CounterPath Reports Fourth Quarter and Fiscal 2012 Financial Results

Company Reports Record Quarterly and Annual Revenues

VANCOUVER, July 19, 2012 /CNW/ - CounterPath Corporation ("CounterPath" or the "Company") (NASDAQ: CPAH) (TSXV: CCV), an award-winning provider of desktop and mobile VoIP software products and solutions, today announced the financial and operating results for its fourth quarter and fiscal year ended April 30, 2012.

Fourth Quarter Financial and Operating Highlights

• Record quarterly revenue of $4.4 million, a 35% increase year-over-year and a 25% increase over the last quarter.
  
• GAAP gross margin of 85%. Non-GAAP gross margin of 88%.
• Operating income of $0.1 million compared to an operating loss of $0.5 million for the fourth quarter of fiscal year 2011.
• A net loss of $1.2 million or a loss of $0.03 per share, compared to a net loss of $0.8 million or a loss of $0.02 per share, for the quarter ended April 30, 2011.  The $1.2 million net loss includes a non-cash $1.4 million charge for fair value adjustment on derivative instruments attributable to a change in fair value of certain warrants, the key determinant of which is proportionate to the increase in the Company's share price.
• Non-GAAP net income of $0.4 million or $0.01 per share compared to a non-GAAP net loss of $0.4 million or a loss of $0.01 per share for the quarter ended April 30, 2011.
• Cash of $8.2 million as of April 30, 2012.

Fiscal 2012 Financial and Operating Highlights

• Record annual revenue of $14.1 million, a 28% increase over last year.
• GAAP gross margin of 80%. Non-GAAP gross margin of 86%.
• Non-GAAP operating income of $0.1 million compared to a non-GAAP operating loss of $2.1 million last year.
• A net loss of $2.1 million or a loss of $0.05 per share compared to a net loss of $3.5 million or a loss of $0.11 per share last year. The $2.1 million net loss includes a non-cash $0.7 million charge for fair value adjustment on derivative instruments.
• Non-GAAP net income of $0.1 million or $0.00 per share, compared to a non-GAAP net loss of $1.9 million or a net loss of $0.06 per share last year.

"Another solid quarter boosted by strong mobile application demand enabled CounterPath to post record quarterly and annual revenues," stated Donovan Jones, President and Chief Executive Officer. "During fiscal 2012, we also controlled costs and improved profitability, evidenced by our first positive operating income in the fourth quarter and our first positive non-GAAP net income for the full fiscal year."

"Over the past year, CounterPath's desktop and mobile solutions have been implemented by several major telecom, OEM and enterprise customers in North America and Europe, while our Bria mobile apps climbed the rankings of both the Apple iTunes App Store and Android Google Play.  We enter fiscal 2013 with a strong balance sheet and the products and solutions to address the large and growing softphone market," continued Jones.

Recent Business Highlights

• Received the BCTIA Technology Impact Award for Achievements on Rogers One Number™ contract by offering a web-based VoIP complement to Rogers' mobile offerings launched in February 2012.
• Launched cloud-based Client Configuration Server hosted offering which allows IT managers to deploy, configure and manage softphone endpoints remotely.
• Granted U.S. Patent "Method and System for Extending Services to Cellular Devices", a patent describing how business users may access enterprise telephony features on their mobile devices such as 4-digit extension dialing, ad hoc conferencing and call transfers.
• Received 2012 Most Innovative VoIP Product Award by the Internet Telephony Service Providers Association (ITSPA), the UK's industry body for Internet telephony service providers for Bria iPad Edition mobile softphone.
• Subsequent to year end, completed private placement on June 19, 2012 for gross proceeds of $3.6 million.
• Subsequent to year end, began trading on The NASDAQ Stock Market LLC on July 11, 2012 under the symbol CPAH.

Subsequent to the year end, on July 19, 2012, the Company granted $215,000 of deferred share units ("DSUs") to six non-employee directors and $175,000 of DSUs to two officers and one employee pursuant to its deferred share plan ("DSUP"). The number of DSUs issued is based on the dollar amount granted divided by the closing market share price today. Each DSU provides the holder thereof the right to exchange the DSU, once vested, into one share of common stock of the Company under the terms and conditions of the DSUP. The DSUs granted to the six non-employee directors in lieu of cash retainers for directorship, vest immediately and the DSUs granted to the two officers and one employee vest as to one-third of the DSUs on the first, second and third anniversary of the date of the grant.

Conference Call Information

CounterPath will host an investor conference call and live webcast today at 11:00 a.m. ET to discuss its financial results for the fourth quarter and fiscal year ended April 30, 2012. To access the conference call by telephone, dial 647-427-7450 or 1-888-231-8191.  Please connect approximately 15 minutes prior to the beginning of the call to ensure participation.  A question and answer session for analysts and institutional investors will follow management's presentation.

A live audio webcast of the conference call will be available at www.newswire.ca.  Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast.  The webcast will be archived for 30 days.

A rebroadcast will be available to listeners until 12 a.m. ET on Thursday, July 26, 2012. To access the rebroadcast, please dial 416-849-0833 or 1-855-859-2056 and enter passcode 96815733, followed by the number sign.

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.

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) general economic conditions as they affect CounterPath and its current and prospective customers, including a continued downturn in general economic conditions internationally, (2) the Company's ability to remain competitive as other better financed parties develop and release competitive products, the Company's ability to control its operating expenses, which may adversely affect its financial condition, (3) a decline in our stock price or insufficient investor interest in the Company's securities which may impact on the Company's ability to raise additional financing as required, (4) the impact of intellectual property litigation that could materially and adversely affect our business, (5) the success by the Company of the sales of its current and new products, (6) the impact of technology changes on the Company's products and on our industry, (7) the failure to develop new and innovative products using the Company's technologies, (8) the potential dilution to shareholders or overhang on our share price of our outstanding stock options and warrants.  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.

About CounterPath

CounterPath's SIP-based VoIP softphones are changing the face of telecommunications. An industry and user favorite, Bria softphones for desktop and mobile devices, together with the company's server applications and Fixed Mobile Convergence (FMC) solutions, enable service providers, OEMs and enterprises large and small around the globe to offer a seamless and unified communications experience across both fixed and mobile networks. Standards-based, cost-effective and reliable, CounterPath's award-winning solutions power the voice and video calling, messaging, and presence offerings of customers such as Alcatel-Lucent, AT&T, Verizon, BT, Mobilkom Austria, Rogers, Avaya, BroadSoft, Cisco Systems, GENBAND, Metaswitch Networks, Mitel and NEC. For more information please visit www.counterpath.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 CONSOLIDATED BALANCE SHEETS
(Stated in U.S. Dollars)

						April 30,			April 30,
						2012			2011
Assets
	Current assets:
		Cash			$	8,154,139		$	1,707,397
		Accounts receivable (net of allowance for doubtful accounts of $334,294 (2011 - $49,883))				4,014,472			3,018,188
		Investment tax credits recoverable				−			−
		Prepaid expenses and deposits				170,556			110,412
				Total current assets		12,339,167			4,835,997
	Deposits					62,521			159,433
	Equipment					101,024			59,574
	Intangible assets (net of accumulated amortization of $5,890,282 (2011 - $5,097,578))					38,853			859,664
	Goodwill					8,957,977			9,247,993
	Other assets					44,402			48,308
Total Assets					$	21,543,944		$	15,210,969
Liabilities and Stockholders' Equity
	Current liabilities:
		Accounts payable and accrued liabilities			$	2,416,489		$	2,340,897
		Derivative instruments				2,026,944			−
		Unearned revenue				1,308,174			958,626
		Customer deposits				13,872			2,018
		Accrued warranty				84,948			146,868
				Total current liabilities		5,850,427			3,448,409
	Convertible debentures					−			1,305,002
	Deferred lease inducements					56,082			2,474
	Unrecognized tax benefit					98,575			98,575
				Total liabilities		6,005,084			4,854,460
	Stockholders' equity:
	Preferred stock, $0.001 par value
		Authorized: 100,000,000
		Issued and outstanding: April 30, 2012 - 1; April 30, 2011 - 1				-			-
	Common stock, $0.001 par value
		Authorized: 83,076,900
		Issued and outstanding:
		April 30, 2012 - 39,960,479; April 30, 2011 - 33,439,906				39,961			33,440
	Additional paid-in capital					61,025,529			53,420,601
	Accumulated deficit					(45,446,771	)		(43,323,410	)
	Accumulated other comprehensive income (loss) - currency translation adjustment					(79,859	)		225,878
				Total stockholders' equity		15,538,860			10,356,509
Liabilities and Stockholders' Equity					$	21,543,944		$	15,210,969

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

					Three Months Ended						Year Ended
					April 30,						April 30,
					2012			2011			2012			2011
Revenue:
	Software			$	2,926,074		$	2,145,653		$	8,494,852		$	7,205,947
	Service				1,438,964			1,085,295			5,588,644			3,834,351
			Total revenue		4,365,038			3,230,948			14,083,496			11,040,298
Operating expenses:
	Cost of sales (includes depreciation of $25,485 (2011 - $22,017) and amortization of intangible assets of $786,712 (2011 - $853,677))				639,537			695,845			2,818,569			2,864,838
	Sales and marketing				1,092,611			888,097			3,869,815			3,495,274
	Research and development				1,444,591			1,152,636			4,782,908			4,469,979
	General and administrative				1,108,282			963,776			4,032,035			3,997,340
			Total operating expenses		4,285,021			3,700,354			15,503,327			14,827,431
Income (loss) from operations					80,017			(469,406	)		(1,419,831	)		(3,787,133	)
Interest and other income (expense), net
	Interest and other income				27,108			54,108			171,453			245,401
	Interest expense				(348	)		(35,460	)		(172,460	)		(80,365	)
	Foreign exchange gain (loss)				(1,622	)		(324,057	)		13,280			(166,949	)
	Fair value adjustment on derivative instruments				(1,352,035	)		-			(715,803	)		-
	Gain on settlement of debt				-			-			-			246,715
Net loss for the year				$	(1,246,880	)	$	(774,815	)	$	(2,123,361	)	$	(3,542,331	)
Other comprehensive income (loss):
	Foreign currency translation adjustments				199,745			784,443			(305,737	)		639,560
Comprehensive loss				$	(1,047,135	)	$	9,628		$	(2,429,098	)	$	(2,902,771	)
Net loss per share:
	Basic and diluted			$	(0.03	)	$	(0.02	)	$	(0.05	)	$	(0.11	)
	Weighted average common shares outstanding:				39,932,662			33,191,749			38,792,066			33,191,749

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 gross profit and non-GAAP income (loss) from operations which exclude non-cash stock-based compensation and amortization of intangible asset charges relative to gross profit and income (loss) from operations calculated in accordance with GAAP. The non-GAAP financial measures also include non-GAAP net income (loss) which excludes non-cash stock-based compensation, amortization of intangible assets and fair value adjustment on derivative instruments charges relative to income (loss) 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
(Unaudited)

					Three Months Ended						Twelve Months Ended
					April 30,						April 30,
					2012			2011			2012			2011
Non-GAAP gross profit:
	Revenue			$	4,365,038		$	$3,230,948		$	14,083,496		$	11,040,298
			Less:
			Cost of sales		639,537			695,845			2,818,569			2,864,838
	GAAP gross profit			$	3,725,501		$	$2,535,103		$	$11,264,927		$	8,175,460
	Percentage of revenue (gross margin)				85%			78%			80%			74%
	GAAP gross profit			$	3,725,501		$	2,535,103		$	11,264,927		$	8,175,460
			Plus:
			Stock-based compensation		8,756			8,088			35,510			27,399
			Amortization of intangible assets		102,977			220,639			786,712			853,677
	Non-GAAP gross profit			$	3,837,234		$	2,763,830		$	12,087,149		$	9,056,536
	Percentage of revenue (Non-GAAP gross margin)				88%			86%			86%			82%

			Three Months Ended						Twelve Months Ended
			April 30,						April 30,
			2012			2011			2012			2011
Non-GAAP income (loss) from operations:
	GAAP loss from operations	$	80,017		$	(469,406	)	$	(1,419,831	)	$	(3,787,133		)
	Plus:
	Stock-based compensation		205,971			120,890			738,803			812,485
	Amortization of intangible assets		102,977			220,639			786,712			853,677
	Non-GAAP income (loss) from operations	$	388,965		$	(127,877	)	$	105,684		$	(2,120,971		)

			Three Months Ended						Twelve Months Ended
			April 30,						April 30,
			2012			2011			2012			2011
Non-GAAP net income (loss):
	GAAP net loss	$	(1,246,880	)	$	(774,815	)	$	(2,123,361	)	$	(3,542,331		)
	Plus:
	Stock-based compensation		205,971			120,890			738,803			812,485
	Amortization of intangible assets		102,977			220,639			786,712			853,677
	Fair value adjustment on derivative instruments		1,352,035			̶̶			715,803			̶
	Non-GAAP net income (loss)	$	414,103		$	(433,286	)	$	117,957		$	(1,876,169		)
	GAAP net loss per share - basic & diluted	$	(0.03	)	$	(0.02	)	$	(0.05	)	$	(0.11		)
	Non-GAAP net loss per share - basic & diluted	$	0.01		$	(0.01	)	$	0.00		$	(0.06		)

 

Contacts:
David Karp
Chief Financial Officer, CounterPath
[email protected]
[phone]

Craig Armitage
Equicom Group
[email protected]
[phone] x278