Item 5. Market for
Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
Our
common stock is traded on the NASDAQ Capital Market and the Toronto Stock
Exchange. The following table sets forth, for the periods indicated, the high
and low sale prices for our common stock on the NASDAQ Capital Market and
Toronto Stock Exchange based on inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions as reported by
the NASDAQ Capital Market and the Toronto Stock Exchange, respectively.
Quarter Ended
|
NASDAQ
(1)
(U.S. dollars)
|
The Toronto Stock
Exchange
(2)
(Canadian dollars)
|
|
High
|
Low
|
High
|
Low
|
July 31, 2015
|
$9.70
|
$4.10
|
$10.10
|
$5.00
|
October 31, 2015
|
$6.20
|
$2.38
|
$7.00
|
$3.50
|
January 31, 2016
|
$5.25
|
$2.02
|
$6.20
|
$3.00
|
April 30, 2016
|
$2.40
|
$2.11
|
$3.49
|
$2.51
|
July 31, 2016
|
$2.80
|
$1.93
|
$3.50
|
$2.50
|
October 31, 2016
|
$2.35
|
$1.89
|
$3.00
|
$2.50
|
January 31, 2017
|
$2.76
|
$1.81
|
$3.45
|
$2.45
|
April 30, 2017
|
$2.45
|
$1.92
|
$3.15
|
$2.65
|
(1)
|
Since July 11, 2012, our stock has been trading on the
NASDAQ Capital Market under the trading symbol "CPAH".
|
|
|
(2)
|
From August 20, 2012 to October 31, 2016, our stock
traded on the Toronto Stock Exchange under the trading symbol "CCV". Since
November 1, 2016, our stock has been trading on the Toronto Stock Exchange
under the trading symbol "PATH".
|
Our
shares of common stock are issued in registered form. Computershare located at
510 Burrard St., 3
rd
Floor, Vancouver, BC, Canada V6C 3B9 (Telephone:
604.661.9400; Facsimile: 604.661.9549) is the registrar and transfer agent for
our shares of common stock.
On
July 7, 2017, the shareholders' list of our shares of common stock showed 104
registered shareholders and
4,946,568 shares outstanding.
Dividend Policy
To
date, we have not declared or paid any dividends on our shares of common stock
and do not expect to declare or pay any dividends on our shares of common stock
in the foreseeable future. Payment of any dividends will depend upon our future
earnings, if any, our financial condition, and other factors as deemed relevant
by our board of directors. Our intention is to retain future earnings for use in
our operations and the expansion of our business.
There are no restrictions in our articles of
incorporation or bylaws that prevent us from declaring dividends. The Nevada
Revised Statutes, however, do prohibit us from declaring dividends where, after
giving effect to the distribution of the dividend:
|
1.
|
We would not be able to pay our debts as they become due
in the usual course of business; or
|
|
|
|
|
2.
|
Our total assets would be less than the sum of our total
liabilities plus the amount that would be needed to satisfy the rights of
stockholders who have preferential rights superior to those receiving
the distribution.
|
20
Equity Compensation Plan Information
The
following table provides a summary of the number of options granted, shares
purchasable or deferred share units granted under our various compensation
plans, the weighted average exercise price and the number of options remaining
available for grant, shares purchasable or deferred share units available for
grant all as at April 30, 2017.
Plan Category
|
Number of Securities to be
issued
upon exercise of
outstanding options,
warrants and
rights
|
Weighted-Average exercise
price of
outstanding
options, warrants and
rights
|
Number of Securities
remaining
available for
future issuance under
equity
compensation plans
|
|
|
|
|
Equity compensation
plans approved by
security
holders:
|
|
|
|
|
|
|
|
2010 Stock Option
|
|
|
|
Plan
|
396,922
|
$2.46
|
325,151
|
|
|
|
|
Employee Share
|
|
|
|
Purchase Plan
|
−
|
N/A
|
86,203
|
|
|
|
|
Deferred Share Unit
|
|
|
|
Plan
|
345,392
|
N/A
|
130,595
|
|
|
|
|
Equity compensation
plans not approved by
security holders
|
N/A
|
N/A
|
N/A
|
|
|
|
|
Total
|
742,314
|
$2.46
|
541,949
|
2010 Stock Option Plan
The
purpose of the 2010 Stock Option Plan is to retain the services of valued key
employees, directors, officers and consultants and to encourage such persons
with an increased initiative to make contributions to our company. Under the
2010 Stock Option Plan, eligible employees, consultants and certain other
persons who are not eligible employees, may receive awards of non-qualified
stock options. Individuals, who, at the time of the option grant, are employees
of our company or any related company (as defined in the 2010 Stock Option Plan)
who are subject to tax in the United States may receive incentive stock
options or non-qualified stock options, and stock options granted to
non-United States residents may receive awards of options.
As
of April 30, 2017, there were 396,922 stock options outstanding entitling the
holders thereof the right to purchase one share of common stock for each option
held.
Employee Share Purchase Plan
On
October 1, 2008, our shareholders approved the employee share purchase plan (the
ESPP) for employees, directors, officers and consultants of our company and
our subsidiaries. The purpose of the plan is to give employees access to an
equity participation vehicle in addition to our stock option plans by way of an
opportunity to purchase shares of our common stock through payroll deductions
and encourage them to use their combined best efforts on behalf of our company
to improve its profits through increased sales, reduction of costs and increased
efficiency. Participation in the ESPP is voluntary. Within the limits of the
ESPP, our company matches fifty percent (50%) of the aggregate number of shares
purchased by the participants. We are permitted to issue up to 120,000 shares of
our common stock under the ESPP. As of April 30, 2017, we have 86,203 shares of
our common stock available for issuance under the ESPP.
21
Deferred Share Unit Plan
Under
the terms of the deferred share unit plan (the DSUP) as approved by the
shareholders on October 22, 2009, each deferred share unit (each, a DSU) is
equivalent to one share of common stock. The maximum number of shares of common
stock that may be reserved for issuance to any one participant pursuant to DSUs
granted under the DSUP and any share compensation arrangement is 5% of the
number of shares of common stock of our company outstanding at the time of
reservation. A DSU granted to a participant who is a director of our company
shall vest immediately on the award date. A DSU granted to a participant other
than a director will generally vest as to one-third (1/3) of the number of DSUs
granted on the first, second and third anniversaries of the award date. Fair
value of the DSUs, which is based on the closing price of our companys common
stock on the date of grant, is recorded as compensation expense in the period of
grant. As of April 30, 2017, we have issued and outstanding 345,392 DSUs under
the DSUP. As of April 30, 2017, 24,014 previously issued DSUs have been
converted to 24,014 shares of common stock.
Purchases of Equity Securities by the Issuer and
Affiliated Purchasers
Issuer Purchases of Equity
Securities
|
|
Total number
of
shares
purchased
|
Average price
paid
per share
(Canadian
dollars)
|
Total number of
shares
purchased
as part of publicly
announced plans
or programs
|
Maximum
number of
shares
that may yet be
purchased under
the plans or
programs
|
Feb 1, 2017 to Feb 28, 2017
|
600
(1)
|
$3.31
|
600
|
−
|
Mar 1, 2017 to Mar 31, 2017
|
1,400
(2)(3)
|
$3.08
|
1,400
|
257,613
|
Apr 1, 2017 to Apr 30, 2017
|
58,900
(2)
|
$2.72
|
58,900
|
198,713
|
Total
|
60,900
|
$2.73
(4)
|
60,900
|
198,713
|
|
(1)
|
Purchased pursuant to a normal course issuer bid
announced on March 16, 2016, which commenced on March 19, 2016 and expired
on March 18, 2017 to purchase up to 273,864 shares of our common
stock.
|
|
|
|
|
(2)
|
Purchased pursuant to a normal course issuer bid
announced on March 27, 2017, which commenced on March 29, 2017 and
expiring on March 28, 2018 to purchase up to 258,613 shares of our common
stock.
|
|
|
|
|
(3)
|
400 shares of our common stock were purchased under the
normal course issuer bid that expired March 18, 2017 and 1,000 shares of
our common stock were purchased under the normal course issuer bid
expiring March 28, 2018.
|
|
|
|
|
(4)
|
Weighted average price.
|
On March 16, 2016, we announced our intention to purchase, by way of a
normal course issuer bid, for cancellation purposes, up to 273,864 shares of our
common stock, representing approximately 10% of our then outstanding public
float. Purchases were made on the open market through the facilities of the TSX,
NASDAQ Capital Market or such other stock exchange or quotation system upon
which the our shares were then listed or quoted, including other Canadian
marketplaces, at market prices prevailing at the time of purchase. The purchases
took place over a 12-month period beginning on March 19, 2016 and expiring on
March 18, 2017. The daily purchase restriction was 1,000 shares, subject to
certain prescribed exemptions.
On
March 27, 2017, we announced our intention to purchase, by way of a normal
course issuer bid, for cancellation purposes, up to 258,613 shares of our common
stock, representing approximately 10% of our then outstanding public float. We believe that our shares trade in a
price range that does not adequately reflect their underlying value based on our
business prospects.
22
Purchases
will be made on the open market through the facilities of the TSX, NASDAQ
Capital Market or such other stock exchange or quotation system upon which the
our shares are then listed or quoted, including other Canadian marketplaces, at
market prices prevailing at the time of purchase and may take place over a
12-month period beginning on March 29, 2017 and expiring on March 28, 2018. We
are permitted to make block purchases once per calendar week in accordance with
the rules of the TSX. The daily purchase restriction is 1,000 shares, subject to
certain prescribed exemptions. All shares purchased by our company under the
normal course issuer bid will be returned to treasury and cancelled.
In
connection with the normal course issuer bid, we renewed our automatic share
purchase plan with National Bank Financial Inc., in order to facilitate
purchases of our shares. Under the purchase plan, National Bank may purchase
shares on our behalf at times when we would ordinarily not be permitted to
purchase shares due to internal trading blackout periods, insider trading rules
or otherwise. The purchase plan has been approved by the TSX and was implemented
as of March 28, 2017. Purchases will be made by National Bank on the open market
based upon the parameters prescribed by the TSX, applicable laws and the terms
and conditions of the purchase plan.
To
our knowledge, none of our directors, senior officers or other insiders (as
defined in the TSX Company Manual) intends to sell any shares under the normal
course issuer bid. However, sales by such persons through the facilities of the
TSX may occur if the personal circumstances of any such person change or if any
such person makes a decision unrelated to these normal course purchases. The
benefits to any such person whose shares are purchased would be the same as the
benefits available to all other holders whose shares are purchased.
Stockholders
may obtain a copy of the notice submitted to the TSX with respect to the normal
course issuer bid, without charge, by contacting our Chief Financial Officer.
Recent Sales of Unregistered Securities
None.
Item 7.
Managements Discussion and Analysis of Financial Condition and Results of
Operations.
The
following discussion and analysis should be read in conjunction with the
financial statements and related notes and the other financial information
appearing elsewhere in this annual report.
Our
financial statements are stated in United States dollars and are prepared in
accordance with United States generally accepted accounting principles. All
references to "common shares" refer to our shares of common stock. As used in
this annual report, the terms we, us and our means CounterPath
Corporation, unless otherwise indicated.
Overview
Background
We
were incorporated under the laws of the State of Nevada on April 18, 2003.
On
August 2, 2007, we acquired all of the shares of NewHeights Software Corporation
through the issuance of 768,017 shares of our common stock and 36,984 preferred
shares issued from a subsidiary of our company, which preferred shares were
exchangeable into 36,984 shares of common stock.
On
February 1, 2008, we acquired all of the shares of FirstHand Technologies Inc.
through the issuance of 590,001 million shares of our common stock. On February
1, 2008, we acquired all of the issued and outstanding shares of BridgePort
Networks, Inc. by way of merger in consideration for the assumption of all of
the assets and liabilities of BridgePort Networks.
Business of CounterPath
We
design, develop and sell software and services that enable enterprises and
telecommunication service providers to deliver Unified Communications (UC)
services, including voice, video, messaging and collaboration functionality,
over their Internet Protocol, or IP, based networks. We are capitalizing upon
numerous industry trends, including the rapid adoption of mobile technology, the
proliferation of bring-your-own-device to work programs, the need for secure business communications, the need
for centralized provisioning, the migration towards cloud-based services and the
migration towards all IP networks. We are also capitalizing on a trend where
communication services such as Skype and WhatsApp are becoming more available
over-the-top (OTT) of the incumbent operators networks or enterprise networks
(a.k.a. Internet OTT providers). We offer our solutions under perpetual license
agreements that generate one-time license revenue and under subscription license
agreements that generate recurring license revenue. We sell our solutions
through our own online store, through third-party online stores, directly using
our in-house sales team and through channel partners. Our channel partners
include original equipment manufacturers, value added distributers and value
added resellers. Enterprises typically leverage our Enterprise OTT solutions to
increase employee productivity and to reduce certain costs. Telecommunication
service providers typically deploy our Operator OTT solutions as part of a broad
strategy to defend their subscriber base from competitive threats by offering
innovative new services. Our original equipment manufacturers and value added
resellers typically integrate our solutions into their products and then sell a
bundled solution to their end customers, which include both telecommunication
service providers and enterprises.
24
Revenue
Our total revenue consists of the following:
|
|
Software
|
|
|
|
|
|
We generate software revenue primarily on a single fee
per perpetual software license basis. We recognize software revenue at the
time of delivery, provided all revenue recognition criteria have been met.
If the revenue recognition criteria has not been met, the revenue is
deferred or not recognized. The number of software licenses purchased has
a direct impact on the average selling price. Our software revenue may
vary significantly from quarter to quarter as a result of long sales and
deployment cycles, new product introductions and variations in customer
ordering practices.
|
|
|
|
|
|
Subscription, support and maintenance
|
|
|
|
|
|
We generate recurring subscription revenue from
subscriptions related to our software as a service offering. Recurring
support and maintenance revenue is generated from annual software support
and maintenance contracts for our perpetual software licenses. Both
subscription revenue and support and maintenance revenue are typically
billed annually in advance based on the terms of the arrangement.
|
|
|
|
|
|
Support and maintenance services include e-mail and
telephone support, unspecified rights to bug fixes and product updates and
upgrades and enhancements available on a when-and-if available basis, and
are recognized rateably over the term of the service period, which is
generally twelve months.
|
|
|
|
|
|
Professional services and other
|
|
|
|
|
|
We generate professional services and other revenue
through services including product configuration and customization,
implementation, dedicated engineering and training. The amount of product
configuration and customization required by a customer typically increases
as the order size increases from a given customer. Services and pricing
may vary depending upon a customer's requirements for customization,
implementation and training.
|
Operating Expenses
Operating
expenses consist of cost of sales, sales and marketing, research and
development, and general and administrative expenses. Personnel-related costs
are the most significant component of each of these expense categories.
Cost
of sales primarily consists of: (a) salaries and benefits related to personnel,
(b) related overhead, (c) billable and non-billable travel, lodging, and other
out-of-pocket expenses, (d) payments to third party vendors for
compression/decompression software known as codecs, (e) amortization of
capitalized software that is implemented into our products and (f) warranty
expense.
25
Sales
and marketing expense consists primarily of: (a) salaries and related personnel
costs including stock-based compensation, (b) commissions, (c) travel, lodging
and other out-of-pocket expenses, (d) marketing programs such as trade shows and
(e) other related overhead. Commissions are recorded as expense when earned by
the employee. We expect increases in sales and marketing expense for the
foreseeable future as we further increase the number of sales professionals and
increase our marketing activities with the intent to grow our revenue. We expect
sales and marketing expense to decrease as a percentage of total revenue,
however, as we leverage our current sales and marketing personnel as well as our
distribution partnerships.
Research
and development expense consists primarily of: (a) salaries and related
personnel costs including stock-based compensation, (b) payments to contractors
for design and consulting services, (c) costs relating to the design and
development of new products and enhancement of existing products, (d) quality
assurance and testing and (e) other related overhead. To date, all of our
research and development costs have been expensed as incurred.
General
and administrative expense consists primarily of: (a) salaries and personnel
costs including stock-based compensation related to our executive, finance,
human resource and information technology functions, (b) accounting, legal, tax
advisory and regulatory fees and (c) other related overhead.
Application of Critical Accounting Policies and Use of
Estimates
Our
consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States. The preparation of these
financial statements requires that we make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. We base our
estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances. We evaluate our estimates and
assumptions on an ongoing basis. Our actual results may differ significantly
from these estimates under different assumptions or conditions. There have been
no material changes to these estimates for the periods presented in this annual
report.
We
believe that of our significant accounting policies, which are described in Note
2 to our annual financial statements, the following accounting policies involve
a greater degree of judgment and complexity. Accordingly, the following policies
are the most critical to aid in fully understanding and evaluating our financial
condition and results of operations.
Revenue Recognition
We
recognize revenue in accordance with ASC 985-605 "Software Revenue Recognition".
In
all of our arrangements, we do not recognize any revenue until we can determine
that persuasive evidence of an arrangement exists, delivery has occurred, the
fee is fixed or determinable, and we deem collection to be probable. For
distribution and reseller arrangements, fees are fixed or determinable and
collection probable when there are no rights to exchange or return and fees are
not dependable upon payment from the end-user. If any of these criteria are not
met, revenue is deferred until such time that all criteria have been met.
A
substantial percentage of our revenue is generated by multiple-element
arrangements, such as products, support and maintenance, and professional
services. When arrangements include multiple elements, we allocate the total fee
among the various elements using the residual method. Under the residual method,
revenue is recognized when vendor-specific objective evidence, or VSOE, of fair
value exists for all of the undelivered elements of the arrangement, but does
not exist for one or more of the delivered elements of the arrangement. Each
arrangement requires us to analyze the individual elements in the transaction
and to estimate the fair value of each undelivered element, which typically
includes maintenance and services. Revenue is allocated to each of the
undelivered elements based on its respective fair value, with the fair value
determined by the price charged when that element is sold separately. Revenue
from multiple-element arrangements are recognized in software, subscription,
support and maintenance, and professional services based on the items or
services delivered.
For contracts with elements related to customized network solutions and
certain network build-outs, we apply FASB Emerging Issues Task Force Issue ASC
605-25, "Revenue Arrangements with Multiple Deliverables" and revenues are recognized under ASC 605-35, "Accounting for
Performance of Construction-Type and Certain Production-Type Contracts",
generally using the percentage-of-completion method.
26
In
using the percentage-of-completion method, revenues are generally recorded based
on a completion of milestones as described in the agreement. Profit estimates on
long-term contracts are revised periodically based on changes in circumstances
and any losses on contracts are recognized in the period that such losses become
known.
Post
contract customer support (PCS) services include e-mail and telephone support,
unspecified rights to bug fixes and product updates and upgrades and
enhancements available on a when-and-if available basis, and are recognized
rateably over the term of the service period, which is generally twelve months.
PCS service revenue generally is deferred until the related product has been
delivered and all other revenue recognition criteria have been met. PCS revenues
are recognized under support and maintenance revenues.
Professional
services and training revenue is recognized as the related service is performed.
Stock-Based Compensation
Stock
options granted are accounted for under ASC 718 "Share-Based Payment" and are
recognized at the fair value of the options as determined by an option pricing
model as the related services are provided and the options earned. ASC 718
requires public companies to recognize the cost of employee services received in
exchange for equity instruments, based on the fair value of those instruments on
the measurement date which generally is the grant date, with limited exceptions.
Stock-based
compensation represents the cost related to stock-based awards granted to
employees and non-employee consultants. We measure stock-based compensation cost
at measurement date, based on the estimated fair value of the award, and
generally recognize the cost as expense on a straight-line basis (net of
estimated forfeitures) over the employee requisite service period or the period
during which the related services are provided by the non-employee consultants
and the options are earned. We estimate the fair value of stock options using a
Black-Scholes option valuation model.
The
expected volatility of options granted has been determined using the volatility
of our company's stock. The expected life of options granted after April 30,
2006 has been determined based on analysis of historical data. We have not paid
and do not anticipate paying cash dividends on our shares of common stock;
therefore, the expected dividend yield is assumed to be zero. In addition, ASC
718 requires companies to utilize an estimated forfeiture rate when calculating
the expense for the period. We applied an estimated forfeiture rate of 15.0% in
the year ended April 30, 2017 in determining the expense recorded in our
consolidated statement of operations. Cost of sales and operating expenses
include stock-based compensation expense, and deferred share unit plan expense.
For the year ended April 30, 2017, we recorded an expense of $835,918 in
connection with share-based payment awards. A future expense of non-vested
options of $439,431 is expected to be recognized over a weighted-average period
of 2.01 years. A future expense of non-vested deferred share units of $110,181
is expected to be recognized over a weighted-average period of 1.44 years.
Research and Development Expense for Software
Products
Research
and development expense includes costs incurred to develop intellectual
property. The costs for the development of new software and substantial
enhancements to existing software are expensed as incurred until technological
feasibility has been established, at which time any additional costs would be
capitalized. We have determined that technological feasibility is established at
the time a working model of software is completed. Because we believe our
current process for developing software will be essentially completed
concurrently with the establishment of technological feasibility, no costs have
been capitalized to date.
Accounts Receivable and Allowance for Doubtful Accounts
We
extend credit to our customers based on evaluation of an individual customer's
financial condition and collateral is generally not required. Accounts
outstanding beyond the contractual payment terms are considered past due. We
determine our allowance for doubtful accounts by considering a number of
factors, including the length of time accounts receivable are beyond the
contractual payment terms, our previous loss history, and a customer's current ability to pay its obligation to us. We write-off
accounts receivable when they are identified as uncollectible. All outstanding
accounts receivable are periodically reviewed for collectability on an
individual basis.
27
Goodwill
We
have goodwill related to the acquisitions of NewHeights Software Corporation and
FirstHand Technologies Inc. The determination of the net carrying value of
goodwill and the extent to which, if any, there is impairment, are dependent on
material estimates and judgments on our part, including the estimate of the
value of future net cash flows, which are based upon further estimates of future
revenues, expenses and operating margins.
GoodwillImpairment Assessments
We
review goodwill for impairment annually and whenever events or changes in
circumstances indicate its carrying value may not be recoverable in accordance
with FASB ASC 350,
Goodwill and Other Intangible Assets
. The provisions
of ASC 350 require that a two-step impairment test be performed on goodwill. In
the first step, we compare the fair value of our reporting unit to its carrying
value. If the fair value of the reporting unit exceeds the carrying value of the
net assets assigned to that unit, goodwill is not considered impaired and we are
not required to perform further testing. If the carrying value of the net assets
assigned to the reporting unit exceeds the fair value of the reporting unit,
then we must perform the second step of the impairment test in order to
determine the implied fair value of the reporting units goodwill. If the
carrying value of our reporting units goodwill exceeds its implied fair value,
then we would record an impairment loss equal to the difference.
Determining
the fair value of our reporting unit involves the use of significant estimates
and assumptions. These estimates and assumptions include future economic and
market conditions and determination of appropriate market comparables. We base
our fair value estimates on assumptions we believe to be reasonable but that are
unpredictable and inherently uncertain. Actual future results may differ from
those estimates. Our most recent annual goodwill impairment analysis, which was
performed at the end of the fourth quarter of fiscal 2017, did not result in an
impairment charge for fiscal year 2017, nor did we record any goodwill
impairment in fiscal 2016.
Derivative Instruments
We
periodically enter into foreign currency forward contracts, not designated as
hedging instruments, to protect us from fluctuations in exchange rates. During
the year, we had no foreign currency forward contracts outstanding. Notional
amounts do not quantify risk or represent assets or liabilities of our company,
but are used in the calculation of cash settlements under the contracts.
Use of Estimates
The
preparation of our financial statements in conformity with generally accepted
accounting principles in the United States requires our management to make
estimates and assumptions which affect the amounts reported in these
consolidated financial statements, the notes thereto, and the disclosure of
contingent assets and liabilities at the date of the financial statements.
Actual results could differ from those estimates.
Results of Operations
Our
operating activities during the year ended April 30, 2017, consisted primarily
of selling our IP telephony software and related services to telecom service
providers, enterprises and channel partners serving the telecom and enterprise
segments, and the continued development of our IP telephony software products.
We
generate our revenue primarily in U.S. dollars and incur a majority of our
expenses in Canadian dollars. As a result of the fluctuation in the Canadian
dollar against the U.S. dollar over the twelve months ended April 30, 2017, we
benefited by recording reduced operating costs on translation of Canadian dollar
costs as compared to the twelve months ended April 30, 2016. For the twelve
months ended April 30, 2017 as compared to twelve months ended April 30, 2016,
the foreign exchange benefit resulting from the decline in the Canadian dollar
was approximately $15,000.
28
Revenue
Revenues
for the year ended April 30, 2017 and 2016 were as follows:
|
|
Twelve Months Ended April
30,
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Period-to-Period Change
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
of Total
|
|
|
|
|
|
of Total
|
|
|
|
|
|
Increase /
|
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
(Decrease)
|
|
Revenue by Type
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
|
$
|
5,449,140
|
|
|
51%
|
|
$
|
6,031,618
|
|
|
54%
|
|
|
($582,478
|
)
|
|
(10%
|
)
|
Subscription, support and maintenance
|
$
|
3,909,326
|
|
|
37%
|
|
$
|
3,435,797
|
|
|
31%
|
|
$
|
473,529
|
|
|
14%
|
|
Professional services and
other
|
$
|
1,327,124
|
|
|
12%
|
|
$
|
1,613,943
|
|
|
15%
|
|
|
($286,819
|
)
|
|
(18%
|
)
|
Total revenue
|
$
|
10,685,590
|
|
|
100%
|
|
$
|
11,081,358
|
|
|
100%
|
|
|
($395,768
|
)
|
|
(4%
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue by Region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
$
|
6,220,367
|
|
|
58%
|
|
$
|
7,192,010
|
|
|
65%
|
|
|
($971,643
|
)
|
|
(14%
|
)
|
International
|
$
|
4,465,223
|
|
|
42%
|
|
$
|
3,889,348
|
|
|
35%
|
|
$
|
575,875
|
|
|
15%
|
|
Total revenue
|
$
|
10,685,590
|
|
|
100%
|
|
$
|
11,081,358
|
|
|
100%
|
|
|
($395,768
|
)
|
|
(4%
|
)
|
For
the year ended April 30, 2017, we generated $10,685,590 in revenue compared to
$11,081,358 for the year ended April 30, 2016, representing a decrease of
$395,768 or 4%.
Software
revenue decreased by $582,478 or 10% to $5,449,140 for the year ended April 30,
2017 compared to $6,031,618 for the year ended April 30, 2016. The decrease in
software revenue was a result of decreases in sales to channel partners and
enterprises.
Subscription,
support and maintenance revenue increased by $473,529 or 14% to $3,909,326 for
the year ended April 30, 2017 compared to $3,435,797 for the year ended April
30, 2016. The increase in subscription, support and maintenance revenue was a
result of increases in sales to channel partners.
Professional
services and other revenue decreased by $286,819 or 18% to $1,327,124 for the
year ended April 30, 2017 compared to $1,613,943 for the year ended April 30,
2016. The decrease in professional services and other revenue was a result of
decreases in sales to channel partners, partially offset by increases in sales
to enterprises and service providers.
North
American revenue decreased by $971,643 or 14% to $6,220,367 for the year ended
April 30, 2017 compared to $7,192,010 for the year ended April 30, 2016, as a
result of lower sales of software and service to North American enterprises,
channel partners and service providers. International revenue outside of North
America increased by $575,875 or 15% to $4,465,223 for the year ended April 30,
2017 compared to $3,889,348 for the year ended April 30, 2016, as a result of
higher sales of software and service to international enterprises and service
providers.
Operating Expenses
Cost of Sales
Cost
of sales for the year ended April 30, 2017 and 2016 were as follows:
|
|
April 30, 2017
|
|
|
April 30, 2016
|
|
|
Period-to-Period Change
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
of
|
|
|
|
|
|
of
|
|
|
|
|
|
Increase /
|
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
(Decrease)
|
|
Year ended
|
$
|
1,729,930
|
|
|
16%
|
|
$
|
1,667,087
|
|
|
15%
|
|
$
|
62,843
|
|
|
4%
|
|
29
Cost of sales was $1,729,930 for the year ended April 30, 2017 compared to
$1,667,087 for the year ended April 30, 2016. The increase of $62,843 was
primarily attributable to a reversal of a provision in 2016 for potential
licensing fees that have been accrued in prior years resulting in a net increase
year over year of approximately $179,200, and an increase in dues and
subscriptions of approximately $45,500. The increase in cost of sales were
partially offset by a decrease in wages, benefits, commissions and consulting
fees of approximately $154,300, and other expenses of approximately $7,600. Cost
of sales expressed as a percent of revenue increased to 16% of revenue for the
year ended April 30, 2017 compared to 15% for the year ended April 30, 2016.
Sales and Marketing
Sales
and marketing expenses for the year ended April 30, 2017 and 2016 were as
follows:
|
|
April 30, 2017
|
|
|
April 30, 2016
|
|
|
Period-to-Period Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
of
|
|
|
|
|
|
of
|
|
|
|
|
|
Increase /
|
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
(Decrease)
|
|
Year ended
|
$
|
3,831,438
|
|
|
36%
|
|
$
|
4,145,351
|
|
|
37%
|
|
|
($313,913
|
)
|
|
(8%
|
)
|
Sales
and marketing expenses were $3,831,438 for the year ended April 30, 2017
compared to $4,145,351 for the year ended April 30, 2016. The decrease of
$313,913 was primarily attributable to a decrease in wages, benefits,
commissions and consulting fees of approximately $324,400, and travel and trade
show expenses of approximately $41,700. The decrease in sales and marketing
expenses was partially offset by an increase in promotions and advertising
expenses of approximately $37,400, and other expenses of approximately $14,800.
Research and Development
Research
and development expenses for the year ended April 30, 2017 and 2016 were as
follows:
|
|
April 30, 2017
|
|
|
April 30, 2016
|
|
|
Period-to-Period Change
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
of
|
|
|
|
|
|
of
|
|
|
|
|
|
Increase /
|
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
(Decrease)
|
|
Year ended
|
$
|
4,843,813
|
|
|
45%
|
|
$
|
4,737,055
|
|
|
43%
|
|
$
|
106,758
|
|
|
2%
|
|
Research
and development expenses were $4,843,813 for the year ended April 30, 2017
compared to $4,737,055 for the year ended April 30, 2016. The increase of
$106,758 resulted primarily from an increase wages, benefits and consulting fees
of approximately $142,900 which was partially offset by a decrease in other
expenses of approximately $36,200.
General and Administrative
General
and administrative expenses for the years ended April 30, 2017 and 2016 were as
follows:
|
|
April 30, 2017
|
|
|
April 30, 2016
|
|
|
Period-to-Period Change
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
of
|
|
|
|
|
|
of
|
|
|
|
|
|
Increase /
|
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
(Decrease)
|
|
Year ended
|
$
|
3,234,026
|
|
|
30%
|
|
$
|
3,373,674
|
|
|
30%
|
|
|
($139,648
|
)
|
|
(4%
|
)
|
General
and administrative expenses for the year ended April 30, 2017 were $3,234,026
compared to $3,373,674 for the year ended April 30, 2016. The decrease of
$139,648 in general and administrative expenses was primarily attributable to a
decrease in bad debt reserve of approximately $109,600, a decrease in
depreciation and amortization expense of approximately $84,800, a decrease in
investor relations of approximately $41,500, and a decrease in wages, benefits,
commissions, directors fees and consulting fess of approximately $9,600. The
decrease in general and administrative expenses was partially offset by an
increase in other expenses or approximately $55,500, and an increase in legal
and professional fees of approximately $50,300.
30
Interest and Other Income
Interest
and other income for the year ended April 30, 2017 was $173 compared to $5,211
for the year ended April 30, 2016. Interest expense for the year ended April 30,
2017, was $3,056 compared to $2,310 for the year ended April 30, 2016.
Foreign
exchange gain for the year ended April 30, 2017, was $497,985 compared to a
foreign exchange gain of $195,003 for the year ended April 30, 2016. The foreign
exchange gain (loss) represents the gain (loss) on account of translation of the
intercompany accounts of our subsidiary which maintains their records in
Canadian dollars and transactional gains and losses. The foreign exchange gain
(loss) includes the translation of quarterly intercompany transfer pricing
invoices from our Canadian subsidiary to us. The increase in foreign exchange
gain is a result of an incrementally larger decline in the Canadian dollar
against the U.S. dollar in the year ended April 30, 2017.
Fair
value adjustment on derivative instruments for the year ended April 30, 2017 was
$nil compared to a loss of $47,690 for the year ended April 30, 2016. On June 7,
2015, we entered into a $1,000,000 notional value foreign currency forward
contract that matured on August 20, 2015.
Liquidity and Capital Resources
As
at April 30, 2017, we had $2,071,019 in cash compared to $2,159,738 at April 30,
2016, representing a decrease of $88,719. Our working capital was $354,289 at
April 30, 2017 compared to $1,737,956 at April 30, 2016, representing a decrease
of $1,383,667. Management anticipates that future capital requirements of our
company will be funded through cash flows generated from operations and from
working capital for the next twelve months and we may seek additional funding to
meet ongoing operating expenses.
We
have $1,621,523 in cash held outside of the United States, and there is no
intent to repatriate at this time. Should we decide to repatriate in the future,
taxes would need to be accrued and paid.
Operating Activities
Our
operating activities resulted in a net cash outflow of $702,732 for the year
ended April 30, 2017. This compares to a net cash outflow of $2,105,823 for the
year ended April 30, 2016, representing a $1,403,090 decrease in cash outflows
from operations. The net cash outflow from operating activities for the year
ended April 30, 2017 was primarily a result of a net loss of $2,458,515, an
adjustments for a non-cash foreign exchange gain of $562,102, an increase in
unearned revenue of $326,091, and a decrease in accounts payable of $46,381. The
net cash outflow was offset by a decrease in accounts receivable of $1,075,810,
and by adjustments for non-cash expenses including $835,918 for stock based
compensation and $113,880 of depreciation and amortization.
The
net cash outflow from operating activities of $2,105,823 for the year ended
April 30, 2016 was primarily a result of a net loss of $2,691,595, a decrease in
accounts payable of $314,804 and adjustments for a non-cash foreign exchange
gain of $248,371. The net cash outflow was offset by a decrease in accounts
receivable of $96,187 and by adjustments for non-cash expenses including
$906,914 for stock based compensation and $199,335 of depreciation and
amortization.
Investing Activities
Investing
activities resulted in a net cash outflow of $128,241 for the year ended April
30, 2017, primarily due to the purchase of equipment and trademarks during the
year. This compares with a net cash outflow of $41,431 for the year ended April
30, 2016, primarily due to the purchase of equipment. At April 30, 2017, we did
not have any material commitments for future capital expenditures.
Financing Activities
Financing
activities resulted in a net cash inflow of $766,015 for the year ended April
30, 2017 compared to a net cash inflow of $1,481,692 for the year ended April
30, 2016. The net cash inflow for the year ended April 30, 2017 was primarily a result of a non-brokered private
placement under which we issued 454,097 shares of common stock at a price of
$2.05 per share raising $930,899. The net cash inflow for the year ended April
30, 2016 was primarily a result of a non-brokered private placement under which
we issued 293,000 units at a price of $5.00 per unit raising $1,465,000.
31
Pursuant
to a normal course issuer bid commencing on March 29, 2017 and expiring March
28, 2018, we are authorized to purchase up to 258,613 shares of our common stock
through the facilities of the TSX and other Canadian marketplaces or U.S.
marketplaces. Pursuant to a normal course issuer bid commencing March 19, 2015
and expiring March 18, 2016, we repurchased 11,360 shares at an average price of
$3.80 (CDN$4.97) for an aggregate purchase price of $43,168. Pursuant to a
normal course issuer bid commencing on March 19, 2016 and expiring March 18,
2017, we repurchased 4,700 shares at an average price of $2.24 (CDN$2.93) for a
total of $10,528. During the period from March 29, 2017 to April 30, 2017, we
repurchased 59,900 shares at an average price of $2.03 (CDN$2.72) for a total of
$121,597 pursuant to a normal course issuer bid commencing on March 29, 2017 and
expiring on March 28, 2018. As of April 30, 2017, a total of 80,488 shares have
been cancelled and the remaining 59,900 repurchased shares are in the process of
being cancelled since the normal course issuer bid was initiated.
Off-Balance Sheet Arrangements
We
do not have, and do not have any present plans to implement, any off-balance
sheet arrangements.
New Accounting Pronouncements
In May 2014, FASB issued ASU 2014-09, Revenue From Contracts With Customers
(Topic 606). Topic 606 removes inconsistencies and weaknesses in revenue
requirements, provides a more robust framework for addressing revenue issues,
improves comparability of revenue recognition practices across entities,
industries, jurisdictions and capital markets, provides more useful information
to users of financial statements through improved disclosure requirements and
simplifies the preparation of financial statements by reducing the number of
requirements to which an entity must refer. The guidance in this update
supersedes the revenue recognition requirements in Topic 605, Revenue
Recognition, and most industry-specific guidance throughout the Industry Topics
of the Codification. In August 2015, ASU 2015-14 was issued which delayed the
effective date for public entities to reporting periods beginning after December
15, 2017. Early adoption is not permitted. We are currently evaluating the
impact of the adoption of this new standard.
In
March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers:
Principal versus Agent Considerations (Reporting Revenue Gross versus Net),
which clarifies the guidance in the new revenue standard on assessing whether an
entity is a principal or an agent in a revenue transaction. This conclusion
impacts whether an entity reports revenue on a gross or net basis. We are
currently evaluating the impact of this standard on our consolidated financial
statements and related disclosures.
In
April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers:
Identifying Performance Obligations and Licensing, which clarifies the guidance
in the new revenue standard regarding an entitys identification of its
performance obligations in a contract, as well as an entitys evaluation of the
nature of its promise to grant a license of intellectual property and whether or
not that revenue is recognized over time or at a point in time. We are currently
evaluating the impact of this standard on our consolidated financial statements
and related disclosures.
In May 2016, the FASB issued ASU 2016-11, Revenue Recognition: Customer Payments
and Incentives, which clarifies the guidance in recognizing costs for
consideration given by a vendor to a customer as a component of cost of sales.
We are currently evaluating the impact of this standard on our consolidated
financial statements and related disclosures.
In
May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers:
Narrow-Scope Improvements and Practical Expedients which amends the guidance in
the new revenue standard on collectability, noncash consideration, presentation
of sales tax, and transition. The amendments are intended to address
implementation issues and provide additional practical expedients to reduce the
cost and complexity of applying the new revenue standard. These amendments have the same effective
date as the new revenue standard. While we are currently evaluating the method
of adoption and the impact of the new revenue standard, as amended, on our
Consolidated Financial Statements and related disclosures, we believe the
adoption of the new standard may have a significant impact on the accounting for
certain transactions with multiple elements or bundled arrangements because
the requirement to have VSOE for undelivered elements under current accounting
standards is eliminated under the new standard. Accordingly, we may be required
to recognize as revenue a portion of the sales price upon delivery of the
software, as compared to the current requirement of recognizing the entire sales
price ratably over an estimated offering period. We continue to evaluate the
impact of the new revenue standard on our consolidated financial statements and
related disclosures.
32
In
August 2014, FASB issued ASU 2014-15, Presentation of Financial Statements
Going Concern, which requires management to evaluate whether there is
substantial doubt about an entitys ability to continue as a going concern and
provide related footnote disclosures. The guidance is effective for annual and
interim reporting periods beginning on or after December 15, 2016. Early
adoption is permitted for financial statements that have not been previously
issued. The standard allows for either a full retrospective or modified
retrospective transition method. We do not expect this standard to have a
material impact our consolidated financial statements upon adoption.
In
February 2016, FASB issued ASU 2016-02, Leases. The guidance would require
lessees to recognize most leases on their balance sheets as lease liabilities
with corresponding right-of-use assets. The guidance is effective for annual and
interim reporting periods beginning on or after December 15, 2018. We are
currently evaluating the impact of its pending adoption of ASU 2016-02 on our
consolidated financial statements.
In
June 2016, the FASB issued ASU 2016-13, Financial Instruments: Measurement of
Credit Losses on Financial Instruments which amends the guidance on measuring
credit losses on financial assets held at amortized cost. The amendment is
intended to address the issue that the previous incurred loss methodology was
restrictive for Companys ability to record credit losses based on not yet
meeting the probable threshold. The new language will require these assets to
be valued at amortized cost presented at the net amount expected to be collected
will a valuation provision. The amendments will be effective for fiscal years
beginning after December 15, 2019. We are evaluating the impact of this
amendment on our consolidated financial statements and related disclosures.
Item
8.
Financial
Statements and Supplementary Data.
33
COUNTERPATH CORPORATION
INDEX TO CONSOLIDATED
FINANCIAL STATEMENTS
April 30, 2017
34
|
Tel: 604 688 5421
|
BDO Canada LLP
|
Fax: 604 688 5132
|
600 Cathedral Place
|
www.bdo.ca
|
925 West Georgia Street
|
|
Vancouver BC V6C 3L2 Canada
|
|
|
Report of Independent Registered Public Accounting
Firm
|
|
|
Board of Directors and Stockholders
CounterPath
Corporation
We have audited the accompanying consolidated balance sheets of
CounterPath Corporation (the Company) as of April 30, 2017 and 2016, and the
related consolidated statements of operations, comprehensive income and loss,
cash flows and changes in stockholders equity for each of the two years in the
period ended April 30, 2017. These financial statements are the responsibility
of the Companys management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States of America). Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Companys internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the consolidated financial
position of CounterPath Corporation at April 30, 2017 and 2016, and the
consolidated results of its operations and its cash flows for each of the two
years in the period ended April 30, 2017, in conformity with accounting
principles generally accepted in the United States of America.
/s/ BDO Canada LLP
Chartered Professional Accountants
Vancouver, Canada
July 12, 2017
35
COUNTERPATH CORPORATION
CONSOLIDATED BALANCE
SHEETS
(Stated in U.S. Dollars)
|
|
April 30,
|
|
|
April 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash
|
$
|
2,071,019
|
|
$
|
2,159,738
|
|
Accounts receivable
(net of allowance for doubtful accounts of $80,232 (2016 - $547,173))
Note 2(b)
|
|
2,133,469
|
|
|
3,209,279
|
|
Prepaid expenses
and deposits
|
|
170,853
|
|
|
184,644
|
|
Total current
assets
|
|
4,375,341
|
|
|
5,553,661
|
|
|
|
|
|
|
|
|
Deposits
|
|
91,400
|
|
|
93,868
|
|
Equipment Note 3
|
|
125,813
|
|
|
142,563
|
|
Goodwill Note 2(b)
|
|
6,440,955
|
|
|
7,001,228
|
|
Other assets
|
|
199,637
|
|
|
174,811
|
|
Total Assets
|
$
|
11,233,146
|
|
$
|
12,966,131
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Accounts payable and accrued
liabilities Note 4
|
$
|
1,825,528
|
|
$
|
1,943,108
|
|
Unearned revenue
|
|
2,134,948
|
|
|
1,808,857
|
|
Customer deposits
|
|
6,211
|
|
|
2,384
|
|
Accrued warranty
Note 2(b)
|
|
54,365
|
|
|
61,356
|
|
Total current
liabilities
|
|
4,021,052
|
|
|
3,815,705
|
|
|
|
|
|
|
|
|
Deferred lease inducements
|
|
23,022
|
|
|
35,379
|
|
Unrecognized tax benefit
Notes 2(b) and 7
|
|
9,763
|
|
|
10,563
|
|
Total liabilities
|
|
4,053,837
|
|
|
3,861,647
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
Preferred stock, $0.001 par
value
Authorized:
100,000,000
Issued
and outstanding: April 30, 2017 nil; April 30, 2016 nil
|
|
|
|
|
|
|
Common stock, $0.001 par value Note 6
Authorized:
100,000,000
Issued:
April 30, 2017 5,005,245; April 30, 2016 4,542,348
|
|
5,005
|
|
|
4,542
|
|
Treasury stock
|
|
(60
|
)
|
|
|
|
Additional paid-in capital
|
|
71,680,575
|
|
|
70,065,082
|
|
Accumulated deficit
|
|
(60,481,015
|
)
|
|
(58,022,500
|
)
|
Accumulated other comprehensive income (loss)
currency translation adjustment
|
|
(4,025,196
|
)
|
|
(2,942,640
|
)
|
Total stockholders equity
|
|
7,179,309
|
|
|
9,104,484
|
|
Liabilities and Stockholders Equity
|
$
|
11,233,146
|
|
$
|
12,966,131
|
|
|
|
|
|
|
|
|
Commitments Note 10
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial
statements
36
COUNTERPATH CORPORATION
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Stated in U.S. Dollars)
|
|
Years Ended
|
|
|
|
April 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Revenue Note 8:
|
|
|
|
|
|
|
Software
|
$
|
5,449,140
|
|
$
|
6,031,618
|
|
Subscription, support and
maintenance
|
|
3,909,326
|
|
|
3,435,797
|
|
Professional
services and other
|
|
1,327,124
|
|
|
1,613,943
|
|
Total
revenue
|
|
10,685,590
|
|
|
11,081,358
|
|
Operating expenses:
|
|
|
|
|
|
|
Cost of sales (includes
depreciation of $6,559 (2016 - $7,225))
|
|
1,729,930
|
|
|
1,667,087
|
|
Sales and
marketing
|
|
3,831,438
|
|
|
4,145,351
|
|
Research and development
|
|
4,843,813
|
|
|
4,737,055
|
|
General and
administrative
|
|
3,234,026
|
|
|
3,373,674
|
|
Total operating expenses
|
|
13,639,207
|
|
|
13,923,167
|
|
Loss from operations
|
|
(2,953,617
|
)
|
|
(2,841,809
|
)
|
Interest and other income (expense), net
|
|
|
|
|
|
|
Interest and
other income
|
|
173
|
|
|
5,211
|
|
Interest expense
|
|
(3,056
|
)
|
|
(2,310
|
)
|
Foreign exchange
gain
|
|
497,985
|
|
|
195,003
|
|
Fair value adjustment on
derivative instruments Note 9
|
|
|
|
|
(47,690
|
)
|
Net loss for the year
|
$
|
(2,458,515
|
)
|
$
|
(2,691,595
|
)
|
|
|
|
|
|
|
|
Net loss per share:
|
|
|
|
|
|
|
Basic Note 11
|
$
|
(0.52
|
)
|
$
|
(0.61
|
)
|
Diluted Note
11
|
$
|
(0.52
|
)
|
$
|
(0.61
|
)
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
Basic Note 11
|
|
4,722,724
|
|
|
4,433,402
|
|
Diluted Note
11
|
|
4,722,724
|
|
|
4,433,402
|
|
See accompanying notes to the consolidated financial
statements
COUNTERPATH CORPORATION
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE LOSS
(Stated in U.S. Dollars)
Net loss for the year
|
$
|
(2,458,515
|
)
|
$
|
(2,691,595
|
)
|
Other comprehensive loss:
|
|
|
|
|
|
|
Foreign currency translation
adjustments
|
|
(1,082,556
|
)
|
|
(550,468
|
)
|
Comprehensive loss
|
$
|
(3,541,071
|
)
|
$
|
(3,242,063
|
)
|
See accompanying notes to the consolidated financial
statements
37
COUNTERPATH CORPORATION
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Stated in U.S. Dollars)
|
|
Years Ended
|
|
|
|
April 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
Net loss for the year
|
$
|
(2,458,515
|
)
|
$
|
(2,691,595
|
)
|
Adjustments to reconcile net
loss to net cash used in operating activities:
|
|
|
|
|
|
|
Deferred lease
inducements
|
|
(9,861
|
)
|
|
(9,882
|
)
|
Depreciation and amortization
|
|
113,880
|
|
|
199,335
|
|
Foreign exchange
(gain) loss
|
|
(562,102
|
)
|
|
(248,371
|
)
|
Stock-based compensation
|
|
835,918
|
|
|
906,914
|
|
Issuance of common
stock for services
|
|
13,963
|
|
|
38,783
|
|
Changes in assets and
liabilities:
|
|
|
|
|
|
|
Accounts payable
and accrued liabilities
|
|
(46,381
|
)
|
|
(314,804
|
)
|
Accounts receivable
|
|
1,075,810
|
|
|
96,187
|
|
Accrued warranty
|
|
(6,991
|
)
|
|
(11,761
|
)
|
Customer deposits
|
|
(567
|
)
|
|
2,384
|
|
Deferred lease
inducements
|
|
|
|
|
|
|
Prepaid expenses and deposits
|
|
16,023
|
|
|
(14,884
|
)
|
Other assets
|
|
|
|
|
|
|
Unearned revenue
|
|
326,091
|
|
|
(58,129
|
)
|
Net cash used in operating activities
|
|
(702,732
|
)
|
|
(2,105,823
|
)
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
Purchase of equipment
|
|
(99,939
|
)
|
|
(27,692
|
)
|
Purchase of intangibles
|
|
(28,302
|
)
|
|
(13,739
|
)
|
Net cash used in investing activities
|
|
(128,241
|
)
|
|
(41,431
|
)
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
Common stock issued
|
|
898,693
|
|
|
1,520,574
|
|
Common stock repurchased
|
|
(132,678
|
)
|
|
(38,882
|
)
|
Net cash used in by financing activities
|
|
766,015
|
|
|
1,481,692
|
|
|
|
|
|
|
|
|
Foreign exchange effect on cash
|
|
(23,761
|
)
|
|
(27,122
|
)
|
|
|
|
|
|
|
|
Decrease in cash
|
|
(88,719
|
)
|
|
(692,684
|
)
|
|
|
|
|
|
|
|
Cash, beginning of the year
|
|
2,159,738
|
|
|
2,852,422
|
|
Cash, end of the year
|
$
|
2,071,019
|
|
$
|
2,159,738
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow
information
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
Interest
|
$
|
3,056
|
|
$
|
2,310
|
|
Taxes
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
Non cash transactions Notes 5 and 6
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial
statements
38
COUNTERPATH
CORPORATION
CONSOLIDATED
STATEMENTS
OF
CHANGES
IN
STOCKHOLDERS
EQUITY
for the Years
Ended April 30, 2017 and 2016
(Stated in U.S. Dollars)
|
|
Common shares
|
|
|
Treasury Shares
|
|
|
Preferred Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Number
|
|
|
|
|
|
Number
|
|
|
|
|
|
Number
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
of
|
|
|
Par
|
|
|
of
|
|
|
Par
|
|
|
of
|
|
|
Par
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
|
|
|
|
Shares
|
|
|
Value
|
|
|
Shares
|
|
|
Value
|
|
|
Shares
|
|
|
Value
|
|
|
Capital
|
|
|
Deficit
|
|
|
Income (Loss)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 30, 2015
|
|
4,233,395
|
|
|
4,233
|
|
|
(1,200
|
)
|
|
(1
|
)
|
|
|
|
|
|
|
|
67,638,003
|
|
|
(55,330,905
|
)
|
|
(2,392,172
|
)
|
|
9,919,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private placement Note 6
|
|
293,000
|
|
|
293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,441,546
|
|
|
|
|
|
|
|
|
1,441,839
|
|
Issuance of common stock for
services Note 6
|
|
10,000
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,773
|
|
|
|
|
|
|
|
|
38,783
|
|
Share repurchase plan
|
|
|
|
|
|
|
|
(10,460
|
)
|
|
(10
|
)
|
|
|
|
|
|
|
|
(6,256
|
)
|
|
|
|
|
|
|
|
(6,266
|
)
|
Cancellation of shares Note
6
|
|
(11,260
|
)
|
|
(11
|
)
|
|
11,260
|
|
|
11
|
|
|
|
|
|
|
|
|
(32,616
|
)
|
|
|
|
|
|
|
|
(32,616
|
)
|
Stock-based compensation Note 6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
906,914
|
|
|
|
|
|
|
|
|
906,914
|
|
Employee share purchase
program
|
|
17,213
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78,718
|
|
|
|
|
|
|
|
|
78,735
|
|
Net income (loss) for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,691,595
|
)
|
|
|
|
|
(2,691,595
|
)
|
Foreign currency translation
adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(550,468
|
)
|
|
(550,468
|
)
|
Balance, April 30, 2016
|
|
4,542,348
|
|
|
4,542
|
|
|
(400
|
)
|
|
|
|
|
|
|
|
|
|
|
70,065,082
|
|
|
(58,022,500
|
)
|
|
(2,942,640
|
)
|
|
9,104,484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private placement, net of
share issuance costs Note 6
|
|
454,097
|
|
|
454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
898,239
|
|
|
|
|
|
|
|
|
898,693
|
|
Issuance of common stock for services Note
6
|
|
13,500
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,949
|
|
|
|
|
|
|
|
|
13,963
|
|
Share repurchase plan
|
|
|
|
|
|
|
|
(64,200
|
)
|
|
(65
|
)
|
|
|
|
|
|
|
|
(133,417
|
)
|
|
|
|
|
|
|
|
(133,482
|
)
|
Cancellation of shares Note 6
|
|
(4,700
|
)
|
|
(5
|
)
|
|
4,700
|
|
|
5
|
|
|
|
|
|
|
|
|
804
|
|
|
|
|
|
|
|
|
804
|
|
Stock-based compensation
Note 6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
835,918
|
|
|
|
|
|
|
|
|
835,918
|
|
Net income (loss) for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,458,515
|
)
|
|
|
|
|
(2,458,515
|
)
|
Foreign currency translation
adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,082,556
|
)
|
|
(1,082,556
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 30, 2017
|
|
5,005,245
|
|
$
|
5,005
|
|
|
(59,900
|
)
|
$
|
(60
|
)
|
|
|
|
$
|
|
|
$
|
71,680,575
|
|
$
|
(60,481,015
|
)
|
$
|
(4,025,196
|
)
|
$
|
7,179,309
|
|
See
accompanying
notes to the
consolidated
financial
statements
39
COUNTERPATH CORPORATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
Note 1
|
Nature of
Operations
|
|
|
|
CounterPath Corporation (the Company) was incorporated
in the State of Nevada on April 18, 2003. The shares of the Companys
common stock are quoted for trading on the NASDAQ Capital Market in the
United States of America and on the Toronto Stock Exchange in Canada.
|
|
|
|
On August 2, 2007, the Company acquired of all of the
shares of NewHeights Software Corporation (NewHeights) through the
issuance of 768,017 shares of the Companys common stock and 36,984
preferred shares issued from a subsidiary of the Company exchangeable into
36,984 shares of the Companys common stock. For accounting purposes, the
Company was deemed to be the acquirer of NewHeights based on certain
factors including the number of common shares issued in the transaction as
a proportion of the total common shares outstanding, and the composition
of the board after the transaction.
|
|
|
|
On February 1, 2008, the Company acquired FirstHand
Technologies Inc. (FirstHand), a private Ontario, Canada corporation,
through the issuance of 590,001 shares of the Companys common stock. For
accounting purposes, the Company was deemed to be the acquirer of
FirstHand based on certain factors including the number of common shares
issued in the transaction as a proportion of the total common shares
outstanding, and the composition of the board after the transaction.
|
|
|
|
On February 1, 2008, the Company acquired BridgePort
Networks, Inc. (BridgePort), a private Delaware corporation, by way of
merger in consideration for the assumption of all of the assets and
liabilities of BridgePort. For accounting purposes, the Company was deemed
to be the acquirer of BridgePort based on certain factors primarily being
the composition of the board after the transaction.
|
|
|
|
On February 5, 2008, the Company's wholly-owned
subsidiaries, NewHeights and CounterPath Solutions R&D Inc. were
amalgamated under the name CounterPath Technologies Inc.
|
|
|
|
On November 1, 2010, the Company's wholly-owned
subsidiaries, FirstHand and CounterPath Technologies Inc. were amalgamated
under the name CounterPath Technologies Inc.
|
|
|
|
The Company focuses on the design, development, marketing
and sales of software applications and related services, such as pre and
post sales technical support and customization services, that enable
enterprises and telecommunication service providers to deliver Unified
Communications (UC) services, including voice, video, messaging and
collaboration functionality, over their Internet Protocol, or IP, based
networks. The Companys products are sold either directly or through
channel partners, to small, medium and large businesses (enterprises)
and telecom service providers, in North America, and in Europe, Middle
East, Africa (collectively EMEA), Asia Pacific and Latin America.
|
|
|
Note 2
|
Significant Accounting Policies
|
|
|
|
These consolidated financial statements have been
prepared in accordance with generally accepted accounting principles in
the United States of America and are stated in U.S. dollars except where
otherwise disclosed. Because a precise determination of many assets and
liabilities is dependent upon future events, the preparation of financial
statements for the period necessarily involves the use of estimates, which
have been made using careful judgment. Actual results may vary from these
estimates.
|
|
|
|
These consolidated financial statements have been
prepared on a going concern basis, which implies the Company will continue
to realize its assets and discharge its liabilities and commitments in the
normal course of business.
|
40
COUNTERPATH CORPORATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
Note 2
|
Significant Accounting
Policies
- (contd)
|
|
a)
|
Basis of Presentation
|
|
|
|
|
|
These consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries, CounterPath
Technologies Inc., a company existing under the laws of the province of
British Columbia, Canada, and BridgePort incorporated under the laws of
the state of Delaware. The results of NewHeights (which subsequently was
amalgamated with another subsidiary to become CounterPath Technologies
Inc.) are included from August 2, 2007, the date of acquisition. The
results of FirstHand (which subsequently was amalgamated with CounterPath
Technologies Inc.) and BridgePort are included from February 1, 2008, the
date of acquisition. All inter-company transactions and balances have been
eliminated.
|
|
|
|
|
|
The Company has experienced flat to declining revenues as
a result of a number of factors including its buildout of a cloud based
subscription platform concurrent with the change of its licensing model to
subscription based licensing and has not reached profitable operations
which raises substantial doubt about its ability to continue operating as
a going concern within one year of the date of the financial
statements.
|
|
|
|
|
|
The Company has historically been able to manage
liquidity requirements through cost management and cost reduction
measures, supplemented with raising additional financing. To alleviate
this situation, the Company has plans in place to improve its financial
position and liquidity, while executing on its growth strategy, by
managing and or reducing costs that is not expected to have an adverse
impact on the ability to generate cash flows, as the transition to its
software as a service platform and subscription licensing
continues.
|
|
|
|
|
|
In addition, the Company has historically been able to
raise additional financing to assist with the Companys
transition.
|
|
|
|
|
|
As of the date of these financial statements, and from
the planned cost management and reduction measures, that the Company has
sufficient liquidity to meet the ongoing cash requirements of the Company
for one year after the issuance date of the financial statements.
Therefore, although substantial doubt has been raised, this has been
alleviated by managements plans.
|
|
|
|
|
b)
|
Significant Accounting Policies
|
|
|
|
|
|
Revenue Recognition:
|
|
|
|
|
|
The Company recognizes revenue in accordance with the
Accounting Standard Codification (ASC) 985- 605 Software Revenue
Recognition. In accordance with these standards, revenue is recognized
when persuasive evidence of an arrangement exists, delivery has occurred,
the fee is fixed or determinable, and collection of the related accounts
receivable is deemed probable. In making these judgments, management
evaluates these criteria as follows:
|
|
|
Persuasive evidence of an arrangement.
The Company
considers a noncancelable agreement signed by the Company and the customer
to be representative of persuasive evidence of an arrangement.
|
|
|
|
|
|
Delivery has occurred.
The Company considers
delivery to have occurred when the product has been delivered to the
customer and no post-delivery obligations exist. In instances where
customer acceptance is required, delivery is deemed to have occurred when
customer acceptance has been achieved.
|
|
|
|
|
|
Fees are fixed or determinable.
The Company
considers the fee to be fixed or determinable unless the fee is subject to
refund or adjustment or is not payable within normal payment terms. If the
fee is subject to refund or adjustment, the Company recognizes revenue
when the refund or adjustment right lapses. If offered payment terms
exceed the Companys normal terms, the Company recognizes revenue as the
amounts become due and payable or upon the receipt of cash when extended
payment terms beyond 180 days are offered.
|
41
COUNTERPATH CORPORATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
Note 2
|
Significant Accounting
Policies
−
(contd)
|
|
b)
|
Significant Accounting Policies
(contd)
|
|
|
Collection is deemed probable.
Collection is
deemed probable if, based upon the Companys evaluation, the Company
expects that the customer will be able to pay amounts under the
arrangement as payments become due. If the Company determines that
collection is not probable, revenue is deferred and recognized upon the
receipt of cash.
|
A substantial amount of the Companys
sales involve multiple element arrangements, such as products, support,
professional services, and training. When arrangements include multiple
elements, the Company allocates the total fee to delivered elements using the
residual method when vendor specific objective evidence (VSOE) does not exist
for the delivered element. Under the residual method, revenue is recognized when
VSOE of fair value exists for all of the undelivered elements of the
arrangement, but does not exist for one or more of the delivered elements of the
arrangement. Each arrangement requires the Company to analyze the individual
elements in the transaction and to estimate the fair value of each undelivered
element, which typically represents support services.
Revenue is allocated to each of the
undelivered elements based on its respective fair value.
For contracts with elements related to
customized network solutions and certain network build-outs, for transactions
accounted for as sales of products or services, we apply Financial Accounting
Standards Board (FASB) ASC Subtopic 605-25 Revenue Recognition
Multiple-Element Arrangements and revenues are recognized under ASC
605-35Revenue Recognition Construction type and Production type Contract,
for long-term transactions entered to supply software, or software systems, that
require significant modification or customization, generally using the
percentage-of-completion method.
For multi-element arrangements, the
Company allocates revenue to all deliverables based on their selling prices. In
such circumstances, the Company uses a hierarchy to determine the selling price
to be used for allocating revenue to deliverables: (i) VSOE, (ii) third-party
evidence of selling price (TPE), and (iii) best estimate of selling price
(ESP). VSOE generally exists only when the Company sells the deliverable
separately and is the price actually charged by the Company for that
deliverable. ESPs reflect the Companys best estimates of what the selling
prices of elements would be if they were sold regularly on a stand-alone basis.
In using the percentage-of-completion
method, revenues are generally recorded based on completion of milestones as
described in the agreement. Profit estimates on long-term contracts are revised
periodically based on changes in circumstances and any losses on contracts are
recognized in the period that such losses become known.
Support and maintenance services
include e-mail and telephone support, unspecified rights to bug fixes and
product updates and upgrades and enhancements available on a when-and-if
available basis, and are recognized rateably over the term of the service
period, which is generally twelve months.
Stock-Based Compensation
:
The Company adopted ASC 718
Compensation Stock Compensation, using the modified prospective method on
May 1, 2006. Under this application, the Company is required to record
compensation expense, based on the fair value of the awards, for all awards
granted after the date of adoption and for the unvested portion of previously
granted awards that remain outstanding as at the date of adoption. In accordance
with ASC 718, the compensation expense is amortized on a straight-line basis
over the requisite service period which approximates the vesting period.
Stock options granted to non-employees
were accounted for in accordance with ASC 718 and ASC 505-50 Equity based
payments to non-employees and were measured at the fair value of the options as
determined by an option pricing model on the measurement date and
compensation expense is amortized over the vesting period or, if none
exists, over the service period. With the adoption of ASC 718, the Company
has elected to use the Black-Scholes option pricing model to determine the
fair value of stock options granted. The Company has estimated the fair
value of option awards to employees and non-employees for the years ended
April 30, 2017 and April 30, 2016 using the assumptions more fully
described in Note 6.
42
COUNTERPATH CORPORATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
Note 2
|
Significant Accounting
Policies
−
(contd)
|
|
b)
|
Significant Accounting Policies
(contd)
|
|
|
|
|
|
Use of Estimates:
|
|
|
|
|
|
The preparation of financial statements in conformity
with generally accepted accounting principles in the United States
requires the Companys management to make estimates and assumptions which
affect the amounts reported in these consolidated financial statements,
the notes thereto, and the disclosure of contingent assets and liabilities
at the date of the financial statements. Actual results could differ from
those estimates.
|
|
|
|
|
|
Equipment and Amortization:
|
|
|
|
|
|
Equipment is recorded at cost. Depreciation is provided
for using the straight-line method over the estimated useful lives as
follows:
|
Computer hardware
|
Two years
|
Computer software
|
Two years
|
Leasehold improvements
|
Shorter of lease term or
estimated economic life
|
Office furniture
|
Five years
|
Website
|
Three years
|
Research and Development:
Research and development expense
includes costs incurred to develop intellectual property. The costs for the
development of new software and substantial enhancements to existing software
are expensed as incurred until technological feasibility has been established,
at which time any additional costs would be capitalized. Management has
determined that technological feasibility is established at the time a working
model of software is completed. Because management believes that the current
process for developing software will be essentially completed concurrently with
the establishment of technological feasibility, no costs have been capitalized
to date.
Website Development Costs:
The Company recognizes the costs
associated with developing a website in accordance with ASC Topic 350-40
Intangibles Internal Use Software.
Internal and external costs incurred
during the preliminary project stage are expensed as they are incurred. Training
costs are not internal-use software development costs and, if incurred during
this stage, are expensed as incurred.
These capitalized costs are amortized
based on their estimated useful life over three years. Payroll and other related
costs are not capitalized, as the amounts principally relate to maintenance.
43
COUNTERPATH CORPORATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
Note 2
|
Significant Accounting
Policies
−
(contd)
|
|
b)
|
Significant Accounting Policies
(contd)
|
|
|
|
|
|
Accounts Receivable and Allowance for Doubtful
Accounts:
|
|
|
|
|
|
Accounts receivable are presented net of an allowance for
doubtful accounts.
|
|
|
|
Years Ended April 30,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Balance of allowance for doubtful debts,
beginning of year
|
$
|
547,173
|
|
$
|
294,719
|
|
|
Bad debt provision
|
|
346,689
|
|
|
612,769
|
|
|
Write-off of receivables
|
|
(813,630
|
)
|
|
(360,315
|
)
|
|
Balance of allowance for doubtful debts, end of year
|
$
|
80,232
|
|
$
|
547,173
|
|
The Company determines the allowance
for doubtful accounts by considering a number of factors, including the length
of time the accounts receivable are beyond the contractual payment terms,
previous loss history, and the customers current ability to pay its obligation.
When the Company becomes aware of a specific customers inability to meet its
financial obligations to the Company, the Company records a charge to the
allowance to reduce the customers related accounts.
Foreign Currency Translation:
The Companys functional currency is
the U.S. dollar. The Companys wholly-owned subsidiaries with a functional
currency other than the U.S. dollar are translated into amounts in the reporting
currency, U.S. dollars, in accordance with ASC Topic 830 Foreign Currency
Matters. Revenues and expenses are translated at the average exchange rate
prevailing during the periods. At each balance sheet date, assets and
liabilities that are denominated in a currency other than U.S. dollars are
adjusted to reflect the current exchange rate which may give rise to a foreign
currency translation adjustment accounted for as a separate component of
stockholders equity and included in comprehensive loss.
For transactions undertaken by the
Company in foreign currencies, monetary assets and liabilities are translated
into the functional currency at the exchange rate in effect at the end of the
year. Non-monetary assets and liabilities are translated at the exchange rate
prevailing when the assets were acquired or the liabilities assumed. Revenues
and expenses are translated at the rate approximating the rate of exchange on
the transaction date. Exchange gains and losses are included in the
determination of net income (loss) for the year.
44
COUNTERPATH CORPORATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
Note 2
|
Significant Accounting
Policies
−
(contd)
|
|
b)
|
Significant Accounting Policies
(contd)
|
|
|
|
|
|
Accrued Warranty:
|
|
|
|
|
|
The Companys warranty policy generally provides for one
year of warranty for its products. The Company records a liability for
estimated warranty obligations at the date products are sold. The
estimated cost of warranty coverage is based on the Companys actual
historical experience with its current products or similar products. For
new products, the required reserve is based on historical experience of
similar products until such time as sufficient historical data has been
collected on the new product. Estimated liabilities for warranty
exposures, which relate to normal product warranties and a one-year
obligation to provide for potential future liabilities for product sales
for the years ended April 30, 2017 and 2016 were as
follows:
|
|
|
|
Years Ended April 30,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year
|
$
|
61,356
|
|
$
|
73,117
|
|
|
Usage during the year
|
|
-
|
|
|
-
|
|
|
Additions (reductions) during the year
|
|
(6,991
|
)
|
|
(11,761
|
)
|
|
Balance, end of year
|
$
|
54,365
|
|
$
|
61,356
|
|
Trademarks:
Costs related to trademark
applications have been deferred and are included in other assets. Once granted,
trademark costs will be amortized over their useful lives.
Fair Value of Financial
Instruments:
The Companys financial instruments
consist of cash, accounts receivable, accounts payable and accrued liabilities,
customer deposits, foreign exchange contracts, and derivative instruments. The
fair value of the financial instruments approximate book value.
As a basis for considering market
participant assumptions in fair value measurements, ASC 820-10 Fair Value
Measurements establishes a fair value hierarchy that distinguishes between
market participant assumptions based on market data obtained from sources
independent of the reporting entity (observable inputs that are classified
within Levels 1 and 2 of the hierarchy) and the reporting entitys own
assumptions about market participant assumptions (unobservable inputs classified
within Level 3 of the hierarchy).
The fair value hierarchy, as defined
by ASC 820-10, contains three levels of inputs that may be used to measure fair
value as follows:
Level 1 inputs utilize quoted prices
(unadjusted) in active markets for identical assets or liabilities;
Level 2 inputs are inputs other than
quoted prices included in Level 1 that are observable for the asset or
liability, either directly or indirectly such as interest rates, foreign
exchange rates, and yield curves that are observable at commonly quoted
intervals; and
Level 3 inputs are unobservable inputs for the asset or liability
which are typically based on an entitys own assumptions, as there is little, if
any, related market activity.
In instances where the determination
of the fair value measurement is based on inputs from different levels of the
fair value hierarchy, the level in the fair value hierarchy within which the
entire fair value measurement falls is based on the lowest level input that is
significant to the fair value measurement in its entirety. The Companys
assessment of the significance of a particular input to the fair value
measurement in its entirety requires judgment and considers factors specific to
the asset or liability.
45
COUNTERPATH CORPORATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
Note 2
|
Significant Accounting
Policies
−
(contd)
|
|
b)
|
Significant Accounting Policies
(contd)
|
|
|
|
|
|
The Companys derivative financial instruments are valued
using observable market-based inputs to industry valuation models. These
valuation models require a variety of inputs, including contractual terms,
market prices, yield curves, and measures of volatility obtained from
various market sources.
|
|
|
|
|
|
The Company measures certain financial assets, including
any foreign currency option or forward contracts at fair value. Unless
otherwise noted, it is managements opinion that the Company is not
exposed to significant interest, currency or credit risks arising from
these financial instruments.
|
|
|
|
|
|
Income Taxes:
|
|
|
|
|
|
The Company accounts for income taxes by the asset and
liability method in accordance with ASC Topic 740 Income Taxes. Under
this method, current income taxes are recognized for the estimated income
taxes payable for the current year. Deferred income tax assets and
liabilities are recognized in the current year for temporary differences
between the tax and accounting bases of assets and liabilities as well as
for the benefit of losses available to be carried forward to future years
for tax purposes that are likely to be realized. In addition, a valuation
allowance is established to reduce any deferred tax asset for which it is
determined that it is more likely than not that some portion of the
deferred tax asset will not be realized.
|
|
|
|
|
|
The Company has not recorded a deferred tax liability
related to its investment in foreign subsidiaries. The Company has
determined that its investment in these subsidiaries is permanent in
nature and it does not intend to dispose of these investments in the
foreseeable future. The amount of the deferred tax liability related to
the Company's investment in foreign subsidiaries is not reasonably
determinable.
|
|
|
|
|
|
The Company has $1,621,523 in cash held outside of the
United States, and there is no intent to repatriate at this time. Should
we decide to repatriate in the future, taxes would need to be accrued and
paid.
|
|
|
|
|
|
Under ASC 740, the Company also adopted a two-step
approach to recognizing and measuring uncertain tax positions taken or
expected to be taken in a tax return. The first step is to determine if
the weight of available evidence indicates that it is more likely than not
that the tax position will be sustained in an audit, including resolution
of any related appeals or litigation processes. The second step is to
measure the tax benefit as the largest amount that is more than 50% likely
to be realized upon ultimate settlement. The Company recognizes interest
and penalties accrued on unrecognized tax benefits within general and
administrative expense. To the extent that accrued interest and penalties
do not ultimately become payable, amounts accrued will be reduced and
reflected as a reduction in general and administrative expenses in the
period that such determination is made.
|
|
|
|
|
|
Comprehensive Loss:
|
|
|
|
|
|
The Company has adopted ASC Topic 220 Comprehensive
Income. Comprehensive loss is comprised of net profit or loss, and
foreign currency translation adjustments.
|
|
|
|
|
|
Basic and Diluted Loss per Share:
|
|
|
|
|
|
The Company computes net loss per share in accordance
with ASC Topics 260 and ASC 260-10 Earnings per
Share.
|
46
COUNTERPATH CORPORATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
Note 2
|
Significant Accounting
Policies
−
(contd)
|
|
b)
|
Significant Accounting Policies
(contd)
|
|
|
|
|
|
ASC 260 requires presentation of both basic and diluted
earnings per share (EPS) on the face of the income statement. Basic EPS
is computed by dividing net loss available to common shareholders by the
weighted average number of common shares outstanding during the year.
Diluted EPS gives effect to all dilutive potential common shares
outstanding during the year including stock options and warrants using the
treasury stock method. In computing diluted EPS, the average stock price
for the year is used in determining the number of shares assumed to be
purchased from the exercise of stock options or warrants. For the year
ended April 30, 2017, income per share excludes 888,814 (April 30, 2016
812,169) potentially dilutive common shares (related to stock options,
deferred share units and warrants) as their effect was
anti-dilutive.
|
|
|
|
|
|
Investment tax credits:
|
|
|
|
|
|
Investment tax credits are accounted for under the cost
reduction method whereby they are netted against the expense or property
and equipment to which they relate. Investment tax credits are recorded
when the qualifying expenditures have been incurred and if it is more
likely than not that the tax credits will be realized.
|
|
|
|
|
|
Goodwill:
|
|
|
|
|
|
Goodwill represents the excess purchase price over the
estimated fair value of net assets acquired and liabilities assumed as of
the acquisition date. ASC Topic 350 Intangibles Goodwill. ASC 350
requires goodwill to be tested for impairment annually or more frequently
if an event occurs or circumstances change that would more likely than not
reduce the fair value of the Company's business enterprise below its
carrying value. These events or circumstances could include a significant
change in the business climate, legal factors, operating performance
indicators, competition, or sale or disposition of a significant portion
of a reporting unit. Recoverability of goodwill is measured at the
reporting unit level by comparing the reporting units carrying amount,
including goodwill, to the fair value of the reporting unit, which is
measured based upon, among other factors, market multiples for comparable
companies as well as a discounted cash flow analysis.
|
|
|
|
|
|
Management has determined that the Company currently has
a single reporting unit which is CounterPath Corporation. If the recorded
value of the assets, including goodwill, and liabilities (net book
value) of the reporting unit exceeds its fair value, an impairment loss
may be required.
|
|
|
|
|
|
Goodwill of $6,339,717 (CDN$6,704,947) and $2,083,960
(CDN$2,083,752) was initially recorded in connection with the acquisition
of NewHeights on August 2, 2007 and FirstHand on February 1, 2008.
Translated to U.S. dollars using the period end rate, the goodwill balance
at April 30, 2017 was $4,914,029 (CDN$6,704,947) (April 30, 2016 -
$5,341,481) and $1,526,926 (CDN$2,083,752) (April 30, 2016 - $1,659,747),
respectively. During the fourth quarter of its fiscal year ended April 30,
2017, the Company performed its annual impairment test. In the first step,
Management compared the fair value of the Company to its carrying value
based upon the market capitalization of the Company as at April 30, 2017.
On this basis Management determined that the Companys fair value exceeded
its carrying value and has not recognized any impairment of goodwill in
the consolidated financial statements for the year ended April 30, 2017
(2016 - $nil).
|
47
COUNTERPATH CORPORATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
Note 2
|
Significant Accounting
Policies
−
(contd)
|
|
b)
|
Significant Accounting Policies
(contd)
|
|
|
|
|
|
Derivative Instruments:
|
|
|
|
|
|
The Company accounts for derivative instruments,
consisting of foreign currency forward contracts, pursuant to the
provisions ASC 815, Derivatives and Hedging (ASC 815). ASC 815 requires
the Company to measure derivative instruments at fair value and record
them in the balance sheet as either an asset or liability and expands
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand
their effects on an entitys financial position, results of operations and
cash flows. The Company does not use derivative instruments for trading
purposes. ASC 815 also requires qualitative disclosures about objectives
and strategies for using derivatives, quantitative disclosures about fair
value amounts of and gains and losses on derivative instruments, and
disclosures about credit-risk-related contingent features in derivative
agreements.
|
|
|
|
|
|
The Company also routinely enters into foreign currency
forward contracts, not designated as hedging instruments, to protect
against fluctuations in exchange rates. Gains or losses arising out of
marked to market fair value valuation of forward contracts, not designated
as hedges, and are recognized in net income.
|
|
|
|
|
|
The Company records foreign currency forward contracts on
its Consolidated Balance Sheets as derivative instruments assets or
liabilities depending on whether the net fair value of such contracts is a
net asset or net liability, respectively (see Note 9 Derivative Financial
Instruments and Risk Management, of the Notes to the Consolidated
Financial Statements). The Company did not hold any foreign currency
derivatives designated as cash flow hedges in the year ended April 30,
2017 (2016 - none).
|
|
|
|
|
c)
|
New Accounting Pronouncements
|
|
|
|
|
|
In May 2014, FASB issued ASU 2014-09,
Revenue From
Contracts With Customers
(Topic 606). Topic 606 removes
inconsistencies and weaknesses in revenue requirements, provides a more
robust framework for addressing revenue issues, improves comparability of
revenue recognition practices across entities, industries, jurisdictions
and capital markets, provides more useful information to users of
financial statements through improved disclosure requirements and
simplifies the preparation of financial statements by reducing the number
of requirements to which an entity must refer. The guidance in this update
supersedes the revenue recognition requirements in Topic 605, Revenue
Recognition, and most industry-specific guidance throughout the Industry
Topics of the Codification. In August 2015, ASU 2015-14 was issued which
delayed the effective date for public entities to reporting periods
beginning after December 15, 2017. Early adoption is not permitted. The
Company is currently evaluating the impact of the adoption of this new
standard.
|
|
|
|
|
|
In March 2016, the FASB issued ASU 2016-08, Revenue from
Contracts with Customers: Principal versus Agent Considerations (Reporting
Revenue Gross versus Net), which clarifies the guidance in the new revenue
standard on assessing whether an entity is a principal or an agent in a
revenue transaction. This conclusion impacts whether an entity reports
revenue on a gross or net basis. We are currently evaluating the impact of
this standard on our Consolidated Financial Statements and related
disclosures.
|
|
|
|
|
|
In April 2016, the FASB issued ASU 2016-10, Revenue from
Contracts with Customers: Identifying Performance Obligations and
Licensing, which clarifies the guidance in the new revenue standard
regarding an entitys identification of its performance obligations in a
contract, as well as an entitys evaluation of the nature of its promise
to grant a license of intellectual property and whether or not that
revenue is recognized over time or at a point in time. We are currently
evaluating the impact of this standard on our Consolidated Financial
Statements and related disclosures.
|
48
COUNTERPATH CORPORATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
Note 2
|
Significant Accounting
Policies
−
(contd)
|
|
c)
|
New Accounting Pronouncements
(contd)
|
|
|
|
|
|
In May 2016, the FASB issued ASU 2016-11, Revenue
Recognition: Customer Payments and Incentives, which clarifies the
guidance in recognizing costs for consideration given by a vendor to a
customer as a component of cost of sales. We are currently evaluating the
impact of this standard on our Consolidated Financial Statements and
related disclosures.
|
|
|
|
|
|
In May 2016, the FASB issued ASU 2016-12, Revenue from
Contracts with Customers: Narrow-Scope Improvements and Practical
Expedients which amends the guidance in the new revenue standard on
collectability, noncash consideration, presentation of sales tax, and
transition. The amendments are intended to address implementation issues
and provide additional practical expedients to reduce the cost and
complexity of applying the new revenue standard. These amendments have the
same effective date as the new revenue standard. While we are currently
evaluating the method of adoption and the impact of the new revenue
standard, as amended, on our Consolidated Financial Statements and related
disclosures, we believe the adoption of the new standard may have a
significant impact on the accounting for certain transactions with
multiple elements or bundled arrangements because the requirement to
have VSOE for undelivered elements under current accounting standards is
eliminated under the new standard. Accordingly, we may be required to
recognize as revenue a portion of the sales price upon delivery of the
software, as compared to the current requirement of recognizing the entire
sales price ratably over an estimated offering period. We continue to
evaluate the impact of the new revenue standard on our Consolidated
Financial Statements and related disclosures.
|
|
|
|
|
|
In June 2016, the FASB issued ASU 2016-13, Financial
Instruments: Measurement of Credit Losses on Financial Instruments which
amends the guidance on measuring credit losses on financial assets held at
amortized cost. The amendment is intended to address the issue that the
previous incurred loss methodology was restrictive for Companys ability
to record credit losses based on not yet meeting the probable threshold.
The new language will require these assets to be valued at amortized cost
presented at the net amount expected to be collected will a valuation
provision. The amendments will be effective for fiscal years beginning
after December 15, 2019. We are evaluating the impact of this amendment on
our consolidated financial statements and related disclosures.
|
|
|
|
|
|
In February 2016, FASB issued ASU 2016-02,
Leases
.
The guidance would require lessees to recognize most leases on their
balance sheets as lease liabilities with corresponding right of-use
assets. The guidance is effective for annual and interim reporting periods
beginning on or after December 15, 2018. The Company is currently
evaluating the impact of its pending adoption of ASU 2016-02 on its
consolidated financial statements.
|
|
|
|
|
d)
|
Recently Adopted Accounting
Pronouncements
|
|
|
|
|
|
In August 2014, FASB issued ASU 2014-15,
Presentation
of Financial Statements Going Concern
, which requires management to
evaluate whether there is substantial doubt about an entitys ability to
continue as a going concern and provide related footnote disclosures. The
guidance is effective for annual and interim reporting periods beginning
on or after December 15, 2016. The standard allowed for either a full
retrospective or modified retrospective transition method. The adoption of
this standard resulted in additional disclosures to be included in note 2
(a) of the financial statements.
|
49
COUNTERPATH CORPORATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
|
|
|
|
|
|
April 30, 2017
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
Cost
|
|
|
Depreciation
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Computer hardware
|
$
|
1,036,217
|
|
$
|
967,681
|
|
$
|
68,536
|
|
|
Computer software
|
|
993,425
|
|
|
986,560
|
|
|
6,865
|
|
|
Leasehold improvements
|
|
230,730
|
|
|
200,434
|
|
|
30,296
|
|
|
Office furniture
|
|
173,902
|
|
|
162,120
|
|
|
11,782
|
|
|
Websites
|
|
118,772
|
|
|
110,438
|
|
|
8,334
|
|
|
|
$
|
2,553,046
|
|
$
|
2,427,233
|
|
$
|
125,813
|
|
|
|
|
|
|
|
April 30, 2016
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
Cost
|
|
|
Depreciation
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Computer hardware
|
$
|
1,049,179
|
|
$
|
976,511
|
|
$
|
72,668
|
|
|
Computer software
|
|
1,008,373
|
|
|
1,002,097
|
|
|
6,276
|
|
|
Leasehold improvements
|
|
263,003
|
|
|
237,147
|
|
|
25,856
|
|
|
Office furniture
|
|
190,754
|
|
|
186,325
|
|
|
4,429
|
|
|
Websites
|
|
120,953
|
|
|
87,619
|
|
|
33,334
|
|
|
|
$
|
2,632,262
|
|
$
|
2,489,699
|
|
$
|
142,563
|
|
Note 4
|
Accounts Payable and
Accrued Liabilities
|
|
|
|
Accounts payable and accrued
liabilities at April 30, 2017 and 2016 are comprised of the following:
|
|
|
|
April 30,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Accounts payable trade
|
$
|
404,234
|
|
$
|
407,737
|
|
|
Accrued commissions
|
|
241,883
|
|
|
272,282
|
|
|
Accrued vacation
|
|
607,238
|
|
|
617,589
|
|
|
Third party software royalties
|
|
328,740
|
|
|
343,447
|
|
|
Other accrued liabilities
|
|
243,433
|
|
|
302,053
|
|
|
|
$
|
1,825,528
|
|
$
|
1,943,108
|
|
50
COUNTERPATH CORPORATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
Note 5
|
Related Party Transactions
|
|
|
|
During the year ended April 30, 2017, the Company through
its wholly owned subsidiary, CounterPath Technologies Inc., paid $78,386
(2016 - $82,288) to Kanata Research Park Corporation (KRP) for leased
office space. KRP is controlled by the Chairman of the Company.
|
|
|
|
On November 21, 2013, the Company, through its wholly
owned subsidiary, CounterPath Technologies, entered into an agreement with
8007004 (Canada) Inc. (8007004) to lease office space. 8007004 is
controlled by a member of the board of directors of the Company.
CounterPath Technologies, paid $30,591 (2016 - $31,910) for the year ended
April 30, 2017.
|
|
|
|
On July 31, 2015, the Company sold products and services
to Magor Corporation for consideration of $134,250. Magor Corporations
chairman of the board is also Chairman of the Company.
|
|
|
|
On December 15, 2016, the Company issued an aggregate of
454,097 shares of common stock under a non- brokered private placement
(Private Placement) at a price of $2.05 per share for total gross
proceeds of $930,899 less issuance costs of $32,207. In connection with
the Private Placement, KRP, a company controlled by the Chairman of the
Company, purchased 198,000 shares and a director and chief executive
officer of the Company purchased 12,195 shares.
|
|
|
|
The above transactions are in the normal course of
operations and are recorded at amounts established and agreed to between
the related parties.
|
|
|
Note 6
|
Common Stock
|
|
|
|
Private Placement
|
|
|
|
On December 15, 2016, the Company issued an aggregate of
454,097 shares of common stock under a non- brokered private placement at
a price of $2.05 per share for total gross proceeds of $930,899 less
issuance costs of $32,206.
|
|
|
|
On April 4, 2016, the Company entered into an agreement
to issue 25,000 shares of the Companys common stock in exchange for
advisory services which was subsequently amended to 23,500 shares. The
shares were issued in three tranches: (i) the first tranche of 10,000
shares was issued on April 22, 2016; (ii) the second tranche of 10,000
shares was issued on May 25, 2016; and (iii) the third tranche of 3,500
shares was issued on June 30, 2016.
|
51
COUNTERPATH CORPORATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
Note 6
|
Common Stock
(contd)
|
|
|
|
Stock Options
|
|
|
|
The Company has a stock option plan (the 2010 Stock
Option Plan) under which options to purchase common shares of the Company
may be granted to employees, directors and consultants. The 2010 Stock
Option Plan is effectively a merging of the Companys 2004 and 2005 stock
option plans. Stock options entitle the holder to purchase common stock at
a subscription price determined by the Board of Directors of the Company
at the time of the grant. The options generally 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.
|
|
|
|
The maximum number of shares of common stock authorized
by the stockholders and reserved for issuance by the Board under 2010
Stock Option Plan is 986,000.
|
|
|
|
On September 12, 2016, the decrease in the exercise price
of certain outstanding stock options to $2.50 was authorized by the
Companys stock holders. Accordingly the exercise price of 319,822 stock
options with exercise prices ranging from $4.50 to $29.00 was decreased to
$2.50. The fair value of the options immediately prior to the modification
was compared to the fair value of the modified options. Stock based
compensation of $112,158 was recognized on the modification of the vested
options.
|
|
|
|
The Company uses the Black-Scholes option pricing model
to determine the fair value of stock options granted. In accordance with
ASC 718 Share-Based Payment for employees, the compensation expense is
amortized on a straight-line basis over the requisite service period which
approximates the vesting period. Compensation expense for stock options
granted to non-employees is amortized over the vesting period or, if none
exists, over the service period. Compensation associated with unvested
options granted to non-employees is re-measured on each balance sheet date
using the Black-Scholes option pricing model.
|
|
|
|
The expected volatility of options granted has been
determined using the method described under ASC 718 using the historical
stock price. The expected term of options granted to employees in the
current fiscal period has been determined utilizing historic data as
prescribed by ASC 718.
|
|
|
|
For non-employees, based on the Companys history, the
expected term of the options approximates the full term of the options.
The risk-free interest rate is based on a treasury instrument whose term
is consistent with the expected term of the stock options. The Company has
not paid and does not anticipate paying dividends on its common stock;
therefore, the expected dividend yield is assumed to be zero. In addition,
ASC 718 requires companies to utilize an estimated forfeiture rate when
calculating the expense for the period, whereas prior to the adoption of
ASC 718 the Company recorded forfeitures based on actual forfeitures and
recorded a compensation expense recovery in the period when the awards
were forfeited. As a result, based on the Companys experience, the
Company applied an estimated forfeiture rate of 15% for year ended April
30, 2017 and 2016 in determining the expense recorded in the accompanying
consolidated statement of operations.
|
|
|
|
For the majority of the stock options granted, the number
of shares issued on the date the stock options are exercised is net of the
minimum statutory withholding requirements that we pay in cash to the
appropriate taxing authorities on behalf of our employees. These withheld
shares are not issued or considered common stock repurchases under our
authorized plan and are not included in the common stock repurchase
totals. In our consolidated financial statements, these withheld shares
are netted against the number of shares that would have been issued upon
vesting.
|
52
COUNTERPATH CORPORATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
Note 6
|
Common Stock
(contd)
|
|
|
|
Stock Options
(contd)
|
|
|
|
The weighted-average fair values of options granted
during the years ended April 30, 2017 and 2016 were $1.54 and $2.35,
respectively. The weighted-average assumptions utilized to determine such
values are presented in the following table:
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
|
April 30, 2017
|
|
|
April 30, 2016
|
|
|
Risk-free interest rate
|
|
1.39%
|
|
|
1.66%
|
|
|
Expected volatility
|
|
94.95%
|
|
|
92.48%
|
|
|
Expected term
|
|
3.7 yrs
|
|
|
3.7 yrs
|
|
|
Dividend yield
|
|
0%
|
|
|
0%
|
|
The following is a summary of the
status of the Companys stock options as of April 30, 2017 and the stock option
activity during the years ended April 30, 2017 and 2016:
|
|
|
Number of
|
|
|
Weighted-Average
|
|
|
|
|
Options
|
|
|
Exercise Price per Share
|
|
|
Outstanding at April 30, 2015
|
|
411,781
|
|
|
$15.20
|
|
|
Granted
|
|
114,900
|
|
|
$3.72
|
|
|
Exercised
|
|
-
|
|
|
-
|
|
|
Forfeited / Cancelled
|
|
(66,216
|
)
|
|
$8.87
|
|
|
Expired
|
|
(49,735
|
)
|
|
$15.63
|
|
|
Outstanding at April 30, 2016
|
|
410,730
|
|
|
$12.99
|
|
|
Granted
|
|
125,000
|
|
|
$2.38
|
|
|
Exercised
|
|
-
|
|
|
-
|
|
|
Forfeited / Cancelled
|
|
(49,268
|
)
|
|
$4.16
|
|
|
Expired
|
|
(89,540
|
)
|
|
$7.59
|
|
|
Outstanding at April 30, 2017
|
|
396,922
|
|
|
$2.46
|
|
|
|
|
|
|
|
|
|
|
Exercisable at April 30, 2017
|
|
221,739
|
|
|
$2.49
|
|
|
Exercisable at April 30, 2016
|
|
236,795
|
|
|
$16.77
|
|
53
COUNTERPATH CORPORATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
Note 6
|
Common Stock
−
(contd)
|
|
|
|
Stock Options
− (contd)
|
|
|
|
The following table summarizes information
regarding stock options outstanding as of April 30, 2017:
|
|
|
Number of
|
|
|
Aggregate
|
|
|
|
|
|
Number of
|
|
|
Aggregate
|
|
Exercise
|
|
Options
|
|
|
Intrinsic
|
|
|
|
|
|
Options
|
|
|
Intrinsic
|
|
Price
|
|
Outstanding
|
|
|
Value
|
|
|
Expiry Date
|
|
|
Exercisable
|
|
|
Value
|
|
$2.03
|
|
10,000
|
|
|
|
|
|
December 15,
2021
|
|
|
|
|
|
|
|
$2.40
|
|
60,000
|
|
|
|
|
|
July 15, 2021
|
|
|
11,250
|
|
|
|
|
$2.41
|
|
51,656
|
|
|
|
|
|
December 14,
2020
|
|
|
17,333
|
|
|
|
|
$2.46
|
|
25,000
|
|
|
|
|
|
March 14, 2022
|
|
|
|
|
|
|
|
$2.50
|
|
250,266
|
|
|
|
|
|
July 19, 2017 to
July 17, 2020
|
|
|
193,156
|
|
|
|
|
April 30, 2017
|
|
396,922
|
|
|
|
|
|
|
|
|
221,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2016
|
|
410,730
|
|
|
|
|
|
|
|
|
236,795
|
|
|
|
|
The aggregate intrinsic value in the
preceding table represents the total intrinsic value, based on the Companys
closing stock price of $1.93 per share as of April 30, 2017 (April 30, 2016
$2.12), which would have been received by the option holders had all option
holders exercised their options as of that date. The total number of
in-the-money options vested and exercisable as of April 30, 2017 was nil (April
30, 2016 nil). The total intrinsic value of options exercised during the year
ended April 30, 2017 was $nil (2016 $nil). The grant date fair value of
options vested during the year ended April 30, 2017 was $412,602 (April 30, 2016
$579,614).
The following table summarizes
information regarding the non-vested stock purchase options outstanding as of
April 30, 2017:
|
|
|
Number of
|
|
|
Weighted Average
|
|
|
|
|
Options
|
|
|
Grant-Date Fair Value
|
|
|
|
|
|
|
|
|
|
|
Non-vested options at April 30, 2015
|
|
201,237
|
|
|
$6.20
|
|
|
Granted
|
|
114,900
|
|
|
$2.35
|
|
|
Vested
|
|
(83,318
|
)
|
|
$6.96
|
|
|
Forfeited
|
|
(58,884
|
)
|
|
$4.79
|
|
|
Non-vested options at April 30, 2016
|
|
173,935
|
|
|
$4.15
|
|
|
Granted
|
|
125,000
|
|
|
$1.54
|
|
|
Vested
|
|
(84,833
|
)
|
|
$4.86
|
|
|
Forfeited
|
|
(38,919
|
)
|
|
$1.95
|
|
|
Non-vested options at April 30, 2017
|
|
175,183
|
|
|
$3.49
|
|
54
COUNTERPATH CORPORATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
Note 6
|
Common Stock
(contd)
|
|
|
|
Stock Options
(contd)
|
|
|
|
As of April 30, 2017, there was $439,431 of total
unrecognized compensation cost related to unvested stock options. This
unrecognized compensation cost is expected to be recognized over a
weighted average period of 2.01 years.
|
|
|
|
Employee and non-employee stock-based compensation
amounts classified in the Companys consolidated statements of operations
for the year ended April 30, 2017 and 2016 are as follows:
|
|
|
|
Years Ended
|
|
|
|
|
April 30,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
$
|
97,434
|
|
$
|
68,259
|
|
|
Sales and marketing
|
|
172,367
|
|
|
253,913
|
|
|
Research and development
|
|
102,975
|
|
|
80,228
|
|
|
General and administrative
|
|
166,713
|
|
|
180,536
|
|
|
Total stock-based compensation
|
$
|
539,489
|
|
$
|
582,936
|
|
Warrants
On September 4, 2015, the Company
completed a non-brokered private placement (the Private Placement) of 293,000
units, at a price of $5.00 per unit, for gross aggregate proceeds of $1,465,000
less stock issuance costs of $23,161. Each unit consists of one share of common
stock and one-half of one non-transferable common share purchase warrant. Each
whole warrant entitles the holder to purchase one additional share of the
Companys common stock at an exercise price of $7.50 per share until September
4, 2017.
The following tables summarize
information regarding the warrants outstanding as of April 30, 2017 and April
30, 2016.
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Number of
|
|
|
Average
|
|
|
|
|
|
|
|
Warrants
|
|
|
Exercise Price
|
|
|
Expiry Dates
|
|
|
Warrants at April 30, 2015
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
146,500
|
|
$
|
7.50
|
|
|
September 4, 2017
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
|
|
|
|
|
|
|
|
Warrants at April 30, 2016
|
|
146,500
|
|
$
|
7.50
|
|
|
September 4,
2017
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
|
|
|
|
|
|
|
|
Warrants at April 30, 2017
|
|
146,500
|
|
$
|
7.50
|
|
|
September 4,
2017
|
|
Employee Stock Purchase Plan
Under the terms of the Employee Stock
Purchase Plan (the ESPP) all regular salaried (non-probationary) employees can
purchase up to 6% of their base salary in common shares of the Company at market
price. The Company will match 50% of the shares purchased by issuing or
purchasing in the market up to 3% of the respective employees base salary in
shares. During the year ended April 30, 2017, the Company matched $35,028 (2016
- $39,472) in shares purchased by employees under the ESPP. During the year
ended April 30, 2017, 45,956 shares (2016 36,539) were issued or purchased by
employees on the open market under the ESPP.
A total of 120,000 shares have been
reserved for issuance under the ESPP. As of April 30, 2017, a total of 86,203
shares were available for issuance under the ESPP.
55
COUNTERPATH CORPORATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
Note 6
|
Common Stock
(contd)
|
|
|
|
Normal Course Issuer Bid Plan
|
|
|
|
Pursuant to a normal course issuer bid commencing on
March 29, 2017 and expiring March 28, 2018, the Company is authorized to
purchase up to 258,613 shares of their common stock through the facilities
of the TSX and other Canadian marketplaces or U.S. marketplaces. Pursuant
to a normal course issuer bid commencing March 19, 2015 and expiring March
18, 2016, the Company repurchased 11,360 shares at an average price of
$3.80 (CDN$4.97) for an aggregate purchase price of $43,168. Pursuant to a
normal course issuer bid commencing on March 19, 2016 and expiring March
18, 2017, the Company repurchased 4,700 shares at an average price of
$2.24 (CDN$2.93) for a total of $10,528. During the period from March 29,
2017 to April 30, 2017, the Company repurchased 59,900 shares at an
average price of $2.03 (CDN$2.72) for a total of $121,597 pursuant to a
normal course issuer bid commencing on March 29, 2017 and expiring on
March 28, 2018. As of April 30, 2017, a total of 80,488 shares have been
cancelled and the remaining 59,900 repurchased shares are in the process
of being cancelled since the normal course issuer bid was initiated.
|
|
|
|
Deferred Share Unit Plan
|
|
|
|
Under the terms of the DSUP which is effective as at
October 22, 2009, each deferred share unit (each, a DSU) is equivalent
to one share of common stock. The maximum number of shares of common stock
that may be reserved for issuance to any one participant pursuant to DSUs
granted under the DSUP and any share compensation arrangement is 5% of the
number of shares of common stock of the Company outstanding at the time of
reservation. A DSU granted to a participant who is a director of the
Company shall vest immediately on the award date. A DSU granted to a
participant other than a director will generally vest as to one-third
(1/3) of the number of DSUs granted on the first, second and third
anniversaries of the award date. Fair value of the DSUs, which is based on
the closing price of the Companys common stock on the date of grant, is
recorded as compensation expense over the vesting period.
|
|
|
|
On September 12, 2016, the maximum number of shares of
common stock authorized by the Companys stockholders reserved for
issuance under the DSUP was increased from 400,000 shares to 500,000
shares. During the year ended April 30, 2017, 90,453 (2016 55,034) DSUs
were issued under the DSUP, of which 24,228 DSUs were granted to officers
and 66,225 DSUs were granted to non-employee directors. As of April 30,
2017, a total of 130,595 shares were available for issuance under the
DSUP.
|
|
|
|
The following table summarizes the Companys outstanding
DSU awards as of April 30, 2017 and 2016, and changes during the period
then ended:
|
|
|
|
|
Weighted Average Grant
|
|
|
Number of DSUs
|
|
Date Fair Value per Unit
|
|
|
|
|
|
|
DSUs at April 30, 2015
|
199,905
|
|
$11.00
|
|
Granted
|
55,034
|
|
$5.20
|
|
Conversions
|
|
|
|
|
Outstanding at April 30, 2016
|
254,939
|
|
$9.79
|
|
Granted
|
90,453
|
|
$2.40
|
|
Conversions
|
|
|
|
|
Outstanding at April 30, 2017
|
345,392
|
|
$7.85
|
56
COUNTERPATH CORPORATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
Note 6
|
Common Stock
(contd)
|
|
|
|
Deferred Share Unit Plan
(contd)
|
|
|
|
As of April 30, 2017, there was $110,181 (2016
$189,523) of total unrecognized compensation cost related to unvested DSU
awards. This unrecognized compensation cost is expected to be recognized
over a weighted average period of 1.44 years (2016 1.63). The total fair
value of DSUs that vested during the year was $319,577 (2016 $338,912).
|
|
|
|
Employee and non-employee DSU based compensation amounts
classified in the Companys consolidated statements of operations for the
year ended April 30, 2017 and 2016 are as follows:
|
|
|
|
Year Ended
|
|
|
|
|
April
3
0,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing
|
$
|
|
|
$
|
|
|
|
Research and development
|
|
|
|
|
1,633
|
|
|
General and administrative
|
|
296,429
|
|
|
322,345
|
|
|
Total deferred share unit-based compensation
|
$
|
296,429
|
|
$
|
323,978
|
|
The following table summarizes
information regarding the non-vested DSUs outstanding as of April 30, 2017:
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
|
|
Grant Date Fair
|
|
|
|
|
Number of DSUs
|
|
|
Value per Unit
|
|
|
|
|
|
|
|
|
|
|
Non-vested DSUs at April 30,
2015
|
|
25,169
|
|
|
$14.60
|
|
|
Granted
|
|
55,034
|
|
|
$5.20
|
|
|
Vested
|
|
(41,681
|
)
|
|
$8.13
|
|
|
Non-vested DSUs at April 30, 2016
|
|
38,522
|
|
|
$8.15
|
|
|
Granted
|
|
90,453
|
|
|
$2.40
|
|
|
Vested
|
|
(82,758
|
)
|
|
$3.86
|
|
|
Non-vested DSUs at April 30,
2017
|
|
46,217
|
|
|
$4.58
|
|
57
COUNTERPATH CORPORATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
Note 7
|
Income Taxes
|
|
|
|
Deferred tax assets and liabilities are recognized for
temporary differences between the carrying amount of the balance sheet
items and their corresponding tax values as well as for the benefit of
losses available to be carried forward to future years for tax purposes
that are likely to be realized.
|
|
|
|
Significant components of the Companys deferred tax
assets and liabilities, after applying enacted corporate income tax rates,
are as follows:
|
|
|
|
Years Ended
|
|
|
|
|
April 30,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Tax loss carry forwards
|
$
|
19,378,000
|
|
$
|
18,796,000
|
|
|
Capital losses carried forward
|
|
227,000
|
|
|
247,000
|
|
|
Equipment
|
|
164,000
|
|
|
242,000
|
|
|
Other
|
|
39,000
|
|
|
64,000
|
|
|
Bad debt
|
|
29,000
|
|
|
186,000
|
|
|
Nondeductible research and development expenses
|
|
2,837,000
|
|
|
3,084,000
|
|
|
Investment tax credits
|
|
413,000
|
|
|
490,000
|
|
|
Cumulative unrealized foreign exchange gain
|
|
405,000
|
|
|
410,000
|
|
|
Acquired technology and other intangibles
|
|
313,000
|
|
|
(1,115,000
|
)
|
|
Valuation allowance established by management
|
|
(23,805,000
|
)
|
|
(22,404,000
|
)
|
|
Net deferred tax assets
|
$
|
|
|
$
|
|
|
The provision for income taxes differ
from the amount calculated using the U.S. federal and state statutory income tax
rates as follows:
|
|
|
Years Ended
|
|
|
|
|
April 30,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Tax (recovery) based on U.S. rates
|
$
|
(836,000
|
)
|
$
|
(915,000
|
)
|
|
Foreign tax rate differential
|
|
(38,000
|
)
|
|
(34,000
|
)
|
|
Non-deductible expenses
|
|
|
|
|
|
|
|
Change in fair value of derivative instrument
|
|
|
|
|
|
|
|
Non-deductible stock option compensation
|
|
289,000
|
|
|
295,000
|
|
|
Effect of reduction (increase) in foreign statutory rates
|
|
|
|
|
104,000
|
|
|
Foreign exchange gain (losses) on
revaluation of deferred tax balances
|
|
(818,000
|
)
|
|
384,000
|
|
|
Under provision relating to prior year
|
|
2,000
|
|
|
(2,026,000
|
)
|
|
Expiry of non-operating losses
|
|
|
|
|
|
|
|
Increase in valuation allowance
|
|
1,401,000
|
|
|
2,192,000
|
|
|
Income tax expense for year
|
$
|
|
|
$
|
|
|
The Company establishes its valuation
allowance based on projected future operations. Management has determined that
the allowance should be 100% of the deferred tax assets. When circumstances
cause a change in managements judgment about the recoverability of deferred tax
assets, the impact of the change on the valuation allowance will be reflected in
current income.
58
COUNTERPATH CORPORATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
Note 7
|
Income Taxes
(contd)
|
|
|
|
As at April 30, 2017, the Company
had net operating loss carry-forwards available to reduce taxable income
in
|
|
future years as follows:
|
|
Country
|
|
|
|
|
Amount
|
|
|
Expiration Dates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States US$
|
|
|
|
$
|
47,730,000
|
|
|
2026 2037
|
|
|
Canada CDN$
|
|
|
|
$
|
17,762,732
|
(1)
|
|
2026 2035
|
|
(1)
These losses are subject
to tax legislation that limits the use of the losses against future income of
the Companys Canadian subsidiaries.
The Company is subject to taxation in
the U.S. and Canada. It is subject to tax examinations by tax authorities for
all taxation years commencing in or after 2002. The Company does not expect any
material increase or decrease in its income tax expense in the next twelve
months related to examinations or changes in uncertain tax positions.
Changes in the Companys uncertain tax
positions for the year ended April 30, 2017 and April 30, 2016 were as follows:
|
|
|
Years Ended
|
|
|
|
|
April 30,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Balance at beginning of year
|
$
|
10,563
|
|
$
|
25,631
|
|
|
Increases related to prior year tax positions (interest and
penalties)
|
|
|
|
|
|
|
|
Increases related to current year tax
positions (interest and penalties)
|
|
|
|
|
|
|
|
Settlements
|
|
|
|
|
|
|
|
Lapses in statute of limitations
|
|
(800
|
)
|
|
(15,068
|
)
|
|
Balance at end of year
|
$
|
9,763
|
|
$
|
10,563
|
|
Note 8
|
Segmented
Information
|
|
|
|
The Companys chief operating decision maker reviews
financial information presented on a consolidated basis, accompanied by
disaggregated information about revenues by geographic region for purposes
of making operating decisions and assessing financial performance.
Accordingly, the Company has concluded that it has one reportable
operating segment.
|
|
|
|
Revenues are based on the country in which the customer
is located. The following is a summary of total revenues by geographic
area for the years ended April 30, 2017 and 2016:
|
|
|
|
Years Ended
|
|
|
|
|
April 30,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
North America
|
$
|
6,220,367
|
|
$
|
7,192,010
|
|
|
EMEA
|
|
2,802,629
|
|
|
2,459,541
|
|
|
Asia Pacific
|
|
1,043,360
|
|
|
699,203
|
|
|
Latin America
|
|
619,234
|
|
|
730,604
|
|
|
|
$
|
10,685,590
|
|
$
|
11,081,358
|
|
As at July 31, 2015, the Company
adjusted geographic regions to better reflect its current operations. In prior
periods geographic groupings included North America, Europe, Asia and Africa and
Latin America.
59
COUNTERPATH CORPORATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
Note 8
|
Segmented Information
- (contd)
|
|
|
|
All of the Companys long-lived assets, which includes
equipment, goodwill, intangible assets, and other assets, are located in
Canada and the United States as follows:
|
|
|
|
As at April 30,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Canada
|
$
|
6,731,644
|
|
$
|
7,279,019
|
|
|
United States
|
|
34,761
|
|
|
39,583
|
|
|
|
$
|
6,766,405
|
|
$
|
7,318,602
|
|
Note 9
|
Derivative Financial Instruments and Risk
Management
|
|
|
|
In the normal course of business, the Company is exposed
to fluctuations in interest rates and the exchange rates associated with
foreign currencies. The Companys primary objective for holding derivative
financial instruments is to manage foreign currency exchange rate risk.
|
|
|
|
Foreign Currency Exchange Rate Risk
|
|
|
|
A majority of our revenue activities are transacted in
U.S. dollars. However, the Company is exposed to foreign currency exchange
rate risk inherent in conducting business globally in numerous currencies,
of which the most significant to our operations for the year ended April
30, 2016 is the Canadian dollar. The Companys foreign currency risk
management program includes foreign currency derivatives with cash flow
hedge accounting designation that utilizes foreign currency forward
contracts to hedge exposures to the variability in the U.S. dollar
equivalent of anticipated non-U.S. dollar-denominated cash flows.
|
|
|
|
The Company periodically enters into foreign currency
forward contracts, not designated as hedging instruments, to protect it
from fluctuations in exchange rates. As of April 30, 2016, the Company had
no foreign currency forward contracts. Notional amounts do not quantify
risk or represent assets or liabilities of the Company, but are used in
the calculation of cash settlements under the contracts.
|
|
|
|
Fair Value Measurements
|
|
|
|
When available, the Company uses quoted market prices to
determine fair value, and classifies such measurements within Level 1. In
some cases where market prices are not available, the Company makes use of
observable market-based inputs to calculate fair value, in which case the
measurements are classified within Level 2. If quoted or observable market
prices are not available, fair value is based upon internally developed
models that use, where possible, current market-based parameters such as
interest rates, yield curves and currency rates. These measurements are
classified within Level 3.
|
|
|
|
Fair value measurements are classified according to the
lowest level input or value-driver that is significant to the valuation. A
measurement may therefore be classified within Level 3 even though there
may be significant inputs that are readily observable.
|
|
|
|
Fair value measurement includes the consideration of
non-performance risk. Non-performance risk refers to the risk that an
obligation (either by a counterparty or the Company) will not be
fulfilled. For financial assets traded in an active market (Level 1), the
non-performance risk is included in the market price. For certain other
financial assets and liabilities (Level 2 and 3), our fair value
calculations have been adjusted accordingly.
|
60
COUNTERPATH CORPORATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
Note 9
|
Derivative Financial
Instruments and Risk Management
- (contd)
|
|
|
|
Fair Value Measurements
(contd)
|
|
|
|
The following table presents the Companys assets and
liabilities, that are measured at fair value on a recurring basis as of
April 30, 2017 and 2016:
|
|
|
|
|
Carrying
|
|
|
|
|
|
Fair Value
|
|
|
|
|
|
As at April
30, 2017
|
|
|
Amount
|
|
|
Fair Value
|
|
|
Levels
|
|
|
Reference
|
|
|
Cash and cash equivalents
|
|
$
|
2,071,019
|
|
$
|
2,071,019
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
|
|
|
Fair Value
|
|
|
|
|
|
at
April 30, 2016
|
|
|
Amount
|
|
|
Fair Value
|
|
|
Levels
|
|
|
Reference
|
|
|
Cash and cash equivalents
|
|
$
|
2,159,738
|
|
$
|
2,159,738
|
|
|
1
|
|
|
|
|
|
Forward contracts
|
|
April 30,
|
|
|
April 30,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Opening balance at the beginning of the
year
|
$
|
−
|
|
$
|
−
|
|
|
Fair value of forward, at issuance
|
|
−
|
|
|
−
|
|
|
Change in fair value of forward contracts
since issuance
|
|
−
|
|
|
(47,690
|
)
|
|
Fair value of forward contracts settled during the year
|
|
−
|
|
|
47,690
|
|
|
Fair value of forward contracts at year end
|
$
|
−
|
|
$
|
−
|
|
Fair Values of Financial
Instruments
In addition to the methods and
assumptions the Company uses to record the fair value of financial instruments
as discussed in the Fair Value Measurements section above, the Company used the
following methods and assumptions to estimate the fair value of the Companys
financial instruments:
Cash
carrying amount
approximates fair value.
Accounts receivable, net
carrying amount approximates fair value.
Forward contracts
the fair
value of foreign currency and commodity forward, option and cross currency
contracts is based on a valuation model that discounts cash flows resulting from
the differential between the contract price and the market-based forward
rate.
61
COUNTERPATH CORPORATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
Note 10
|
Commitments
|
|
|
|
Total payable over the term of the lease
agreements for the years ended April 30, are as follows:
|
|
|
|
Office Leases
|
|
|
Office Leases
|
|
|
Total Office
|
|
|
|
|
Related Party
|
|
|
Unrelated Party
|
|
|
Leases
|
|
|
2018
|
$
|
75,638
|
|
$
|
525,129
|
|
$
|
600,767
|
|
|
2019
|
|
75,638
|
|
|
529,362
|
|
|
605,000
|
|
|
2020
|
|
−
|
|
|
263,691
|
|
|
263,691
|
|
|
2021
|
|
−
|
|
|
6,092
|
|
|
6,092
|
|
|
|
$
|
151,276
|
|
$
|
1,324,274
|
|
$
|
1,475,550
|
|
Note 11
|
Loss per common share
|
|
|
|
Computation of loss per share:
|
|
|
|
Year ended April 30, 2017
|
|
|
|
|
|
|
|
|
|
|
Per Share
|
|
|
|
|
Income
|
|
|
Shares
(1)(2)
|
|
|
Amount
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
Income available to common stockholders
|
$
|
(2,458,515
|
)
|
|
4,722,724
|
|
$
|
(0.52
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect on dilutive securities
|
|
|
|
|
|
|
|
|
|
|
(Gain)/Loss from derivative instruments
|
|
−
|
|
|
−
|
|
|
|
|
|
Diluted EPS
|
$
|
(2,458,515
|
)
|
|
4,722,724
|
|
$
|
(0.52
|
)
|
|
|
|
Year ended April 30, 2016
|
|
|
|
|
|
|
|
|
|
|
Per Share
|
|
|
|
|
Income
|
|
|
Shares
(1)(2)
|
|
|
Amount
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
Income available to common stockholders
|
$
|
(2,691,595
|
)
|
|
4,433,402
|
|
$
|
(0.61
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect on dilutive securities
|
|
|
|
|
|
|
|
|
|
|
(Gain)/Loss from derivative instruments
|
|
−
|
|
|
−
|
|
|
|
|
|
Diluted EPS
|
$
|
(2,691,595
|
)
|
|
4,433,402
|
|
$
|
(0.61
|
)
|
(1)
For the years ended
April 30, 2017 and April 30, 2016, common share equivalents (consisting of
shares issuable on exercise of options, deferred share units, and warrants)
totalling 888,814, and 812,169, respectively, were not included in the
computation of diluted earnings per share because the effect was anti-dilutive.
(2)
Diluted by assumed
exercise of outstanding common share equivalents using the treasury stock
method.
62