CounterPath Reports First Quarter Fiscal 2010 Financial Results

Company Moving Closer to Profitability

VANCOUVER, Sept. 14 /CNW/ - CounterPath Corporation ("CounterPath" or the "Company") (OTCBB: CPAH; TSX-V: CCV), a leading provider of desktop and mobile VoIP software products and solutions, today announced financial and operating results for the first quarter of fiscal year 2010.

Financial and operating highlights for the first quarter ended July 31, 2009 include:

    
    -   Revenue for the first quarter of $2.1 million compared to revenue of
        $2.2 million for the fourth quarter ended April 30, 2009, and revenue
        of $2.6 million for the quarter ended July 31, 2008.

    -   A net loss for the first quarter of $1.2 million ($0.04 per share)
        compared to a net loss of $4.2 million ($0.15 per share) for the
        fourth quarter ended April 30, 2009, and a net loss of $5.9 million
        ($0.23 per share) for quarter ended July 31, 2008.

    -   Significant reduction in expenses as non-GAAP operating expenses for
        the first quarter were $2.5 million, down from $3.3 million in non-
        GAAP operating expenses for the fourth quarter ended April 30, 2009
        and $7.2 million in non-GAAP operating expenses for the quarter ended
        July 31, 2008.

    -   Significant reduction in losses as non-GAAP operating loss for the
        first quarter was $0.4 million, down from the $1.1 million non-GAAP
        operating loss for the fourth quarter ended April 30, 2009 and the
        $4.6 million non-GAAP operating loss for the quarter ended July 31,
        2008.

    -   The announcement that Genesys, the world's No. 1 contact center
        software company, will integrate CounterPath's Software Development
        Kit (SDK) into its Agent Desktop product suite to bring improved VoIP
        communication technology to call center customers worldwide.

    -   The initiation of two additional trials with North American service
        providers for CounterPath's convergence gateway, and development of a
        SIP-based peer to peer communications feature that federates
        seamlessly with the SMS network to allow subscribers to leverage
        their single telephone for both voice and text communications.

    -   The launching of a new beta version of X-Lite focused on enriching
        the softphone experience for the X-Lite community. With over 340,000
        softphone downloads a month, this latest version of the world's
        favorite free softphone provides new features, usability
        improvements and a more unified approach to communicating with peers
        regardless of location.
    

"This quarter CounterPath delivered improving operating performance in a challenging market environment," stated Donovan Jones, President and CEO, CounterPath. "While our revenue has been impacted by the slowdown in the world economy and rationalization of our product lines, our aggressive cost restructuring and disciplined expense management over the last few quarters has brought us closer to profitability. Our business strategy is sound and we are beginning to see signs of improvement in the industry and in our orders. Our patented technology allows users to leverage the Internet to save money on communications costs while improving their productivity, a value proposition that resonates well in today's market," continued Jones.

    
    Financial Results

    (All amounts in U.S. dollars and in accordance with accounting principles
    generally accepted in the United States ("GAAP") unless otherwise
    specified. Consolidated financial results include the financial results
    of NewHeights Software Corporation from August 2, 2007 and the financial
    results for FirstHand Technologies Inc. and BridgePort Networks, Inc.,
    from February 1, 2008)
    

For the quarter ended July 31, 2009, revenue was $2.1 million compared to $2.6 million for the quarter ended July 31, 2008. Software revenue for the quarter ended July 31, 2009 was $1.1 million compared to $1.8 million for the same quarter last year. Service revenue for the quarter ended July 31, 2009 was $0.9 million compared to $0.8 million for same quarter last year.

Operating expenses for the quarter ended July 31, 2009 were $2.9 million compared to $8.3 million for the same quarter last year. Inclusive in operating expenses of $2.9 million were non-cash expenses of $0.4 million, including $0.2 million from amortization of intangible assets acquired from NewHeights, FirstHand and BridgePort, and a non-cash $0.2 million stock-based compensation expense. The quarter-over-quarter decrease in operating expenses was primarily due to significant employee rationalization completed over the previous four quarters.

Sales and marketing expenses were $0.8 million for the quarter ended July 31, 2009 compared to $1.5 million for same quarter last year. For the quarter ended July 31, 2009, research and development expenses were $0.8 million and general and administrative expenses were $0.6 million, compared to $3.0 million and $2.2 million, respectively, for the same quarter last year.

The net loss for the quarter ended July 31, 2009 was $1.2 million, or a loss of $0.04 per share, compared to a net loss of $5.9 million, or a loss of $0.23 per share for the quarter ended July 31, 2008.

At July 31, 2009, the Company had $2.1 million in cash, compared to $2.9 million at April 30, 2009. At July 31, 2009, the Company's working capital was $1.5 million, compared to $1.6 million at April 30, 2009.

About CounterPath

CounterPath Corporation is a leading provider of innovative desktop and mobile VoIP software products and solutions. The Company's product suite includes SIP-based softphones, server applications and Fixed Mobile Convergence (FMC) solutions that enable service providers, enterprises and Original Equipment Manufacturers (OEM) to cost-effectively integrate voice, video, presence and Instant Messaging (IM) applications into their VoIP offerings and extend functionality across both fixed and mobile networks.

CounterPath's customers include some of the world's largest telecommunications service providers and network equipment providers including AT&T, Verizon, BT (British Telecommunications PLC), Deutsche Telekom, Cisco Systems, Mitel and Nortel.

Visit www.counterpath.com.

Non-GAAP Financial Measures

This news release contains "non-GAAP financial measures". The non-GAAP financial measures in this news release consist of non-GAAP operating expenses and non-GAAP operating losses, which exclude non-cash stock-based compensation, amortization and impairment of intangible asset charges relative to operating expenses and operating losses calculated in accordance with GAAP. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. CounterPath utilizes both GAAP and non-GAAP financial measures to assess what it believes to be its core operating performance and to evaluate and manage its internal business and assist in making financial operating decisions. CounterPath believes that the inclusion of non-GAAP financial measures, together with GAAP measures, provides investors with an alternative presentation useful to investors' understanding of CounterPath's core operating results and trends.

    
    Reconciliation to GAAP

                                                Three months ending
                                     ----------------------------------------
                                         July 31,     April 30,      July 31,
    (Unaudited)                             2009          2009          2008
                                     ------------  ------------  ------------
    Non-GAAP operating expenses       $2,463,585    $3,322,580    $7,242,833
    Add:
      Stock-based compensation           219,615       366,779       507,988
      Amortization of intangible
       assets                            205,972       496,315       545,473
      Impairment of intangible assets          -     2,755,333             -
                                     ------------  ------------  ------------
    Operating expenses (GAAP)         $2,889,172    $6,941,007    $8,296,294
                                     ------------  ------------  ------------
                                     ------------  ------------  ------------


                                                Three months ending
                                     ----------------------------------------
                                         July 31,     April 30,      July 31,
    (Unaudited)                             2009          2009          2008
                                     ------------  ------------  ------------
    Non-GAAP operating loss            ($413,128)  ($1,149,130)  ($4,630,073)
    Add:
      Stock-based compensation           219,615       366,779       507,988
      Amortization of intangible
       assets                            205,972       496,315       545,473
      Impairment of intangible assets          -     2,755,333             -
                                     ------------  ------------  ------------
    Operating loss (GAAP)              ($838,715)  ($4,767,557)  ($5,683,534)
                                     ------------  ------------  ------------
                                     ------------  ------------  ------------
    

Forward-Looking Statements

This news release contains "forward-looking statements". Statements in this news release, which are not purely historical, are forward-looking statements and include any statements regarding beliefs, plans, expectations or intentions regarding the future, such as the following: (1) Our business strategy is sound and we are beginning to see signs of improvement in the industry and in our orders or that (2) the Company is moving closer profitability.

It is important to note that actual outcomes and the Company's actual results could differ materially from those in such forward-looking statements. Actual results could differ from those projected in any forward-looking statements due to numerous factors. Such factors include, among others: (1) the failure to develop new and innovative products using the Company's technologies, (2) the Company's ability to remain competitive as other parties develop and release competitive products, (3) the Company's ability to retain the employees necessary to continue research and development of current and new products, (4) the success by the Company of the sales of its current and new products, (5) the impact of technology changes on the Company's products and on the VoIP industry, (6) the compatibility of the Company's products with new computer operating systems, (7) the rate of adoption by service providers and the general public of VoIP as a replacement for regular and cellular phone service, (8) general economic conditions as they affect CounterPath and its current and prospective customers, including a continued downturn in general economic conditions internationally, (9) the ability of the Company to control costs operating, general administrative and other expenses, and (10) insufficient investor interest in the Company's securities which may impact on the Company's ability to raise additional financing as required. Readers should also refer to the risk disclosures outlined in the Company's quarterly reports on Form 10-Q, annual reports on Form 10-K and the Company's other disclosure documents filed from time-to-time with the Securities and Exchange Commission at www.sec.gov and the Company's interim and annual filings and other disclosure documents filed from time-to-time on SEDAR at www.sedar.com.

    
    Disclaimer: Neither TSX Venture Exchange nor its Regulation Services
    Provider (as that term is defined in the policies of the TSX Venture
    Exchange) accepts responsibility for the adequacy or accuracy of this
    release.


                           COUNTERPATH CORPORATION
                CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS
                           (Stated in U.S. Dollars)

                                                       July 31,     April 30,
                                                          2009          2009
                                                   ------------  ------------
    Assets                                          (Unaudited)
      Current assets:
        Cash                                       $ 2,107,364   $ 2,931,932
        Accounts receivable (net of allowance
         for doubtful accounts of $625,065 and
         $755,114, respectively)                     2,731,045     2,524,220
        Investment tax credits recoverable                   -       143,334
        Other current assets                         1,269,802       310,274
                                                   ------------  ------------
          Total current assets                       6,108,211     5,909,760

      Deposits                                          99,958       114,267
      Equipment                                        229,554       258,442
      Intangible assets (net of accumulated
       amortization of $3,581,167 and $3,375,195,
       respectively)                                 2,893,795     2,201,894
      Goodwill                                       8,093,201     7,262,701
      Other assets                                      86,065        92,101
                                                   ------------  ------------
    Total Assets                                   $17,510,784   $15,839,165
                                                   ------------  ------------
                                                   ------------  ------------

    Liabilities and Stockholders' Equity
      Current liabilities:
        Accounts payable and accrued liabilities   $ 3,835,803   $ 3,488,001
        Unearned revenue                               607,761       708,455
        Customer deposits                                4,079         9,443
        Accrued warranty                               123,212       137,378
                                                   ------------  ------------
          Total current liabilities                  4,570,855     4,343,277

      Deferred lease inducements                        17,466        55,016
      Unrecognized tax benefit                          98,575        98,575
                                                   ------------  ------------
        Total liabilities                            4,686,896     4,496,868

      Stockholders' equity:
      Preferred stock, $0.001 par value
        Authorized: 100,000,000
        Issued and outstanding: July 31, 2009 - 1;
         April 30, 2009 - 1                                  -             -
      Common stock, $0.001 par value - Note 5
        Authorized: 83,076,900
        Issued and outstanding:
        July 31, 2009 - 29,409,420
        April 30, 2009 - 28,832,050                     29,409        28,832
      Additional paid-in capital                    49,330,897    48,718,443
      Accumulated deficit                          (35,560,531)  (34,318,195)
      Accumulated other comprehensive loss -
       currency translation adjustment                (975,887)   (3,086,783)
                                                   ------------  ------------
        Total stockholders' equity                  12,823,888    11,342,297
                                                   ------------  ------------
    Liabilities and Stockholders' Equity           $17,510,784   $15,839,165
                                                   ------------  ------------
                                                   ------------  ------------



                           COUNTERPATH CORPORATION
           CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
                       AND COMPREHENSIVE INCOME (LOSS)
                          (Stated in U.S. Dollars)
                                 (Unaudited)

                                                  Three Months Ended July 31,
                                                  ---------------------------
                                                          2009          2008
                                                  ------------- -------------
    Revenue:
      Software                                     $ 1,141,343   $ 1,848,305
      Service                                          909,114       764,455
                                                  ------------- -------------
        Total revenue                                2,050,457     2,612,760
    Operating expenses:
      Cost of sales (includes depreciation of
       $2,121 and $21,484 and amortization of
       intangible assets of $205,972 and $545,473)     642,728     1,377,843
      Sales and marketing                              759,005     1,481,951
      Research and development                         820,128     3,017,412
      General and administrative                       622,399     2,228,127
      Restructuring costs                               44,912       190,961
                                                  ------------- -------------
        Total operating expenses                     2,889,172     8,296,294
                                                  ------------- -------------
    Loss from operations                              (838,715)   (5,683,534)
    Interest and other income (expense), net
      Interest income                                   27,758        18,068
      Interest expense                                  (1,666)       (7,295)
      Foreign exchange loss                           (429,713)     (183,041)
                                                  ------------- -------------
    Net loss for the period                        $(1,242,336)  $(5,855,802)
                                                  ------------- -------------
                                                  ------------- -------------
      Other comprehensive income (loss):
      Foreign currency translation adjustments       2,110,896       (20,450)
                                                  ------------- -------------
    Comprehensive income (loss)                    $   868,560   $(5,835,352)
                                                  ------------- -------------
                                                  ------------- -------------
    Loss per share:
      Basic and diluted                            $     (0.04)  $     (0.23)
                                                  ------------- -------------
                                                  ------------- -------------
      Weighted average common shares outstanding:   28,968,332    25,948,247
    

SOURCE CounterPath Corporation

For further information: For further information: David Karp, Chief Financial Officer, CounterPath Corporation, (604) 320-3344 ext 1114, ir@counterpath.com

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CounterPath Corporation

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