VOIP-PAL.COM INC.

Notes to the Interim Consolidated Financial Statements

(Unaudited – prepared by management)

(Expressed in United States Dollars)

DecemberMarch 31, 20172023

NOTE 1. NATURE AND CONTINUANCE OF OPERATIONS

VOIP-PAL.com, Inc. (the “Company”) was incorporated in the state of Nevada in September 1997 as All American Casting International, Inc. The Company’s registered office is located at 10900 NE 4^th Street,7215 Bosque Blvd, Suite 2300, Bellevue, Washington102, Waco, Texas in the United States of America.

Since March 2004, the Company has been developingdeveloped 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. The Company operates in one reportable segment being the acquisition and development of VoIP-related intellectual property including patents and technology. All intangible assets are located in the United States of America

In December 2013, the Company completed the acquisition of Digifonica (International) Limited, a private company based in Gibraltar,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 DecemberMarch 31, 2017,2023, had an accumulated deficit of $34,911,906$71,468,498 (September 30, 20172022 - $34,246,816)$70,076,579). 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.

COVID-19

In March 2020, the World Health Organization declared a global pandemic related to the COVID-19 coronavirus. Its impact on global economies has been far-reaching and businesses around the world are being forced to cease or limit operations for long or indefinite periods of time. Measures taken to contain the spread of the COVID-19 virus, including travel bans, quarantines, social distancing, and closures of non-essential services have triggered significant disruptions to businesses worldwide, resulting in an economic slowdown. Global stock markets have also experienced great volatility and significant declines. Governments and central banks have responded with monetary and fiscal interventions to stabilize economic conditions.

The duration and impact of the COVID-19 pandemic, as well as the effectiveness of government and central bank responses, remains unclear at this time. It is not possible to reliably estimate the duration and severity of the COVID-19 pandemic, nor its impact on the financial position and results of the Company in future periods. The Company is proceeding with its business activities as long as the work environment remains safe – at this point there has been minimal disruption to day-to-day operations resulting from health and safety measures. Disruptions and volatility in the global capital markets may increase the Company’s cost of capital and adversely impact access to capital.

VOIP-PAL.COM INC.

Notes to the Interim Consolidated Financial Statements

(Unaudited – prepared by management)

(Expressed in United States Dollars)

March 31, 2023

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 DecemberMarch 31, 2017,2023, 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

VOIP-PAL.COM INC.

Notes to the Interim Consolidated Financial Statements 

(Unaudited – prepared by management) 

(Expressed in United States Dollars) 

December 31, 2017

Cash

Cash consists of cash on hand, cash held in trust, and monies held in checking and savings accounts. The Company had $1,379,057 and $12,157$1,166,569 in cash on DecemberMarch 31, 20172023 (September 30, 2022 - $305,485).

Fixed Assets

Fixed assets are stated at cost less accumulated depreciation, and September 30, 2017, respectively.depreciated using the straight-line method over their useful lives; Furniture and computers – 5 years.

Intangible Assets

Intangible assets, consisting of Intellectual VoIP communication patent intellectual properties (IP) are recorded at cost and amortized over the assets estimated life on a straight-line basis. Costs to renew or extend patents are capitalized. 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.

VOIP-PAL.COM INC.

Notes to the Interim Consolidated Financial Statements

(Unaudited – prepared by management)

(Expressed in United States Dollars)

March 31, 2023

U.S. GAAP establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined as the amount that would be received for an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes the following fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:

Level 1: Quoted prices in active markets for identical assets and liabilities.

Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The fair value of cash is classified as Level 1 at DecemberMarch 31, 20172023 and September 30, 2017.2022.

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 expensesliabilities are classified as other financial liabilities, and have a fair value approximating their carrying value, due to their short-term nature.

VOIP-PAL.COM INC.

Notes to the Interim Consolidated Financial Statements 

(Unaudited – prepared by management) 

(Expressed in United States Dollars) 

December 31, 2017

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-convertedif-converted method.

For the three-month period ended DecemberMarch 31, 20172023 and the year ended September 30, 20172022, 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.

VOIP-PAL.COM INC.

Notes to the Interim Consolidated Financial Statements

(Unaudited – prepared by management)

(Expressed in United States Dollars)

March 31, 2023

Concentrations of Credit Risk

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The Company’s policy is to maintain cash with reputable financial institutions or in retainers with trusted vendors. The Company maintainshas at times had cash balances at financial institutions which at times, may be in excess of insured limits. The Companythe Federal Deposit Insurance Corporation (FDIC) Insurance Limit of $250,000, but 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.result. As of DecemberMarch 31, 2017,2023, the Company’s bank operating account balances exceeded thanexceeds the Federal Deposit Insurance CorporationFDIC Insurance Limit of $250,000$250,000 by $1,129,063.$916,569.

Recent Accounting Pronouncements and Adoption

ASU 2020-10 – Codification Improvements In November 2015,October 2020, the FASB issued ASU 2015-17, Balance Sheet Classification2020-10, Codification Improvements. The guidance contains improvements to the Codification by ensuring that all guidance that requires or provides an option for an entity to provide information in the notes to financial statements is codified in the Disclosure Section of Deferred Taxes (“the Codification. The guidance also contains Codifications that are varied in nature and may affect the application of the guidance in cases in which the original guidance may have been unclear. For public business entities, the amendments in the ASU 2015-17”). ASU 2015-17 requires companies to classify all deferred tax assets or liabilities as noncurrent on the balance sheet rather than separately disclosing deferred taxes as current and noncurrent. This standard isare effective for the Companyfiscal years beginning on October 1, 2017 and can be applied either prospectively or retrospectively toafter December 15, 2020. For all periods presented upon adoption. The standard did not have any impact on the Company’s financial statements.

In January 2016, FASB issued ASU 2016-01 to amend certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Most prominent amongother entities, 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 will beare effective for the Company beginning October 1, 2018. The standard is not expected to have any impact on the Company’s financial statements.

VOIP-PAL.COM INC.

Notes to the Interim Consolidated Financial Statements 

(Unaudited – prepared by management) 

(Expressed in United States Dollars) 

December 31, 2017

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 and interim periods beginning after December 15, 2018, with early2021, and interim periods within annual periods beginning after December 15, 2022. Early adoption permitted upon issuance. When adopted, the Company doesis permitted. We do not expect this guidancethe adoption of ASU 2020-10 to have a material impact on itsour condensed consolidated financial statements.

ASU 2021-04 – Earnings per share. In June 2016,May 2021, the FASB issued ASU 2016-13 to replace the incurred loss impairment methodology2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in current U.S. GAAP with a methodology that reflects expected credit losses and requires considerationEntity’s Own Equity (Subtopic 815-40). ASU 2021-04 addresses issuer’s accounting for certain modifications or exchanges 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. 

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230)”. The new guidance is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. ASU No. 2016-15freestanding equity-classified written call options. This amendment is effective for all entities, for fiscal years, and interim periods within those years beginning after December 15, 2017.2021, including interim periods within those fiscal years. Early adoption is permitted, provided that all ofpermitted. We do not expect the amendments are adopted in the same period. The guidance requires application using a retrospective transition method. The Company is currently evaluating the impactadoption of ASU No. 2016-152021-04 to have a material impact on itsour condensed consolidated financial position, results of operations and liquidity.statements.

NOTE 4.PURCHASE OF DIGIFONICA

The Company acquired Digifonica in December 2013. Pursuant to the terms in the2013 by way of a Share Purchase Agreement (the “SPA”), pursuant to which the Company acquired purchased 100% of the shares of Digifonica from the seller, the CEO of the Company (the “Seller”), for a cash payment of $800,000$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 requiresrequired 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 arewere recorded as a share issuance cost within the Additional Paid-in Capital account (Notes 68 and 9)10).

During the year ended September 30, 2021, on April 12, 2021, the SPA was amended to provide that: a) from its inception until March 31, 2021, the Company would issue warrants to purchase common shares of the Company in an equivalent amount to and instead of the required shares being issued pursuant to the Anti-Dilution Clause; and b) the Anti-Dilution Clause would be null and void from April 1, 2021 forward. As a result of this amendment, the Seller returned 513,535,229 common shares to the treasury of the Company and relinquished his right to receive an additional 107,935,333 common shares in exchange for 621,470,562 warrants to purchase common shares at a price of $0.021 for a period of ten years from the date of issue.

NOTE 5.RETAINER

The Company has retainers with certain of its professional service providers. The balance due on these prepaid retainers was $6,206 as of March 31, 2023, and $1,181 for the year ended September 30, 2022. The Company recognizes the expense from these retainers as they are invoiced and the invoiced charges are deducted from the various providers’ prepaid retainer balances.

VOIP-PAL.COM INC.

Notes to the Interim Consolidated Financial Statements

(Unaudited – prepared by management)

(Expressed in United States Dollars)

March 31, 2023

NOTE 6.FIXED ASSETS

A summary of the Company’s fixed assets as of March 31, 2023 and September 30, 2022 is as follows:

SCHEDULE OF FIXED ASSETS

There were no retirements of any fixed assets in the periods presented.

NOTE 7.INTANGIBLE ASSETS

The Company acquired certain patents and technology from Digifonica in December 2013 (See(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 DecemberMarch 31, 20172023 and September 30, 20172022 is as follows:

SCHEDULE OF INTANGIBLE ASSETS

There were no disposals of any intangible assets in the yearsperiods presented.

VOIP-PAL.COM INC.

Notes to the Interim Consolidated Financial Statements NOTE 8.RELATED PARTY TRANSACTIONS AND KEY MANAGEMENT COMPENSATION

(Unaudited – prepared by management) 

(Expressed in United States Dollars) 

December 31, 2017 

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 periodsix-month periods ended DecemberMarch 31, 20172023 and 2022 includes:

SCHEDULE OF COMPENSATION PAID OR ACCRUED TO KEY MANAGEMENT FOR SERVICES

At DecemberMarch 31, 20172023, included in accounts payable and accrued liabilities is $227,200$Nil (September 30, 20172022 - $186,700)$Nil) owed to current officers and directors. Amounts due to/from related parties are non-interest bearing, unsecured and have no fixed terms of repayment unless otherwise noted. 

As at DecemberAt March 31, 2017,2023, included in shares to be issuedprepaid expense is $902,000$9,000 (September 30, 20172022 - $902,000) for unpaid Officer$Nil) of prepaid compensation to current officers and Director fees and $80,000 (September 30, 2017 - $80,000) for professional fees & services paid todirectors.

During the six-month period ended March 31, 2023, a director for consulting services provided. Additionally, $2,726,179 (September 30, 2017of the Company forgave $2,100 (2022 - $994,548) was$Nil) of accrued in the yeardirector fees.

VOIP-PAL.COM INC.

Notes to the Seller of Digifonica for the Anti-Dilution Clause (Notes 4 and 9).  Interim Consolidated Financial Statements

(Unaudited – prepared by management)

(Expressed in United States Dollars)

March 31, 2022

NOTE 9.SUPPLEMENTAL CASH FLOW INFORMATION

During the three-month period ended DecemberMarch 31, 2017,2023, the Company paid $nil$Nil (September 30, 20172022 - $nil)$Nil) in interest or income taxes.

The Company from time-to-time issues convertible debentures that are due on demand. The convertible debentures are convertible at fixed conversion rates and typically carryThere were no interest. See Note 9 for details of common shares issuednon-cash investing or financing transactions during the period from the conversion of convertible debentures. six-month periods ended March 31, 2023 and 2022.

As at December 31, 2017 there are $nil (September 30, 2017 - $nil) in convertible debentures issued and outstanding. 

NOTE 10.SHARE CAPITAL

Capital Stock Authorized and Issued:Issued as at March 31, 2023:

Subsequent to the period ended December 31, 2017, the board of directors of the Company authorized the increase of the Company’s capital stock to 1,500,000,000 common voting shares with a par value of $0.001 per share.

VOIP-PAL.COM INC.

Notes to the Interim Consolidated Financial Statements 

(Unaudited – prepared by management) 

(Expressed in United States Dollars) 

December 31, 2017

Issues during the three-monthsix-month period ended DecemberMarch 31, 20172023

During the three-monthsix-month period ended DecemberMarch 31, 2017,2023, the Company issued:

Issues during the year ended September 30, 20172022

During the year ended September 30, 2017,2022, the Company issued 73,067,166 common shares priced between $0.02 and $0.03 per common share for cash proceeds of $1,590,010 from private placements, as follows: Company:

Subsequent Issues

Subsequent to the six-month period ended March 31, 2023, as of May 10, 2023 the Company had issued:

During the year ended September 30, 2017, the Company issued: 

During the year ended September 30, 2017, 900,000 common shares priced at $0.05 per common share were cancelled. The shares had been issued as an advance payment for the provision of services under a contract which was terminated prior to fulfillment. 

Shares to be Issued

As at DecemberMarch 31, 2017,2023, there are 23,353,8462,000,000 (September 30, 20172022 - Nil) common shares valued at $10,000 (September 30, 2022 - $Nil) to be issued as a result of a pre-paid subscription in a private placement.

As at March 31, 2023, there are $Nil (September 30, 2022 – 23,353,846)1,977,523) common shares to be issued that are accrued for professional services provided to the Company valued at $1,058,320$Nil (September 30, 20172022 – $1,058,320), of$61,320). During the period ended March 31, 2023, the Company entered into settlement agreements with two vendors pursuant to which 21,281,903 (September 30, 2017 – 21,281,903) are accrued to management and related parties. As at December 31, 2017, $4,721 (September 30, 2017 – $4,721) was included in commonthey relinquished their aggregate 1,977,523 shares to be issued in exchange for cash received in advance of common shares being issued. totaling $4,000.