UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.FORM 10-Q

FOR THE QUARTER ENDED March 31, 2016(Mark One)

COMMISSION FILE NO. 000-30202For the quarterly period ended September 30, 2021

FORM 10-QOr

mPhase Technologies, Inc.For the transition period from _______________________ to ___________________

Commission File Number 000-30202

mPHASE TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

973-256-3737(301) 329-2700

ISSUER’S TELEPHONE NUMBERRegistrant’s telephone number, including area code:

INDICATE BY CHECK MARK WHETHER THE REGISTRANTSecurities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTIONhas filed all reports required to be filed by Section 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OFor 15(d) of the Securities Exchange Act of 1934 DURING THE PRECEDINGduring the preceding 12 MONTHS (OR FOR SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORT)months (or for such shorter period that the registrant was required to file such reports), ANDand (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PASThas been subject to the filing requirements for the past 90 DAYS.days.

☒Yes ☐ No

YES

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 ☒No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.

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

THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT’S CLASSES OF COMMON STOCK AS OF October 19, 2017 IS 16,497,486,598 SHARES, ALL OF ONE CLASS OF $.001 PAR VALUE COMMON STOCK.As of November 15, 2021, there were 80,440,821 shares of the issuer’s common stock, $0.01 par value per share, outstanding.

mPHASE TECHNOLOGIES, INC.

QUARTERLY REPORT ON FORM 10-Q

INDEX

TABLE OF CONTENTS

mPHASE TECHNOLOGIES, INC.

Condensed Consolidated Balance Sheets

The accompanying notes are an integral part of these condensed consolidated financial statements.

mPHASE TECHNOLOGIES, INC.ITEM 1. FINANCIAL STATEMENTS

Condensed

mPhase Technologies, Inc.

Consolidated Statements of OperationsBalance Sheets

(Unaudited)

The accompanying condensed notes are an integral part of these unaudited condensed consolidated financial statements.

mPHASE TECHNOLOGIES, INC.

Condensed mPhase Technologies, Inc.

Consolidated Statements of Operations and Other Comprehensive Income (Loss)

(Unaudited)

(Unaudited)

The accompanying condensed notes are an integral part of these unaudited condensed consolidated financial statements.

mPHASE TECHNOLOGIES, INC.mPhase Technologies, Inc.

 Condensed Consolidated Statements of Cash FlowsStockholders’ Equity

For the Three Months Ended September 30, 2021 and 2020

(Unaudited)

The accompanying condensed notes are an integral part of these unaudited condensed consolidated financial statements.

mPhase Technologies, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

mPHASE TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(UNAUDITED)

NOTE 1: NATURE OF OPERATIONSBUSINESS AND BASIS OF PRESENTATION

Organization and Nature of Business

mPhase Technologies, Inc. (the “Company”), including its wholly-owned subsidiaries, are collectively referred to herein as “mPhase,” “XDSL”, “Company,” “us,” or “we.”

The Company was organized on Octoberincorporated in the state of New Jersey in 1979 under the name Tecma Laboratory, Inc. and has subsequently operated under Tecma Laboratories, Inc., and Lightpaths TP Technologies, Inc., until June 2, 19961997 when the Company changed its name to mPhase Technologies, Inc.

On January 11, 2019, the Company underwent a major change in management and control. New management of the Company is presentlypositioning the Company to be a technology leader in artificial intelligence and machine learning while enabling a more rapid commercial development of its patent portfolio and other intellectual property. The Company believes there are significant opportunities to embed artificial intelligence and machine learning into business operations, platform architectures, business services, and customer experiences, whereby its goal is to generate significant revenue from its artificial intelligence and machine learning technologies.

On February 15, 2019, the Company acquired Travel Buddhi, a software platform to enhance travel via ultra-customization tools that tailor a planned trip experience in ways not previously available.

On June 30, 2019, the Company acquired 99% of the outstanding common shares of Alpha Predictions LLP (“Alpha Predictions”). Alpha Predictions is an India-based technology company that has developed a suite of commercial data analysis products for use across multiple industries. This acquisition has been integrated into the Company’s international operations and as expected, has driven revenue growth and innovation.

On May 11, 2020, the Company acquired CloseComms, a patented, software application platform that can be integrated into a retail customer’s existing Wi-Fi infrastructure, giving the retailer important customer data and enabling AI-enhanced, targeted promotions to drive store traffic and sales.

During 2021, the Company announced that it would be adding 5G and EV charging to its consumer engagement platform as part of a major strategic initiative to monetize additional points of contact during consumer travel and travel planning. As of July 2021, the Company was actively planning pilot programs in 5G and EV charging, as part of a larger strategy to build an AI-driven consumer ecosystem. By late-2021, the Company plans to transition into a “green” consumer company, serving as an important bridge between consumers, retailers, and service providers.

The Company can best be described as a technology company focused on restructuringconsumer engagement using data analytics and artificial intelligence to create a monetizable link between consumers and retailers at opportunistic times and places. The Company is currently building a connected ecosystem of EV charging, 5G internet connectivity and software solutions that optimize consumer engagement within the framework of a SaaS/TaaS model. Branded under the mPower name, this ecosystem will empower the way people shop, dine, fuel and interact with the world to create a richer life experience. The mPower ecosystem is tailored to each individual’s tastes and needs, with particular emphasis on empowering tomorrow’s green consumer. The Company has data driven business units generating recurring revenue outside of its debt obligationsconsumer ecosystem, in addition to be inlegacy nanobattery technology and a position to capitalize on its existing intellectual propertyrelated patent portfolio and endeavor to further develop new “smart surface” products through the sciences of microfluidics, microelectromechanical systems (MEMS) and nanotechnology.that are slated for future development. The Company plans to restructureexpand into other markets, both in the United States and globally, where it believes its business through some combination of raising additional capital, strategic partnershipstechnology and or mergers & acquisitions.services will provide a distinct competitive advantage over its competition.

mPHASE TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(UNAUDITED)

NOTE 1: NATURE OF BUSINESS AND BASIS OF PRESENTATION (continued)

Concurrently, the Company continues to pursue strategic alternatives to best monetize its patent portfolio, including partnering to exploit opportunities for its drug delivery system. The Company is seeking to obtain government funding available under the Departments of Defense and Homeland Security including The Department of Defense Ordnance Technology Consortium (“DOTC”), Small Business Innovative Research (“SBIR”), Cooperative Research and Development Agreements (“CRADA”) and similar programs for targeted applications for its smart nano-battery applications.

Basis of Presentation

The accompanying unaudited condensed consolidated financial information furnished herein reflects all adjustments, consisting only of normal recurring items, which in the opinion of management, are necessary to fairly state the Company’s financial position, results of operations and cash flows for the dates and periods presented and to make such information not misleading. Certain information and footnote disclosures normally included in annual financial statements have been prepared in accordance with accounting principles generally accepted accounting principles for interim financial information andin the United States of America (“U.S. GAAP”) have been omitted pursuant to therules and regulations of the Securities and Exchange Commission. Accordingly, they do not include allCommission (the “SEC”); nevertheless, management of the Company believes that the disclosures herein are adequate to make the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the nine months ending March 31, 2016 arepresented not necessarily indicative of the results that may be expected for a full fiscal year. For further information, refer to themisleading.

The unaudited consolidated financial statements for the three months ended September 30, 2021 and footnotes thereto included2020 include the operations of mPhase and its wholly-owned subsidiaries, mPower Technologies, Inc., Medds, Inc., mPhase Technologies India Private Limited effective March 19, 2019, and Alpha Predictions LLP effective June 30, 2019. All significant intercompany accounts and transactions have been eliminated in the consolidation.

These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended June 30, 2021, contained in the Company’s Annual Report on Form 10-K as amended,filed with the SEC on October 13, 2021. The results of operations for the three months ended September 30, 2021, are not necessarily indicative of results to be expected for any other interim period or the fiscal year endedending June 30, 2015.2022.

Impact of COVID-19 Pandemic

A novel strain of coronavirus, COVID-19, surfaced during December 2019 and has spread around the world, including to the United States. During March 2020, COVID-19 was declared a pandemic by the World Health Organization. During certain periods of the pandemic thus far, a number of U.S. states and various countries throughout the world had been under governmental orders requiring that all workers remain at home unless their work was critical, essential, or life-sustaining. As a result of these governmental orders, the Company temporarily closed its domestic and international offices and required all of its employees to work remotely. As economic activity has begun and continues recovering, the impact of the COVID-19 pandemic on our business has been more reflective of greater economic and marketplace dynamics. Furthermore, in light of variant strains of the virus that have emerged, the COVID-19 pandemic could once again impact our operations and the operations of our customers and vendors as a result of quarantines, illnesses, and travel restrictions.

The full impact of the COVID-19 pandemic on the Company’s financial condition and results of operations will depend on future developments, such as the ultimate duration and scope of the pandemic, its impact on the Company’s employees, customers, and vendors, in addition to how quickly normal economic conditions and operations resume and whether the pandemic impacts other risks disclosed in Item 1A “Risk Factors” within the Company’s Annual Report on Form 10-K. Even after the pandemic has subsided, the Company may continue to experience adverse impacts to its business as a result of any economic recession or depression that has occurred as a result of the pandemic. Therefore, the Company cannot reasonably estimate the impact at this time. The Company continues to actively monitor the pandemic and may determine to take further actions that alter its business operations as may be required by federal, state, or local authorities or that it determines are in the best interests of its employees, customers, vendors, and shareholders.

mPHASE TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(UNAUDITED)

NOTE 2: GOING CONCERN

The Company’saccompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Through March 31, 2016,The Company has generated net income of $293,761 and has used cash in operating activities of $642,178 for the three months ended September 30, 2021. At September 30, 2021, the Company had incurred cumulative (a) losses totaling ($211,629,125)a working capital surplus of $10,547,542, (b) stockholders’and an accumulated deficit of ($4,440,236)$225,767,648. At March 31, 2016, the Company had $1,002 of cash and $4,116 of trade receivablesWhile these factors alone may raise doubt as to fund short-term working capital requirements. In addition, the Company relies on the continuation of funding through private placements of its common stock. In the Company’s form 10k for the period June 30, 2015, the Company’s Auditor stated that” there is substantial doubt about the Company’s ability to continue as a going concern”.

concern, management believes the Company’s present and expected cash flows will enable it to meet its obligations for a period of twelve months from the date of this filing. The Company’s abilityunaudited consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts nor to the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concernconcern.

In the event managements’ plans do not materialize, in order to meet the Company’s working capital needs through the next twelve months and to fund the growth of its future success is dependent uponnanotechnology, artificial intelligence, and machine learning technologies, as well as our 5G and EV charging initiatives, the Company may consider plans to raise additional funds through the issuance of equity or debt. Although the Company intends to obtain additional financing to meet its cash needs, the Company may be unable to secure any additional financing on terms that are favorable or acceptable to it, if at all. The Company’s ability to raise additional capital may also be impacted by the recent COVID-19 pandemic, which such ability is highly uncertain, cannot be predicted, and could have an adverse effect on the Company’s business and financial condition.

NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Reclassifications

Certain reclassifications of prior year amounts have been made to enhance comparability with the current year’s unaudited consolidated financial statements, including, but not limited to, presentation of certain items within the unaudited consolidated statements of operations and comprehensive income (loss), unaudited consolidated statements of cash flows, and certain notes to the unaudited consolidated financial statements.

Foreign Currency Translation and Transactions

The functional currencies of our operations in India and the United Kingdom are the Indian Rupee (“INR”) and the British Pound (“GBP”), respectively. Assets and liabilities are translated into U.S. dollars at the exchange rates in effect at the balance sheet date, and income and expense items are translated at the average exchange rates in effect during the applicable period. The aggregate effect of foreign currency translation is recorded in accumulated other comprehensive income (loss) in our consolidated balance sheets. Our net investments in our Indian and United Kingdom operations are recorded at the historical rates and the resulting foreign currency translation adjustments, net of income taxes, are reported as other comprehensive income and accumulated other comprehensive income within stockholders’ equity in accordance with ASC 220 – Comprehensive Income.

mPHASE TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(UNAUDITED)

NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The exchange rates used to translate amounts in INR (beginning March 19, 2019) and GBP (beginning May 11, 2020) into USD for the purposes of preparing the consolidated financial statements were as follows:

SCHEDULE OF FOREIGN CURRENCIES TRANSLATION EXCHANGE RATE

Balance sheet:

Income statement:

Translation gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are translated, as the case may be, at the rate on the date of the transaction and included in the near term to: (1) satisfy its current obligations, (2) continue its research and development efforts, and (3) allow the successful wide scale development, deployment and marketingresults of its products. There can be no assurance the necessary debt or equity financing will be available, or if so, on terms acceptable to the Company.operations as incurred.

INVENTORYUse of Estimates

The Company uses the First In First Out method (FIFO) to account for inventory which is carried at lower of cost and net realizable value. As of June 30, 2015, inventory consisted primarily of its various Jump products including the Jump and the mini Jump, and our remaining flashlight inventory, and was valued at $218,653. As of March 31, 2016, inventory consisted primarily of the Company’s line of Jump products including the new Jump Plus, and our remaining flashlight inventory, and was valued at $67,895. Subsequently, the Company discontinued its entire line of Jump products in the 1^st quarter of fiscal year 2017 owing to increased competition and decreasing margins. Appropriate reserves have been taken as of June 30, 2015 and March 31, 2016, to assure that the cost of such inventory does not exceed the expected net realizable value.

USE OF ESTIMATES

The preparation of unaudited consolidated financial statements in conformity with generally accepted accounting principlesU.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the reported amounts of revenues and expenses duringfor the reporting periods. These include net realizable inventories, prepaid expenses, accrued expenses and changes in and the ending fair value of derivative liability.period. Actual results could differ from those estimates. If actual results significantly differ from the Company’s estimates, the Company’s financial condition and results of operations could be materially impacted. Significant estimates include the collectability of accounts receivable, estimated useful lives of finite-lived intangible assets, accrued expenses, valuation of derivative liabilities, stock-based compensation, and the deferred tax asset valuation allowance.

LOSS PER COMMON SHARE, BASIC AND DILUTEDConcentrations of Credit Risk

Basic income (loss) per share is computed by dividing net income (loss)Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company maintains cash and cash equivalents with four financial institutions. Deposits held with the financial institutions may exceed the amount of insurance provided by the weighted average numberFederal Deposit Insurance Corporation on such deposits, but may be redeemed upon demand. The Company performs periodic evaluations of sharesthe relative credit standing of common stock outstanding during the period. Diluted earnings per share is computed by dividing net loss adjustedfinancial institutions. With respect to accounts receivable, the Company monitors the credit quality of its customers as well as maintains an allowance for income or loss that would resultdoubtful accounts for estimated losses resulting from the assumed conversioninability of potential common shares from contracts that may be settled in stock or cash by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. The Company had no warrantscustomers to purchase shares of its common stock and no options to purchase shares of its common stock outstanding at March 31, 2016.make required payments.

mPHASE TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(UNAUDITED)

NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue Risk

Agreements which potentially subject the Company to concentrations of revenue risk consist principally of one customer agreement. For the three months ended September 30, 2021 and 2020, this one customer accounted for 100% and 100% of our total revenue, respectively. At March 31, 2016September 30, 2021 and June 30, 2021, this one customer accounted for approximately 100% and 100% of our total accounts receivable, respectively.

Supplier Risk

Agreements which potentially subject the Company to concentrations of supplier risk consist principally of one supplier agreement. For the three months ended September 30, 2021, this one supplier accounted for approximately 100% of our total cost of revenue and accounted for approximately 0% of our total accounts payable. For the three months ended September 30, 2020, this one supplier accounted for approximately 100% of our total cost of revenue and accounted for approximately 94% of our total accounts payable.

Cash and Cash Equivalents

For purposes of balance sheet presentation and reporting of cash flows, the Company considers all unrestricted demand deposits, money market funds and highly liquid debt instruments with an original maturity of less than 90 days to be cash and cash equivalents. There were 0 cash equivalents at September 30, 2021 and June 30, 2021. The Company places its cash and cash equivalents with high-quality financial institutions. At times, balances in the Company’s cash accounts may exceed the Federal Deposit Insurance Corporation (“FDIC”) limit. At September 30, 2021 and June 30, 2021, the Company’s cash balance at one financial institution exceeded the FDIC limit.

Accounts Receivable

The Company regularly reviews outstanding receivables and provides for estimated losses through an allowance for doubtful accounts. In evaluating the level of established loss reserves, the Company makes judgments regarding its customers’ ability to make required payments, economic events and other factors. As the financial condition of these parties change, circumstances develop or additional information becomes available, adjustments to the allowance for doubtful accounts may be required. The Company maintains reserves for potential credit losses, and such losses traditionally have been within its expectations. Additionally, to date, the Company has convertible securities held by third parties that are immediately convertibleentered into 440,555,647 shares of common stock (which amount include one additional assumed monthly conversion by John Fife in April 2016 under the terms of the Forbearance Agreement, as amended). Under the terms of the Forbearance Agreement, as amended,six separate tri-party settlement and offset agreements with John Fife (arrangement #4), Fife may acquire a total of 5,044,264,869 shares ofits largest customer and largest vendor, whereby the Company’s common stock based upon the conversion terms; if the forbearance agreement discussed in Note 3 is settled entirely in stock. In addition,largest customer has agreed to direct funds due the Company has convertible notes plus accrued interest thereon held by officersfor certain outstanding invoices, to the Company’s largest vendor to satisfy payment on behalf of the Company subject to availability, convertible into approximately 1,455,462,450, immediately, if available.

The following table illustrates debts convertible into sharesfor certain outstanding invoices. To date, the aggregate amount of the Company’s Common Stock at March 31, 2016:

*** convertible if shares available

RECLASSIFICATIONS

Certain reclassifications have been made in the prior period consolidated financial statements, primarily sellingsix tri-party settlement and marketing expense in the prior period, to conform to the current period presentation. The reclassified financial statement items had no effect on (a) Net Loss for the nine months ended March 31, 2016offset agreements has totaled $48,750,000. At September 30, 2021 and 2015, or (b), total Stockholders’ Deficit or total Assets as of March 31, 2016 or June 30, 2015.2021, the Company determined there was 0 requirement for an allowance for doubtful accounts.

Goodwill and Intangible Assets

MATERIAL FINANCIAL INSTRUMENTS

The Company has material financial instruments including convertible securities. Such securities have conversion features that are accountedGoodwill is recorded when the purchase price paid for as derivative liabilities that are evaluated quarterly for any changes inan acquisition exceeds the fair value. (SEE NOTE 3)

DERIVATIVE LIABILITY

The Company has estimated the value of the derivative liability associated with its convertible debt. Such estimate is based on a Black Scholes calculation atnet identified tangible and intangible assets acquired. The Company evaluates goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate that the timecarrying value may not be recoverable. The Company tests goodwill for impairment by first comparing the debt was issued. At each reporting period, thefair value of this liabilitythe reporting unit to its carrying value. If the fair value is markeddetermined to market and adjusted accordingly. Such adjustments are included in Other Income (Expense).be less than the carrying value, a second step is performed to measure the amount of impairment loss, if any. On June 30, 2022, the Company will perform its annual evaluation of goodwill impairment to determine if the estimated fair value of the reporting unit exceeds its carrying value.

mPHASE TECHNOLOGIES, INC.

TheNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(UNAUDITED)

NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Patents and licenses are capitalized when the Company in its annual meetingdetermines there will be a future benefit derived from such assets and are stated at cost. Amortization is computed using the straight-line method over the estimated useful life of shareholders for the fiscal year endedasset, generally five years. As of September 30, 2021 and June 30, 2013 held on February 12, 2014 received shareholder approval to increase its authorized shares to 18 billion shares2021, the book value of common stock so that aspatents and licenses of March 31, 2016 the Company has said number of authorized shares of stock.

Private Placements

During the nine months ended March 31, 2016, the Company issued 616,666,667 shares of its common stock in connection with private placements, pursuant to Section 4(a) (2) of the Securities Act of 1933, as amended, raising gross proceeds of $170,000 and incurred finder’s fees in the amount of $17,000. The proceeds were used by the Company as working capital.

During the nine months ended March 31, 2015, the Company issued 1.533 million shares of its common stock in connection with private placements pursuant to Section 4(a) (2) of the Securities Act of 1933, as amended, raising gross proceeds of $550,000 and incurring finder’s fees of 50,000,000 shares of common stock and $34,500. The proceeds were used by the Company as working capital.

Stock Based Compensation

During the nine months ended March 31, 2016, the Company issued 23,028,000 shares of common stock to employees valued at $7,804, based upon the closing trading price for each quarter end earned, the entire amount of which is included in selling and marketing expenses in the Condensed Consolidated Statements of Operations for that period. The Company during such period did not issue any common stock, warrants or options to officers.

During the nine months ended March 31, 2015, the Company issued 33,459,857 shares of common stock compensation to an employee valued at $17,955, based upon the closing trading price for each quarter end earned, the entire amount of which is included in selling and marketing expenses in the Condensed Consolidated Statements of Operations for that period. The Company during such period did not issue any common stock, warrants or options to officers.

Other Short-Term Notes 

Note Payable, Director

A Director of the Company loaned the Company $90,000 in the fourth quarter of fiscal year ended June 30, 2015 and additionally, he advanced the Company $20,000 in the nine months ended March 31, 2016, net of repayments, together with $3,775 of accrued interest totaled $113,775 which was outstanding at March 31, 2016.

Other Note payable

An unaffiliated shareholder advanced the Company $10,000 in September 2015 and $25,000 in December of 2015, totaling $35,000, which was converted into 175,000,000 shares of the Company’s common stock effective March 31, 2016.

Note Payable Finance Company

The Company Borrowed approximately $66,000 under two advances commencing January 2016, with scheduled repayments of approximately $87,500 originally due through July 2016, incurring $19,527 of finance charges which are included in interest expense during the nine months ended March 31, 2016. At March 31, 2016, $31851 remains outstanding under this note.

Long Term Convertible Debentures / Debt Discount

The Company had five separate convertible debt arrangements with independent investors that were in effect at various times during the fiscal year ended June 30, 2015, three of which were still active as of March 31, 2016.

During the nine months ended March 31, 2016, the Company incurred the conversion of $10,000 of Convertible Debt and Accrued Interest thereon relating to the forbearance agreement and a $35,000 Demand note into 62,500,000 and 175,000,000 shares respectively, or a total of 237,500,000 shares; of the Company’s Common stock.

The following table summarizes notes payable under convertible debt and debenture agreements as of:

Included in accrued expenses is $297,271 and $231,944 interest accrued on these notes at March 31, 2016 (unaudited) & June 30, 2015, respectively.

These transactions are intended to provide liquidity and capital to the Company and are summarized below.

Arrangement #1, #2 &, #3 (JMJ Financial, Inc.)

Arrangement #1

The Company entered into a convertible note on November 17, 2009, the Company received a total of $186,000 of proceeds in connection with a new financing agreement with JMJ Financial. This transaction consists of the following: 1) a convertible note in the amount of $1,200,000 plus a one-time interest factor of 12% ($144,000) and a maturity date of September 23, 2012 and (2) a secured promissory note in the amount of $1,100,000 plus a one-time interest rate factor of 13.2% ($144,000 each) and a maturity date of September 23, 2012 due from the holder of the convertible note.

At June 30, 2012 this convertible note had $372,060 outstanding which was combined with arrangement #3 JMJ Financial, Inc.

Arrangement #2

On December 15, 2009 the Company entered into a new financing agreement with JMJ Financial that consists of the following: 1) a convertible note issued by the Company in the amount of $1,500,000 plus a one-time interest factor of 12% ($180,000) and a maturity date of December15, 2012 and (2) a secured promissory note in the amount of $1,400,000 plus a one-time interest rate factor of 13.2% ($180,000) and a maturity date of December 15, 2012 due from the holder of the convertible note. To date the Company has received a total of $300,000 cash under this note and has issued no shares of common stock to the holder upon conversions.

The Company and the holder entered into a Forbearance Agreement amendment, as amended, and funding and conversions have not occurred since April 2011. As of June 30, 2012, this convertible note had $321,000 outstanding which was combined with arrangement #3 JMJ Financial, Inc.

Arrangement #3

On April 5, 2010, the Company entered into a new financing agreement with JMJ Financial that consists of the following: 1) a convertible note issued by the Company in the principal amount of $1,200,000 plus a one-time interest factor of 12% ($144,000) and a maturity date of December 15, 2012, and (2) a secured promissory note from the holder of the convertible note in the amount of $1,100,000 plus a one-time interest rate factor of 13.2% ($144,000 each) and a maturity date of December 15, 2012. To date the Company has received a total of $100,000 cash under this note and has issued no shares of common stock to the holder upon conversions. The remaining $1,144,000 of cash to be received from the holder plus accrued and unpaid interest is convertible into shares of common stock at the option of the holder.

During the year ended June 30, 2012 the Company reduced the debt discount for this note by $91,000 to $9,000, and as a result $109,000 was combined with Arrangements 1&2 for a total of $ 802,060 principle due from the combined notes payable, with a revised interest rate of 9%214,383, to JMJ.

As of June 30, 2015, and as of March 31, 2016, the combined arrangements with JMJ in this note would be convertible into 258,208,588 into 274,469,385 common shares at the conversion floor price of $.004; and would be required to do so if the Company does not make the scheduled payments pursuant to the June 1, 2012 amended agreement.

The Company has not made any payments of the $37,018 installment payments commencing October 1, 2012 and the holder has continued to accrue interest on the outstanding balance. At March 31, 2016 the amount recorded in Current Liabilities for all three convertible notes and accrued interest thereon previously issued to JMJ Financial was $1,097,877.

Arrangement #4 (John Fife dba St. George Investors)/Fife Forbearance

The Company entered into an amended agreement on June 1, 2012, when principle of $557,500 accrued interest of $66,338 and $95,611 of contractual charges for previous notes with John Fife totaled $719,449; whereby, the Company agreed to make payments of principle and interest of $33,238 per month commencing October 1, 2012 through September 1, 2014 at 8% interest and so long as the payments are not in default then no conversions into the Company’s common stock would be available to the holder.

On November 20, 2012, mPhase Technologies, Inc. (the “Company”) formally received an Event of Default and Redemption Notice dated November 16, 2012 with respect to an 8% Convertible Note dated September 13, 2011 issued by the Company to St. George Investments LLC and assigned to John Fife. The notice included alleged defaults with respect to payments owed by the Company under the Convertible Note and the failure to convert the Note into shares of the Company’s common stock. The alleged amount owed according to the notice is approximately $902,279.

On December 15, 2014, a Memorandum Opinion and Order was issued by the United States District Court Northern District of Illinois Eastern Division granting the motion of John Fife, plaintiff (“Plaintiff”), for summary judgment against mPhase Technologies, Inc. (the “Company”) for breach of contract (the “Opinion”). All other claims and counterclaims were dismissed. The Company commenced settlement negotiations with the Plaintiff after we explored options with regard to an appeal and other alternatives, which there is no guarantee of success. As discussed in Note 7, effective February 10, 2015, the Company entered into a Forbearance Agreement with the Holder. The agreement provides that the Holder would forego his right to enforce its remedies pursuant to the judgment, which include demand for immediate payment of approximately $1.6 million, provided the Company satisfy its forbearance obligation of $1,003,943, and after accounting for a payment of $15,000 the Company paid, under the terms of the agreement.

The terms of the agreement, as amended, provide for interest to accrue on the unpaid portion at 9% per annum with monthly payments in cash or conversions into common stock of the Company; commencing with an initial $15,000 payment due on February 15, 2015, and thereafter and on or before the 15^th day of each month thereafter the Company agrees to pay to Holder the following amounts ; $30,000.00 per month on each of the following dates: March 15, 2015, April 15, 2015, May 15, 2015, June 15, 2015, and July 15, 2015; $15,000.00 per month on each of the following dates: August 15, 2015 and September 15, 2015; $20,000.00 per month on each of the following dates: October 15, 2015, November 15, 2015, and December 15, 2015; $35,000.00 per month on each of the following dates: January 15, 2016 and February 15, 2016 and March 15, 2016; and $50,000.00 per month thereafter until the Forbearance Amount has been paid in full. The Company has been able to meet its monthly payment obligations through November, 2015.

The value of the forbearance debt obligation on June 30, 2015 is $902,253. At June 30, 2015, given the changes in the Company’s stock price during the 20 day look-back period for June 30, 2015, the estimated derivative liability had decreased to $232,423, a decrease from June 30, 2014 of $548,906 totaling $316,493, which when added to the $18,469 increase at the time the forbearance agreement resulted in a non-cash credit to earnings of $334,962 for the year ended June 30, 2015. The Forbearance agreement requires the Company to place,fully amortized and the Company has done so, 1,000,000,000 shares in reserve with its transfer agent, to satisfy the conversion provisions for any unpaid monthly cash payments. The original agreement also provided that the Company file a Proxy statement before June 1, 2015 should additional shares be needed for the conversion reserve. The Company has not filed such a proxy statement due to cost prohibitions. The Company had not issued any stock for conversions since entering into the forbearance agreement and during the year ended June 30, 2015 and has made cash payments repaying $69,081 of principle and $41,019 of interest under the agreement. During the nine months ended March 31, 2016 the Company repaid $95,170 of principle and $54,830 of interest under the agreement, which included a non-cash conversion of 62,500,000 shares of the Company’s common stock valued at $10,080 of which $3,907 represented accrued interest and $6,093 represented principle. The value of the forbearance debt obligation on March 31, 2016 is $807,083.

As of August 11, 2015 the Company entered into an Amendment No. 1 with Fife to the Forbearance Agreement rescheduling the monthly payment schedules

At December 31, 2015, the derivative liability0 amortization expense was estimated to be $716,543, an increase of $484,120 from $232,423, the balance as of our last fiscal year end, creating a charge to expense of a like amount during the six months then ended.

As of January 19, 2016 the Company entered into a Second Amendment to the Forbearance Agreement again rescheduling certain of the monthly payments.

As of March 31, 2016 the derivative liability was estimated to be $207,957, a decrease of $508,586recorded for the three months ended March 31, 2016 resultingSeptember 30, 2021 and 2020.

Capitalized Software Development Costs

The Company follows the provisions of ASC 350-40, “Internal Use Software.” ASC 350-40 provides guidance for determining whether computer software is internal-use software, and on accounting for the proceeds of computer software originally developed or obtained for internal use and then subsequently sold to the public. It also provides guidance on capitalization of the costs incurred for computer software developed or obtained for internal use. The Company expenses all costs incurred during the preliminary project stage of its development, and capitalizes the costs incurred during the application development stage. Costs incurred relating to upgrades and enhancements to the software are capitalized if it is determined that these upgrades or enhancements add additional functionality to the software. Costs incurred to improve and support products after they become available are charged to expense as incurred.

Capitalized software development costs are amortized on a straight-line basis over the estimated useful lives, currently three years. Management evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets.

At September 30, 2021, the book value of purchased and developed technology of $3,876,624, included three technology platforms, a net credit formachine learning platform and two artificial intelligence platforms. For the three months periodended September 30, 2021 and 2020, the Company incurred amortization expense of that amount$224,794 and a $24,467 net credit$223,833, respectively.

Fair Value of Financial Instruments

The Company accounts for the nine months ended March 31, 2016.

As of March 31, 2016 this forbearance obligation, as amended, would only be convertible for monthly obligations the Company elects to/or does not pay in cash in part or in full, for: (i) up to281, 250,000 shares, for the satisfaction of the next required monthly payment, (ii) up to 2,824,375,000 shares, for the satisfaction of the next 12 required monthly payments; and (iii) up to 5,044,264,869 shares of our common stock should the entire obligation be converted.

On August 18, 2017 the Company entered into a Judgment Settlement Agreement with John Fife with respect to the Judgment in favor of Fife, which reduces the balance under the amended agreement to $360, 000, without conversion rights, in connection with the default by the Company under a Convertible Debenture dated September 13, 2011.

Arrangement #5 (MH Investment trust II)

On August 26, 2014, the Company issued to the MH Investment Trust. a Convertible Note in a Private Placement pursuant to Section 4(2) of the Securities Act of 1933 in which the Company received $40,000 in gross proceeds on September 1, 2014. The instrument is in the principal amount of $40,000 and matures on May 1, 2015. Interest only is payable at the rate of 12% per annum by the Company to the holder until maturity. The instrument is convertible into the Company’s common stock at 60% of the volume weight average price of the stock based upon the average of the three lowest trading days in the 10 day trading period immediately preceding such conversion, or 65 % when the trading price exceeds $.0020 for the five days before such conversion. All proceeds received in connection with the above financing have been used by the Company as working capital.

At the time of the transaction, the estimated derivative liability of this security and the warrant was calculated to be $37,778 and the company recorded a loan discount of the same amount. During the year ended June 30, 2015 the Company amortized $37,778 to loan discount expense and the unamortized loan discount was reduced to $0. As of June 30, 2015, which given the changes in the Company’s stock price during the 10 day look-back period for this date the estimated liability had decreased to $3,002, a decrease for this period of $34,776 and creating a non-cash credit to earnings of that amount. Based upon the price of the Company’s common stock and partial principle payments during the year ended June 30, 2015 of $36,667; on June 30, 2015 this Note is convertible into approximately 25,016,667 shares of common stock. As of March 31, 2016, which given the changes in the Company’s stock price during the 10 day look-back period for this date the estimated liability had increased to $7,396, an increase for this period of $4,394 and creating a non-cash charge to earnings of that amount during the nine months ended March 31, 2016. At March 31, 2026 the note balance was $3,333 and accrued interest of $1,597, at 12%, remained due under this agreement. Based upon the price of the Company’s common stock on March 31, 2016 this Note is convertible into approximately 41,086,385 shares of common stock.

EQUITY LINE OF CREDIT

The Company entered a $10,000,000 equity line of Credit with Dutchess Opportunity Fund II, LLC in December of 2011. Under the equity line, the Company is eligible to “PUT” to the fund, 20,000,000 shares of its common stock during any pricing period. The Company had registered a total of 250,000,000 shares of its common stock on a Form S-1 Registration Statement with the Securities and Exchange Commission that was declared effective on January 17, 2012 relating to the Dutchess Equity Line.

Through June 30, 2014, the Company has received $227,744 of proceeds under the Equity Line relating to the resale of 135,990,000 shares of the Company’s common stock, net of $22,920 transaction fees. No proceeds under this line were received in the year ended June 30, 2015.

As of February 13, 2015, the Equity line of Credit expired, and the Company may no longer draw any funds under such equity line.

RESERVED SHARES

The Forbearance agreement connected with arrangement #4 above requires the Company to place, and the Company has done so, 1,000,000,000 shares in reserve with its transfer agent, to satisfy the conversion provisions for any unpaid monthly cash payments. During the nine months ended March 31, 2016, 62,500,000 shares were issued upon conversion of $10,000 of monthly payments as requested by holder and 937,500,000 shares remained in reserve for conversion under this agreement at March 31, 2016. Through August 31, 2016, the remaining 937,500,000 shares from this reserve have been issued to satisfy the conversion of $150,000 of scheduled payments due under the forbearance agreement through that date.

During the Fiscal Year Ended June 30, 2014 the Company advanced 40,000,000 shares distributable under the Equity Line of Credit discussed above, of which 3,990 shares of the Company’s common stock were resold and 36,010,000 shares were unsold when the agreement expired in February 2015, and remain subject to be returned to the Company’s treasury for cancellation.

COMMITMENTS

Our corporate headquarters had been located in Clifton, New Jersey since August 15, 2014., The Company initially rented the Clifton premise under a one year lease with monthly rent of $4,020, which was renewed with monthly rent of $4,132 per month through July, 2016, when this lease terminated by mutual agreement with landlord. The Company cancelled its security deposit and no amounts remain due under the agreement. 

The Company had leased a warehouse and limited office space in Norwalk, Connecticut, commencing in April of 2015 with a monthly rental of $2,200 per month. The Company vacated the Norwalk premise in April 2016 and the Company moved its warehouse contents, primarily inventory and associated shipping materials of its mPower battery products into the Clifton premise. The Company has $22,000 of unpaid rent in accounts payable at March 31, 2016.

Presently the Company has relocated its office, which includes modest office space, limited storage and utilities, to 688 New Dorp Lane, Staten Island, New York, on May 1, 2017, the rental terms included a three-month commitment; renewable 3 months at a time, with monthly rent of $400.

The Company entered into a conditional lease for a production facility located in Passaic, New Jersey, the commencement of which was contingent upon the Company obtaining funding from investors pursuant to an economic development program within governmental guidelines. During the six months ended December 31, 2015 the Company canceled this lease and received the deposit.

CONTINGENCIES

The Company had been in litigation with John Fife with respect to a Convertible Note originally issued on September 13, 2011 in the principal amount of $557,000. Fife sought damages on a Motion for Summary Judgment in the amount in excess of $1,300,000 attorney’s fees. On December 15, 2014 the federal district court in the North East District of Illinois found in favor of Fife on a motion for Summary Judgment. The Company has entered into a Forbearance Agreement with Fife as a result of negotiations to settle such Judgment.

Thefair value of the forbearance obligation on March 31, 2016 is $807,083 (See Note 3). At March 31, 2016, the derivative liability was estimated to be $207,957, and as such a total of $1,015,040 liabilities have been recordedfinancial instruments in the unaudited condensed consolidated financial statements to reflect this obligation, $807,083 which is included in current liabilities and $207,957 non-current. The value of the judgment totaled approximately $1.6 million as of December 31, 2014 and bears a punitive interest rate of 16%, and would become payable in full if the Company defaults under the forbearance obligation reduced by payments under the Forbearance Agreement, which through March 31, 2016 totals $204,150 or approximately, 1.4 million. Through March 31, 2016 the Company has not defaulted under the agreement. The Forbearance agreement requires the Company to place, and the Company has done so, 1,000,000,000 shares in reserveaccordance with its transfer agent, to satisfy the conversion provisions for any unpaid monthly cash payments, which through March 31, 2016, 62,500,000 shares from this reserve have been issued to satisfy the conversion provisions. 

As of March 31, 2016, this forbearance obligation would only be convertible for monthly obligations the Company elects to/or does not pay in cash in part or in full, for: (i) up to 281,250,000 shares, for the satisfaction of the next required monthly payment, (ii) up to 2,825,375,000 shares, for the satisfaction of the next 12 required monthly payments; and (iii) up to 5,044,264,869 shares of our common stock should the entire obligation be converted.

Effective July 1, 2008, we adopted Accounting Standards Codification (“ASC”) 820-10-20, FairASC topic 820, “Fair Value Measurements and Disclosures” (ASC 820), which provides a framework for measuring fair value under GAAP.formerly SFAS No. 157 “Fair Value Measurements”. ASC 820-10-20820 defines fair value“fair value” as the exchange price that would be received for an asset or paid to transfer a liability (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.

mPHASE TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(UNAUDITED)

NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

ASC 820-10-20 requires820 also describes three levels of inputs that valuation techniques maximize the use of observablemay be used to measure fair value:

Level 1: Observable inputs and minimize the use of unobservable inputs. ASC 820-10-20 also establishes a fair value hierarchy, which prioritizes the valuation inputs into three broad levels. Financial assets and liabilities valued using level 1 inputs are based onthat reflect unadjusted quoted market prices within active markets. Financial assets and liabilities valued using level 2 inputs are based primarily on quoted prices for identical assets or liabilities traded in active markets.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Inputs that are generally unobservable. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

Financial instruments consist principally of cash, accounts receivable, prepaid expenses, accounts payable, accrued liabilities, due to related parties, and current and long-term debt. The carrying amounts of such financial instruments in the accompanying balance sheets approximate their fair values due to their relatively short-term nature. The fair value of short and long-term debt is based on current rates at which the Company could borrow funds with similar remaining maturities. The carrying amounts approximate fair value with the exception of the fair value of due to related parties as the fair value cannot be determined due to a lack of similar instruments available to the Company. It is management’s opinion that the Company is not exposed to any significant currency or credit risks arising from these financial instruments.

Revenue Recognition

The Company recognizes revenue in accordance with the Financial Accounting Standards Board’s (“FASB”), Accounting Standards Codification (“ASC”) ASC 606, Revenue from Contracts with Customers (“ASC 606”). Revenues are recognized when control is transferred to customers in amounts that reflect the consideration the Company expects to be entitled to receive in exchange for those goods. Revenue recognition is evaluated through the following five steps: (i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied.

Revenue is derived from the sale of artificial intelligence and machine learning focused technology products and related services. The Company recognizes revenue when performance obligations under the terms of a contract with the customer are satisfied. Product sales occur once control is transferred upon delivery to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products. The amount of consideration the Company receives and revenue the Company recognizes varies with changes in customer incentives the Company offers to its customers and their customers. In the event any discounts, sales incentives, or similar arrangements are agreed to with a customer, such amounts are estimated at time of sale and deducted from revenue. Sales taxes and other similar taxes are excluded from revenue (see Note 5).

Contract liabilities include amounts billed to customers in excess of revenue recognized and are presented as contract liabilities on the consolidated balance sheets (see Note 5).

A contract asset is recognized for incremental costs to obtain a customer contract that are recoverable, otherwise such incremental costs are expensed as incurred.

mPHASE TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(UNAUDITED)

NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Share-Based Compensation

The Company computes share based payments in accordance with the provisions of ASC Topic 718, Compensation – Stock Compensation and related interpretations. As such, compensation cost is measured on the date of grant at the fair value of the share-based payments. Such compensation amounts, if any, are amortized over the respective vesting periods of the grants. The Company estimates the fair value of stock options and warrants by using the Black-Scholes option pricing model.

Derivative Instruments

The Company enters into financing arrangements that consist of freestanding derivative instruments or are hybrid instruments that contain embedded derivative features. The Company accounts for these arrangements in accordance with ASC Topic 815, Accounting for Derivative Instruments and Hedging Activities as well as related interpretations of this standard. In accordance with this standard, derivative instruments are recognized as either assets or liabilities in activethe balance sheet and are measured at fair values with gains or inactive markets. For certain long-term debt,losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or loss in earnings. The Company determines the fair value wasof derivative instruments and hybrid instruments based on presentavailable market data using appropriate valuation models, considering all of the rights and obligations of each instrument.

The Company estimates fair values of derivative financial instruments using various techniques (and combinations thereof) that are considered consistent with the objective measuring fair values. In selecting the appropriate technique, the Company considers, among other factors, the nature of the instrument, the market risks that it embodies and the expected means of settlement. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques (such as Black-Scholes model) are highly volatile and sensitive to changes in the trading market price of the Company’s common stock. Since derivative financial instruments are initially and subsequently carried at fair values, our income (expense) going forward will reflect the volatility in these estimates and assumption changes.

Convertible Debt Instruments

The Company records debt net of debt discount for beneficial conversion features and warrants, on a relative fair value techniquesbasis. Beneficial conversion features are recorded pursuant to the Beneficial Conversion and Debt Topics of the Financial Accounting Standards Board (“FASB”) ASC. The amounts allocated to warrants and beneficial conversion rights are recorded as debt discount and as additional paid-in-capital. Debt discount is amortized to interest expense over the life of the debt using inputs derived principally or corroborated from market data. Financialthe effective interest method.

Income Taxes

The Company accounts for income taxes in accordance with Accounting for Income Taxes, as clarified by ASC 740-10, Accounting for Uncertainty in Income Taxes (“ASC 740”). Under this method, deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities using level 3 inputsand net operating loss and tax credit carryforwards given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year. In providing for deferred taxes, the Company considers tax regulations of the jurisdictions in which the Company operates, estimates of future taxable income, and available tax planning strategies. If tax regulations, operating results or the ability to implement tax planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required. Valuation allowances are recorded related to deferred tax assets based on the “more likely than not” criteria of ASC 740.

mPHASE TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(UNAUDITED)

NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

ASC 740 requires that the Company recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the “more-likely-than-not” threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company’s tax returns for its June 30, 2021, 2020, 2019, and 2018 tax years may be selected for examination by the taxing authorities as the statute of limitations remains open.

The Company recognizes expenses for tax penalties and interest assessed by the Internal Revenue Service and other taxing authorities upon receiving valid notice of assessments. The Company has received no such notices for the years ended June 30, 2021 and 2020.

Earnings Per Share

In accordance with the provisions of FASB ASC Topic 260, Earnings per Share, basic earnings per share (“EPS”) is computed by dividing earnings available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Other potentially dilutive common shares, and the related impact to earnings, are considered when calculating EPS on a diluted basis.

In computing diluted EPS, only potential common shares that are dilutive, those that reduce EPS or increase loss per share, are included. The effect of contingently issuable shares are not included if the result would be anti-dilutive, such as when a net loss is reported. For the three months ended September 30, 2021 and 2020, as we incurred net income for those periods, dilutive shares included 41,398,021 and 32,943,371 shares, respectively, of the Company’s common stock related to convertible promissory notes and warrants, assuming conversion of such convertible promissory notes and warrants occurred at July 1, 2021 and 2020, respectively, as the conversion price of the convertible promissory notes and warrants were less than the average market price of the Company’s common stock for the three months ended September 30, 2021 and 2020. At September 30, 2021, there were no shares of the Company’s common stock to be issued. At September 30, 2020, there were 2,666,666 shares of the Company’s common stock to be issued in conjunction with the CloseComms acquisition, and 115,817 restricted shares of the Company’s common stock to be issued upon vesting pursuant to the terms of an employment agreement with its Chief Financial Officer, which were not included in computing dilutive EPS.

Modification/Extinguishment of Debt

In accordance with ASC 470, a modification or an exchange of debt instruments that adds or eliminates a conversion option that was substantive at the date of the modification or exchange is considered a substantive change and is measured and accounted for as extinguishment of the original instrument along with the recognition of a gain or loss. Additionally, under ASC 470, a substantive modification of a debt instrument is deemed to have been accomplished with debt instruments that are substantially different if the present value of the cash flows under the terms of the new debt instrument is at least 10 percent different from the present value of the remaining cash flows under the terms of the original instrument. A substantive modification is accounted for as an extinguishment of the original instrument along with the recognition of a gain or loss.

mPHASE TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(UNAUDITED)

NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Recently Issued Accounting Standards Not Yet Adopted

During August 2020, the FASB issued ASU 2020-06, to modify and simplify the application of U.S. GAAP for certain financial instruments with characteristics of liabilities and equity. The standard is effective for the Company as of July 1, 2024, with early adoption permitted. The Company is reviewing the impact of this guidance on its consolidated financial statements.

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on the accompanying unaudited consolidated financial statements.

NOTE 4: INTANGIBLE ASSET – PURCHASED SOFTWARE, NET

Intangible asset – Purchased Software, net, is comprised of the following at:

SCHEDULE OF INTANGIBLE ASSET