It is the opinion of management that the interim consolidated
financial statements for the quarter ended January 31, 2019 include all
adjustments necessary in order to ensure that the interim consolidated financial
statements are not misleading.
In the interim consolidated financial statements for the
quarter ended January 31, 2019, all amounts are expressed in United States
dollars, unless otherwise indicated. The interim consolidated financial
statements for the quarter ended January 31, 2019 are prepared in accordance
with generally accepted accounting principles in the United States of America.
COUNTERPATH CORPORATION
|
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Stated in U.S. Dollars)
|
(Unaudited)
|
|
|
Nine Months Ended
|
|
|
|
January 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
Net loss for the period
|
$
|
(4,134,084
|
)
|
$
|
(1,772,042
|
)
|
Adjustments to reconcile net loss to
net cash used in operating activities:
|
|
|
|
|
|
|
Bad debt expense
|
|
817,331
|
|
|
197,870
|
|
Deferred lease
inducements
|
|
(7,421
|
)
|
|
(7,626
|
)
|
Depreciation and amortization
|
|
73,323
|
|
|
85,153
|
|
Unrealized foreign
exchange (gain) loss
|
|
(172,503
|
)
|
|
707,942
|
|
Stock-based compensation Note 8
|
|
404,414
|
|
|
494,883
|
|
Issuance of common
stock for services
|
|
|
|
|
11,105
|
|
Change in fair value of derivative
instruments
|
|
6,045
|
|
|
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
Accounts payable and
accrued liabilities
|
|
(3,901
|
)
|
|
166,680
|
|
Accounts receivable
|
|
460,929
|
|
|
(1,997,358
|
)
|
Deferred sales
commission costs Note 4
|
|
(38,340
|
)
|
|
|
|
Accrued warranty
|
|
(13,825
|
)
|
|
10,965
|
|
Customer deposits
|
|
937
|
|
|
(5,730
|
)
|
Prepaid expenses and other current
assets
|
|
(81,217
|
)
|
|
(46,973
|
)
|
Unearned revenue Note
4
|
|
114,197
|
|
|
286,724
|
|
Net cash used in operating activities
|
|
(2,574,115
|
)
|
|
(1,868,407
|
)
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
Purchases of equipment
|
|
(29,147
|
)
|
|
(73,415
|
)
|
Purchases of intangibles
|
|
(9,395
|
)
|
|
(13,864
|
)
|
Net cash used in investing activities
|
|
(38,542
|
)
|
|
(87,279
|
)
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
Net proceeds from issuance of common stock
|
|
16,739
|
|
|
2,895,655
|
|
Repurchases of common stock
|
|
|
|
|
(32,059
|
)
|
Proceeds received from loan payable Note 7
|
|
2,000,000
|
|
|
|
|
Net cash provided by financing activities
|
|
2,016,739
|
|
|
2,863,596
|
|
|
|
|
|
|
|
|
Foreign exchange effect on cash
|
|
(8,106
|
)
|
|
69,489
|
|
|
|
|
|
|
|
|
Decrease in cash
|
|
(604,024
|
)
|
|
977,399
|
|
|
|
|
|
|
|
|
Cash, beginning of the period
|
|
2,348,883
|
|
|
2,071,019
|
|
Cash, end of the period
|
$
|
1,744,859
|
|
$
|
3,048,418
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
Interest
|
$
|
26,740
|
|
$
|
341
|
|
Taxes
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
Non cash transactions Note 8
|
|
|
|
|
|
|
See accompanying notes to the interim consolidated financial
statements
7
COUNTERPATH CORPORATION
|
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS EQUITY
|
for the Six Months Ended January 31, 2019
|
(Stated in U.S. Dollars)
|
(Unaudited)
|
|
|
Common Shares
|
|
|
Treasury Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Number
|
|
|
|
|
|
Number
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
of
|
|
|
|
|
|
of
|
|
|
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
|
|
|
|
Shares
|
|
|
Par
Value
|
|
|
Shares
|
|
|
Par
Value
|
|
|
Capital
|
|
|
Deficit
|
|
|
Loss
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 30, 2017
|
|
5,005,245
|
|
$
|
5,005
|
|
|
(59,900
|
)
|
$
|
(60
|
)
|
$
|
71,680,575
|
|
$
|
(60,481,015
|
)
|
$
|
(4,025,196
|
)
|
$
|
7,179,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued Note 8:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private placement, net of share issuance
costs
|
|
966,740
|
|
|
967
|
|
|
|
|
|
|
|
|
2,831,479
|
|
|
|
|
|
|
|
|
2,832,446
|
|
Issuance of common stock for
services
|
|
14,000
|
|
|
14
|
|
|
|
|
|
|
|
|
33,303
|
|
|
|
|
|
|
|
|
33,317
|
|
Share repurchase plan
|
|
|
|
|
|
|
|
(13,600
|
)
|
|
(14
|
)
|
|
(33,807
|
)
|
|
|
|
|
|
|
|
(33,821
|
)
|
Cancellation of shares
|
|
(73,500
|
)
|
|
(74
|
)
|
|
73,500
|
|
|
74
|
|
|
1,762
|
|
|
|
|
|
|
|
|
1,762
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
494,883
|
|
|
|
|
|
|
|
|
494,883
|
|
Employee share purchase
program
|
|
22,226
|
|
|
22
|
|
|
|
|
|
|
|
|
61,970
|
|
|
|
|
|
|
|
|
61,992
|
|
Exercise of stock options
|
|
495
|
|
|
1
|
|
|
|
|
|
|
|
|
1,217
|
|
|
|
|
|
|
|
|
1,218
|
|
Net loss for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,772,042
|
)
|
|
|
|
|
(1,772,042
|
)
|
Foreign currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,404,362
|
|
|
1,404,362
|
|
Balance, January 31, 2018
|
|
5,935,206
|
|
$
|
5,935
|
|
|
|
|
$
|
|
|
$
|
75,071,382
|
|
$
|
(62,253,057
|
)
|
$
|
(2,620,834
|
)
|
$
|
10,203,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 30, 2018
|
|
5,930,468
|
|
$
|
5,931
|
|
|
|
|
$
|
|
|
$
|
75,170,181
|
|
$
|
(63,701,685
|
)
|
$
|
(3,233,241
|
)
|
$
|
8,241,186
|
|
Adoption of ASC 606 Note 4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
134,033
|
|
|
|
|
|
134,033
|
|
Balance, May 1, 2018
|
|
5,930,468
|
|
$
|
5,931
|
|
|
|
|
$
|
|
|
$
|
75,170,181
|
|
$
|
(63,567,652
|
)
|
$
|
(3,233,241
|
)
|
$
|
8,375,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued Note 8:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
404,414
|
|
|
|
|
|
|
|
|
404,414
|
|
Employee share purchase program
|
|
9,406
|
|
|
9
|
|
|
|
|
|
|
|
|
19,109
|
|
|
|
|
|
|
|
|
19,118
|
|
Exercise of stock options
|
|
6,958
|
|
|
7
|
|
|
|
|
|
|
|
|
(2,386
|
)
|
|
|
|
|
|
|
|
(2,379
|
)
|
Net loss for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,134,084
|
)
|
|
|
|
|
(4,134,084
|
)
|
Foreign currency translation
adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(316,356
|
)
|
|
(316,356
|
)
|
Balance, January 31, 2019
|
|
5,946,832
|
|
$
|
5,947
|
|
|
|
|
$
|
|
|
$
|
75,591,318
|
|
$
|
(67,701,736
|
)
|
$
|
(3,549,597
|
)
|
$
|
4,345,932
|
|
See accompanying notes to the interim consolidated financial
statements
8
COUNTERPATH CORPORATION
|
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
|
January 31, 2019
|
(Unaudited)
|
Note 1
|
Nature of Operations
|
CounterPath Corporation (the
Company) was incorporated in the State of Nevada on April 18, 2003. 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
|
Basis of Presentation and Principles of
Consolidation
|
The accompanying interim consolidated
financial statements have been prepared in accordance with the accounting
principles generally accepted in the United States of America (U.S. GAAP) and
are stated in U.S. dollars, except where otherwise disclosed.
These interim 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, BridgePort Networks, Inc.
(BridgePort), a company incorporated under the laws of the state of Delaware
and CounterPath LLC, a company formed on August 27, 2018, under the laws of the
state of Delaware. The results of NewHeights Software Corporation
(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 Technologies Inc. (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.
These interim 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.
Going Concern
The Company has experienced recurring
losses and has an accumulated deficit of $67,701,736 as of January 31, 2019, as
a result of flat to declining revenues resulting from 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 issuance
of the financial statements.
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
are 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.
The Company has historically been able
to manage liquidity requirements through cost management and cost reduction
measures, supplemented with raising additional financing. On October 10, 2018,
the Company entered into a loan agreement for an aggregate principal amount of
up to $3,000,000. See
Note 7 Loan Payable
for further detail. As of
January 31, 2019, the Company has no other commitments to raise funds.
9
COUNTERPATH CORPORATION
|
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
|
January 31, 2019
|
(Unaudited)
|
Interim Reporting
The information presented in the
accompanying interim consolidated financial statements is without audit pursuant
to the rules and regulations of the Securities and Exchange Commission (SEC).
Certain information and footnote disclosures normally included in the
consolidated financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading.
These statements reflect all
adjustments, which are, in the opinion of management, necessary to present
fairly the financial position, results of operations and cash flows for the
interim periods presented in accordance with generally accepted accounting
principles in the United States of America. Except where noted, these interim
financial statements follow the same accounting policies and methods of their
application as the Companys April 30, 2018 annual audited consolidated
financial statements. All adjustments are of a normal recurring nature. It is
suggested that these interim financial statements be read in conjunction with
the Companys April 30, 2018 annual audited consolidated financial statements.
Operating results for the three and
nine months ended January 31, 2019 are not necessarily indicative of the results
that can be expected for the year ending April 30, 2019.
Reclassification
Certain prior period balances have
been reclassified to conform to the current period presentation in the Companys
consolidated interim financial statements and the accompanying notes.
Note 3
|
Summary of Significant Accounting
Policies
|
The significant accounting policies
used in preparation of these interim consolidated financial statements are
disclosed in our Annual Report on Form 10-K for the fiscal year ended April 30,
2018 filed with the Securities Exchange Commission on July 25, 2018, and there
have been no changes to the Company's significant accounting policies during the
three and nine months ended January 31, 2019, except for the revenue recognition
policy, described in
Note 4 Revenue Recognition under ASC 606
, that was
updated as a result of adopting Accounting Standards Update (ASU) No. 2014-09,
Revenue from Contracts with Customers: Topic 606
(ASU 2014-09 or ASC
606). ASU 2014-09 also included Subtopic 340-40,
Other Assets and Deferred
Costs - Contracts with Customers
. All amounts and disclosures set forth
herein are in compliance with these standards.
Concentrations of Credit Risk
Financial instruments that potentially
subject the Company to concentrations of credit risk consist primarily of cash
and accounts receivable. The Company has exposure to credit risk to the extent
cash balances exceed amounts covered by federal deposit insurance; however, the
Company believes that its credit risk on cash balances is immaterial. The
Company is also subject to concentrations of credit risk in its accounts
receivable. The Company monitors and actively manages its receivables, and from
time to time will insure certain receivables with higher credit risk and may
require collateral or other securities to support its accounts receivable.
10
COUNTERPATH CORPORATION
|
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
|
January 31, 2019
|
(Unaudited)
|
Revenue from significant customers for
the three and nine months ended January 31, 2019 and 2018 is summarized below:
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
January 31,
|
|
|
January 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Customer A
|
|
%
|
|
|
17%
|
|
|
%
|
|
|
6%
|
|
The table below presents significant
customers who accounted for greater than 10% of total accounts receivable as of
January 31, 2019 and April 30, 2018:
|
|
|
January 31,
|
|
|
April 30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
Customer A
|
|
%
|
|
|
18%
|
|
|
Customer B
|
|
%
|
|
|
13%
|
|
Accounts Receivable and Allowance
for Doubtful Accounts
Accounts receivable are presented net
of an allowance for doubtful accounts.
|
|
|
January 31,
|
|
|
April 30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
Balance of allowance for doubtful accounts,
beginning of period
|
$
|
322,638
|
|
$
|
80,232
|
|
|
Bad debt provision
|
|
801,523
|
|
|
578,024
|
|
|
Write-off of receivables
|
|
|
|
|
(335,618
|
)
|
|
Balance of allowance for doubtful accounts, end of period
|
$
|
1,124,161
|
|
$
|
322,638
|
|
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.
Derivative Instruments
The Company accounts for derivative
instruments, consisting of foreign currency forward contracts, pursuant to the
provisions of 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 the Company from fluctuations in exchange rates. Gains or losses arising
out of marked to market fair value valuation of non-designated forward contracts
are recognized in net income.
The Company records foreign currency option and
forward contracts on its Consolidated Balance Sheets as derivative assets or
liabilities depending on whether the fair value of such contracts is a net asset
or net liability, respectively.
See Note 5 - Derivative Instruments
for
further detail. The Company did not enter any foreign currency derivatives
designated as cash flow hedges in the three and nine months ended January 31,
2019.
11
COUNTERPATH CORPORATION
|
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
|
January 31, 2019
|
(Unaudited)
|
Recently Adopted Accounting
Pronouncements
In May 2014, FASB issued ASU 2014-09,
Revenue From Contracts With Customers
(Topic 606) which supersedes the
revenue recognition requirements in Topic 605 Revenue Recognition (Topic
605) and requires entities to recognize revenue when control of the promised
goods or services is transferred to customers at an amount that reflects the
consideration to which the entity expects to be entitled to in exchange for
those goods and services. The Company adopted ASU 2014-09 as of May 1, 2018
using the modified retrospective transition method. See
Note 4 Revenue
Recognition
under ASC 606 for further details.
Recently Issued Accounting
Pronouncements
In August 2017, the FASB issued ASU
2017-12, Targeted Improvements to Accounting for Hedging Activities, which
amends the presentation and disclosure requirements and changes how companies
assess effectiveness. The amendments are intended to more closely align hedge
accounting with companies risk management strategies, simplify the application
of hedge accounting, and increase transparency as to the scope and results of
hedging programs. This amendment is effective for annual periods beginning after
December 15, 2018, including interim periods within those periods. Early
application is permitted. The Company is currently assessing the future impact
of this update on its consolidated financial statements and related disclosures.
In January 2017, the FASB issued ASU
2017-04, Intangibles Goodwill and Other: Simplifying the Test for Goodwill
Impairment, which amends the guidance to eliminate Step 2 from the goodwill
impairment test. Instead, under the amendments in the new guidance, an entity
should perform its annual, or interim, goodwill impairment test by comparing the
fair value of a reporting unit with its carrying amount. The entity should
recognize an impairment charge for the amount by which the carrying amount
exceeds the reporting units fair value. The amendments will be effective for
annual or any interim goodwill impairment tests in fiscal years beginning after
December 15, 2019. The Company is evaluating the impact of this amendment on its
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 a 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. The Company is 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.
Note 4
|
Revenue Recognition under ASC 606
|
On May 1, 2018, the Company adopted
the new accounting standard,
ASC 606 Revenue from Contracts with
Customers
and all related amendments to the new accounting standard to
contracts using the modified retrospective method. The Company recognized the
cumulative effect of initially applying the new revenue recognition
standard to contracts with open performance obligations as of May 1, 2018, as an
adjustment to the opening balance of retained earnings. Results of the reporting
period beginning May 1, 2018 are presented under ASC 606, while prior period
amounts are not adjusted and continue to be reported in accordance with the
Company's historic accounting under ASC 605.
12
COUNTERPATH CORPORATION
|
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
|
January 31, 2019
|
(Unaudited)
|
Revenues from contracts with customers
are recognized when control of promised goods and services is transferred to
customers in an amount that reflects the consideration the Company expects to be
entitled to in exchange for those goods or services.
The Company recognizes revenue using
the five-step model as prescribed by ASC 606:
|
1)
|
Identification of the contract, or contracts, with a
customer;
|
|
2)
|
Identification of the performance obligations in the
contract;
|
|
3)
|
Determination of the transaction price;
|
|
4)
|
Allocation of the transaction price to the performance
obligations in the contract; and
|
|
5)
|
Recognition of revenue when or as, the Company satisfies
a performance obligation.
|
When a contract with a customer is
signed, the Company assesses whether collection of the fees under the
arrangement is probable. The Company estimates the amount to reserve for
uncollectible amounts at the end of each reporting period based on the aging of
the contract balance, current and historical customer trends, and communications
with its customers. These reserves are recorded against the related accounts
receivable.
The transaction price is the
consideration that the Company expects to receive from its customers in exchange
for its products or services. In determining the allocation of the transaction
price, the Company identifies performance obligations in contracts with
customers, which may include products, subscriptions to software and services,
support, professional services and training. The Company allocates the
transaction price to each performance obligation on a relative standalone
selling price basis. The standalone selling price (SSP) is the price at which
the Company would sell a promised product or service separately to a customer.
The Company determines the SSP using information that may include market
conditions or other observable inputs. In certain cases, the Company is able to
establish a SSP based on observable prices for products or services sold
separately. In these instances, the Company would use a single amount to
estimate a SSP. If a SSP is not directly observable, for example when pricing is
variable, the Company will use a range of SSP.
In certain circumstances, the Company
may estimate SSP for a product or service by applying the residual approach.
This approach has been most commonly used when certain perpetual software
licenses are only sold bundled with one year of post-contract support or other
services, and a price has not been established for the software.
Significant judgement is used to
determine SSP and to determine whether there is a variance that needs to be
allocated based on the relative SSP of the various products and services.
Estimating SSP is a formal process that includes review and approval by the
Companys management.
Software Revenue
The Company generates software revenue
primarily on a single fee per perpetual software license basis. The Company
recognizes software revenue for perpetual licenses when control has transferred
to the customer, which is generally at the time of delivery when the customer
has the ability to deploy the licenses, provided all revenue recognition
criteria have been met. If the revenue recognition criteria has not been met,
the revenue is deferred or not recognized.
13
COUNTERPATH CORPORATION
|
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
|
January 31, 2019
|
(Unaudited)
|
Subscription, support and
maintenance
Revenue from the Companys recurring
subscription revenue from subscriptions related to our software as a service
offering is recognized ratably over the contractual subscription term as control
of the goods or services is transferred to the customer, beginning on the date
that the subscription is made available to the customer. Support and maintenance
revenue is generated from recurring annual software support and maintenance
contracts for our perpetual software licenses and is recognized ratably over the
term of the service period, which is generally twelve months. 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. Both subscription revenue and support and
maintenance revenue are typically billed annually in advance based on the terms
of the arrangement.
Professional services and other
Professional services
and other revenue is generated 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 customers requirements for customization,
implementation and training. Depending on the services to be provided, revenue
from professional services and other is generally recognized at the time of
delivery when the services have been completed and control has been transferred.
For contracts with elements related to
customized network solutions and certain network build-outs or software systems
that require significant modification or customization, the Company will
recognize revenue using the percentage-of-completion method. 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.
Unearned Revenue
Unearned revenue represent billings or
payments received in advance of revenue recognition and is recognized upon
transfer of control. Balances consist primarily of annual support and
subscription services and professional services not yet provided as of the
balance sheet date.
During the three and nine months ended
January 31, 2019, the Company recognized $473,272 and $2,129,124 in revenue,
respectively, in its consolidated statements of operations that was previously
recognized as unearned revenue in the consolidated balance sheets at May 1,
2018.
Costs to Obtain a Customer Contract
Sales commissions and related expenses
are considered incremental and recoverable costs of acquiring customer
contracts. These costs are capitalized and amortized on a systematic basis,
consistent with the timing of revenue recognition over the anticipated benefit
period of up to 3.5 years, depending on the products and services. The
anticipated benefit period was estimated based on the average length of
applicable customer contracts and includes the contract term and any anticipated
renewal periods. This amortization expense is recorded in sales and marketing
expense within the Company's consolidated statement of operations. The Company
has elected to apply a practical expedient that permits the Company to expense
costs to obtain a contract as incurred, if the anticipated benefit period is one
year or less. From time to time, management will revisit the estimates used in
recognizing the costs to obtain customer contracts.
During the three and nine months ended
January 31, 2019, the Company capitalized approximately $79,926 and $399,058,
respectively, of costs to obtain revenue contracts and amortized approximately
$73,127 and $186,822 of commissions during those same periods to sales and
marketing expense.
14
COUNTERPATH CORPORATION
|
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
January 31, 2019
|
(Unaudited)
|
Capitalized costs to obtain a revenue
contract on the Company's condensed consolidated balance sheets totaled
approximately $172,373 at January 31, 2019.
Costs to Fulfill a Customer
Contract
Certain contract costs incurred to
fulfill obligations under a contract are capitalized when such costs generate or
enhance resources to be used in satisfying future performance obligations and
the costs are deemed recoverable. Judgement is used in determining whether
certain contract costs can be capitalized. These costs are capitalized and
amortized on a systematic basis to match the timing of revenue recognition over
the anticipated benefit period of up to 3.5 years, depending on the products and
services. The anticipated benefit period was estimated based on the average
length of applicable customer contracts and includes the contract term and any
anticipated renewal periods. This amortization expense is recorded in cost of
sales in the Companys consolidated statement of operations. From time to time,
management will review the capitalized costs for impairment and will also
revisit the estimates used in recognizing the costs to fulfill customer
contracts.
Adoption Impact of ASC 606
The Company recognized the cumulative
effect of initially applying ASC 606 as an adjustment to retained earnings in
the condensed consolidated balance sheet as of May 1, 2018:
|
|
|
Balance at
|
|
|
ASC 606
|
|
|
Balance at
|
|
|
|
|
April 30, 2018
|
|
|
Adjustments
|
|
|
May 1, 2018
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
Deferred sales commissions costs
|
$
|
|
|
$
|
70,248
|
|
$
|
70,248
|
|
|
Non-current assets:
|
|
|
|
|
|
|
|
|
|
|
Deferred sales commissions costs
|
$
|
|
|
$
|
63,785
|
|
$
|
63,785
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
Accumulated deficit
|
$
|
(63,701,685
|
)
|
$
|
134,033
|
|
$
|
(63,567,652
|
)
|
The following tables summarize the
adoption impact of ASC 606 on the Company's condensed consolidated financial
statements for the three and nine months ended January 31, 2019.
Selected Condensed Consolidated
Income Statement Line Items:
|
|
|
Three Months Ended January 31, 2019
|
|
|
|
|
|
|
|
ASC 606
|
|
|
(As Reported)
|
|
|
|
|
ASC 605
|
|
|
Adjustments
|
|
|
ASC 606
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
Software
|
$
|
1,104,256
|
|
$
|
15,055
|
|
$
|
1,119,311
|
|
|
Subscription, support and
maintenance
|
|
1,369,457
|
|
|
(2,070
|
)
|
|
1,367,387
|
|
|
Professional services and other
|
|
118,206
|
|
|
(17,146
|
)
|
|
101,060
|
|
|
Total
revenue
|
$
|
2,591,919
|
|
$
|
(4,161
|
)
|
$
|
2,587,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing
|
$
|
990,089
|
|
$
|
(6,799
|
)
|
$
|
983,290
|
|
|
Loss from operations
|
$
|
(1,030,030
|
)
|
$
|
2,638
|
|
$
|
(1,027,392
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share:
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
$
|
(0.18
|
)
|
$
|
|
|
$
|
(0.18
|
)
|
15
COUNTERPATH CORPORATION
|
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
|
January 31, 2019
|
(Unaudited)
|
|
|
|
Nine Months Ended January 31, 2019
|
|
|
|
|
|
|
|
ASC 606
|
|
|
(As Reported)
|
|
|
|
|
ASC 605
|
|
|
Adjustments
|
|
|
ASC 606
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
Software
|
$
|
3,415,716
|
|
$
|
(16,987
|
)
|
$
|
3,398,729
|
|
|
Subscription, support and
maintenance
|
|
3,941,904
|
|
|
(3,657
|
)
|
|
3,938,247
|
|
|
Professional services and other
|
|
556,698
|
|
|
23,175
|
|
|
579,873
|
|
|
Total
revenue
|
$
|
7,914,318
|
|
$
|
2,531
|
|
$
|
7,916,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing
|
$
|
2,982,294
|
|
$
|
(36,355
|
)
|
$
|
2,945,939
|
|
|
Loss from operations
|
$
|
(4,255,635
|
)
|
$
|
38,886
|
|
$
|
(4,216,749
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share:
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
$
|
(0.71
|
)
|
$
|
0.01
|
|
$
|
(0.70
|
)
|
Selected Condensed Consolidated
Balance Line Items:
|
|
|
January 31, 2019
|
|
|
|
|
|
|
|
ASC 606
|
|
|
(As Reported)
|
|
|
|
|
ASC 605
|
|
|
Adjustments
|
|
|
ASC 606
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
Deferred sales commissions costs
|
$
|
|
|
$
|
110,561
|
|
$
|
110,561
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
Unearned revenue
|
$
|
2,682,604
|
|
$
|
(2,531
|
)
|
$
|
2,680,073
|
|
|
Non-current assets:
|
|
|
|
|
|
|
|
|
|
|
Deferred sales commissions costs
|
$
|
|
|
$
|
61,812
|
|
$
|
61,812
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
Accumulated deficit
|
$
|
(67,871,578
|
)
|
$
|
169,842
|
|
$
|
(67,701,736
|
)
|
Selected Condensed Consolidated
Statement of Cash Flows Line Items:
|
|
|
Nine Months Ended January 31, 2019
|
|
|
|
|
|
|
|
ASC 606
|
|
|
(As Reported)
|
|
|
|
|
ASC 605
|
|
|
Adjustments
|
|
|
ASC 606
|
|
|
Net loss
|
$
|
(4,172,970
|
)
|
$
|
38,886
|
|
$
|
(4,134,084
|
)
|
|
Deferred sales commissions costs
|
$
|
|
|
$
|
(38,340
|
)
|
$
|
(38,340
|
)
|
|
Unearned revenue
|
$
|
116,728
|
|
$
|
(2,531
|
)
|
$
|
114,197
|
|
|
Unrealized foreign exchange (gain) loss
|
$
|
(174,488
|
)
|
$
|
1,985
|
|
$
|
(172,503
|
)
|
|
Net cash provided by operating activities
|
$
|
(2,574,115
|
)
|
$
|
|
|
$
|
(2,574,115
|
)
|
Disaggregation of Revenue
The Company disaggregates its revenue
by geographic region. See
Note 10 Segmented Information
for more
information.
16
Note 5
|
Derivative Instruments
|
In the normal course of business, the
Company is exposed to fluctuations in 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 the Companys 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
multiple currencies, primarily from its business operations in Canada.
The Companys foreign currency risk
management program includes entering into foreign currency derivatives at
various times to mitigate the currency exchange rate risk on Canadian dollar
denominated cash flows. These foreign currency forward and option contracts are
considered non-designated derivative instruments and are not used for trading or
speculative purposes. The changes in fair value and settlements are recorded in
change in fair value of derivative instruments, net in the consolidated
statement of operations.
During the three and nine months ended
January 31, 2019 and 2018, the Company did not enter into any designated cash
flow hedge contracts.
The following table summarizes the
notional amounts of the Companys outstanding derivative instruments:
|
|
|
|
January 31,
|
|
|
April 30,
|
|
|
Fair value of
Undesignated Derivatives
|
|
|
2019
|
|
|
2018
|
|
|
Foreign currency option contracts
|
|
$
|
2,000,000
|
|
$
|
|
|
The following table presents the fair
values of the Companys derivative instruments on a gross basis as reflected on
the Companys consolidated balance sheets. The Company did not have any
outstanding derivative contracts as of April 30, 2018.
|
|
|
|
January 31, 2019
|
|
|
|
|
|
Derivative
|
|
|
Derivative
|
|
|
Fair value of
Undesignated Derivatives
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Foreign currency option contracts
|
|
$
|
12,007
|
|
$
|
18,052
|
|
During the three and nine months ended
January 31, 2019, the Company recorded a gain of $4,255 and a loss of $897,
respectively, resulting from the change in fair value of derivative instruments.
No such gains or losses were recorded in the prior year as the Company did not
enter into any forward and option contracts.
Note 6
|
Fair Value Measurements
|
Assets and liabilities recorded at
fair value in the consolidated financial statements are categorized based upon
the level of judgment associated with the inputs used to measure their fair
value. Hierarchical levels directly related to the amount of subjectivity
associated with the inputs to valuation of these assets or liabilities are set
forth below. Transfers between levels are recognized at the end of each quarter.
The Company did not recognize any transfers between levels during the periods
presented.
Level 1Inputs utilize quoted prices (unadjusted) in active markets
for identical assets or liabilities.
Level 2Inputs (other than quoted prices
included in Level 1) 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.
17
Level 3 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.
Assets and liabilities are classified
based on the lowest level of input that is significant to the fair value
measurements. 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.
The carrying values of financial
instruments classified as current assets and current liabilities approximates
their fair values, based on the nature and short maturity of these instruments,
and are presented in the Companys financial statements at carrying cost.
Financial Instruments Measured at
Fair value
The following table presents the
Companys assets and liabilities that are measured at fair value on a recurring
basis as of January 31, 2019 and April 30, 2018.
|
|
|
|
Carrying
|
|
|
|
|
|
Fair Value
|
|
|
|
|
|
As at January 31, 2019
|
|
|
Amount
|
|
|
Fair Value
|
|
|
Levels
|
|
|
Reference
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
1,744,859
|
|
$
|
1,744,859
|
|
|
1
|
|
|
N/A
|
|
|
Foreign currency option contracts
|
|
|
12,007
|
|
|
12,007
|
|
|
2
|
|
|
Note 5
|
|
|
|
|
$
|
1,756,866
|
|
$
|
1,756,866
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency option contracts
|
|
$
|
18,052
|
|
$
|
18,052
|
|
|
2
|
|
|
Note 5
|
|
|
|
|
|
Carrying
|
|
|
|
|
|
Fair Value
|
|
|
|
|
|
As at April 30, 2018
|
|
|
Amount
|
|
|
Fair Value
|
|
|
Levels
|
|
|
Reference
|
|
|
Cash
|
|
$
|
2,348,883
|
|
$
|
2,348,883
|
|
|
1
|
|
|
N/A
|
|
Financial Instruments Not Measured
at Fair Value
The following table presents the
Companys liability that is not measured at fair value as of January 31, 2019,
but for which fair value is available:
|
|
|
|
Carrying
|
|
|
|
|
|
Fair Value
|
|
|
|
|
|
As at January 31, 2019
|
|
|
Amount
|
|
|
Fair Value
|
|
|
Levels
|
|
|
Reference
|
|
|
Loan payable
|
|
$
|
2,000,000
|
|
$
|
2,118,677
|
|
|
2
|
|
|
Note 7
|
|
Loan payable is presented on the
consolidated balance sheets at carrying cost. The fair value of the fixed
interest rate loan is estimated based on observable market prices or inputs.
Where observable prices or inputs are not available, valuation models are
applied using the net present value of cash flow streams over the term, using
estimated market rates for similar instruments and remaining terms.
On October 10, 2018, the Company
entered into a loan agreement (the Loan Agreement) with Wesley Clover
International Corporation and KMB Trac Two Holdings Ltd for an aggregate
principal amount of up to $3,000,000. Pursuant to the terms of the Loan
Agreement, the loan is unsecured and will be made available in multiple advances
at the discretion of the Company and will bear interest at a rate of 8% per
year, payable monthly. The outstanding principal and any accrued interest may be
prepaid without penalty and is to be fully repaid on the second anniversary of
the first advance.
18
As of January 31, 2019, the principal
balance of the loan payable was $2,000,000. This balance is to be repaid on or
before October 11, 2020. During the three and nine months ended January 31,
2019, the Company recognized $22,137 and $26,740, respectively, in interest
expense in the consolidated statement of operations. See Note 9
Related
Party Transactions
.
Private Placement
On January 24, 2018, the Company
issued an aggregate of 427,500 shares of common stock under a non-brokered
private placement at a price of $4.01 per share for total gross proceeds of
$1,714,275 less issuance costs of $48,325.
On July 20, 2017, the Company issued
an aggregate of 539,240 shares of common stock under a non-brokered private
placement at a price of $2.20 per share for total gross proceeds of $1,186,328
less issuance costs of $19,832. There were no private placements during the nine
months ended January 31, 2019.
Shares Issued for Services
On October 16, 2017, the Company
entered into an agreement to issue 14,000 shares of the Companys common stock
in exchange for investor relation services. The agreement was terminated on
April 8, 2018 as the services were no longer required. Pursuant to the terms of
the agreement, upon termination, 7,211 shares of common stock were returned to
the Company.
Stock Options
During the nine months ended January
31, 2019, the Company granted 221,000 stock options to certain employees of the
Company. No stock options were granted during the same period in the prior year.
The weighted-average fair value of options granted during the nine months ended
January 31, 2019 was $0.82. The weighted-average assumptions utilized to
determine such value is presented in the following table:
|
|
|
Nine Months Ended
|
|
|
|
|
January 31, 2019
|
|
|
Risk-free interest rate
|
|
2.7%
|
|
|
Expected volatility
|
|
77.2%
|
|
|
Expected term
|
|
3.7 years
|
|
|
Dividend yield
|
|
%
|
|
During the nine months ended January
31, 2019, the Company issued 6,958 shares pursuant to cashless exercises of
35,500 stock options and remitted employee tax withholdings of approximately
$2,386 on the behalf of its employees. No stock options were exercised in the
same periods in the prior year. The following is a summary of the status of the
Companys stock options as of January 31, 2019 and the stock option activity
during the nine months ended January 31, 2019:
|
|
|
Weighted Average
|
|
|
|
|
Number of
|
|
|
Exercise Price
|
|
|
|
|
Options
|
|
|
per Share
|
|
|
Outstanding at April 30, 2018
|
|
675,042
|
|
$
|
2.66
|
|
|
Granted
|
|
221,000
|
|
$
|
1.45
|
|
|
Forfeited/Cancelled
|
|
(151,635
|
)
|
$
|
2.74
|
|
|
Expired
|
|
(71,000
|
)
|
$
|
2.50
|
|
|
Exercised
|
|
(35,500
|
)
|
$
|
2.50
|
|
|
Outstanding at January 31, 2019
|
|
637,907
|
|
$
|
2.25
|
|
|
|
|
|
|
|
|
|
|
Exercisable at January 31, 2019
|
|
217,493
|
|
$
|
2.57
|
|
|
Exercisable at April 30, 2018
|
|
256,555
|
|
$
|
2.47
|
|
19
Employee and non-employee stock-based
compensation amounts classified in the Companys consolidated statements of
operations for the three and nine months ended January 31, 2019 and 2018 are as
follows:
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
January 31,
|
|
|
January 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Cost of sales
|
$
|
11,528
|
|
$
|
11,583
|
|
$
|
37,098
|
|
$
|
39,439
|
|
|
Sales and marketing
|
|
16,333
|
|
|
17,141
|
|
|
55,093
|
|
|
58,814
|
|
|
Research and development
|
|
11,478
|
|
|
11,006
|
|
|
37,491
|
|
|
42,933
|
|
|
General and administrative
|
|
10,455
|
|
|
25,630
|
|
|
55,178
|
|
|
97,978
|
|
|
Total stock-option based compensation
|
$
|
49,794
|
|
$
|
65,360
|
|
$
|
184,860
|
|
$
|
239,164
|
|
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 shares of the Companys common stock
at market price. The Company matches 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 nine months ended January 31, 2019, the Company matched
$19,118 (2018 - $36,210) in shares purchased by employees under the ESPP. During
the nine months ended January 31, 2019, 19,724 shares (2018 12,832 shares)
were purchased on the open market and 9,406 shares (2018 22,226) were issued
from treasury under the ESPP.
A total of 220,000 shares have been
reserved for issuance under the ESPP. As of January 31, 2019, a total of 152,098
shares were available for issuance under the ESPP.
Deferred Share Unit Plan
During the nine months ended January
31, 2019, 236,981 (2018 - 119,998) deferred stock units (DSUs) were issued
under the Deferred Stock Unit Plan (DSUP), of which 45,661 DSUs have been cancelled. Of the oustanding DSUs granted this year, 122,830 were granted to
officers and employees and 68,490 were granted to non-employee directors. As of
January 31, 2019, a total of 42,495 shares were available for issuance under the
DSUP.
The following table summarizes the
Companys outstanding DSU awards as of January 31, 2019, and changes during the
period then ended:
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average Grant
|
|
|
|
|
|
|
|
Date Fair
|
|
|
|
|
Number of DSUs
|
|
|
Value Per DSU
|
|
|
DSUs outstanding at April 30, 2018
|
|
465,390
|
|
$
|
6.40
|
|
|
Granted
|
|
236,981
|
|
$
|
2.05
|
|
|
Cancelled
|
|
(68,880
|
)
|
$
|
2.42
|
|
|
DSUs outstanding at January 31, 2019
|
|
633,491
|
|
$
|
5.20
|
|
20
Employee and non-employee DSU based
compensation amounts classified in the Companys consolidated statements of
operations for the three and nine months ended January 31, 2019 and 2018 are as
follows:
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
January 31,
|
|
|
January 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
General and administrative
|
$
|
15,024
|
|
$
|
22,564
|
|
$
|
219,554
|
|
$
|
255,719
|
|
Normal Course Issuer Bid Plan
Pursuant to a normal course issuer bid
(NCIB) commencing on March 29, 2017 and expired March 28, 2018, the Company
was authorized to purchase 258,613 shares of the Companys common stock through
the facilities of the Toronto Stock Exchange (the TSX) and other Canadian
marketplaces or U.S. marketplaces. During the period March 29, 2017 to January
31, 2018, the Company repurchased 73,500 common shares at an average price of
$2.18 (CDN$2.81) for a total of $160,230. As of January 31, 2018, a total of
73,500 shares had been cancelled.
On March 27, 2018, the Company filed
another normal course issuer bid commencing on March 29, 2018 and expiring March
28, 2019. Under this normal course issuer bid, the Company is authorized to
purchase up to 284,278 shares of its common stock through the facilities of the
TSX and other Canadian marketplaces or U.S. marketplaces. During the three and
nine months ended January 31, 2019, no shares were repurchased under the NCIB.
Note 9
|
Related Party Transactions
|
On October 10, 2018, the Company
entered into a loan agreement (the Loan Agreement) with Wesley Clover
International Corporation, a company controlled by the Chairman of the Company,
and KMB
Trac Two Holdings Ltd., a company
owned by the spouse of a director of the Company. As of January 31, 2019, the
principal balance of the loan payable was $2,000,000. During the three and nine
months ended January 31, 2019, the Company recognized $22,137 and $26,740,
respectively, in interest expense in the consolidated statement of operations.
See
Note 7
Loan Payable
for more information.
During the three and nine months ended
January 31, 2019, the Company through its wholly owned subsidiary, CounterPath
Technologies Inc., paid $20,946 and $63,012 (2018 - $21,911 and $65,277),
respectively, to KRP Properties (KRP) (previously known as Kanata Research
Park Corporation) 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 Inc., 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 Inc., paid $7,733 and $23,263 (2018 - $8,258 and
$24,820) for the three and nine months ended January 31, 2019, respectively.
On January 24, 2018, the Company
issued an aggregate of 427,500 shares of common stock under a non-brokered
private placement at a price of $4.01 per share for total gross proceeds of
$1,714,275 less issuance costs of $48,325. In connection with this private
placement, KRP, a company controlled by the Chairman of the Company, purchased
125,000 shares and KMB Trac Two Holdings Ltd., a company owned by the spouse of
a director of our Company, purchased 125,000 shares.
On July 20, 2017, our Company issued
an aggregate of 539,240 shares of common stock under a non-brokered private
placement at a price of $2.20 per share for total gross proceeds of $1,186,328
less issuance costs of $19,832. In connection with this private placement,
Wesley Clover International Corporation purchased 144,357 shares, KMB Trac Two
Holdings Ltd., purchased 180,446 shares, the chief financial officer of the
Company, purchased 4,511 shares, and the executive vice president, sales and marketing of the Company,
purchased 4,545 shares.
21
The above transactions are in the
normal course of operations and are recorded at amounts established and agreed
to between the related parties.
Note 10
|
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 categorized based on the
country in which the customer is located. The following is a summary of total
revenues by geographic area for the three and nine months ended January 31, 2019
and 2018:
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
January 31,
|
|
|
January 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
North America
|
$
|
1,682,944
|
|
$
|
1,648,430
|
|
$
|
5,063,949
|
|
$
|
5,158,026
|
|
|
EMEA
|
|
501,404
|
|
|
1,127,537
|
|
|
1,713,885
|
|
|
3,304,887
|
|
|
Asia Pacific
|
|
278,440
|
|
|
216,479
|
|
|
830,100
|
|
|
744,693
|
|
|
Latin America
|
|
124,970
|
|
|
91,457
|
|
|
308,915
|
|
|
399,668
|
|
|
|
$
|
2,587,758
|
|
$
|
3,083,903
|
|
$
|
7,916,849
|
|
$
|
9,607,274
|
|
All of the Companys long-lived
assets, which include equipment, goodwill and intangible assets and other
assets, are located in Canada and the United States as follows:
|
|
|
January 31,
|
|
|
April 30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
Canada
|
|
6,965,438
|
|
|
7,150,537
|
|
|
United States
|
|
30,905
|
|
|
35,919
|
|
|
|
$
|
6,996,343
|
|
$
|
7,186,456
|
|
Total payable over the term of the
agreements for the period ended are as follows:
|
|
|
Office
|
|
|
Office
|
|
|
|
|
|
Voice
|
|
|
|
|
|
|
|
Leases
|
|
|
Leases
|
|
|
Total
|
|
|
Platform
|
|
|
|
|
|
|
|
Related
|
|
|
Unrelated
|
|
|
Office
|
|
|
Service
|
|
|
Total
|
|
|
|
|
Party
|
|
|
Party
|
|
|
Leases
|
|
|
Contract
|
|
|
Commitments
|
|
|
2019
|
$
|
28,038
|
|
$
|
145,282
|
|
$
|
173,320
|
|
$
|
60,000
|
|
$
|
233,320
|
|
|
2020
|
|
5,156
|
|
|
305,167
|
|
|
310,323
|
|
|
240,000
|
|
|
550,323
|
|
|
2021
|
|
−
|
|
|
41,331
|
|
|
41,331
|
|
|
220,000
|
|
|
261,331
|
|
|
2022
|
|
−
|
|
|
24,110
|
|
|
24,110
|
|
|
−
|
|
|
24,110
|
|
|
|
$
|
33,194
|
|
$
|
515,890
|
|
$
|
549,084
|
|
$
|
520,000
|
|
$
|
1,069,084
|
|
The Company is party to legal claims
from time to time which arise in the normal course of business. These claims are
not expected to have a material adverse effect on the financial position,
results of operations or cash flows of the Company.
22
The following table shows the
computation of basic and diluted loss per share:
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
January 31,
|
|
|
January 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Numerator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(1,059,380
|
)
|
$
|
(778,343
|
)
|
$
|
(4,134,084
|
)
|
$
|
(1,772,042
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding
|
|
5,945,181
|
|
|
5,539,352
|
|
|
5,939,803
|
|
|
5,354,690
|
|
|
Effect of dilutive securities
|
|
−
|
|
|
−
|
|
|
−
|
|
|
−
|
|
|
|
|
5,945,181
|
|
|
5,539,352
|
|
|
5,939,803
|
|
|
5,354,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
$
|
(0.18
|
)
|
$
|
(0.14
|
)
|
$
|
(0.70
|
)
|
$
|
(0.33
|
)
|
For the three and nine months ended
January 31, 2019, common share equivalents consisting of stock options and DSUs
totaling 1,271,398 for both periods were not included in the computation of
diluted EPS because the effect was anti-dilutive. For the three and nine months
ended January 31, 2018, common share equivalents consisting of stock options and
DSUs totaling 1,144,172 for both periods were not included in the computation of
diluted EPS because the effect was anti-dilutive.
23