CounterPath Corporation (“CounterPath” or the “Company”) (OTCBB: CPAH; TSX-V: CCV), an award-winning provider of desktop and mobile VoIP software products and solutions, today announced that as a result of an internal review, it will restate its annual consolidated financial statements as at April 30, 2009 and 2010 and for the years then ended and its interim consolidated financial statements as at July 31, 2010 and for the quarterly periods ended July 31, 2009 and 2010 to correct a computational error in accounting for intangible assets and the accounting for the over-accrual for certain estimated costs.
The combined effect of the restated figures is a decrease in basic and diluted loss per share by approximately $0.01 to $0.17 per share for the year ended April 30, 2010 and an increase in basic and diluted loss per share by approximately $0.01 to $0.58 per share for the year ended April 30, 2009. There was no change to basic and diluted loss per share for the three months ended July 31, 2010 (July 31, 2009 – $nil). This restatement has no effect on the Company’s reported cash flows, taxes or liquidity.
As a result of a computational error which occurred in translating Canadian dollar denominated intangible assets to United States dollar denominated assets, the Company is restating previously issued financial statements to properly record the period end amounts of intangible assets and accumulated other comprehensive loss – foreign currency translation adjustments and the related revision to the impairment of intangible assets charge taken in fiscal year 2009. These adjustments result in an increase in net loss of approximately $349,000 for the year ending April 30, 2009. The adjustments also result in a decrease in the carrying amount of intangible assets by approximately $1,256,000 as at April 30, 2010 and by approximately $1,057,000 as at July 31, 2010. In addition, the adjustments result in an increase of approximately $349,000 in accumulated deficit as of April 30, 2009 to reflect the cumulative effect of the error. This restatement has no effect on the Company’s reported cash flows or liquidity, and has no tax effect.
In addition, the Company determined through its recent investigation that it overstated the accrual of its estimated royalty costs. As a result, the Company is restating previously issued financial statements to reverse the overstated amount of its cost of sales and accrued liabilities. These adjustments result in a decrease in net loss of approximately $114,000 for the year ending April 30, 2010 (April 30, 2009 – $68,000). In addition, the restatement results in a decrease of approximately $114,000 in accumulated deficit as of April 30, 2010 and a decrease in accumulated deficit of approximately $240,000 as of April 30, 2009 to reflect the cumulative effect of the error. The effect on the Company’s consolidated balance sheet as of April 30, 2010 and July 31, 2010 is a decrease in accounts payable and accrued liabilities of approximately $354,000 (April 30, 2009 – $240,000). This restatement has no effect on reported cash flows, no tax effect and improves the Company’s working capital by approximately $354,000 as of April 30, 2010 and July 31, 2010.
Accordingly, on December 3, 2010, management concluded, and the Company’s audit committee agreed, that the Company’s annual financial statements as at April 30, 2009 and 2010 and for the years then ended and the related reports of its independent registered public accounting firm and its unaudited interim consolidated financial statements as at July 31, 2010 and for the quarterly periods ended July 31, 2009 and 2010, and all earnings press releases and similar communications issued by the Company relating to such financial statements should no longer be relied upon.
The Company’s audit committee has discussed the matters relating to the accounting errors with its independent public accountants, BDO Canada LLP and intends to file an amended Annual Report on Form 10-K for the fiscal year ended April 30, 2010 and an amended Quarterly Report on Form 10-Q for the period ended July 31, 2010 with the Securities and Exchange Commission promptly upon the completion of its review. The estimated restatement amounts disclosed above are preliminary, unaudited and subject to adjustment.
CounterPath Corporation is an award-winning provider of innovative desktop and mobile VoIP software products and solutions. The company’s product suite includes SIP-based softphones, server applications and Fixed Mobile Convergence (FMC) solutions that enable service providers, enterprises and Original Equipment Manufacturers (OEM) to cost-effectively integrate voice, video, presence and Instant Messaging (IM) applications into their VoIP offerings and extend functionality across both fixed and mobile networks.
CounterPath’s customers include some of the world’s largest telecommunications service providers and network equipment providers including AT&T, Verizon, BT (British Telecommunications PLC), Mobilkom Austria, Avaya, Cisco Systems, Metaswitch and Mitel.
For more information please visit www.counterpath.com.
Disclaimer: Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Chief Financial Officer
+1.604.320.3344 ext 1110
Except for historical information, the matters discussed herein are “forward-looking statements” within the meaning of the applicable securities laws and regulations. Forward-looking statements, including statements regarding the Company’s intent to restate its prior financial statements, the estimated adjustments of the restated financial statements, the internal review by our management, audit committee and auditors and the filing of the restated financial reports, involve risks and uncertainties which may cause actual results to differ materially from those stated here. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, the risk that additional information may arise which may require further adjustments to the financial statements, the risk that the process of preparing and auditing the financial statements or other subsequent events would require the Company to make additional adjustments, the time and effort required to complete the restatement of the financial reports and the impact of any inquiry initiated by the SEC and any related or additional investigative proceedings, as well as other risks described more fully in the Company’s filings with the SEC and on SEDAR. Forward-looking statements reflect management’s analysis as of the date hereof. Except as required by law, the Company does not intend to update these forward-looking statements.