• Filing Date: 2012-09-13
  • Form Type: 10-Q
  • Description: Quarterly report
v2.4.0.6
Document and Entity Information
3 Months Ended
Jul. 31, 2012
Sep. 12, 2012
Document and Entity Information [Line Items]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Jul. 31, 2012  
Trading Symbol cpah  
Entity Registrant Name COUNTERPATH CORP  
Entity Central Index Key 0001236997  
Current Fiscal Year End Date --04-30  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   41,572,353
Entity Current Reporting Status Yes  
Entity Voluntary Filers No  
Entity Well Known Seasoned Issuer No  
Document Fiscal Year Focus 2013  
Document Fiscal Period Focus Q1  
v2.4.0.6
Statement of Financial Position (USD $)
Jul. 31, 2012
Apr. 30, 2012
Current assets:    
Cash $ 11,404,439 $ 8,154,139
Accounts receivable (net of allowance for doubtful accounts of $258,974 and $334,294, respectively) 5,391,270 4,014,472
Prepaid expenses and deposits 123,262 170,556
Total current assets 16,918,971 12,339,167
Deposits 77,741 62,521
Equipment 109,077 101,024
Intangible assets (net of accumulated amortization of $5,900,190 and $5,890,282, respectively) - (e) 29,139 38,853
Derivative instruments - 57,700 0
Goodwill - (e) 8,754,087 8,957,977
Other assets 53,582 44,402
Total Assets 26,000,297 21,543,944
Current liabilities:    
Accounts payable and accrued liabilities 2,357,631 2,416,489
Derivative instruments - 1,244,876 2,026,944
Unearned revenue 1,679,861 1,308,174
Customer deposits 13,872 13,872
Accrued warranty 94,072 84,948
Total current liabilities 5,390,312 5,850,427
Deferred lease inducements 54,758 56,082
Unrecognized tax benefit 98,575 98,575
Total liabilities 5,543,645 6,005,084
Stockholders' equity:    
Preferred stock, $0.001 par value Authorized: 100,000,000 Issued and outstanding: July 31, 2012 - 1; April 30, 2012 - 1 0 0
Common stock, $0.001 par value - Authorized: 83,076,900 Issued and outstanding: July 31, 2012 - 41,563,353; April 30, 2012 - 39,960,479 41,564 39,961
Additional paid-in capital 65,234,746 61,025,529
Accumulated deficit (44,579,233) (45,446,771)
Accumulated other comprehensive income - currency translation adjustment (240,425) (79,859)
Total stockholders' equity 20,456,652 15,538,860
Liabilities and Stockholders' Equity $ 26,000,297 $ 21,543,944
v2.4.0.6
Statement of Financial Position (Parenthetical) (USD $)
Jul. 31, 2012
Apr. 30, 2012
Allowance for Doubtful Accounts Receivable, Current $ 258,974 $ 334,294
Accumulated Amortization of Intangible Assets $ 5,900,190 $ 5,890,282
Preferred Stock, Par Value Per Share $ 0.001 $ 0.001
Preferred Stock, Shares Authorized 100,000,000 100,000,000
Preferred Stock, Shares Issued 1 1
Preferred Stock, Shares Outstanding 1 1
Common Stock, Par Value Per Share $ 0.001 $ 0.001
Common Stock, Shares Authorized 83,076,900 83,076,900
Common Stock, Shares, Issued 41,563,353 39,960,479
Common Stock, Shares, Outstanding 41,563,353 39,960,479
v2.4.0.6
Statement of Operations (USD $)
3 Months Ended
Jul. 31, 2012
Jul. 31, 2011
Revenue - :    
Software $ 2,528,056 $ 1,584,051
Service 1,859,712 1,174,683
Total revenue 4,387,768 2,758,734
Operating expenses:    
Cost of sales (includes depreciation of $5,310 (2011 - $6,181) and amortization of intangible assets of $9,908 (2011 - $280,880) - (e)) 559,793 860,145
Sales and marketing 1,055,035 822,034
Research and development 1,361,012 992,511
General and administrative 1,379,319 1,034,274
Total operating expenses 4,355,159 3,708,964
Income (loss) from operations 32,609 (950,230)
Interest and other income (expense), net:    
Interest and other income 43,853 49,353
Interest expense (470) (171,242)
Fair value adjustment on derivative instruments - 785,128 145,714
Foreign exchange gain 6,418 687
Net income (loss) for the period 867,538 (925,718)
Other comprehensive income (loss):    
Foreign currency translation adjustments (160,566) (47,057)
Comprehensive income (loss) $ 706,972 $ (972,775)
Net income (loss) per share:    
Basic and diluted $ 0.02 $ (0.03)
Weighted average common shares outstanding: 40,727,122 35,831,910
v2.4.0.6
Statement of Operations (Parenthetical) (USD $)
3 Months Ended
Jul. 31, 2012
Jul. 31, 2011
Depreciation $ 5,310 $ 6,181
Amortization of Intangible Assets $ 9,908 $ 280,880
v2.4.0.6
Statement of Cash Flows (USD $)
3 Months Ended
Jul. 31, 2012
Jul. 31, 2011
Cash flows from operating activities:    
Net income (loss) for the period $ 867,538 $ (925,718)
Adjustments to reconcile net income (loss) to net cash used in operating activities:    
Depreciation and amortization 33,495 30,841
Amortization of intangible assets 9,908 280,880
Stock-based compensation 396,770 244,261
Share purchase warrants 0 0
Shares issued as part of share purchase plan 0 0
Fair value adjustment on derivative instruments (785,128) (145,714)
Foreign exchange gain (6,418) (687)
Accretion of debenture discount 0 159,798
Changes in assets and liabilities:    
Accounts receivable (1,376,773) 599,061
Other current assets 47,175 24,927
Decrease in other assets (12,752) (29,229)
Accounts payable and accrued liabilities (29,129) (387,661)
Unearned revenue 371,687 (188,252)
Customer deposits 0 65
Accrued warranty 9,124 (22,967)
Net cash used in operating activities (474,503) (360,395)
Cash flows from investing activities:    
Purchase of equipment (41,227) (671)
Deposits 6,726 (1,021)
Net cash used in investing activities (34,501) (1,692)
Cash flows from financing activities:    
Common stock issued, net of transaction costs 3,759,409 5,857,404
Net cash provided by financing activities 3,759,409 5,857,404
Foreign exchange effect on cash (105) 26,760
Increase (decrease) in cash 3,250,300 5,522,077
Cash, beginning of the period 8,154,139 1,707,397
Cash, end of the period 11,404,439 7,229,474
Non cash transactions -    
Interest $ 470 $ 5,297
v2.4.0.6
Statement of Stockholders Equity (USD $)
Common shares [Member]
USD ($)
Preferred shares [Member]
Additional Paid-In Capital [Member]
USD ($)
Accumulated Deficit [Member]
USD ($)
Accumulated Other Comprehensive Loss [Member]
USD ($)
Total
USD ($)
Beginning Balance at Apr. 30, 2012 $ 39,961   $ 61,025,529 $ (45,446,771) $ (79,859) $ 15,538,860
Beginning Balance (Shares) at Apr. 30, 2012 39,960,479 1        
Private Placements 1,465   3,577,870     3,579,335
Private Placements (Shares) 1,465,000          
Proceeds allocated on exercise of warrants     54,640     54,640
Less: Share issue costs     (15,592)     (15,592)
Shares issued on exercise of warrants 57   126,871     126,928
Shares issued on exercise of warrants (Shares) 57,000          
Exercise of stock options 81   68,658     68,739
Exercise of stock options (Shares) 80,874          
Stock-based compensation     396,770     396,770
Share purchase warrants           0
Net loss for the period       867,538   867,538
Foreign currency translation adjustment         (160,566) (160,566)
Ending Balance at Jul. 31, 2012 $ 41,564   $ 65,234,746 $ (44,579,233) $ (240,425) $ 20,456,652
Ending Balance (Shares) at Jul. 31, 2012 41,563,353 1        
v2.4.0.6
Nature of Operations
3 Months Ended
Jul. 31, 2012
Nature of Operations [Text Block]
Note 1

Nature of Operations

 

 

 

CounterPath Corporation (the “Company”) was incorporated in the State of Nevada on April 18, 2003. The Company’s common shares 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 all of the shares of NewHeights Software Corporation (“NewHeights”) through the issuance of 7,680,168 shares of the Company’s common stock and 369,836 preferred shares issued from a subsidiary of the Company exchangeable into 369,836 shares of common stock of the Company. 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 5,900,014 shares of the Company’s 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 Technologies Inc. and CounterPath Technologies Inc. were amalgamated under the name CounterPath Technologies Inc.

 

 

 

The Company focuses on the design, development, marketing and sales of personal computer and mobile communications application software, gateway (server) software and related professional services, such as pre and post sales technical support and customization services. The Company’s products are sold into the Voice over Internet Protocol (VoIP) market primarily to telecom carriers, telecom original equipment manufacturers and businesses in North America, Central and South America, Europe and Asia.

 

 

v2.4.0.6
Significant Accounting Policies and Going Concern
3 Months Ended
Jul. 31, 2012
Significant Accounting Policies and Going Concern [Text Block]
Note 2

Significant Accounting Policies

 

 

 

These interim 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.

 


  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 Networks, Inc. incorporated under the laws of the state of Delaware. The results of NewHeights Software Corporation (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. (which subsequently was amalgamated with CounterPath Technologies Inc.) and BridgePort Networks, Inc. are included from February 1, 2008, the date of acquisition. All inter-company transactions and balances have been eliminated.

     

  b)

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. Certain information and footnote disclosures normally included in the 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 accounting principles generally accepted 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 Company’s April 30, 2012 annual 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 Company’s April 30, 2012 annual consolidated financial statements.

     
   

Operating results for the three months ended July 31, 2012 are not necessarily indicative of the results that can be expected for the year ending April 30, 2013.

     

  c)

New Accounting Pronouncements

     
   

In May 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs , which aligns the fair value measurement and disclosure requirements in U.S. GAAP and the International Financial Reporting Standards (IFRSs). Many of the amendments in this ASU will not result in a change in requirements, but simply clarify existing requirements. The amendments in this ASU that do change a principle or requirement for measuring fair value or disclosing information about fair value measurements include the following: (1) the ASU permits an exception for measuring fair value when a reporting entity manages its financial instruments on the basis of its net exposure, rather than gross exposure, to those risks; (2) the ASU clarifies that the application of premiums and discounts in a fair value measurement is related to the unit of account for the asset or liability being measured at fair value; (3) the ASU prohibits blockage discounts for level 2 and 3 investments; and (4) the amendments expand the fair value measurement disclosures. The ASU is to be applied prospectively. For public entities, the ASU is effective during interim and annual periods beginning after December 15, 2011.

 


     
   

In June 2011 the FASB issued Accounting Standards Update (ASU) 2011-05, Presentation of Comprehensive Income , which eliminates the option of presenting the components of other comprehensive income (OCI) as part of the statement of changes in stockholders’ equity. The ASU instead permits an entity to present the total of comprehensive income, the components of net income and the components of OCI either in a single continuous statement of comprehensive income or in two separate but consecutive statements. With either format, the entity is required to present each component of net income along with total net income, each component of OCI along with the total for OCI, and a total amount for comprehensive income. Also, the ASU requires entities to present, for either format, reclassification adjustments for items that are reclassified from OCI to net income in the statement(s) where the components of net income and the components of OCI are presented. This ASU is to be applied retrospectively. For public entities, the ASU is effective for interim and annual periods beginning after December 15, 2011. We early implemented the requirements and present net income and comprehensive income in a single continuous statement.

     
   

In May 2011, the FASB issued Accounting Standards Update (ASU) 2011-04, "Fair Value Measurement (Topic 820), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS." There are few differences between the ASU and IFRS 13. While the ASU is largely consistent with existing fair value measurement principles in U.S. GAAP, it expands ASC 820's existing disclosure requirements for fair value measurements and makes other amendments. The amendments in the update became effective for fiscal years and interim periods beginning after December 15, 2011. The Company has adopted this standard, and it did not materially impact the consolidated financial statements.

In September 2011, the FASB issued Accounting Standards Update (ASU) 2011-08 to simplify how tests for potential goodwill impairment are performed. These amended standards permit an assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit in which goodwill resides is less than its carrying value. For reporting units in which this assessment concludes it is more likely than not that the fair value is more than its carrying value, these amended standards eliminate the requirement to perform further goodwill impairment testing as required under the previous standards. The ASU is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 31, 2011. Early adoption was permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011 if an entity’s financial statements had not yet been issued. We have early adopted this standard on September 30, 2011 and it did not materially impact our consolidated financial statements.

     

  d)

Derivative Financial Instruments

     
   

Foreign currency contracts are used by the Company to offset fluctuations in exchange rates. Our company’s 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. These instruments generally have a maturity of less than one year. For these derivatives, our company reports the after-tax gain or loss from the effective portion of the hedge as a component of accumulated other comprehensive income (loss) in stockholders’ equity and reclassifies it into earnings in the same period in which the hedged transaction affects earnings, and within the same line item on the consolidated statements of operations as the impact of the hedged transaction. There can be no assurance that our hedging program will not result in a negative impact on our earnings and earnings per share. We did not enter any foreign currency derivatives designated as cash flow hedges in the quarter ended July 31, 2012.

     
   

We also routinely enter into foreign currency forward contracts, not designated as hedging instruments, to protect us from fluctuations in exchange rates. Gains or losses arising out of marked to market fair value valuation of forward contracts, not designated as hedges, are recognized in earnings.

 

 


  e)

Goodwill and Intangible Assets

     
   

Goodwill represents the excess purchase price over the estimated fair value of net assets acquired as of the acquisition date. ASC Topic 350 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 unit’s 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 Software Corporation on August 2, 2007 and FirstHand Technologies Inc. on February 1, 2008. Translated to U.S. dollars using the period end rate, the goodwill balance at July 31, 2012 was $6,678,798 (CDN$6,704,947) (April 30, 2012 - $6,834,353) and $2,075,289 (CDN$2,083,752) (April 30, 2012 - $2,123,624), respectively. Management will perform its annual impairment test in its fiscal fourth quarter. No impairment charges were recorded for the three months ended July 31, 2012 and 2011.

     
   

The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.

     
   

Intangible assets include the intangibles purchased in connection with the acquisition of NewHeights Software Corporation on August 2, 2007, and FirstHand Technologies Inc. and BridgePort Networks, Inc. on February 1, 2008.

     
   

The intangible assets of NewHeights are reported at acquisition cost and include amounts initially allocated to acquired technologies of $3,454,839 (CDN$3,678,100) and customer asset of $2,283,908 (CDN$2,431,500). The acquired technologies are amortized based on their estimated useful life of four years and the customer asset is amortized on the basis of Management’s estimate of the future cash flows from this asset over approximately five years, which is Management’s estimate of the useful life of the customer asset.

     
   

The intangible assets of FirstHand are reported at acquisition cost and include amounts initially allocated to acquired technologies of $2,804,700 (CDN$2,804,700) and customer asset of $587,000 (CDN$587,000). The acquired technologies are amortized based on their estimated useful life of four years and the customer asset is amortized on the basis of Management’s estimate of the future cash flows from this asset over approximately five years, which is Management’s estimate of the useful life of the customer asset.

     
   

The intangible assets of BridgePort are being carried and reported at acquisition cost and include amounts initially allocated to acquired technologies of $476,703 and customer asset of $43,594. The acquired technologies are amortized based on their estimated useful life of four years and the customer asset is amortized on the basis of Management’s estimate of the future cash flows from this asset over approximately five years, which is Management’s estimate of the useful life of the customer asset.

 


     
   

A summary of the Company’s intangible assets, net, at July 31, 2012 is as follows:


                  Accumulated        
            Accumulated     Impairment     Net Carrying  
      Cost     Amortization     Charge     Amount  
  Acquired technologies $   6,306,336   $   4,417,678   $   1,888,658   $  –  
  Customer assets   2,727,679     1,482,512     1,216,028     29,139  
  Intangible assets $   9,034,015   $   5,900,190   $   3,104,686   $   29,139  
v2.4.0.6
Related Party Transactions
3 Months Ended
Jul. 31, 2012
Related Party Transactions [Text Block]
Note 3

Related Party Transactions

 

 

 

The Company’s Chairman is the Chairman and founding shareholder of Mitel Networks Corporation (“Mitel”). On July 31, 2008 the Company entered into a source code license agreement whereby the Company licensed to Mitel the source code for the Your Assistant product in consideration of a payment of $650,000. Associated with the agreement, as amended on April 6, 2009, are license fees paid by Mitel of $13.50 per copy deployed, declining to $9.00 per copy deployed after two years and declining from $9.00 to nil after four years. In addition, the agreement provides Mitel with a first right to match any third party offer to purchase the source code software and related intellectual property. The Company’s software license revenue for the three months ended July 31, 2012, pursuant to the terms of these agreements, was $134,493 (2011 - $108,642).

 

 

 

As at July 31, 2012, the Company had an accounts receivable balance from Mitel of $150,632 (April 30, 2012 - $242,469).

 

 

 

During the three months ended July 31, 2012, the Company through its wholly owned subsidiary, CounterPath Technologies Inc., paid $21,025 (2011 - $21,030) to Kanata Research Park Corporation (“KRP”) for leased office space. KRP is controlled by the Chairman of the Company.

 

 

 

In connection with a non-brokered private placement which closed on October 29, 2010, the Company issued a convertible debenture in the principal amount of $490,750 (CDN$500,000) to Wesley Clover Corporation, a company controlled by the Chairman of the Company. In connection with a subsequent private placement on June 14, 2011, Wesley Clover Corporation converted its outstanding convertible debentures of the Company in the aggregate principal amount of $490,750 to 358,211 shares of common stock. The debenture was convertible by the holder at any time prior to maturity, in whole or in part into common shares of the Company at a conversion price of $1.37 per share. The convertible debenture was unsecured, bearing interest at the prime bank rate as quoted by the Bank of Montreal with interest payable monthly and maturing on July 30, 2012

 

 

 

In connection with a non-brokered private placement of 3,333,334 units which closed on October 29, 2009, Wesley Clover Corporation purchased 1,666,667 units, at a price of $0.56 (CDN$0.60) per unit, for aggregate proceeds of $933,881 (CDN$1,000,000). Each unit consisted of one share of common stock and one-half of one non-transferable common share purchase warrant. In the event that Wesley Clover did not exercise all of the warrants on or before August 31, 2011, a default amount of $250,000 would have been immediately due and payable to the Company and such default amount would have incurred interest at the rate of 2% per month (on a pro-rata basis) on the default amount until the default amount is paid in full.

 

 

 

On August 24, 2011, Wesley Clover Corporation exercised 833,334 warrants at the original exercise price of $0.90 per common share.

 

 

The Company’s Chairman is a beneficial shareholder of Mitel Trade s.r.o. On January 30, 2012, the Company sold products and services to Mitel Trade s.r.o. for consideration of $208,992. The Company’s revenue for the three months ended July 31, 2012, pursuant to the terms of this sale, was $10,969 (2011 - $nil). As at July 31, 2012, the Company had an accounts receivable balance from Mitel Trade s.r.o. of $206,500 (April 30, 2012 - $206,500).

 

 

 

The above transactions are in the normal course of operations and are recorded at amounts established and agreed to between the related parties.

 

 

v2.4.0.6
Derivative Instruments and Fair Value Measurement
3 Months Ended
Jul. 31, 2012
Derivative Instruments and Fair Value Measurement [Text Block]
Note 4

Derivative Instruments and Fair Value Measurement

 

 

 

Forward Contracts

 

 

 

In the normal course of business, the Company is exposed to fluctuations in interest rates and the exchange rates associated with foreign currencies. The Company’s primary objective for holding derivative financial instruments is to manage foreign currency exchange rate risk.

 

 

 

The Company addresses certain financial exposures through a controlled program of risk management that includes the use of derivative financial instruments. The Company’s 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. These instruments generally have a maturity of less than one year. For these derivatives, the Company reports the after-tax gain or loss from the effective portion of the hedge as a component of accumulated other comprehensive income (loss) in stockholders’ equity and reclassifies it into earnings in the same period in which the hedged transaction affects earnings, and within the same line item on the consolidated statements of operations as the impact of the hedged transaction. There can be no assurance that the Company’s hedging program will not result in a negative impact on the Company’s earnings and earnings per share. The Company did not enter any foreign currency derivatives designated as cash flow hedges in the quarter ended July 31, 2012.

 

 

 

The Company also routinely enter into foreign currency forward contracts, not designated as hedging instruments, to protect us from fluctuations in exchange rates. As of July 31, 2012, the Company had $2,000,000 of notional value foreign currency forward contracts maturing through February 25, 2013. 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. The fair value marked to market gain (loss) of forward contracts as of July 31, 2012 is $57,700.

 

 

 

Derivative Warrant Liability

 

 

 

Following the guidance in ASC 815-40-15, the Company recorded the warrants issued on June 14, 2011 as derivative liabilities due to their exercise price being denominated in a currency other than the Company’s U.S. Dollar functional currency. The fair value of the derivative liability is revalued at the end of each reporting period, and the change in fair value of the derivative liability is recorded as a gain or loss in the Company’s consolidated statements of operations.

 

  The warrant liability is accounted for at its fair value as follows:

      Fair Value  
  Fair value of warrant liability, at issuance $   1,311,141  
  Change in fair value of warrant liability for the period   715,803  
  Fair value of warrant liability at April 30, 2012   2,026,944  
  Change in fair value of warrant liability for the period   (727,429 )
  Warrants exercised during the period   (54,639 )
  Fair value of warrant liability at July 31, 2012 $   1,244,876  

The Company used the Binomial method to estimate the fair value of the June 14, 2011 warrants with the following assumptions:

    As at   As at the date of issuance
    July 31, 2012   June 14, 2011
  Risk-free interest rate 0.17%   1.60%
  Expected volatility 70%   70%
  Expected term 0.87 years to 0.37 years   1.5 years to 2 years
  Dividend yield 0%   0%

The warrant liability is revalued at the end of each reporting period with the change in the fair value of the derivative liability recorded as a gain or loss in the Company’s consolidated statement of operations. The fair value of the warrants will continue to be classified as a liability until such time as they are exercised, expire or there is an amendment to the respective agreements that renders these financial instruments to be no longer classified as a liability.

At the time of the June 14, 2011 private placement offering, the Company allocated the proceeds to each of the common shares and the one-half of one common share purchase warrants. Because the warrants were classified as a liability and are subsequently marked to fair value through earnings in each reporting period, the Company allocated the proceeds of $1,311,141 to the warrants at inception with the residual proceeds of $3,773,946 allocated to common stock.

During the three months ended July 31, 2010, the Company entered into a warrant agreement with a customer whereby the Company issued 1,000,000 stock purchase warrants as part of a contract that the Company entered into with the customer. The fair value of 320,000 stock purchase warrants that was charged to revenue during the three months ended July 31, 2011 was $136,934. The warrants expired unexercised on July 30, 2012.

Fair Value Measurement

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 us) 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.

   
  The fair value of the derivative instrument is primarily based on standard industry accepted binomial model.

  As at July 31, 2012     Fair Value     Level 1     Level 2     Level 3  
  Derivate Warrant Liability   $   (1,244,876 ) $ -   $   -   $   (1,244,876 )
  Forward exchange contracts     57,700   $ 57,700     -     -  
  Total Liabilities   $   (1,187,176 ) $ 57,700   $   -   $   (1244,876 )

  As at April 30, 2012     Fair Value     Level 1     Level 2     Level 3  
  Derivative Warrant Liability   $   (2,026,944 ) $   -   $   -   $   (2,026,944 )
  Forward exchange contracts     -     -     -     -  
  Total Liabilities   $   (2,026,944 ) $   -   $   -   $   (2,026,944 )
v2.4.0.6
Common Stock
3 Months Ended
Jul. 31, 2012
Common Stock [Text Block]
Note 5 Common Stock
   
  Private Placement
   
 

On June 14, 2011, the Company issued an aggregate of 3,145,800 units under a brokered private placement for aggregate gross proceeds of $5,636,170 (CDN$5,505,150) at a price of $1.79 (CDN$1.75) per unit, with each unit consisting of one share of the Company’s common stock and one-half of one common share purchase warrant, with each whole warrant entitling the holder to purchase one additional common share of the Company’s common stock at an exercise price of CDN$2.25 per share until June 14, 2013. In connection with the offering, the Company issued an aggregate of 220,206 broker warrants, with each broker warrant entitling the holder thereof to purchase one common share of the Company at an exercise price of CDN$1.75 per share until December 14, 2012. In addition, the Company incurred $605,922 in share issue costs.

 

 

 

On June 19, 2012, the Company issued an aggregate of 1,465,000 units under a non–brokered private placement for aggregate gross proceeds of CDN $3,662,500 ($3,580,156) at a price of CDN $2.50 ($2.24) per unit, with each unit consisting of one share of the Company’s common stock and one–half of one common share purchase warrant, with each whole warrant entitling the holder to purchase one additional common share of the Company’s common stock at an exercise price of $3.25 per share until June 19, 2014.

 

 

 

Stock Options

 

 

 

The Company has a stock option plan under which options to purchase common shares of the Company may be granted to employees, directors and consultants. 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 of Directors of the Company under the 2010 Stock Option Plan is 6,860,000.

 

 

The Company has elected to use the Black-Scholes option pricing model to determine the fair value of stock options granted. In accordance with ASC 718 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 remeasured 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 the “simplified” method as prescribed by ASC 718 Share-Based Payment.

 

 

 

For non-employees, based on the Company’s 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 Company’s experience, the Company applied an estimated forfeiture rate of 15% for the three month period ended July 31, 2012 and 2011 in determining the expense recorded in the accompanying consolidated statement of operations.

 

 

 

The weighted-average fair value of options granted during the three months ended July 31, 2012 was $1.54 (2011 - $nil). The weighted-average assumptions utilized to determine such values are presented in the following table:


      Three Months Ended  
      July 31, 2012     July 31, 2011  
  Risk-free interest rate   0.62%     n/a  
  Expected volatility   74.47%     n/a  
  Expected term   3.7 years     n/a  
  Dividend yield   0%     n/a  

The following is a summary of the status of the Company’s stock options as of July 31, 2012 and the stock option activity during the three months ended July 31, 2012:

            Weighted Average  
      Number of     Exercise Price  
      Options     per Share  
  Outstanding at April 30, 2012   3,925,979   $ 1.15  
  Granted   305,000   $ 2.90  
  Exercised   (80,874 ) $ 0.85  
  Forfeited/Cancelled   (175,875 ) $ 1.69  
  Outstanding at July 31, 2012   3,974,230   $ 1.27  
               
  Exercisable at July 31, 2012   2,286,993   $ 0.90  
  Exercisable at April 30, 2012   2,087,742   $ 0.85  

 

 

The following table summarizes information regarding stock purchase options outstanding as of July 31, 2012:


    Number of     Aggregate       Number of     Aggregate  
Exercise   Options     Intrinsic       Options     Intrinsic  
Price   Outstanding     Value   Expiry Date   Exercisable     Value  
$0.44   387,258   $   778,389   December 15, 2013   344,119   $   691,679  
$0.47   411,389     814,550   October 12, 2012 to September 26, 2016   411,389     814,550  
$0.60   425,708     787,560   December 14, 2014   279,088     516,313  
$0.62   850,000     1,555,500   April 17, 2014   690,625     1,263,844  
$1.70   800,000     600,000   December 17, 2014   116,667     87,500  
$1.90   421,875     232,031   December 14, 2015   165,104     90,807  
$2.00   6,000     2,700   October 1, 2012   6,000     2,700  
$2.15   240,000     72,000   September 7, 2016   240,000     72,000  
$2.27   102,000     18,360   March 10, 2016   34,001     6,120  
$2.55   25,000       March 8, 2017        
$2.90   305,000       July 19, 2017        
July 31, 2012   3,974,230   $   4,861,090       2,286,993   $   3,545,513  
                           
April 30, 2012   3,925,979   $   6,751,493       2,087,742   $   4,213,032  

The aggregate intrinsic value in the preceding table represents the total intrinsic value, based on the Company’s closing stock price of $2.45 per share as of July 31, 2012 (April 30, 2012 – $2.87), 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 July 31, 2012 was 2,286,993 (April 30, 2012 – 2,087,742). The total intrinsic value of options exercised during the three months ended July 31, 2012 was $129,403 (2011 – $61,665). The grant date fair value of options vested during the three months ended July 31, 2012 was $199,542 (2011 – $112,474).

The following table summarizes information regarding the non-vested stock purchase options outstanding as of July 31, 2012.

        Weighted Average
    Number of Options   Grant Date Fair Value
  Non-vested options at April 30, 2012 1,838,237   $0.82
  Granted 305,000   $1.54
  Vested (280,125)   $0.71
  Cancelled/Forfeited (175,875)   $0.90
  Non-vested options at July 31, 2012 1,687,237   $0.96

As of July 31, 2012 there was, $1,411,923 of total unrecognized compensation cost related to unvested share-based compensation awards. This unrecognized compensation cost is expected to be recognized over a weighted average period of 3.14 years.

 

 

Employee and non-employee stock-based compensation amounts classified in the Company’s consolidated statements of operations for the three months ended July 31, 2012 and 2011 are as follows:


      Three Months Ended  
      July 31,  
      2012     2011  
  Cost of sales $   8,839   $   9,044  
  Sales and marketing   53,935     8,966  
  Research and development   10,716     10,050  
  General and administrative   55,943     30,878  
  Total stock-based compensation $   129,433   $   58,938  

Warrants

During the three months ended July 31, 2010, the Company entered into a warrant agreement with a customer whereby the Company issued 1,000,000 stock purchase warrants as part of a contract that the Company entered into with the customer. The fair value of 320,000 stock purchase warrants that was charged to revenue during the three months ended July 31, 2011 was $136,934. These warrants expired unexercised on July 30, 2012.

On May 17, 2012, and July 25, 2012, holder of warrants issued under a brokered private placement, exercised 50,000 warrants and 7,000 warrants respectively, at the original exercise price of $2.25 per common share.

The following table summarizes information regarding the warrants outstanding as of July 31, 2012:

      Number of     Weighted Average    
      Warrants     Exercise Price   Expiry Dates
  Warrants at April 30, 2012   2,793,105     $1.94   July 30, 2012 to June 14, 2013
  Granted   732,500     $3.25   June 19, 2014
  Exercised   (57,000 )   $2.25   June 14, 2013
  Expired   (1,000,000 )   $1.50   July 30, 2012
  Warrants at July 31, 2012   2,468,605     $2.50   December 14, 2012 to June 19, 2014

Employee Stock Purchase Plan

Under the terms of the Employee Stock Purchase Plan (the “ESPP”), all regular salaried (non-probationary) employees may purchase up to 6% of their base salary in common shares of the Company at market price. The Company matches 50% of the shares purchased by issuing or purchasing in the market up to 3% of the respective employee’s base salary in shares.

A total of 700,000 shares have been reserved for issuance under the ESPP. As of July 31, 2012, a total of 556,401 (April 30, 2012 - 556,401) shares were available for issuance under the ESPP. During the three months ended July 31, 2012, nil shares (April 30, 2012 - 55,571) were sold or issued to employees under the ESPP.

 

 

Deferred Share Unit Plan

 

 

 

Under the terms of the Deferred Share Unit Plan (the “DSUP”), each deferred share unit 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 deferred share units 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 and, as applicable, any grants of deferred share units to any one participant may not exceed a value of $100,000 per annum on the date of grant. A deferred share unit (DSU) granted to a participant who is a director of the board of the Company shall vest immediately on the award date. A deferred share unit granted to a participant other than a director will generally vest as to one-third (1/3) of the number of deferred share units granted on the first, second and third anniversaries of the award date. Fair value of the DSU’s, which is based on the closing price of the Company’s common stock on the date of grant, is recorded as compensation expense over the vesting period.

 

 

 

A total of 2,000,000 shares have been reserved for issuance under the DSUP. During the three months ended July 31, 2012, 133,443 deferred share units were issued under the DSUP, of which 59,878 were granted to officers or employees and 73,565 were granted to non-employee directors. As of July 31, 2012, a total of 278,493 shares were available for issuance under the DSUP.

 

 

 

The following table summarizes the Company’s outstanding deferred share unit awards as of July 31, 2012, and changes during the period then ended:


        Weighted Average
        Grant Date Fair
    Number of DSU’s   Value Per Unit
  DSU’s outstanding at April 30, 2012 1,588,064   $0.83
  Granted 133,443   $2.90
  Conversions  
  DSU’s outstanding at July 31, 2012 1,721,507   $1.01

The following table summarizes information regarding the non-vested deferred share units outstanding as of July 31, 2012:

        Weighted Average
        Grant Date Fair
    Number of DSU’s   Value Per Unit
  Non-vested DSU’s at April 30, 2012 334,337   $1.33
  Granted 133,443   $2.90
  Vested (165,007)   $1.52
  Non-vested DSU’s at July 31, 2012 302,773   $1.63

As of July 31, 2012 there was $428,461 (2011 – $496,636) of total unrecognized compensation cost related to unvested deferred share units awards. This unrecognized compensation cost is expected to be recognized over a weighted average period of 2.17 years (2011 – 2.47 years).

 

 

Employee and non-employee deferred share unit based compensation amounts classified in the Company’s consolidated statements of operations for the three months ended July 31, 2012 and 2011 are as follows:


      Three Months Ended  
      July 31,  
      2012     2011  
  Sales and marketing $   4,167   $   –  
  Research and development   272      
  General and administrative   262,898     185,323  
  Total deferred share unit-based compensation $   267,337   $   185,323  
v2.4.0.6
Segmented Information
3 Months Ended
Jul. 31, 2012
Segmented Information [Text Block]
Note 6 Segmented Information
   
 

The Company’s chief operating decision maker reviews financial information presented on a consolidated basis, accompanied by desegregated 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.

 

 

 

Foreign 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 three months ended July 31, 2012 and 2011:


      Three Months Ended  
      July 31,  
      2012     2011  
  North America $   2,920,517   $   1,603,753  
  Europe   691,113     847,033  
  Asia and Africa   556,687     219,198  
  Latin America   219,451     88,750  
    $   4,387,768   $   2,758,734  

Contained within the results of North America for the three months ended July 31, 2012 are revenues from the United States of $1,935,087 (2011 - $951,087) and from Canada of $985,430 (2011 - $652,666).

Contained within the results of Europe for the three months ended July 31, 2012 are revenues from Norway of $179,382 (2011 - $4,995), from Germany of $130,412 (2011 - $102,566), from the United Kingdom of $123,146 (2011 - $379,940), from Slovakia of $35,099 (2011 - $1,242), and from Spain of $33,398 (2011 - $25,083).

Contained within the results of Asia and Africa for the three months ended July 31, 2012 are revenues from Japan of $355,881 (2011 - $15,342), from China of $77,258 (2011 - $20,974), from Russian Federation of $55,731 (2011 - $17,175), from Australia of $20,301 (2011 - $22,270), and from South Africa of $17,535 (2011 - $72,974).

Contained within the results of Latin America for the three months ended July 31, 2012 are revenues from Brazil of $144,950 (2011 - $32,813), from Mexico of $20,568 (2011 - $14,115), from Dominican Republic of $14,160 (2011 - $nil), from Uruguay of $11,370 (2011 - $nil), and from Colombia of $10,701 (2011 - $19,192).

 

 

All of the Company’s long-lived assets, which include equipment, intangible assets, goodwill and other assets, are located in Canada and the United States as follows:


      As at     
      July 31, 2012     April 30, 2012  
  Canada $   8,926,627   $ 9,830,664  
  United States   19,258     18,891  
    $   8,945,885   $ 9,849,555  

Revenue from significant customers for the three months ended July 31, 2012 and 2011 is summarized as follows:

      Three Months Ended  
      July 31,  
      2012     2011  
  Customer A   15%     -%  
  Customer B   10%     15%  
      25%     15%  

  Accounts receivable balances for Customer A were $770,828 as at July 31, 2012 (April 30, 2012 - $32,703).
  Accounts receivable balances for Customer B were $720,471 as at July 31, 2012 (April 30, 2012 - $79,100).
   
v2.4.0.6
Commitments
3 Months Ended
Jul. 31, 2012
Commitments [Text Block]
Note 7 Commitments

  a)

On April 29, 2005, the Company entered into a lease for office premises, which commenced on October 1, 2005 and expires on September 30, 2012 for which a deposit of $9,890 was made. The monthly lease payment under this agreement is $9,890 plus $8,666 in operating costs. The Company is subleasing part of these premises for a monthly charge of $7,476. The sublease commenced on August 1, 2007 and expires on September 30, 2012.

     
  b)

On January 11, 2011, the Company entered into a lease agreement, which commenced on October 1, 2011, and expires September 30, 2014 for which a deposit of $49,805 was made. The monthly lease payment under the agreement is $21,579 plus $21,182 in operating costs. Management believes that this office space is adequate for the operations of the Company for the foreseeable future.

     
  c)

On December 9, 2011, the Company signed a fifth amendment to an existing lease agreement to extend the lease starting May 1, 2012 to April 30, 2014. The monthly lease payment under the new lease extension is $7,008 (CDN$7,036).T his lease expense is a related party transaction as it was incurred with a company with a director in common with the Company.

     
  d)

On March 12, 2009, the Company and its wholly-owned subsidiary, CounterPath Technologies Inc., entered into a settlement agreement with a founder and former officer of the Company. Under the settlement agreement, the Company will pay a total of $493,070 (CDN$495,000) over 45 months at a rate of CDN$11,000 per month.

     
  e)

On August 2, 2011, the Company entered into extension of an existing operating lease agreement which commenced on August 1, 2011 and expires on February 28, 2013. The monthly lease payment under the new extension agreement is $6,700.

 

  Total payable over the term of the agreements for the years ended April 30 are as follows:

            Office Leases                    
      Office Leases –     –Unrelated     Sub Lease     Total Office     Settlement  
      Related Party     Party     Income     Leases     Agreement  
  2013 $   63,074   $   456,014   $   (14,953 ) $   504,135   $   49,307  
  2014   84,099     496,005     -     580,104     -  
  2015   -     206,669     -     206,669     -  
    $   147,173   $   1,158,688   $   (14,953 ) $   1,290,908   $   49,307  
v2.4.0.6
Subsequent Events
3 Months Ended
Jul. 31, 2012
Subsequent Events [Text Block]
Note 8 Subsequent Events
   
 

On September 13, 2012, the Company granted 5,000 stock options to one employee pursuant to its 2010 Stock Option Plan. Each stock option entitles the holder thereof the right to purchase one share of common stock at a price equal to the closing market share price on September 13, 2012. The options vest in the amount of 12.5% on the date which is six months from the date of grant and then beginning in the seventh month at 1/42 per month for 42 months, at which time the options are fully vested.

 

v2.4.0.6
Summary of Significant Accounting Policies (Policies)
3 Months Ended
Jul. 31, 2012
Basis of Presentation [Policy Text Block]
  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 Networks, Inc. incorporated under the laws of the state of Delaware. The results of NewHeights Software Corporation (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. (which subsequently was amalgamated with CounterPath Technologies Inc.) and BridgePort Networks, Inc. are included from February 1, 2008, the date of acquisition. All inter-company transactions and balances have been eliminated.

     
Interim Reporting [Policy Text Block]
  b)

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. Certain information and footnote disclosures normally included in the 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 accounting principles generally accepted 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 Company’s April 30, 2012 annual 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 Company’s April 30, 2012 annual consolidated financial statements.

     
   

Operating results for the three months ended July 31, 2012 are not necessarily indicative of the results that can be expected for the year ending April 30, 2013.

     
New Accounting Pronouncements, Policy [Policy Text Block]
  c)

New Accounting Pronouncements

     
   

In May 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs , which aligns the fair value measurement and disclosure requirements in U.S. GAAP and the International Financial Reporting Standards (IFRSs). Many of the amendments in this ASU will not result in a change in requirements, but simply clarify existing requirements. The amendments in this ASU that do change a principle or requirement for measuring fair value or disclosing information about fair value measurements include the following: (1) the ASU permits an exception for measuring fair value when a reporting entity manages its financial instruments on the basis of its net exposure, rather than gross exposure, to those risks; (2) the ASU clarifies that the application of premiums and discounts in a fair value measurement is related to the unit of account for the asset or liability being measured at fair value; (3) the ASU prohibits blockage discounts for level 2 and 3 investments; and (4) the amendments expand the fair value measurement disclosures. The ASU is to be applied prospectively. For public entities, the ASU is effective during interim and annual periods beginning after December 15, 2011.

 


     
   

In June 2011 the FASB issued Accounting Standards Update (ASU) 2011-05, Presentation of Comprehensive Income , which eliminates the option of presenting the components of other comprehensive income (OCI) as part of the statement of changes in stockholders’ equity. The ASU instead permits an entity to present the total of comprehensive income, the components of net income and the components of OCI either in a single continuous statement of comprehensive income or in two separate but consecutive statements. With either format, the entity is required to present each component of net income along with total net income, each component of OCI along with the total for OCI, and a total amount for comprehensive income. Also, the ASU requires entities to present, for either format, reclassification adjustments for items that are reclassified from OCI to net income in the statement(s) where the components of net income and the components of OCI are presented. This ASU is to be applied retrospectively. For public entities, the ASU is effective for interim and annual periods beginning after December 15, 2011. We early implemented the requirements and present net income and comprehensive income in a single continuous statement.

     
   

In May 2011, the FASB issued Accounting Standards Update (ASU) 2011-04, "Fair Value Measurement (Topic 820), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS." There are few differences between the ASU and IFRS 13. While the ASU is largely consistent with existing fair value measurement principles in U.S. GAAP, it expands ASC 820's existing disclosure requirements for fair value measurements and makes other amendments. The amendments in the update became effective for fiscal years and interim periods beginning after December 15, 2011. The Company has adopted this standard, and it did not materially impact the consolidated financial statements.

In September 2011, the FASB issued Accounting Standards Update (ASU) 2011-08 to simplify how tests for potential goodwill impairment are performed. These amended standards permit an assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit in which goodwill resides is less than its carrying value. For reporting units in which this assessment concludes it is more likely than not that the fair value is more than its carrying value, these amended standards eliminate the requirement to perform further goodwill impairment testing as required under the previous standards. The ASU is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 31, 2011. Early adoption was permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011 if an entity’s financial statements had not yet been issued. We have early adopted this standard on September 30, 2011 and it did not materially impact our consolidated financial statements.

     
Derivative Financial Instruments [Policy Text Block]
  d)

Derivative Financial Instruments

     
   

Foreign currency contracts are used by the Company to offset fluctuations in exchange rates. Our company’s 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. These instruments generally have a maturity of less than one year. For these derivatives, our company reports the after-tax gain or loss from the effective portion of the hedge as a component of accumulated other comprehensive income (loss) in stockholders’ equity and reclassifies it into earnings in the same period in which the hedged transaction affects earnings, and within the same line item on the consolidated statements of operations as the impact of the hedged transaction. There can be no assurance that our hedging program will not result in a negative impact on our earnings and earnings per share. We did not enter any foreign currency derivatives designated as cash flow hedges in the quarter ended July 31, 2012.

     
   

We also routinely enter into foreign currency forward contracts, not designated as hedging instruments, to protect us from fluctuations in exchange rates. Gains or losses arising out of marked to market fair value valuation of forward contracts, not designated as hedges, are recognized in earnings.

 

Goodwill and Intangible Assets, Policy [Policy Text Block]
  e)

Goodwill and Intangible Assets

     
   

Goodwill represents the excess purchase price over the estimated fair value of net assets acquired as of the acquisition date. ASC Topic 350 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 unit’s 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 Software Corporation on August 2, 2007 and FirstHand Technologies Inc. on February 1, 2008. Translated to U.S. dollars using the period end rate, the goodwill balance at July 31, 2012 was $6,678,798 (CDN$6,704,947) (April 30, 2012 - $6,834,353) and $2,075,289 (CDN$2,083,752) (April 30, 2012 - $2,123,624), respectively. Management will perform its annual impairment test in its fiscal fourth quarter. No impairment charges were recorded for the three months ended July 31, 2012 and 2011.

     
   

The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.

     
   

Intangible assets include the intangibles purchased in connection with the acquisition of NewHeights Software Corporation on August 2, 2007, and FirstHand Technologies Inc. and BridgePort Networks, Inc. on February 1, 2008.

     
   

The intangible assets of NewHeights are reported at acquisition cost and include amounts initially allocated to acquired technologies of $3,454,839 (CDN$3,678,100) and customer asset of $2,283,908 (CDN$2,431,500). The acquired technologies are amortized based on their estimated useful life of four years and the customer asset is amortized on the basis of Management’s estimate of the future cash flows from this asset over approximately five years, which is Management’s estimate of the useful life of the customer asset.

     
   

The intangible assets of FirstHand are reported at acquisition cost and include amounts initially allocated to acquired technologies of $2,804,700 (CDN$2,804,700) and customer asset of $587,000 (CDN$587,000). The acquired technologies are amortized based on their estimated useful life of four years and the customer asset is amortized on the basis of Management’s estimate of the future cash flows from this asset over approximately five years, which is Management’s estimate of the useful life of the customer asset.

     
   

The intangible assets of BridgePort are being carried and reported at acquisition cost and include amounts initially allocated to acquired technologies of $476,703 and customer asset of $43,594. The acquired technologies are amortized based on their estimated useful life of four years and the customer asset is amortized on the basis of Management’s estimate of the future cash flows from this asset over approximately five years, which is Management’s estimate of the useful life of the customer asset.

 


     
   

A summary of the Company’s intangible assets, net, at July 31, 2012 is as follows:


                  Accumulated        
            Accumulated     Impairment     Net Carrying  
      Cost     Amortization     Charge     Amount  
  Acquired technologies $   6,306,336   $   4,417,678   $   1,888,658   $  –  
  Customer assets   2,727,679     1,482,512     1,216,028     29,139  
  Intangible assets $   9,034,015   $   5,900,190   $   3,104,686   $   29,139  
v2.4.0.6
Significant Accounting Policies and Going Concern (Tables)
3 Months Ended
Jul. 31, 2012
Schedule of Acquired Finite-Lived Intangible Assets by Major Class [Table Text Block]
                  Accumulated        
            Accumulated     Impairment     Net Carrying  
      Cost     Amortization     Charge     Amount  
  Acquired technologies $   6,306,336   $   4,417,678   $   1,888,658   $  –  
  Customer assets   2,727,679     1,482,512     1,216,028     29,139  
  Intangible assets $   9,034,015   $   5,900,190   $   3,104,686   $   29,139  
v2.4.0.6
Derivative Instruments and Fair Value Measurement (Tables)
3 Months Ended 12 Months Ended
Jul. 31, 2012
Apr. 30, 2012
Schedule of Warrant Liabilities at Fair Value [Table Text Block]
      Fair Value  
  Fair value of warrant liability, at issuance $   1,311,141  
  Change in fair value of warrant liability for the period   715,803  
  Fair value of warrant liability at April 30, 2012   2,026,944  
  Change in fair value of warrant liability for the period   (727,429 )
  Warrants exercised during the period   (54,639 )
  Fair value of warrant liability at July 31, 2012 $   1,244,876  
 
Schedule Of Share Based Payment Award Warrants Valuation Assumptions [Table Text Block]
    As at   As at the date of issuance
    July 31, 2012   June 14, 2011
  Risk-free interest rate 0.17%   1.60%
  Expected volatility 70%   70%
  Expected term 0.87 years to 0.37 years   1.5 years to 2 years
  Dividend yield 0%   0%
 
Fair Value, Liabilities Measured on Recurring Basis [Table Text Block]
  As at July 31, 2012     Fair Value     Level 1     Level 2     Level 3  
  Derivate Warrant Liability   $   (1,244,876 ) $ -   $   -   $   (1,244,876 )
  Forward exchange contracts     57,700   $ 57,700     -     -  
  Total Liabilities   $   (1,187,176 ) $ 57,700   $   -   $   (1244,876 )
  As at April 30, 2012     Fair Value     Level 1     Level 2     Level 3  
  Derivative Warrant Liability   $   (2,026,944 ) $   -   $   -   $   (2,026,944 )
  Forward exchange contracts     -     -     -     -  
  Total Liabilities   $   (2,026,944 ) $   -   $   -   $   (2,026,944 )
v2.4.0.6
Common Stock (Tables)
3 Months Ended
Jul. 31, 2012
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]
      Three Months Ended  
      July 31, 2012     July 31, 2011  
  Risk-free interest rate   0.62%     n/a  
  Expected volatility   74.47%     n/a  
  Expected term   3.7 years     n/a  
  Dividend yield   0%     n/a  
Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]
            Weighted Average  
      Number of     Exercise Price  
      Options     per Share  
  Outstanding at April 30, 2012   3,925,979   $ 1.15  
  Granted   305,000   $ 2.90  
  Exercised   (80,874 ) $ 0.85  
  Forfeited/Cancelled   (175,875 ) $ 1.69  
  Outstanding at July 31, 2012   3,974,230   $ 1.27  
               
  Exercisable at July 31, 2012   2,286,993   $ 0.90  
  Exercisable at April 30, 2012   2,087,742   $ 0.85  
Disclosure of Share-based Compensation Arrangements by Share-based Payment Award [Table Text Block]
    Number of     Aggregate       Number of     Aggregate  
Exercise   Options     Intrinsic       Options     Intrinsic  
Price   Outstanding     Value   Expiry Date   Exercisable     Value  
$0.44   387,258   $   778,389   December 15, 2013   344,119   $   691,679  
$0.47   411,389     814,550   October 12, 2012 to September 26, 2016   411,389     814,550  
$0.60   425,708     787,560   December 14, 2014   279,088     516,313  
$0.62   850,000     1,555,500   April 17, 2014   690,625     1,263,844  
$1.70   800,000     600,000   December 17, 2014   116,667     87,500  
$1.90   421,875     232,031   December 14, 2015   165,104     90,807  
$2.00   6,000     2,700   October 1, 2012   6,000     2,700  
$2.15   240,000     72,000   September 7, 2016   240,000     72,000  
$2.27   102,000     18,360   March 10, 2016   34,001     6,120  
$2.55   25,000       March 8, 2017        
$2.90   305,000       July 19, 2017        
July 31, 2012   3,974,230   $   4,861,090       2,286,993   $   3,545,513  
                           
April 30, 2012   3,925,979   $   6,751,493       2,087,742   $   4,213,032  
Schedule of Nonvested Performance-based Units Activity [Table Text Block]
        Weighted Average
    Number of Options   Grant Date Fair Value
  Non-vested options at April 30, 2012 1,838,237   $0.82
  Granted 305,000   $1.54
  Vested (280,125)   $0.71
  Cancelled/Forfeited (175,875)   $0.90
  Non-vested options at July 31, 2012 1,687,237   $0.96
Schedule of Employee and Non-Employee Service Share-based Compensation Allocation of Recognized Period Costs [Table Text Block]
      Three Months Ended  
      July 31,  
      2012     2011  
  Cost of sales $   8,839   $   9,044  
  Sales and marketing   53,935     8,966  
  Research and development   10,716     10,050  
  General and administrative   55,943     30,878  
  Total stock-based compensation $   129,433   $   58,938  
Schedule of Stockholders' Equity Note, Warrants or Rights, Activity [Table Text Block]
      Number of     Weighted Average    
      Warrants     Exercise Price   Expiry Dates
  Warrants at April 30, 2012   2,793,105     $1.94   July 30, 2012 to June 14, 2013
  Granted   732,500     $3.25   June 19, 2014
  Exercised   (57,000 )   $2.25   June 14, 2013
  Expired   (1,000,000 )   $1.50   July 30, 2012
  Warrants at July 31, 2012   2,468,605     $2.50   December 14, 2012 to June 19, 2014
Schedule of Stockholders Equity Deferred Share Unit Plan [Table Text Block]
        Weighted Average
        Grant Date Fair
    Number of DSU’s   Value Per Unit
  DSU’s outstanding at April 30, 2012 1,588,064   $0.83
  Granted 133,443   $2.90
  Conversions  
  DSU’s outstanding at July 31, 2012 1,721,507   $1.01
Schedule of Stockholders Equity Non Vested Deferred Share Units [Table Text Block]
        Weighted Average
        Grant Date Fair
    Number of DSU’s   Value Per Unit
  Non-vested DSU’s at April 30, 2012 334,337   $1.33
  Granted 133,443   $2.90
  Vested (165,007)   $1.52
  Non-vested DSU’s at July 31, 2012 302,773   $1.63
Schedule of Allocation of Share Based Compensation Costs for Deferred Share Units [Table Text Block]
      Three Months Ended  
      July 31,  
      2012     2011  
  Sales and marketing $   4,167   $   –  
  Research and development   272      
  General and administrative   262,898     185,323  
  Total deferred share unit-based compensation $   267,337   $   185,323  
v2.4.0.6
Segmented Information (Tables)
3 Months Ended
Jul. 31, 2012
Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area [Table Text Block]
      Three Months Ended  
      July 31,  
      2012     2011  
  North America $   2,920,517   $   1,603,753  
  Europe   691,113     847,033  
  Asia and Africa   556,687     219,198  
  Latin America   219,451     88,750  
    $   4,387,768   $   2,758,734  
Schedule of Long Lived Assets by Geographical Areas [Table Text Block]
      As at     
      July 31, 2012     April 30, 2012  
  Canada $   8,926,627   $ 9,830,664  
  United States   19,258     18,891  
    $   8,945,885   $ 9,849,555  
Schedule of Revenue by Major Customers by Reporting Segments [Table Text Block]
      Three Months Ended  
      July 31,  
      2012     2011  
  Customer A   15%     -%  
  Customer B   10%     15%  
      25%     15%  
v2.4.0.6
Commitments (Tables)
3 Months Ended
Jul. 31, 2012
Schedule of Agreements by Year [Table Text Block]
            Office Leases                    
      Office Leases –     –Unrelated     Sub Lease     Total Office     Settlement  
      Related Party     Party     Income     Leases     Agreement  
  2013 $   63,074   $   456,014   $   (14,953 ) $   504,135   $   49,307  
  2014   84,099     496,005     -     580,104     -  
  2015   -     206,669     -     206,669     -  
    $   147,173   $   1,158,688   $   (14,953 ) $   1,290,908   $   49,307  
v2.4.0.6
Nature of Operations (Narrative) (Details)
3 Months Ended
Jul. 31, 2012
Nature Of Operations 1 7,680,168
Nature Of Operations 2 369,836
Nature Of Operations 3 369,836
Nature Of Operations 4 5,900,014
v2.4.0.6
Significant Accounting Policies and Going Concern (Narrative) (Details)
3 Months Ended
Jul. 31, 2012
USD ($)
Jul. 31, 2012
CAD
Significant Accounting Policies And Going Concern 1 3 3
Significant Accounting Policies And Going Concern 2 $ 6,339,717  
Significant Accounting Policies And Going Concern 3   6,704,947
Significant Accounting Policies And Going Concern 4 2,083,960  
Significant Accounting Policies And Going Concern 5   2,083,752
Significant Accounting Policies And Going Concern 6 6,678,798  
Significant Accounting Policies And Going Concern 7   6,704,947
Significant Accounting Policies And Going Concern 8 6,834,353  
Significant Accounting Policies And Going Concern 9 2,075,289  
Significant Accounting Policies And Going Concern 10   2,083,752
Significant Accounting Policies And Going Concern 11 2,123,624  
Significant Accounting Policies And Going Concern 12 3,454,839  
Significant Accounting Policies And Going Concern 13   3,678,100
Significant Accounting Policies And Going Concern 14 2,283,908  
Significant Accounting Policies And Going Concern 15   2,431,500
Significant Accounting Policies And Going Concern 16 2,804,700  
Significant Accounting Policies And Going Concern 17   2,804,700
Significant Accounting Policies And Going Concern 18 587,000  
Significant Accounting Policies And Going Concern 19   587,000
Significant Accounting Policies And Going Concern 20 476,703  
Significant Accounting Policies And Going Concern 21 $ 43,594  
v2.4.0.6
Related Party Transactions (Narrative) (Details)
3 Months Ended
Jul. 31, 2012
USD ($)
units
warrants
Jul. 31, 2012
CAD
Related Party Transactions 1 $ 650,000  
Related Party Transactions 2 13.5  
Related Party Transactions 3 9  
Related Party Transactions 4 9  
Related Party Transactions 5 0  
Related Party Transactions 6 134,493  
Related Party Transactions 7 108,642  
Related Party Transactions 8 150,632  
Related Party Transactions 9 242,469  
Related Party Transactions 10 21,025  
Related Party Transactions 11 21,030  
Related Party Transactions 12 490,750  
Related Party Transactions 13   500,000
Related Party Transactions 14 490,750  
Related Party Transactions 15 358,211 358,211
Related Party Transactions 16 $ 1.37  
Related Party Transactions 17 3,333,334 3,333,334
Related Party Transactions 18 1,666,667 1,666,667
Related Party Transactions 19 0.56  
Related Party Transactions 20   0.6
Related Party Transactions 21 933,881  
Related Party Transactions 22   1,000,000
Related Party Transactions 23 250,000  
Related Party Transactions 24 2.00% 2.00%
Related Party Transactions 25 833,334 833,334
Related Party Transactions 26 0.9  
Related Party Transactions 27 208,992  
Related Party Transactions 28 10,969  
Related Party Transactions 29 0  
Related Party Transactions 30 206,500  
Related Party Transactions 31 $ 206,500