CounterPath Reports Second Quarter Fiscal 2010 Financial Results

VANCOUVER, Dec. 15 /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 second quarter of fiscal year 2010.

Financial and operating highlights for the second quarter ended October 31, 2009 include:

    
    -  The closing of a $1.9 million (CDN$2.0 million) private placement
       providing additional capital resources to fund operations.

    -  Revenue for the second quarter of $1.9 million compared to revenue of
       $2.1 million for the first quarter ended July 31, 2009.

    -  A significant reduction in expenses as non-GAAP operating expenses for
       the second quarter were $3.3 million, down from $5.9 million in
       non-GAAP operating expenses for the quarter ended October 31, 2008.

    -  A net loss for the second quarter of $1.8 million ($0.06 per share)
       compared to a net loss of $3.5 million ($0.12 per share) for the
       quarter ended October 31, 2008.

    -  The launch of Bria for BroadWorks, a feature-rich, open
       standards-based softphone that interoperates seamlessly with
       BroadSoft's BroadWorks(R) VoIP application platform, and the
       demonstration of the softphone with added single number SMS capability
       at BroadSoft Connections 2009.

    -  The addition of a tier one OEM for our Bria softphone which adds to
       the growing number of tier one OEM's that license our technology such
       as Cisco Systems, Mitel and Nortel.

    -  Record monthly downloads of the X-Lite softphone, which in recent
       months have exceeded 500,000 per month. Additionally, our online store
       sales for the quarter increased 33% over the prior quarter.

    -  Subsequent to the quarter, the beta launches of our new softphone
       offerings Bria 3.0 and X-Lite 4.0, both of which will become generally
       available in early calendar 2010 for Windows as well as Mac operating
       systems.
    

"While we grew our customer base during the quarter and saw repeat customers, we had lower than normal average order sizes reflecting the slowdown in spending on communications technologies," stated Donovan Jones, President and CEO, CounterPath. "We are excited about our strong product portfolio and plan to use funds from our recently closed private placement to add sales and marketing resources to grow our business. In particular, we expect to leverage our OEM partnerships as well as build new channels to deploy our solutions. In addition, we expect to see continued growth in online sales of our softphone products as users of our free softphone convert to our feature rich paid for versions," 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 October 31, 2009, revenue was $1.9 million compared to $3.0 million for the same quarter last year. Software revenue for the quarter ended October 31, 2009 was $1.5 million compared to $2.1 million for the same quarter last year. Service revenue for the quarter ended October 31, 2009 was $0.4 million compared to $0.9 million for same quarter last year.

Operating expenses for the quarter ended October 31, 2009 were $3.7 million compared to $6.7 million for the same quarter last year. Operating expenses for the quarter included a non-cash expense of $0.2 million for amortization of intangible assets and a non-cash stock-based compensation expense of $0.2 million. 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 $0.7 million for the quarter ended October 31, 2009 compared to $1.2 million for same quarter last year. For the quarter ended October 31, 2009, research and development expenses were $1.0 million and general and administrative expenses were $1.3 million, compared to $2.1 million and $1.6 million, respectively, for the same quarter last year.

The net loss for the quarter ended October 31, 2009 was $1.8 million, or a loss of $0.06 per share, compared to a net loss of $3.5 million, or a loss of $0.12 per share, for the quarter ended October 31, 2008.

At October 31, 2009, the Company had $3.4 million in cash, compared to $2.9 million at April 30, 2009. At October 31, 2009, the Company's working capital was $2.2 million, compared to $1.6 million at April 30, 2009.

Subsequent to the quarter, on December 14, 2009, the Company granted 520,161 deferred share units to eight non-officer directors and two officers pursuant to its deferred share unit plan. Each deferred share unit provides the holder thereof the right to exchange the unit into one share of common stock of the Company under the terms and conditions of the plan. 278,226 of the deferred share units vest immediately and 241,935 of the deferred share units vest as to 1/3 of the deferred share units on the first, second and third anniversary of the date of the grant, at which time the deferred share units are fully vested.

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 and Mitel.

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 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

                                                          October 31,
                                                  ---------------------------
    (Unaudited)                                       2009          2008
                                                  ------------- -------------
    Non-GAAP operating expenses                   $  3,288,552  $  5,856,172
    Add:
      Stock-based compensation                         190,787       311,965
      Amortization of intangible assets                216,584       510,171
                                                  ------------- -------------

    Operating expenses (GAAP)                     $  3,695,923  $  6,678,308
                                                  ------------- -------------
                                                  ------------- -------------
    

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) We plan to use funds from our recently closed private placement to add sales and marketing resources to grow our business; (2) we expect to leverage our OEM partnerships as well as build new channels to deploy our solutions; and (3) we expect to see continued growth in online sales of our softphone products as users of our free softphone convert to our feature rich paid for versions.

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)

                                                   October 31,    April 30,
                                                      2009          2009
                                                  ------------- -------------
    Assets                                         (Unaudited)
      Current assets:
        Cash                                      $  3,441,969  $  2,931,932
        Accounts receivable (net of allowance for
         doubtful accounts of $1,028,269 and
         $755,114, respectively)                     1,841,100     2,524,220
        Investment tax credits recoverable             181,896       143,334
        Other current assets                           816,684       310,274
                                                  ------------- -------------
          Total current assets                       6,281,649     5,909,760

      Deposits                                         101,912       114,267
      Equipment                                        217,072       258,442
      Intangible assets                              2,790,277     2,201,894
      Goodwill                                       8,197,782     7,262,701
      Other assets                                      75,172        92,101
                                                  ------------- -------------
    Total Assets                                  $ 17,663,864  $ 15,839,165
                                                  ------------- -------------
                                                  ------------- -------------

    Liabilities and Stockholders' Equity
      Current liabilities:
        Accounts payable and accrued liabilities  $  3,459,562  $  3,488,001
        Unearned revenue                               513,956       708,455
        Customer deposits                                4,213         9,443
        Accrued warranty                               108,786       137,378
                                                  ------------- -------------
          Total current liabilities                  4,086,517     4,343,277

      Deferred lease inducements                        10,147        55,016
      Unrecognized tax benefit                          98,575        98,575
                                                  ------------- -------------
        Total liabilities                            4,195,239     4,496,868

      Stockholders' equity:
      Preferred stock, $0.001 par value
        Authorized: 100,000,000
        Issued and outstanding: October 31,
         2009 - 1; April 30, 2009 - 1                        -             -
      Common stock, $0.001 par value
        Authorized: 83,076,900
        Issued and outstanding:
        October 31, 2009 - 32,768,629 April 30,
         2009 - 28,832,050                              32,768        28,832
      Additional paid-in capital                    51,383,429    48,718,443
      Accumulated deficit                          (37,314,084)  (34,318,195)
      Accumulated other comprehensive loss -
       currency translation adjustment                (633,488)   (3,086,783)
                                                  ------------- -------------
        Total stockholders' equity                  13,468,625    11,342,297
                                                  ------------- -------------
    Liabilities and Stockholders' Equity          $ 17,663,864  $ 15,839,165
                                                  ------------- -------------
                                                  ------------- -------------



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

                          Three Months Ended           Six Months Ended
                              October 31,                 October 31,
                      --------------------------- ---------------------------
                          2009          2008          2009          2008
                      ------------- ------------- ------------- -------------
    Revenue:
      Software        $  1,451,826  $  2,113,617  $  2,593,169  $  3,961,922
      Service              448,781       903,213     1,357,895     1,667,668
                      ------------- ------------- ------------- -------------
        Total revenue    1,900,607     3,016,830     3,951,064     5,629,590
    Operating expenses:
      Cost of sales
       (includes
       depreciation of
       $2,925 and
       $36,862 and
       amortization of
       intangible
       assets of
       $422,556 and
       $1,055,644 for
       six months ended
       October 31, 2009
       and 2008
       respectively)       727,874     1,086,203     1,370,602     2,464,046
      Sales and
       marketing           690,551     1,186,713     1,449,556     2,668,664
      Research and
       development       1,004,594     2,103,685     1,824,722     5,121,097
      General and
       administrative    1,272,904     1,559,672     1,895,303     3,787,799
      Restructuring
       costs                     -       742,035        44,912       932,996
                      ------------- ------------- ------------- -------------
        Total operating
         expenses        3,695,923     6,678,308     6,585,095    14,974,602
                      ------------- ------------- ------------- -------------
        Loss from
         operations     (1,795,316)   (3,661,478)   (2,634,031)   (9,345,012)
    Interest and other
     income (expense),
     net:
      Interest income       33,816        32,198        61,574        50,266
      Interest expense          (5)       (3,140)       (1,671)      (10,435)
      Foreign exchange
       gain (loss)           7,952       108,346      (421,761)      (74,695)
                      ------------- ------------- ------------- -------------
      Net loss for the
       period         $ (1,753,553) $ (3,524,074) $ (2,995,889) $ (9,379,876)
                      ------------- ------------- ------------- -------------
                      ------------- ------------- ------------- -------------
    Other comprehensive
     income (loss):

      Foreign currency
       translation
       adjustments         342,399    (3,052,311)    2,453,295    (3,031,861)
                      ------------- ------------- ------------- -------------
      Comprehensive
       loss           $ (1,411,154) $ (6,576,385) $   (542,594) $(12,411,737)
                      ------------- ------------- ------------- -------------
                      ------------- ------------- ------------- -------------
    Net loss per share:
      Basic and
       diluted        $      (0.06) $      (0.12) $      (0.10) $      (0.35)
                      ------------- ------------- ------------- -------------
                      ------------- ------------- ------------- -------------

    Weighted average
     common shares
     outstanding:       29,526,663    28,682,680    29,247,497    26,441,072
    

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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