COUNTERPATH REPORTS SECOND QUARTER FISCAL 2011 FINANCIAL RESULTS

VANCOUVER, Dec. 15 /CNW/ - CounterPath Corporation ("CounterPath" or the "Company") (OTCBB: CPAH; TSX-V: CCV), an award-winning provider of desktop and mobile VoIP software products and solutions, today announced the financial and operating results for the second quarter of fiscal year 2011.

Financial and operating highlights for the second quarter ended October 31, 2010 include:

    
    -   Revenue for the second quarter ended October 31, 2010 of $2.6 million
        compared to revenue of $2.2 million for the first quarter ended July
        31, 2010, and $1.9 million for the second quarter ended October 31,
        2009.

    -   A non-GAAP operating loss of $0.7 million for the second quarter
        compared to non-GAAP operating loss of $1.4 million for the second
        quarter ended October 31, 2009.

    -   A net loss for the second quarter of $0.8 million ($0.03 per share)
        compared to a net loss of $1.7 million ($0.6 per share) for the
        second quarter ended October 31, 2009.

    -   The entering into of a long-term strategic agreement with Metaswitch
        Networks, exposing CounterPath's and Metaswitch's joint solution to
        Metaswitch's approximately 250 service provider customers. The
        agreement leverages CounterPath's entire product suite comprised of
        desktop and mobile softphones and convergence servers.

    -   The introduction of NEC's Smart Mobile Client, a sophisticated
        CounterPath solution for Fixed-Mobile Convergence (FMC) that extends
        the functionality and capabilities of NEC communication servers to
        market-leading smartphones. This solution is based on CounterPath's
        Enterprise Mobility Gateway and mobile client offering.

    -   The expansion of CounterPath's portfolio of patents and exclusive
        license protections for CounterPath's FMC technologies with the
        granting of a patent for assigning single-number identity across
        multiple devices and networks and a patent for presence detection
        across fixed and mobile networks.

    -   The launch of the full featured Bria iPhone Edition 1.1 with
        multitasking, full SIP compliance, superior call quality to circuit-
        switched wireline and wireless voice, one-touch access to voicemail,
        Bluetooth support, multi-call management, and signaling and call
        encryption, enabling enterprise-class security.

    -   The closing of a $1.5 million private placement providing additional
        capital resources to fund operations.
    

"The market continues to improve for our products and our sales were strong this quarter, up 35% over the same quarter last year", stated Donovan Jones, President and CEO, CounterPath. "We are seeing growth across all product lines providing support for a comment by NetworkWorld which recently reported that 70% of companies are increasing their deployment of softphones. The next phase of our strategy entails leveraging our OEM sales channels to reach a broader service provider and enterprise market. The announced efforts with Avaya, BroadSoft, Genesys, Metaswitch and NEC provide a solid foundation for this next growth period. In addition, we plan to increase sales of our recently launched iPhone and Android mobile phone applications by following the white label and customizable model that we have used successfully with our desktop softphone applications."

Financial Results

(All amounts in U.S. dollars and in accordance with accounting principles generally accepted in the United States ("GAAP") unless otherwise specified.)

For the quarter ended October 31, 2010, revenue was $2.6 million compared to $1.9 million for the same quarter last year. Software revenue for the quarter ended October 31, 2010 was $1.8 million compared to $1.5 million for the same quarter last year. Service revenue for the quarter ended October 31, 2010 was $0.8 million compared to $0.4 million for same quarter last year.

Operating expenses for the quarter ended October 31, 2010 were $3.7 million compared to $3.7 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 $0.3 million.

Sales and marketing expenses were $0.9 million for the quarter ended October 31, 2010 compared to $0.7 million for same quarter last year. For the quarter ended October 31, 2010, research and development expenses were $1.1 million and general and administrative expenses were $1.1 million, compared to $1.0 million and $1.3 million, respectively, for the same quarter last year.

The net loss for the quarter ended October 31, 2010 was $0.8 million, or a loss of $0.03 per share, compared to a net loss of $1.7 million, or a loss of $0.06 per share, for the quarter ended October 31, 2009.

At October 31, 2010, the Company had $2.2 million in cash, compared to $1.6 million at April 30, 2010. At October 31, 2010, the Company's working capital was $1.6 million, compared to $1.2 million at April 30, 2010.

Subsequent to the end of the quarter, on December 14, 2010, the Company granted 40,000 stock options each to two non-employee directors pursuant to its stock option plan. Each stock option entitles the holder thereof the right to purchase one share of common stock at $1.90 per share under the terms and conditions of the plan. The options vest in the amount of 12.5% on the date which is six months from the date of grant and then beginning in the seventh month at 1/42 per month for 42 months, at which time the options are fully vested.

About CounterPath

CounterPath Corporation is an award-winning 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), Mobilkom Austria, Avaya, Cisco Systems, Metaswitch Networks and Mitel.

For more information please 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 losses which exclude non-cash stock-based compensation and amortization of intangible asset charges relative to 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 Ended
                                                          October 31,
                                               ------------------------------
                                                     2010            2009
                                               --------------  --------------
                                                                   Restated
    (Unaudited)
    Non-GAAP operating loss                    $    (685,418)  $  (1,359,902)
    Less:
      Stock-based compensation                       281,299         190,787
      Amortization of intangible assets              209,920         218,144
                                               --------------  --------------
    Loss from operations (GAAP)                $  (1,176,637)  $  (1,768,833)
    

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) the market continues to improve for our products; (2) the next phase of our strategy entails leveraging our OEM sales channels to reach a broader service provider and enterprise market; and (3) we plan to increase sales of our recently launched iPhone and Android mobile phone applications by following the white label and customizable model that we have used successfully with our desktop softphone applications.

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 or Form 10-Q/A, or in the annual reports on Form 10-K or Form 10-K/A, 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.

    
                             (TABLES TO FOLLOW)


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


                                                    October 31,    April 30,
                                                       2010          2010
                                                  ------------- -------------
    Assets                                          (Unaudited)    Restated
      Current assets:
        Cash                                      $  2,184,011  $  1,556,813
        Accounts receivable (net of allowance
         for doubtful accounts of $1,103,468
         and $1,116,119, respectively)               2,311,842     2,345,633
        Investment tax credits recoverable              29,445       129,285
        Other current assets                           179,419       221,041
                                                  ------------- -------------
          Total current assets                       4,704,717     4,252,772

      Deposits                                         100,943       101,994
      Equipment                                        113,782       111,150
      Intangible assets (net of accumulated
       amortization of $4,668,285 and
       $4,249,895, respectively)                     1,173,519     1,674,359
      Goodwill                                       8,625,777     8,740,025
      Other assets                                      43,910        58,817
                                                  ------------- -------------
    Total Assets                                  $ 14,762,648  $ 14,939,117
                                                  ------------- -------------
                                                  ------------- -------------

    Liabilities and Stockholders' Equity
      Current liabilities:
        Accounts payable and accrued liabilities  $  2,211,092  $  2,313,688
        Unearned revenue                               766,912       655,361
        Customer deposits                                2,018         5,127
        Accrued warranty                               136,325       120,963
                                                  ------------- -------------
          Total current liabilities                  3,116,347     3,095,139

      Deferred lease inducements                         3,462         4,677
      Convertible debentures                         1,249,264             -
      Unrecognized tax benefit                          98,575        98,575
                                                  ------------- -------------
        Total liabilities                            4,467,648     3,198,391

      Stockholders' equity:
      Preferred stock, $0.001 par value
        Authorized: 100,000,000
        Issued and outstanding: October 31,
         2010 - 1; April 30, 2010 - 1                        -             -
      Common stock, $0.001 par value
        Authorized: 83,076,900
        Issued and outstanding:
        October 31, 2010 -33,149,969; April 30,
         2010 - 33,015,627                              33,150        33,016
      Additional paid-in capital                    52,933,447    51,902,471
      Accumulated deficit                          (42,057,335)  (39,781,079)
    Accumulated other comprehensive loss -
     currency translation adjustment                  (614,262)     (413,682)
                                                  ------------- -------------
        Total stockholders' equity                  10,295,000    11,740,726
                                                  ------------- -------------
    Liabilities and Stockholders' Equity          $ 14,762,648  $ 14,939,117
                                                  ------------- -------------
                                                  ------------- -------------



                           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,
                      ------------  ------------  ------------  -------------
                          2010           2009         2010           2009
                      ------------  ------------  ------------  -------------
                                       Restated                     Restated
    Revenue:
      Software        $  1,751,317  $  1,451,826  $  3,570,469  $  2,593,169
      Service              816,346       448,781     1,216,779     1,357,895
                      ------------  ------------  ------------  -------------
        Total revenue    2,567,663     1,900,607     4,787,248     3,951,064
    Operating expenses:
      Cost of sales
       (includes
       depreciation of
       $9,654 and
       $2,925 and
       amortization of
       intangible
       assets of
       $418,392 and
       $425,591 for
       six months ended
       October 31, 2010
       and 2009
       respectively)       695,822       701,391     1,444,684     1,327,112
      Sales and marketing  900,264       690,551     1,765,947     1,449,556
      Research and
       development       1,096,115     1,004,594     2,159,762     1,824,722
      General and
       administrative    1,052,099     1,272,904     2,047,561     1,895,303
      Restructuring
       costs                     -             -             -        44,912
                      ------------  ------------  ------------  -------------
        Total operating
         expenses        3,744,300     3,669,440     7,417,954     6,541,605
                      ------------  ------------  ------------  -------------
        Loss from
         operations     (1,176,637)   (1,768,833)   (2,630,706)   (2,590,541)
    Interest and other
     income (expense),
     net:
      Interest income       42,709        33,816        94,788        61,574
      Interest expense      (2,532)           (5)       (2,753)       (1,671)
      Foreign exchange
       gain (loss)          43,746         7,952        15,700      (421,761)
      Gain on settlement
       of debt             246,715             -       246,715             -
                      ------------  ------------  ------------  -------------
    Net loss for the
     period           $   (845,999) $ (1,727,070) $ (2,276,256) $ (2,952,399)
                      ------------  ------------  ------------  -------------
                      ------------  ------------  ------------  -------------
    Other
     comprehensive
     income (loss):
      Foreign
       currency
       translation
       adjustments          16,429       254,725      (200,580)    1,684,397
                      ------------  ------------  ------------  -------------
      Comprehensive
       loss           $   (829,570) $ (1,472,345) $ (2,476,836) $ (1,268,002)
                      ------------  ------------  ------------  -------------
                      ------------  ------------  ------------  -------------
    Net loss per
     share:
      Basic and
       diluted        $      (0.03) $      (0.06) $      (0.07) $      (0.10)
                      ------------  ------------  ------------  -------------
                      ------------  ------------  ------------  -------------
    Weighted average
     common shares
     outstanding:       33,113,474    29,526,663    33,089,839    29,247,497
    

SOURCE CounterPath Corporation

For further information: For further information: David Karp, Chief Financial Officer, CounterPath Corporation, +1.604.320.3344 ext 1114, ir@counterpath.com

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CounterPath Corporation

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