Mr. David Karp reports

COUNTERPATH REPORTS FIRST QUARTER FISCAL 2019 FINANCIAL RESULTS

CounterPath Corp. has released the financial and operating results for its quarter ended July 31, 2018, being the first quarter of fiscal year 2019.

Fiscal 2019 first quarter financial highlights:

• Revenue of $2.9-million for the quarter, compared with revenue of $3.1-million for the first quarter of fiscal 2018;
• Growth in subscription, support and maintenance revenue (revenue of a recurring nature) of 29 per cent for the quarter, compared with first quarter of fiscal 2018;
• Non-GAAP (generally accepted accounting principles) loss from operations of $800,000 for the quarter, compared with non-GAAP loss from operations of $200,000 for the first quarter of fiscal 2018;
• Net loss of $1-million, or 17 cents per share, for the quarter, compared with a net loss of $1.2-million, or 23 cents per share, for the first quarter of fiscal 2018;
• Non-GAAP net loss of $800,000, or 14 cents per share, for the quarter, compared with non-GAAP net loss of $200,000, or five cents per share, for the first quarter of fiscal 2018;
• Cash of $1.9-million as of July 31, 2018, compared with cash of $2.3-million as of April 30, 2018.

Management commentary

"We are pleased with the progress we continue to make on growing our recurring revenue through new accounts as well as through our current customer base," said Donovan Jones, president and chief executive officer. "During this quarter, we signed an agreement with a leading contact centre solution provider that has over 100,000 Bria licences to deploy the CounterPath-hosted Stretto platform for provisioning and remote support of their Bria. Additionally, the full-service, award-winning telecommunications service provider, Vonex Ltd., announced a partnership agreement with CounterPath and will jointly market a combined product offering for the Australian market. In a recent research report from telecoms and IT [information technology] analyst firm MZA Ltd., CounterPath is listed as the fourth-largest vendor in desktop and mobile UC [unified communications] client markets behind industry leaders Cisco, Microsoft, Avaya with double-digit market share in 2017. Building on the momentum, we look forward to an upcoming refresh of our highly scalable software-as-a service (SaaS) solution that enables enterprises to communicate and collaborate better in a global, secure and productive environment. This subscription-based offering is targeted towards new users of the SMB [small and medium business] market as well as our extensive X-lite and Bria user base. CounterPath continues to deliver high-value services leveraging the award-winning Bria user experience, including secure corporate instant messaging, screen sharing and message synchronization, all hosted by CounterPath from the cloud," continued Mr. Jones.

Financial overview (all amounts in U.S. dollars and in accordance with accounting principles generally accepted in the United States (GAAP) unless otherwise specified; unaudited)

Revenue was $2.9-million for the quarter ended July 31, 2018, compared with $3.1-million for the same quarter in the last fiscal year. Software revenue was $1.4-million, compared with $1.7-million for the same quarter in the last fiscal year; subscription, support and maintenance revenue was $1.3-million, compared with $1-million for the same quarter in the last fiscal year; and professional services and other revenue was $300,000, compared with $400,000 for the same quarter in the last fiscal year.

Operating expenses for the quarter ended July 31, 2018, were $4-million, compared with $3.6-million for the same quarter in the last fiscal year. Operating expenses for the quarter ended July 31, 2018, included a non-cash stock-based compensation expense of $300,000 (2017: $300,000). Sales and marketing expenses were $1-million for the quarter ended July 31, 2018, compared with $1-million for the same quarter last fiscal year. For the quarter ended July 31, 2018, research and development expenses were $1.4-million and general and administrative expenses were $1-million, compared with $1.4-million and $900,000, respectively, for the same quarter in the last fiscal year.

Foreign exchange gain for the quarter ended July 31, 2018, was $100,000, compared with foreign exchange loss of $600,000 for the same quarter last fiscal year. The foreign exchange gain (loss) represents the gain (loss) on account of translation of the intercompany accounts of the company's subsidiary, which are maintained in Canadian dollars, and transactional gains and losses resulting from transactions denominated in currencies other than U.S. dollars.

The net loss for the quarter ended July 31, 2018, was $1-million, or 17 cents per share, compared with a net loss of $1.2-million, or 23 cents per share, for the same quarter in the last fiscal year. As of July 31, 2018, the company had $1.9-million in cash, compared with $2.3-million at April 30, 2018.

About CounterPath Corp.

CounterPath's unified communications solutions are changing the face of telecommunications. An industry and user favourite, Bria soft phones for desktop, tablet and mobile devices, together with Stretto platform server solutions, enable operators, OEMs (original equipment manufacturers) and enterprises large and small around the globe to offer a seamless and unified over-the-top (OTT) communications experience across both fixed and mobile networks.

                    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                    (in U.S. dollars)
                                                                     Three months ended      
                                                                 July 31,       July 31,              
                                                                    2018           2017        
Revenue                                                                             
Software                                                     $ 1,356,002    $ 1,698,893 
Subscription, support and maintenance                          1,251,020        967,062 
Professional services and other                                  280,808        446,851 
Total revenue                                                  2,887,830      3,112,806 
Operating expenses                                                                  
Cost of sales (includes depreciation of $528 (2017: $1,584))     595,556        388,243 
Sales and marketing                                              994,960      1,004,284 
Research and development                                       1,402,956      1,361,473 
General and administrative                                       991,638        892,587 
Total operating expenses                                       3,985,110      3,646,587 
(Loss) from operations                                        (1,097,280)      (533,781)
Interest and other income (expense), net                                            
Interest expense                                                      (5)           (53)
Foreign exchange gain (loss)                                      80,936       (618,699)
Gain on change in fair value of derivative instruments             5,402              - 
Total interest and other income (expense), net                    86,333       (618,752)
Net (loss) for the period                                    $(1,010,947)   $(1,152,533)
Net (loss) per share                                                                  
Basic and diluted                                            $     (0.17)   $     (0.23)

We seek Safe Harbor.