer does not ‘improve’ the computer or convert the idea into a patent-eligible
application of that idea.”); BSG Tech LLC v. Buyseasons, Inc., 899 F.3d 1281, 1291 (Fed. Cir. 2018)
(“As a matter of law, narrowing or reformulating an abstract idea does not add ‘significantly more’
to it.”). Moreover, Defendants’ discussion of the claims and material historical facts do not
contradict the specification or the Third Amended Complaint, leaving no factual dispute for future
resolution. VoIP-Pal’s Complaints should thus be dismissed with prejudice because the asserted
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claims are directed to patent ineligible subject matter.1
II. UNDER ALICE STEP ONE, THE ASSERTED CLAIMS ARE DIRECTED TO ABSTRACT IDEAS.
A. The Asserted Claims Are Written In Functional, Results-Oriented Language That A Person Could Carry Out As Mental Steps Or With A Pen And Paper. The asserted claims are written in functional, goal-oriented language that could be carried
out in a person’s mind or by pen and paper, and VoIP-Pal’s Opposition fails to show otherwise.
VoIP-Pal argues that the claims are not directed to acquiring, analyzing, and presenting
information, referring to passages from the specification to argue that the call controller causes a
communication link to be established in response to a routing message. Opp. at 11. VoIP-Pal
further argues that “the asserted claims define, with particularity, the process through which the
call controller is set up to route the communications.” Id. at 12. Specifically, VoIP-Pal asserts that
“calling attributes” located from a “caller dialing profile” are compared to “at least a portion of the
callee identifier” to identify a “match”; when the match meets “classification criteria,” the call is
classified as a public or private network call in the “classifying” step; and the classification of the
call yields a “routing message” that “sets up the call controller.” Id. And VoIP-Pal further argues
that the call controller is set up to “establish the call” by “identifying a gateway to the public
network.” Id. at 14. But VoIP-Pal’s own argument illustrates that the claim elements are fashioned
from vague functional terms—“attributes,” “criteria,” and “classifying”—to obtain results (a
classification and routing message). The claims do not specify how attributes are compared to a
1 VoIP-Pal repeatedly cites to inter partes review proceedings and Apple’s arguments in those IPRs regarding prior art. Opp. at 4, 21 n.16, 25. Patent eligibility was not—and indeed, could not have been—analyzed in those IPRs. Likewise, any statements that Apple or the PTAB made about novelty and obviousness over particular prior art references are irrelevant to the subject matter eligibility analysis. See Diamond v. Diehr, 450 U.S. 175, 188-90 (1981); Uniloc US, Inc. v. Med. Info. Tech., Inc., 2017 U.S. Dist. LEXIS 192677, at *9 (E.D. Tex. Mar. 30, 2017) (“denial of a petition for inter partes review is irrelevant to the eligibility analysis”), aff’d, Uniloc USA, Inc. v. Picis, Inc., No. 2017-2171, 2019 U.S. App. LEXIS 3922 (Fed. Cir. Feb. 8, 2019). VoIP-Pal’s reference to AT&T’s and Verizon’s withdrawal of their previous motions to dismiss is also an irrelevant diversion. Opp. at 1. In Nevada, AT&T and Verizon filed motions to dismiss VoIP-Pal’s Second Amended Complaints. AT&T ECF No. 6. In response to the motions, VoIPPal sought leave to file Third Amended Complaints. AT&T and Verizon withdrew their motions so the allegations in the Third Amended Complaints could be addressed in an efficient and orderly manner. AT&T ECF No. 49. After transfer to this Court, VoIP-Pal filed Third Amended Complaints against AT&T and Verizon and the First Amended Complaint against Twitter. Those recent Complaints are the subject of Defendants’ present Consolidated Motion to Dismiss.
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callee identifier, what criteria matter, or how a routing message may be used to “set up” a call
controller or “identif[y] network infrastructure” for a given call.
VoIP-Pal attempts to find eligibility in identifying an end goal—improving the problem of
integration when “two networks have significant differences such as the use of incompatible callee
identifiers, addressing schemes and protocols” (Opp. at 5)—but the asserted claims do not explain
how that goal is accomplished. See, e.g., Two-Way Media Ltd. v. Comcast Cable Commc’ns, LLC,
874 F.3d 1329, 1337 (Fed. Cir. 2017) (“[A claimed] method for routing information using result
based functional language . . . requires the functional results of ‘converting,’ ‘routing,’
‘controlling,’ ‘monitoring,’ and ‘accumulating records’ but does not sufficiently describe how to
achieve these results in a non-abstract way.”); Univ. of Florida Research Found., Inc. v. GE Co.,
No. 2018-1284, 2019 U.S. App. LEXIS 5568, at *9 (Fed. Cir. Feb. 26, 2019) (“That the automation
[of collecting, analyzing, manipulating, and displaying of medical data] can result in life altering
consequences . . . is laudable, but it does not render it any less abstract.”); BroadSoft, Inc. v.
CallWave Commc’ns., LLC, 282 F. Supp. 3d 771, 781 (D. Del. 2017) (finding abstract the process
of “accessing stored information and directing the call in accordance with the stored instructions”),
aff’d, 739 F. App’x 985 (Fed. Cir. 2018). Furthermore, the asserted single-network claims refer to
one network, not two. To the extent a “gateway” is mentioned in the claims, it is merely a potential
call routing destination—i.e., a generic part of the technological environment in which the abstract
idea occurs. And for claims that require “initiation of a call,” receiving a call is likewise abstract.
Mot. at 16 (citing cases).
Additionally, VoIP-Pal does not contest that a person could perform the claimed steps in
their mind or with a pen and paper. On that point, VoIP-Pal argues only that telephone operators
did not look at caller information to classify calls. Opp. at 16-17. But that conflates separate issues
under Alice step one: whether the claims could be performed in a person’s mind with whether the
claims reflect an actual longstanding practice. See, e.g., Intellectual Ventures I LLC v. Symantec
Corp., 838 F.3d 1307, 1318 (Fed. Cir. 2016) (analyzing as separate issues whether the claims could
be performed as mental steps and whether the claims were directed to long-standing practices).
VoIP-Pal’s arguments address only the latter issue (longstanding practice), and even there, VoIP
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Pal is incorrect. See infra Section II.D.
VoIP-Pal further argues, “claims organizing or analyzing information are eligible when
directed to something more,” citing McRO, Inc. v. Bandai Namco Games Am. Inc., 837 F.3d 1299,
1313-14 (Fed. Cir. 2016), and Core Wireless Licensing S.A.R.L. v. LG Elecs., Inc., 880 F.3d 1356,
1362-63 (Fed. Cir. 2018). Opp. at 12-13. Those decisions are distinguishable because they
involved patent claims that are very different from VoIP-Pal’s asserted claims: McRO involved
claims for automating 3-D animation that recited specific rules that are lacking in VoIP-Pal’s
asserted claims. McRO, 837 F.3d at 1313-14. Likewise, Core Wireless concerned claims for “a
specific manner of displaying a limited set of information to the user, rather than using conventional
user interface methods to display a generic index on a computer.” Core Wireless, 880 F.3d at 1363
(emphasis added).
B. The Purported Benefits Of “User-Specific Calling” And “Transparent Routing” Are Insufficient. VoIP-Pal contends that the asserted claims are not directed to abstract ideas because they
give rise to “user-specific calling” and “transparent routing” as purported benefits. Opp. at 7-10
(citing Third Amended Complaint, AT&T ECF No. 59 ¶¶ 9-10, 12-14). That contention is
irrelevant because the asserted claims do not recite or require those purported benefits.
VoIP-Pal’s Third Amended Complaint against AT&T avers that the Asserted Patents
“support user-specific calling styles from any continent or country based on the application of user
specific attributes to callee identifiers and network classification criteria to route a call. It was
unnecessary for the user to do anything special to ‘trigger’ such user-specific call processing.”
AT&T ECF No. 59 ¶ 12. VoIP-Pal’s Opposition further states, “Different callers with differently
configured attributes could dial the same string of digits to reach different destinations because the
meaning of the callee identifier is different based on each caller’s attributes.” Opp. at 7-8 (italics
in original). Contrary to VoIP-Pal’s contentions, the asserted claims do not require “user-specific
calling.” The claims do not contain any limitation regarding “calling styles from any continent or
country” or “the string of digits that a caller may dial,” much less using caller attributes to allow
the same string of dialed digits to reach different destinations.
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For “transparent routing,” VoIP-Pal acknowledges that this purported benefit simply refers
to automatic routing without requiring the user’s manual input:
. . . enables using a caller’s attributes to evaluate a callee identifier against network routing criteria to cause a call to automatically be routed over a system network (“private network”) or another network interconnected to the system network via a gateway (e.g., a “public network”) transparently to the user—without the user manually specifying the network to use for routing by the user’s manner of placing the call (e.g., by dialing a prefix of “9” to make a PSTN call) and even without the user knowing whether the destination is on the private or public network.
Opp. at 8 (citing AT&T ECF No. 59 ¶¶ 9-10, 13-14) (italics in original; emphasis in bold italics
added). Here again, the asserted claims do not require automatic (or “transparent”) routing of a call
or communication without the user manually specifying information, such as the network to use.
The claims do not recite any limitation regarding what the caller specifies, or does not specify, to
place a call, nor do the claims refer to a caller making a PSTN call without dialing the prefix “9.”
Unclaimed features such as “user-specific calling” or “transparent routing” cannot save the
asserted claims from a finding of abstractness or patent ineligibility. Synopsys, Inc. v. Mentor
Graphics Corp., 839 F.3d 1138, 1149 (Fed. Cir. 2016) (“[D]etails from the specification cannot
save a claim directed to an abstract idea that recites generic computer parts.”) (citing Accenture
Global Servs., GmbH v. Guidewire Software, Inc., 728 F.3d 1336, 1345 (Fed. Cir. 2013)).
Even if the Court were to find that “user-specific calling” or “transparent routing” are
required by the claims, those features would not change the claims’ abstract nature or impart an
inventive concept. By VoIP-Pal’s own descriptions, those features merely automate functions that
were previously carried out manually. Opp. at 7-9. The Federal Circuit has held that “mere
automation of manual processes using generic computers does not constitute a patentable
improvement in computer technology.” Credit Acceptance Corp. v. Westlake Servs., 859 F.3d
1044, 1055 (Fed. Cir. 2017). “In those cases, ‘the focus of the claims is not on such an improvement
in computers as tools, but on certain independently abstract ideas that use computers as tools.’” Id.
(quoting Elec. Power Grp., LLC v. Alstom S.A., 830 F.3d 1350, 1354 (Fed. Cir. 2016)).
C. The Asserted Means-Plus-Function Claims Are Similarly Ineligible. VoIP-Pal argues that the asserted claims written in means-plus-function form are not
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directed to an abstract idea. Opp. at 14. But such claims (claims 28 and 111 of the ’815 patent and
claim 73 of the ’005 patent) merely recast the elements of the asserted method claims (such as the
representative claims) in means-plus-function format. As a general matter, this variation in claim
format does not change the abstract nature of the asserted claims. See Procter & Gamble Co. v.
QuantifiCare Inc., 288 F. Supp. 3d 1002, 1025, 1030 (N.D. Cal. 2017) (means-plus-function claim
was found ineligible on a motion to dismiss because the specification’s description of the relevant
elements confirmed that the claim remained focused on “acquiring and analyzing information”).
VoIP-Pal asserts that the structure associated with the means-plus-function elements of
claim 28 of the ’815 patent correspond to algorithms shown in Figures 8A-8D, which are carried
out by the routing controller. Opp. at 14-15. As an initial matter, the specification describes the
routing controller in generic computer terms as an item that “may be implemented as separate
modules on a common computer system or by separate computers, for example.” ’005 patent at
13:20-22. The routing controller includes generic computer components: a processor, program
memory, a table memory, buffer memory, and an I/O port. E.g., id. at 17:25-53, Fig. 7. The
program memory contains code that directs the processor to carry out the functions of the routing
controller, which produces a routing message. Id.
The routing controller compares information in the dialing profiles of the caller and callee,
generates a routing message, which reflects the result of the comparison and is used to determine
how to route the call. Mot. at 4-5, 13-14. The routing controller searches a database to obtain the
dialing profiles—for example, “to locate and retrieve from the database 18 a record associating
calling attributes with the calling subscriber.” Id.; ’005 patent at 17:63-66. While Figures 8A-8D
provide more detail concerning the specific types of information that is compared, the information
is still conventional: the dialing profiles include information such as the user name, domain,
international and national dialing digits, country code, and number length. Mot. at 4-5, 13-14; ’005
patent at 17:63-66, Figs. 9 (user or subscriber profile), 10 (caller profile), 11 and 12 (callee
profiles); see Phoenix Licensing, L.L.C. v. Consumer Cellular, Inc., No. 2:16-CV-0152-JRG-RSP,
2017 U.S. Dist. LEXIS 47790, at *72-77 (E.D. Tex. Mar. 7, 2017) (finding means-plus-function
claims that required conventional computer and network components for obtaining, selecting,
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preparing, and delivering marketing communications ineligible). Moreover, those figures confirm
that the alleged structure merely “involves analyzing information by steps people go through in
their minds.” See Procter & Gamble, 288 F. Supp. 3d at 1025 (finding that “merely spell[ing] out
the algorithmic processes in more detail” did not shift the focus of the claims away from the abstract
idea) (internal quotations and citations omitted).
As a result, the purported algorithmic structure identified by VoIP-Pal for the asserted
means-plus-function claims—Figures 8A-8D and related descriptions in the specification—merely
describes an abstract process of acquiring, analyzing, and presenting information. Mot. at 15-17.
The basic character of the claim remains unchanged by the purported structure in the specification
and is not substantively different than the representative claim for purposes of Section 101.
Therefore, the asserted means-plus-function claims are also directed to an abstract idea.
D. Defendants’ “Brick and Mortar” Analogy Is Properly Tied To The Claim Language And Confirms The Abstract Nature Of The Claims. VoIP-Pal’s asserted claims are directed to an abstract idea for the reasons explained above.
In addition, Defendants’ analogy of telephone operators illustrates and confirms the abstract nature
of the asserted claims, but Defendants’ Motion does not depend on the Court’s acceptance of this
analogy. VoIP-Pal’s criticism of Defendants’ “brick and mortar” analogy—that switchboard
operators allegedly never used information about a caller to classify or route calls—is incorrect. Opp. at 16.2 VoIP-Pal concedes that switchboard operators long ago routed calls using callee
information and that caller information was readily available, known to the operators, and used by
them for other purposes. Id. (discussing use of caller information for toll charges, recording for
call back, and via incoming trunks). But VoIP-Pal goes too far in asking the Court to ignore
common knowledge that switchboard operators used information about the caller, not just the
callee, to classify and route calls.
2 VoIP-Pal’s averment regarding the practice of switchboard operators is not reflected in the Third Amended Complaint or in the specification of the asserted patents, and therefore, need not be accepted as true for purposes of resolving the Rule 12 motion. Moreover, the Court can disregard this statement because it contradicts historical fact. See Secured Mail Sols. LLC v. Universal Wilde, Inc., 873 F.3d 905, 913 (Fed. Cir. 2017) (a “court need not ‘accept as true allegations that contradict matters properly subject to judicial notice’” in ruling on Rule 12 motion) (citations omitted).
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Switchboard operators did in fact classify and route calls based on attributes of a caller.3
For example, a long-distance operator would need to know if the caller and callee were in the same
service area. E.g., Stanacard v. Rubard, LLC, No. 12CIV5176CMMHD, 2015 U.S. Dist. LEXIS
157345, at *21 (S.D.N.Y. Nov. 18, 2015) (in finding call-routing claims reflected longstanding
practices, holding that operator “recognized Ruth as the caller from the line that rang at Central”
and callerID implemented the same feature with machinery instead of humans) (emphasis added);
see supra n.3. VoIP-Pal claims nothing more than the use of that caller information (i.e., caller ID)
to classify calls, which has been found abstract for similar claims directed to long-distance call
routing. See Stanacard, 2015 U.S. Dist. LEXIS 157345, at *21-24 (finding claims directed to the
abstract idea of “connecting two people via long distance telephony using caller ID and call
forwarding,” which recite “nothing more tha[n] caller ID as it has long existed”). The same holds true here.4
VoIP-Pal relies on two cases in its effort to refute the telephone operator analogy under
Alice step one, but they are distinguishable. Opp. at 17. First, in Pure Data Sys., LLC v. Ubisoft,
Inc., 329 F. Supp. 3d 1054 (N.D. Cal. 2018), this Court agreed that the claims were akin to certain
“brick and mortar” practices that rendered them abstract under Alice step one. Id. at 1065. In that
way, Pure Data supports Defendants’ argument that the claims are abstract. The Court in Pure
Data, however, rejected the argument that those practices were sufficiently well-known and
conventional to a skilled artisan in the relevant field under Alice step two. Id. at 1067-68. Thus, at
3 VoIP-Pal curiously argues that “Defendants[’] reliance on the historical fact that telephone operators routed calls in some fashion has no foundation . . . and there is no record to support such conclusions.” Opp. at 20. This incorrectly intimates that the Court must ignore common sense and historical observations in deciding Rule 12 motions. Nevertheless, this historical fact is readily ascertainable and properly subject to judicial notice. See, e.g., Telephone Technology – 1940s – USA,” YouTube, available at https://www.youtube.com/watch?v=1801JMLNV9U (last accessed February 28, 2019) (demonstrating long-distance operator routing calls and using caller’s phone number in routing process). 4 Defendants object to VoIP-Pal’s proffered expert declaration in support of its opposition brief as presenting matters outside the pleadings under Rule 12 and not subject to judicial notice. See infra Section IV. Even were the Court to consider this declaration, VoIP-Pal’s expert admits that caller information was used in the routing process. AT&T ECF No. 69-6 ¶ 15 (“[A]n issue emerged where a caller would be a customer of one telephone company and the callee would be a customer of another. The solution that emerged to the problem was to introduce trunk lines, which connect one company to another.”); id. ¶ 20 (“These devices comprise a set of input ports, each dedicated to, and associated with a specific caller, and output ports, each associated with the callee.”).
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most, Pure Data confirms that analogies from dissimilar industries or fields may be helpful in
illustrating abstractness under Alice step one but might not be sufficient to demonstrate what was
well-known, routine, and conventional under Alice step two. Crucially, VoIP-Pal does not contest
that the practices of switchboard operators are relevant to this case and fails to connect the
proposition from Pure Data to the circumstances here.
Likewise, VoIP-Pal relies on Intellectual Ventures II LLC v. BITCO Gen. Ins. Corp., for the
proposition that a brick and mortar analogy does not apply if used in a way that “ignore[s] the
language” of the asserted claims. No. 6:18-CV-00298-JRG, 2019 U.S. Dist. LEXIS 11355, at *16
17 (E.D. Tex. Jan. 24, 2019) (finding the “analogy of selecting and donating books from and to a
library or store” was too far removed from the claimed invention of “using the selection and
contribution of content by the users to their respective personalized access points to distribute
content through a network”). But here, the practice of switchboard operators in using caller and
callee information to classify and determine how to route calls tracks the elements of VoIP-Pal’s
claims, which require “comparing” caller and callee information to “classify” a call.
Finally, even if operators never used caller information (which Defendants dispute), the
Court need not rely on any actual practice of operators using caller information to find the claims
directed to an abstract idea. See, e.g., Affinity Labs of Tex., LLC v. DIRECTV, LLC, 838 F.3d 1253,
1263 n.3 (Fed. Cir. 2016) (“The eligibility finding does not turn on [] novelty . . . .”); Two-Way
Media, 874 F.3d at 1340 (“Eligibility and novelty are separate inquiries.”).
E. VoIP-Pal’s Cited District Court Decisions Involving Communication Routing Are Of No Avail To VoIP-Pal. VoIP-Pal asserts, “Courts have found similar telephone and other communication routing
claims to be eligible,” citing three district court decisions, only one of which is from this District,
without discussion. Opp. at 6. These non-binding decisions are distinguishable and do not
overcome the Federal Circuit authority cited in Defendants’ Motion. In Genband US LLC v.
Metaswitch Networks Corp., No. 2:14-cv-33-JRG-RSP, 2016 U.S. Dist. LEXIS 37946 (E.D. Tex.
Jan. 6, 2016), the court found claims not abstract because they involved a specific set of operations
for transforming a computer address in the context of a problem “specifically arising in computer
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networks.” Id. at *23-24. In Ronald A. Katz Tech. Licensing, L.P. v. FedEx Corp., No. 2:15-cv
02329-JPM-TMP, 2016 U.S. Dist. LEXIS 38479 (W.D. Tenn. Mar. 24, 2016), the claim included
four structural elements that could carry out activities that were directed to more than “only [] the
abstract idea of item-ordering” and described “a specific way of processing calls to restrict access.”
Id. at *16-17. In Twilio, Inc. v. Telesign Corporation, No. 16-cv-06925-LHK, 2017 WL 1208588
(N.D. Cal. March 31, 2017), the Court found “platform patent” claims with highly computer
specific limitations (API, URI) to be “directed to a specific improvement in a type of computer
technology.” Id. at *26-29. In contrast, the Court found “score patent” claims to be directed to an
abstract idea and ineligible. Id. at *13-23.
III. UNDER ALICE STEP 2, THE ASSERTED CLAIMS LACK ANY INVENTIVE CONCEPT.
A. None Of The Purported Benefits Lauded By VoIP-Pal Exist In The Claims, And Therefore Cannot Supply An Inventive Concept. VoIP-Pal argues that Defendants disregard certain concepts that allegedly impart an
inventive concept, e.g., that the inventions relate to “individually customizable routing schemes
and elements”; “new and useful routing controller”; “facilitating the interoperability of private and
public communication networks”; “customization of dialing to follow any local PSTN convention
(or other dialing styles)”; and a “specially programmed routing controller.” Opp. at 18, 20, 21, 23,
24. Fatal to VoIP-Pal’s argument—regardless of whether such concepts described at that level of
generality could even qualify as inventive—is that none of those concepts or elements are reflected
in the claims. See supra Section II.B. The inventive concept inquiry must look to the language in
the claims, not to technical concepts that may be described in the specification. Symantec, 838 F.3d
at 1322 (“The district court erred in relying on the technological details set forth in the patent’s
specification and not set forth in the claims to find an inventive concept.”) (citing cases);
Berkheimer v. HP Inc., 881 F.3d 1360, 1369 (Fed. Cir. 2018)(holding that improvements described
in the specification may be relevant only “to the extent they are captured in the claims”).
In substance, much of VoIP-Pal’s argument under Alice step two regarding use of caller
attributes and callee identifiers to transparently route calls between private and public networks
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(Opp. at 18-23) is a repackaging of its arguments regarding “user-specific calling” and “transparent
routing” under Alice step one. As explained above, those features are not claimed and merely
automate functions that were previously carried out manually, which is not an inventive concept.
Moreover, the Third Amended Complaint provides that “user-specific calling” is achieved through
storing user-specific attributes about the caller in a “dialing profile.” AT&T ECF No. 59 ¶ 12.
Storing information specific to a user in a database for call processing is routine computer activity
and not inventive. Content Extraction & Transmission LLC v. Wells Fargo Bank, 776 F.3d 1343,
1347-48 (Fed. Cir. 2014); Broadsoft, 282 F. Supp. 3d at 784-88 (holding that storing multiple phone
addresses for a subscriber in a database for call routing is abstract and not inventive). Automating
the call routing without user intervention is also not inventive. Broadsoft, 282 F. Supp. 3d at 780
83 (invalidating claims that receive a call, access stored information, and “execut[e] an automated
response”); Stanacard,2015 U.S. Dist. LEXIS 157345, at *20-21 (recognizing that in longstanding
switchboard operator practice, the caller “didn’t have to dial any numbers at all” to have the call
routed).
B. The Asserted Claims Recite Functional Descriptions Of Conventional Call Routing Technology, Not Unconventional Computer Network Systems. VoIP-Pal argues that the asserted claims are not conventional because “the claims recite a
specially programmed routing controller to provide call placement and routing in an individually
customizable manner for each caller.” Opp. at 18. But regardless of whether VoIP-Pal’s argument
is correct, it is irrelevant and would not save VoIP-Pal’s claims because the actual language of the
claims does not recite such a requirement. Instead, they simply recite steps of matching an
“attribute” of one participant to information from another participant and classifying a
communication when the “match” meets “criteria.” Whether one could discern from those vague
steps a potential to use the claims to “customize” routing is a distinct (and irrelevant) question from
whether the claims are written in a way such that they “ensure that the patent in practice amounts
to significantly more than a patent upon the ineligible concept itself.” Alice Corp. Pty. Ltd. v. CLS
Bank Int’l, 134 S. Ct. 2347, 2355 (2014) (internal citations and quotations omitted). They do not.
The cases to which VoIP-Pal attempts to analogize its claims do not demonstrate an
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inventive concept. For example, in DDR Holdings LLC v. Hotels.com, the “claims address[ed] the
[Internet-centric] problem of retaining website visitors . . . [that are] instantly transported away
from a host’s website” after clicking a hyperlink. 773 F.3d 1245, 1257 (Fed. Cir. 2014). The claims
recited an automatically-generated hybrid web page: a solution for a particular Internet-centric
problem that is “necessarily rooted in computer technology.” Id. The claims in DDR Holdings
“required doing something to a web page, not simply doing something on a web page.” Affinity
Labs, 838 F.3d at 1262. Here, the asserted claims are not directed to an Internet-centric problem
(nor do most even recite the use of the Internet); rather they are directed to routing of
communications such as calls, which pre-dates the Internet. Nor do the claims recite a technological
improvement to call routing; instead they merely recite determining where to route a
communication using information about the participants. See id. Messaging Gateway Sols., LLC
v. Amdocs, Inc. is similarly distinguishable. No. 14-732-RGA, 2015 U.S. Dist. LEXIS 49408 (D.
Del. Apr. 15, 2015). There, the district court cited DDR Holdings in finding patent eligible claims
reciting inserting a “text message into an Internet Protocol (IP) message,” where the “text message
contains a multidigit address that is fewer than seven digits and that is associated with a URL of
the internet server.” Id. at *7-8, *15-16. The court found the claims to be “directed to a problem
unique to text message telecommunication between a mobile device and a computer” and to
“specif[y] how an interaction between a mobile phone and a computer is manipulated in order to
achieve a desired result which overrides conventional practice.” Id. at *15-16. Unlike in Messaging
Gateway, the claims here lack the same specificity that tied the claim language to the problem
arising in the realm of computer networks. Id.
This case is also distinguishable from the other cases that VoIP-Pal cites—BASCOM,
Amdocs, Avocent, and Meetrix—because the claims do not specify any specific, unconventional
arrangement of computer network elements. The only purported computer component claimed is
a “controller,” and the remaining functional context of the claims do not recite any non
conventional or non-generic characteristics of the controller. ’815 patent asserted claims (“call
routing controller” and “call controller”); ’005 patent at claim 49 and 73 (“call controller”), other
asserted claims (“controller”); see Mot. at 21-23. By contrast:
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? In BASCOM Glob. Internet Servs. v. AT&T Mobility LLC, the claims recited “installation
of a filtering tool at a specific location, remote from the end-users, with customizable
filtering features specific to each end user.” 827 F.3d 1341, 1350 (Fed. Cir. 2016). The
Federal Circuit found that the “specific location” was different from the location of
traditional content filters, and therefore, could represent a “non-conventional and non
generic arrangement of known, conventional pieces.” Id. ? In Avocent Huntsville, LLC v. ZPE Sys., the claimed invention “consolidate[ed] and
conver[ted] . . . [a plurality of different types of] management data at a single” management
application closer to the managed devices. No. 3:17-cv-04319-WHO, 2018 U.S. Dist.
LEXIS 47655, at *20-21 (N.D. Cal. Mar. 21, 2018). ? In Meetrix IP, LLC v. Citrix Sys., the claims recited “PSTN, VoIP, IP, and VPN . . .
[elements that] work together to operate in an unconventional manner.” No. 1-16-CV
1033-LY, 2017 U.S. Dist. LEXIS 196967, at *9 (W.D. Tex. July 27, 2017). ? In Amdocs (Isr.) Ltd. v. Openet Telecom, Inc., the Federal Circuit found an inventive
concept where the claimed “generic gatherers, network devices, and other components work[ed] in an unconventional distributed fashion.” 841 F.3d 1288, 1301 (Fed. Cir. 2016).5
IV. NO FACTUAL ISSUES STAND IN THE WAY OF DISMISSAL. Citing Berkheimer, VoIP-Pal contends that discovery is necessary before the Court can find
the claims ineligible. But as Berkheimer acknowledged, “not every § 101 determination contains
genuine disputes over the underlying facts material to the § 101 inquiry.” 881 F.3d at 1368.
“District courts have frequently decided section 101 issues on motions to dismiss, and the Federal
Circuit has approved of that procedure on numerous occasions, including in cases post-dating the
decisions in Aatrix and Berkheimer.” British Telecomms. PLC v. IAC/InterActiveCorp, No. 18
366-WCB, 2019 U.S. Dist. LEXIS 17269, at *66 (D. Del. Feb. 4, 2019) (collecting cases).
Here, there exists no factual dispute relevant to disposition of VoIP-Pal’s claims for failure
5 VoIP-Pal also relies upon Visual Memory and Finjan, but those cases did not address Alice step two. See Visual Memory LLC v. NVIDIA Corp., 867 F.3d 1253, 1262 (Fed. Cir. 2017); Finjan, Inc. v. Blue Coat Sys., 879 F.3d 1299, 1306 (Fed. Cir. 2018).
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to satisfy § 101. For example, VoIP-Pal promises to “elicit evidence to show that a VoIP system
is inherently a computer network” that communicates using PSTN and non-PSTN protocols, which
may have incompatible caller/callee identifiers. Opp. at 24-25. VoIP-Pal’s proposed evidence,
however, cannot create a genuine dispute for two reasons. First, none of the asserted claims include
the term PSTN, none discuss communicating via PSTN and non-PSTN protocols, and none discuss
processing incompatible caller/callee identifiers. See Synopsys, 839 F.3d at 1149 (“The § 101
inquiry must focus on the language of the Asserted Claims themselves.”). Second, whether “a VoIP
system is inherently a computer network” is irrelevant to the Section 101 analysis because limiting
an abstract idea to a particular technological environment (e.g., a computer network or VoIP
system) is legally insufficient to demonstrate an inventive concept. See, e.g., Interval Licensing,
896 F.3d at 1346.
VoIP-Pal’s declaration from its technical expert also does not create a factual dispute. For
one, the Court should disregard VoIP-Pal’s procedurally improper attempt to introduce evidence
outside the pleadings in a Rule 12(b)(6) motion. See Evolutionary Intelligence, LLC v. Sprint
Nextel Corp., 137 F. Supp. 3d 1157, 1163 n.5 (N.D. Cal. 2015) (finding expert declaration
submitted in opposition to Rule 12 motion on § 101 “not appropriate for the court to consider on a
motion to dismiss”), aff’d, 677 F. App’x 679 (Fed. Cir. 2017). Regardless, the declaration merely
provides a history of telephone and VoIP technology and does not include an opinion or evidence
that the VoIP-Pal patents are inventive over then-existing telephony systems. AT&T ECF No. 68
6 ¶¶ 12-25. As the Federal Circuit found in a similar situation, an expert’s “declaration of the
alleged advantages in the claimed invention also does not preclude dismissal on the pleadings.”
Glasswall Sols., Ltd. v. Clearswift Ltd., No. 2018-1407, 2018 U.S. App. LEXIS 35818, at *5 (Fed.
Cir. Dec. 20, 2018); see Uniloc USA, Inc. v. Apple Inc., No. C 18-00358-WHA, 2018 U.S. Dist.
LEXIS 84239, at *23 (N.D. Cal. May 18, 2018) (finding no factual dispute as to the “routine and
conventional nature” of claimed invention where alleged improvements are “results flowing from
an underlying patent-ineligible concept rather than from any specific hardware configuration”).
V. CONCLUSION Defendants respectfully request that the Court grant the motion to dismiss with prejudice.
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DATED: February 28, 2019
By: /s/ Gene W. Lee Gene W. Lee
PERKINS COIE LLP Gene W. Lee (pro hac vice) Thomas Matthew (pro hac vice) 30 Rockefeller Plaza 22nd Floor New York, NY 10112-0015 Telephone: (212) 262-6900 Facsimile: (212) 977-1638 GLee@perkinscoie.com TMatthew@perkinscoie.com
By: /s/ Megan S. Woodworth Megan S. Woodworth
VENABLE LLP Frank C. Cimino, Jr. (pro hac vice) Megan S. Woodworth (pro hac vice) 600 Massachusetts Ave., NW Washington, D.C. 20001 Telephone: (202) 344-4569 Facsimile: (202) 344-8300 mswoodworth@venable.com fccimino@venable.com
Sarah Stahnke (SBN 264838) Amisha Manek (SBN 305163) 3150 Porter Drive Palo Alto, CA 94304-1212 Telephone: (650) 838-4300 Facsimile: (650) 838-4489 SStahnke@perkinscoie.com AManek@perkinscoie.com
Attorneys for Defendant Twitter, Inc.
William A. Hector (SBN 298490) 101 California Street, Suite 3800 San Francisco, CA 94111 Telephone: (415) 653-3750 Facsimile: (415) 653-3755 WAHector@venable.com
Attorneys for Defendant Cellco Partnership
By: /s/ Bryant C. Boren, Jr. Bryan C. Boren, Jr.
BAKER BOTTS LLP Bryant C. Boren, Jr. 1001 Page Mill Road, Bldg. One, St. 200 Palo Alto, CA 94304 Telephone: (650) 739-7500 Facsimile: (650) 739-7601 bryant.c.boren@bakerbotts.com
Wayne O. Stacy 101 California Street, Suite 3600 San Francisco, CA 94111 Telephone: (415) 291-6206 Facsimile: (415) 291-6306 wayne.stacy@bakerbotts.com
Attorneys for Defendant AT&T Corp.
By: /s/ Peter C. Magic Peter C. Magic
DESMARAIS LLP John M. Desmarais (SBN 320875) Ameet A. Modi (pro hac vice application to be submitted) 230 Park Avenue New York, NY 10169 Telephone: (212) 351-3400 Facsimile: (212) 351-3401 jdesmarais@desmaraisllp.com amodi@desmaraisllp.com
Peter C. Magic (SBN 278917) pmagic@desmaraisllp.com 101 California Street, Suite 3070 San Francisco, CA 94111 Telephone: (415) 573-1900 Facsimile: (415) 573-1901
Attorneys for Defendant Apple Inc.
Case 5:18-cv-06177-LHK Document 70 Filed 02/28/19 Page 22 of 24
17 DEFS.’REPLY IN SUPPORT OF MOTION TO DISMISS CASE NOS.18-CV-04523,-06054,-06177,-06217-LHK
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Samir A. Bhavsar (pro hac vice) Morgan Grissum (pro hac vice) 2001 Ross Avenue, Suite 900 Dallas, Texas 75201 Telephone: (214) 953-6500 Facsimile: (214) 661-4581 samir.bhavsar@bakerbotts.com morgan.grissum@bakerbotts.com
Lauren J. Dreyer (pro hac vice) 1299 Pennsylvania Ave NW Washington, DC 20004 Telephone: (202) 639-7700 Facsimile: (202) 639-7890 lauren.dreyer@bakerbotts.com
Attorneys for Defendant AT&T Corp.
ATTESTATION OF CONCURRENCE IN FILING Pursuant to Northern District of California Local Rule 5-1(i)(3), I attest that concurrence
in the filing of this document has been obtained from the other Signatories to this document.
By: /s/ Bryant C. Boren, Jr. Bryan C. Boren, Jr. BAKER BOTTS LLP Bryant C. Boren, Jr. 1001 Page Mill Road, Bldg. One, St. 200 Palo Alto, CA 94304 Telephone: (650) 739-7500 Facsimile: (650) 739-7601 bryant.c.boren@bakerbotts.com
Case 5:18-cv-06177-LHK Document 70 Filed 02/28/19 Page 23 of 24
18 DEFS.’REPLY IN SUPPORT OF MOTION TO DISMISS CASE NOS.18-CV-04523,-06054,-06177,-06217-LH
Consulting the Pivot Points
Posted by PCN Staff Writer on February 26, 2019 at 12:04 pm
A “pivot point” is a technical analysis indicator used to glean the overall trend of the market over differing time periods. The pivot point itself is simply the average of the high, low and closing prices from the previous day’s trading. On the following day, any trading above the pivot point indicates ongoing bullish trends, while trading below the pivot point indicates a bearish trend. Pivot point analysis is used in calculating support and resistance levels, much like trend line analysis. In pivot point analysis, the first support and resistance levels are found by utilizing the width of the trading range between the pivot point and either the high or low prices of the previous trading day. Secondary support and resistance levels are found using the full width between the high and low prices of the previous trading day.
Pivot points are oft-used indicators for trading futures, commodities, and stocks. They are static, remaining at the same price level throughout the day. Five pivot point levels are generated by using data from the previous day’s trading range. These are composed of a pivot point and two higher pivot point resistances called R1 and R2 and also two lower pivot point supports called as S1 and S2. Voip-Pal.com (VPLM)’s Pivot Point is 0.0638. Its 1st Resistance Point is 0.0652 and its 2nd Resistance Point is 0.0663. The 1st Support Point is 0.0627 while its 2nd Support Point is 0.0613.
Voip-Pal.com (VPLM)’s Raw Stochastic, which shows (on a range of 0%-100%) where the price closed in relation to its price range over the last nine days is 9.42%. Their Stochastic %K, which indicates (on a range of 0%-100%) where the price closed in relation to its price range over the last nine days with a 3-period exponential moving average applied is 20.26%. Finally, their Stochastic %D, the indicator that shows (on a range of 0%-100%) where the price closed in relation to its price range over the last nine days with a 3-period exponential moving average applied, is 23.94%.
Known also as statistical volatility, Historical Volatility is the realized volatility of a financial instrument over a specified period of time. The measure is calculated by finding the average deviation from the average price of a commodity during a specified time period.
Standard deviation is the most common, though not only, way to calculate historical volatility. Voip-Pal.com (VPLM)’s 9-Day Historical Volatility is 47.27%, its 14-Day Historical Volatility is 105.28%, and looking back further, its 20-Day Historical Volatility is 94.76%.
Voip-Pal.com (VPLM)’s TrendSpotter Opinion, the signal from Trendspotter, a Barchart trend analysis system that uses wave theory, market momentum & volatility in an attempt to find a general trend, is Hold.
Barchart Opinions show investors what a variety of popular trading systems are suggesting. These Opinions take up to 2 years’ worth of historical data and runs the prices through thirteen technical indicators. After each calculation, a buy, sell or hold value for each study is assigned, depending on where the price is in reference to the interpretation of the study.
Today’s opinion, the overall signal based on where the price lies in reference to the common interpretation of all 13 studies, for Voip-Pal.com (VPLM) is 72% Sell.
Disclaimer: Nothing contained in this publication is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.
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Author: PCN Staff Writer
if the shares were dumped years ago. how does he replace them?
THE.MONEY.BOD BONUSED.FROM.THE.TREASURY.MUST. BE.RETURNED.IT.WILL.BE.NEEDED.FOR.LEGAL.COSTS
WOULD.THE.BOD.SELLING.VPLM.OR.THE.PATENTS.BE.THE.WORST.DECISION.EVER.MADE.IN.HISTORY.BY.A.BOD?