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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31,
2010

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________to
______________

Commission file number 000-50346

COUNTERPATH
CORPORATION(Exact name of registrant as specified in its
charter)

|Nevada                                           | 20-0004161                       
|------------------------------------------------ | ---------------------------------
|(State or other jurisdiction of incorporation or | (IRS Employer Identification No.)
|organization)                                    |                                  

Suite 300, One Bentall Centre, 505 Burrard Street,
Vancouver, British Columbia, Canada V7X 1M3(Address, including zip
code, of principal executive offices)

(604) 320-3344(Registrants telephone number,
including area code)

Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).
Yes [ ] No [ ]

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.

|Large accelerated filer [ ] |                                                     | Accelerated filer [ ]          
|--------------------------- | --------------------------------------------------- | -------------------------------
|Non-accelerated filer [ ]   | (Do not
      check if a smaller reporting company) | Smaller reporting company [ x ]

Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [x]

---

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practicable date: 32,983,806
shares of common stock issued and outstanding as of March 12, 2010.

2

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|COUNTERPATH CORPORATION                       
|----------------------------------------------
|JANUARY 31, 2010 QUARTERLY REPORT ON FORM 10-Q
|                                              
|INDEX                                         

|               |                                                                                              | Page
|-------------- | -------------------------------------------------------------------------------------------- | ----
|               | Part I                                                                                       |     
|Item
      1.  | Financial
      Statements.                                                                  | 4   
|Item 2.        | Managements Discussion and Analysis of Financial
      Condition and Results of Operations. | 26  
|Item
      4T. | Controls
      and Procedures.                                                               | 40  
|               | Part II                                                                                      |     
|Item
      1.  | Legal
      Proceedings.                                                                     | 40  
|Item
      1A. | Risk
      Factors.                                                                          | 40  
|Item
      2.  | Unregistered
      Sales of Equity Securities and Use of Proceeds.                           | 45  
|Item
      3.  | Defaults
      Upon Senior Securities.                                                       | 45  
|Item
      4.  | Submission
      of Matters to a Vote of Security Holders.                                   | 45  
|Item
      5.  | Other
      Information.                                                                     | 45  
|Item
      6.  | Exhibits.                                                                                    | 45  

3

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PART I

Item 1. Financial Statements.

It is the opinion of management that the interim consolidated
financial statements for the quarter ended January 31, 2010 include all
adjustments necessary in order to ensure that the interim consolidated financial
statements are not misleading.

The interim consolidated financial statements are stated in
United States dollars and are prepared in accordance with generally accepted
accounting principles in the United States of America.

COUNTERPATH CORPORATIONINDEX TO INTERIM
CONSOLIDATED FINANCIAL STATEMENTS January 31, 2010 (Unaudited)(Stated in U.S. Dollars)

|                                                                           | Page  
|-------------------------------------------------------------------------- | ------
|Interim Consolidated Balance
      Sheets                                  | 5     
|Interim Consolidated Statements of Operations
      and Comprehensive Loss | 6     
|Interim Consolidated Statements
      of Cash Flows                        | 7     
|Interim Consolidated Statements of Changes
      in Stockholders Equity   | 8     
|Notes to the Interim Consolidated
      Financial Statements               | 9 - 25

4

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|COUNTERPATH CORPORATION            
|-----------------------------------
|INTERIM CONSOLIDATED BALANCE SHEETS
|(Stated in U.S. Dollars)           

|                                                                                                                                                                                                    |   | January 31, |   |   | April 30,   |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|                                                                                                                                                                                                    |   | 2010        |   |   | 2009        |  
|Assets                                                                                                                                                                                              |   | (Unaudited) |   |   |             |  
|Current assets:                                                                                                                                                                                     |   |             |   |   |             |  
|Cash                                                                                                                                                                                                | $ | 2,351,791   |   | $ | 2,931,932   |  
|Accounts
      receivable (net of allowance for doubtful accounts of
                 
      $1,032,784 and $755,114, respectively)                                                                 |   | 1,546,144   |   |   | 2,524,220   |  
|Investment tax credits
      recoverable                                                                                                                                                            |   | 102,817     |   |   | 143,334     |  
|Other current
      assets                                                                                                                                                                          |   | 854,816     |   |   | 310,274     |  
|Total current
      assets                                                                                                                                                                          |   | 4,855,568   |   |   | 5,909,760   |  
|                                                                                                                                                                                                    |   |             |   |   |             |  
|Deposits                                                                                                                                                                                            |   | 101,538     |   |   | 114,267     |  
|Equipment                                                                                                                                                                                           |   | 202,638     |   |   | 258,442     |  
|Intangible assets (net of accumulated
      amortization of $4,018,121
               and $3,375,195,
      respectively)  Note 2(e)                                                               |   | 2,587,959   |   |   | 2,201,894   |  
|Goodwill  Note 2(e)                                                                                                                                                                                |   | 8,214,480   |   |   | 7,262,701   |  
|Other assets                                                                                                                                                                                        |   | 67,912      |   |   | 92,101      |  
|Total Assets                                                                                                                                                                                        | $ | 16,030,095  |   | $ | 15,839,165  |  
|                                                                                                                                                                                                    |   |             |   |   |             |  
|Liabilities and Stockholders Equity                                                                                                                                                                |   |             |   |   |             |  
|Current liabilities:                                                                                                                                                                                |   |             |   |   |             |  
|Accounts payable
      and accrued liabilities                                                                                                                                                      | $ | 3,191,821   |   | $ | 3,488,001   |  
|Unearned revenue                                                                                                                                                                                    |   | 486,862     |   |   | 708,455     |  
|Customer
      deposits                                                                                                                                                                             |   | 4,213       |   |   | 9,443       |  
|Accrued warranty                                                                                                                                                                                    |   | 108,786     |   |   | 137,378     |  
|Total current liabilities                                                                                                                                                                           |   | 3,791,682   |   |   | 4,343,277   |  
|                                                                                                                                                                                                    |   |             |   |   |             |  
|Deferred lease inducements                                                                                                                                                                          |   | 9,619       |   |   | 55,016      |  
|Unrecognized tax benefit                                                                                                                                                                            |   | 98,575      |   |   | 98,575      |  
|Total liabilities                                                                                                                                                                                   |   | 3,899,876   |   |   | 4,496,868   |  
|                                                                                                                                                                                                    |   |             |   |   |             |  
|Stockholders equity:                                                                                                                                                                               |   |             |   |   |             |  
|Preferred stock, $0.001 par value
               Authorized:
      100,000,000          Issued
      and outstanding: January 31, 2010  1; April 30, 2009  1                                      |   |            |   |   |            |  
|Common stock, $0.001 par value
       Note 5          Authorized:
      83,076,900          Issued and
      outstanding:          January
      31, 2010  32,949,835 April 30, 2009  28,832,050 |   | 32,949      |   |   | 28,832      |  
|Additional paid-in capital                                                                                                                                                                          |   | 51,743,434  |   |   | 48,718,443  |  
|Accumulated deficit                                                                                                                                                                                 |   | (39,095,668 | ) |   | (34,318,195 | )
|Accumulated other comprehensive loss 
      currency translation         
      adjustment                                                                                                         |   | (550,496    | ) |   | (3,086,783  | )
|Total stockholders equity                                                                                                                                                                          |   | 12,130,219  |   |   | 11,342,297  |  
|Liabilities and Stockholders Equity                                                                                                                                                                | $ | 16,030,095  |   | $ | 15,839,165  |  

Going concern  Note 2 Commitments and contingent liability
 Notes 7 and 8 Subsequent events  Note 11

See accompanying notes to the consolidated financial
statements

5

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|COUNTERPATH CORPORATION                          
|-------------------------------------------------
|INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND
|COMPREHENSIVE LOSS                               
|(Stated in U.S. Dollars)                         
|(Unaudited)                                      

|                                                                                                                                                                                                                                          |   | Three Months Ended |   |   | Nine Months Ended |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------------ | - | - | ----------------- | -
|                                                                                                                                                                                                                                          |   | January 31,        |   |   | January 31,       |  
|                                                                                                                                                                                                                                          |   | 2010               |   |   | 2009              |  
|Revenue  Note 6:                                                                                                                                                                                                                         |   |                    |   |   |                   |  
|Software                                                                                                                                                                                                                                  | $ | 1,030,004          |   | $ | 1,305,303         |  
|Service                                                                                                                                                                                                                                   |   | 333,414            |   |   | 724,758           |  
|Total
      revenue                                                                                                                                                                                                                       |   | 1,363,418          |   |   | 2,030,061         |  
|Operating expenses:                                                                                                                                                                                                                       |   |                    |   |   |                   |  
|Cost of sales (includes depreciation of $4,911 and
         $48,490 and amortization of intangible assets of
         $642,925 and $1,514,515 for nine months ended
         January 31, 2010 and 2009 respectively  Note
         2(e)) |   | 794,364            |   |   | 863,573           |  
|Sales and marketing                                                                                                                                                                                                                       |   | 644,212            |   |   | 762,398           |  
|Research and development                                                                                                                                                                                                                  |   | 797,162            |   |   | 1,142,497         |  
|General and administrative                                                                                                                                                                                                                |   | 915,302            |   |   | 1,524,559         |  
|Restructuring costs  Note 9                                                                                                                                                                                                              |   | -                  |   |   | 26,268            |  
|Total operating expenses                                                                                                                                                                                                                  |   | 3,151,040          |   |   | 4,319,295         |  
|Loss from
      operations                                                                                                                                                                                                                |   | (1,787,622         | ) |   | (2,289,234        | )
|Interest and other income (expense), net:                                                                                                                                                                                                 |   |                    |   |   |                   |  
|Interest income                                                                                                                                                                                                                           |   | 53,239             |   |   | 33,627            |  
|Interest expense                                                                                                                                                                                                                          |   | (685               | ) |   | (1,278            | )
|Foreign exchange gain (loss)                                                                                                                                                                                                              |   | (46,516            | ) |   | 19,360            |  
|Net loss for the period                                                                                                                                                                                                                   | $ | (1,781,584         | ) | $ | (2,237,525        | )
|Other comprehensive income (loss):                                                                                                                                                                                                        |   |                    |   |   |                   |  
|                                                                                                                                                                                                                                          |   |                    |   |   |                   |  
|Foreign currency translation adjustments                                                                                                                                                                                                  |   | 82,992             |   |   | (282,407          | )
|Comprehensive loss                                                                                                                                                                                                                        | $ | (1,698,592         | ) | $ | (2,519,932        | )
|Net loss per share:                                                                                                                                                                                                                       |   |                    |   |   |                   |  
|Basic and diluted                                                                                                                                                                                                                         | $ | (0.06              | ) | $ | (0.08             | )
|                                                                                                                                                                                                                                          |   |                    |   |   |                   |  
|Weighted average common shares
      outstanding:                                                                                                                                                                                         |   | 30,710,069         |   |   | 28,542,855        |  

See accompanying notes to the consolidated financial
statements

6

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|COUNTERPATH CORPORATION                      
|---------------------------------------------
|INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
|(Stated in U.S. Dollars)                     
|(Unaudited)                                  

|                                                                                      |   | Nine Months Ended |  
|------------------------------------------------------------------------------------- | - | ----------------- | -
|                                                                                      |   | January 31,       |  
|                                                                                      |   | 2010              |  
|Cash flows from operating
      activities:                                           |   |                   |  
|Net loss for the period                                                               | $ | (4,777,473        | )
|Adjustments to reconcile
      net loss to net cash used in     operating activities: |   |                   |  
|Depreciation and
      amortization                                                   |   | 220,219           |  
|Amortization of intangible assets                                                     |   | 642,925           |  
|Stock-based
      compensation  Note 5                                               |   | 747,198           |  
|Foreign exchange loss                                                                 |   | 468,277           |  
|Changes in assets and liabilities:                                                    |   |                   |  
|Accounts receivable                                                                   |   | 1,066,118         |  
|Other current
      assets                                                            |   | (529,867          | )
|Accounts payable and accrued liabilities                                              |   | (151,112          | )
|Unearned revenue                                                                      |   | (207,339          | )
|Customer deposits                                                                     |   | (5,230            | )
|Accrued warranty                                                                      |   | (28,594           | )
|Net cash used in operating activities                                                 |   | (2,554,878        | )
|                                                                                      |   |                   |  
|Cash flows from investing
      activities:                                           |   |                   |  
|Purchase of equipment                                                                 |   | (53,641           | )
|Deposits                                                                              |   | 25,740            |  
|Decrease (increase) in other assets                                                   |   | 24,189            |  
|Net cash used in investing activities                                                 |   | (3,712            | )
|                                                                                      |   |                   |  
|Cash flows from financing
      activities:                                           |   |                   |  
|Common stock issued, net of transaction costs                                         |   | 1,881,854         |  
|Net cash provided by financing activities                                             |   | 1,881,854         |  
|                                                                                      |   |                   |  
|Foreign exchange effect on cash                                                       |   | 96,595            |  
|                                                                                      |   |                   |  
|Decrease in cash                                                                      |   | (580,141          | )
|                                                                                      |   |                   |  
|Cash, beginning of the period                                                         |   | 2,931,932         |  
|Cash, end of the period                                                               | $ | 2,351,791         |  
|                                                                                      |   |                   |  
|Supplemental disclosure of cash flow information                                      |   |                   |  
|Cash paid for:                                                                        |   |                   |  
|Interest                                                                              | $ | 2,356             |  
|Taxes                                                                                 |   |                  |  
|Non cash
      transactions  Notes 4 and 5                                           |   |                   |  

See accompanying notes to the consolidated financial
statements

7

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|COUNTERPATH CORPORATION                                                 
|------------------------------------------------------------------------
|INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN
      STOCKHOLDERS EQUITY
|for the Nine Months Ended January 31, 2010                              
|(Stated in U.S. Dollars)                                                
|(Unaudited)                                                             

|                                              |  | Common shares |  |   | Preferred Shares |  |  |        |  |   |                 |  |   |            |   |   |             |  
|--------------------------------------------- |  | ------------- |  | - | ---------------- |  |  | ------ |  | - | --------------- |  | - | ---------- | - | - | ----------- | -
|                                              |  |               |  |   |                  |  |  |        |  |   |                 |  |   |            |   |   |             |  
|                                              |  | Number        |  |   |                  |  |  | Number |  |   |                 |  |   | Additional |   |   |             |  
|                                              |  | of            |  |   |                  |  |  | of     |  |   |                 |  |   | Paid-in    |   |   | Accumulated |  
|                                              |  | Shares        |  |   | Par
      Value  |  |  | Shares |  |   | Par
      Value |  |   | Capital    |   |   | Deficit     |  
|Balance, May 1, 2009                          |  | 28,832,050    |  | $ | 28,832           |  |  | 1      |  | $ |                |  | $ | 48,718,443 |   | $ | (34,318,195 | )
|                                              |  |               |  |   |                  |  |  |        |  |   |                 |  |   |            |   |   |             |  
|Shares issued:                                |  |               |  |   |                  |  |  |        |  |   |                 |  |   |            |   |   |             |  
|Private Placements  Note 5                   |  | 3,333,334     |  |   | 3,333            |  |  |       |  |   |                |  |   | 1,849,793  |   |   |            |  
|As part of debt settlement 
      Note 5     |  | 527,370       |  |   | 527              |  |  |       |  |   |                |  |   | 392,889    |   |   |            |  
|Exercise of stock options                     |  | 25,875        |  |   | 26               |  |  |       |  |   |                |  |   | 11,952     |   |   | -           |  
|Employee share purchase plan                  |  | 26,660        |  |   | 26               |  |  | -      |  |   | -               |  |   | 23,365     |   |   | -           |  
|Exchange of subsidiary preferred shares       |  | 204,546       |  |   | 205              |  |  |       |  |   |                |  |   | (205       | ) |   |            |  
|Stock-based compensation 
      Note 5       |  |              |  |   |                 |  |  |       |  |   |                |  |   | 747,198    |   |   |            |  
|Net loss for the period                       |  |              |  |   |                 |  |  |       |  |   |                |  |   |           |   |   | (4,777,473  | )
|Foreign currency translation
      adjustment |  |              |  |   |                 |  |  |       |  |   |                |  |   |           |   |   |            |  
|Balance, January 31, 2010 (Unaudited)         |  | 32,949,835    |  | $ | 32,949           |  |  | 1      |  | $ |                |  | $ | 51,743,434 |   | $ | (39,095,668 | )

See accompanying notes to the consolidated financial
statements

8

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|COUNTERPATH CORPORATION                                     
|------------------------------------------------------------
|NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
      STATEMENTS
|January 31, 2010                                            
|(Unaudited)                                                 

|Note 1 | Nature of Operations
|------ | --------------------

CounterPath Corporation (the
Company) was incorporated in the State of Nevada on April 18, 2003. The
Company changed its name from CounterPath Solutions, Inc. to CounterPath
Corporation on October 17, 2007. The Companys common shares are quoted for
trading on the Over-The-Counter Bulletin Board in the United States of America
and on the TSX Venture Exchange in Canada.

On August 2, 2007, the Company
acquired of 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 that are
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 merged as a wholly-owned subsidiary of the Company under the name
CounterPath Technologies Inc.

On March 19, 2008, the Companys Board
of Directors approved a five for one common stock consolidation. As a result,
the Company's authorized capital decreased from 415,384,500 shares of common
stock to 83,076,900 shares of common stock. The par value of the common stock
was unaffected by the stock consolidation and remains at $0.001 per share. All
per share amounts and outstanding shares, including all common stock equivalents
(stock options and warrants) have been retroactively adjusted in the
Consolidated Financial Statements and in the Notes to the Consolidated Financial
Statements for all periods presented to reflect the stock consolidation.

The Company focuses on the design,
development, marketing and sales of desktop 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 carriers, original equipment manufacturers and
businesses in North America, Central and South America, Europe and Asia.

|Note 2 | Significant Accounting Policies and Going
      Concern
|------ | -------------------------------------------------------

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.

9

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|COUNTERPATH CORPORATION                                     
|------------------------------------------------------------
|NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
      STATEMENTS
|January 31, 2010                                            
|(Unaudited)                                                 

|Note 2 | Significant Accounting Policies and Going
      Concern - (contd)
|------ | ------------------------------------------------------------------

These interim consolidated financial
statements have been prepared on a going concern basis, which implies the
Company will continue to realize its assets and discharge its liabilities and
commitments in the normal course of business. The continuation of the Company as
a going concern is dependent upon the continued financial support from its
stockholders, the ability of the Company to obtain necessary equity financing to
continue operations and to generate sustainable significant revenue. There is no
guarantee that the Company will be able to raise any equity financing or
generate profitable operations. As at January 31, 2010, the Company has not yet
achieved profitable operations and had an accumulated deficit of $39,095,668
since incorporation. These factors raise substantial doubt regarding the
Companys ability to continue as a going concern.

Under its current operating plan the
Company will require approximately $11-$13 million to fund ongoing operations
and working capital requirements through January 31, 2011. Management is
implementing a plan to address these uncertainties to enable the Company to
continue as a going concern through the end of fiscal 2010 and beyond. This plan
includes new equity financing in amounts sufficient to sustain operations, such
as the private placement discussed in Note 5, and to increase revenues and
decrease costs from operations.

Realizable values may be substantially
different from carrying values as shown in these financial statements should the
Company be unable to continue as a going concern. These financial statements do
not include any adjustments to the recoverability and classification of recorded
asset amounts and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern. The consolidated financial
statements have been properly prepared within the framework of the significant
accounting policies as follows:

| | 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, FirstHand Technologies Inc., continued under
      laws of the province of British Columbia, BridgePort Networks, Inc.
      incorporated under the laws of the state of Delaware and 6789722 Canada
      Inc., incorporated under the Canada Business Corporations Act. The results
      of NewHeights Software Corporation (which subsequently merged with another
      subsidiary to become CounterPath Technologies Inc.) are included from
      August 2, 2007, the date of acquisition. The results of FirstHand
      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, 2009 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, 2009 annual consolidated financial
      statements.                                                                                                                                                                                 

10

---

|COUNTERPATH CORPORATION                                     
|------------------------------------------------------------
|NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
      STATEMENTS
|January 31, 2010                                            
|(Unaudited)                                                 

|Note 2 | Significant Accounting Policies and Going
      Concern - (contd)
|------ | ------------------------------------------------------------------

| | b) | Interim Reporting  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | Operating results for the nine months ended January 31,
      2010 are not necessarily indicative of the results that can be expected
      for the year ending April 30, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | c) | New Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | ASC 805. FASB statement No 141(R) Business
      Combinationswas issued in December 2007. This statement was
      incorporated into ASC 805, Business Combinations, under the new
      FASB codifications. ASC 805 establishes principles and requirements for
      how an acquirer recognizes and measures in its financial statements the
      identifiable assets acquired and liabilities assumed, any non-controlling
      interest in the acquiree, and the goodwill acquired. This standard also
      establishes disclosure requirements which will enable users to evaluate
      the nature and financial effects of the business combination. This
      standard is effective for financial statements issued for fiscal years
      beginning after December 15, 2008. The adoption of this standard did not
      have any material impact on these financial statements.                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | ASC 810. In December 2007, the FASB issued Statement of
      Financial Accounting Standards No. 160, Non controlling Interests in
      Consolidated Financial Statements  an amendment to ARB No.51(SFAS
      No. 160). SFAS No. 160 was incorporated into ASC 810. ASC 810 establishes
      accounting and reporting standards for a non-controlling interest in a
      subsidiary and for deconsolidation of a subsidiary. This standard applies
      prospectively to business combinations for which the acquisition date is
      on or after the beginning of the first annual reporting period beginning
      on or after December 15, 2008. This standard may not be applied before
      that date. The adoption of this standard did not have any material impact
      on these financial statements.                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | ASC 815: In March 2008, the Financial Accounting
      Standards Board (FASB) issued Statement of Financial Accounting
      Standards No. 161, Disclosures about Derivative Instruments and
      Hedging Activities  an amendment of FASB Statement No. 133 (FAS
      161). SFAS No. 161 was incorporated into ASC 815, Derivatives and
      Hedging(ASC 815). ASC 815 modifies existing requirements to include
      qualitative disclosures regarding the objectives and strategies for using
      derivatives, fair value amounts of gains and losses on derivative
      instruments and disclosures about credit-risk-related contingent features
      in derivative agreements. The pronouncement also requires the
      cross-referencing of derivative disclosures within the financial
      statements and notes thereto. This statement is effective for financial
      statements issued for years beginning after November 15, 2008 and interim
      periods within those years. The adoption of this standard did not have any
      material impact on these financial statements.                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | ASC 855: In May 2009, the Financial Accounting Standards
      Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
      No. 165, Subsequent Events (SFAS No. 165). This statement was
      incorporated into ASC 855, Subsequent Events(ASC 855). ASC 855
      requires the disclosure of the date through which an entity has evaluated
      subsequent events for potential recognition or disclosure in the financial
      statements and whether that date represents the date the financial
      statements were issued or were available to be issued. This standard also
      provides clarification about circumstances under which an entity should
      recognize events or transactions occurring after the balance sheet date in
      its financial statements and the disclosures that an entity should make
      about events or transactions that occurred after the balance sheet date.
      This standard was in effect for the Companys interim and annual periods
      beginning with the interim three month period ended July 31, 2009.The adoption of this standard did not have a
      material impact on the Companys consolidated financial
  statements.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | The Company has evaluated subsequent events as at March
      12, 2010 for potential recognition and disclosure in the financial
      statements. This date represents the date the financial statements are
      available to be issued.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

11

---

|COUNTERPATH CORPORATION                                     
|------------------------------------------------------------
|NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
      STATEMENTS
|January 31, 2010                                            
|(Unaudited)                                                 

|Note 2 | Significant Accounting Policies and Going
      Concern - (contd)
|------ | ------------------------------------------------------------------

| | c) | New Accounting Pronouncements  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | ASC 105: In June 2009, the FASB issued SFAS No. 168,
      The FASB Accounting Standards Codificationand the Hierarchy of Generally Accepting Accounting
      PrinciplesA Replacement of FASB Statement No. 162(FAS 168) which
      established the FASB Accounting Standards Codification (Codification)
      as the single source of authoritative nongovernmental U.S. GAAP which was
      launched on July 1, 2009. This statement was incorporated into ASC 105,
      Generally Accepted Accounting Principlesunder the new FASB
      codification which became effective on July 1, 2009. The Codification does
      not change current U.S. GAAP, but is intended to simplify user access to
      all authoritative U.S. GAAP by providing all the authoritative literature
      related to a particular topic in one place. All existing accounting
      standard documents will be superseded and all other accounting literature
      not included in the Codification will be considered non-authoritative. The
      Codification is effective for interim and annual periods ending after
      September 15, 2009 and will not have an impact on the Companys financial
      condition or results of operations. The Company has updated its financial
      reporting process of providing Codification references in its public
      filings and the Codification references are reflected in these
      consolidated interim financial statements.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | ASC 260. FASB Staff Position (FSP) EITF 03-06-1,
      Participating securities and instruments granted in share-based payment
      transactions.Under the new FASB codification this FSP was
      incorporated into ASC 260, Earnings Per Share(ASC 260). ASC 260
      addresses whether instruments granted in share-based payment transactions
      are participating securities prior to vesting that should be included in
      the earnings allocation in computing earnings per share under the
      two-class method described.ASC 260 is effective for years
      beginning after December 15, 2008, and interim periods within those years.
      The adoption of this standard did not have any material impact on these
      financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | In October 2009, the FASB issued Accounting Standards
      Update (ASU) No. 2009-13, Multiple- Deliverable Revenue Arrangements a
      consensus of the FASB Emerging Issues Task Force, (ASU 2009- 13). ASU
      2009-13 addresses the accounting for multiple-deliverable arrangements and
      requires that the overall arrangement consideration be allocated to each
      deliverable in a revenue arrangement based on an estimated selling price
      when vendor specific objective evidence or third-party evidence of fair
      value is not available. This guidance also eliminates the residual method
      of allocation and requires that arrangement consideration be allocated to
      all deliverables using the relative selling price method. This will result
      in more revenue arrangements being separated into separate units of
      accounting. ASU 2009-13 is effective for fiscal years beginning on or
      after June 15, 2010. Companies can elect to apply this guidance (1)
      prospectively to new or materially modified arrangements after the
      effective date or (2) retrospectively for all periods presented. The
      Company is currently assessing the impact of adoption of ASU 2009-13 and
      does not currently plan to early adopt.                                                                                                                                                                         

12

---

|COUNTERPATH CORPORATION                                     
|------------------------------------------------------------
|NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
      STATEMENTS
|January 31, 2010                                            
|(Unaudited)                                                 

|Note 2 | Significant Accounting Policies and Going
      Concern - (contd)
|------ | ------------------------------------------------------------------

| | c) | New Accounting Pronouncements  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | In October 2009, the FASB issued ASU No. 2009-14,
      Certain Revenue Arrangements That Include Software Elements, (ASU
      2009-14). ASU 2009-14 changes the accounting model for revenue
      arrangements that include both tangible products and software elements.
      Tangible products containing both software and non-software components
      that function together to deliver the products essential functionality
      will no longer be within the scope of ASC 985-605 Software Revenue
      Recognition (ASC 985-605). The entire product (including the software
      and non-software deliverables) will therefore be accounted for under
      accounting literature found in ASC 605. ASU 2009-14 is effective for
      fiscal years beginning on or after June 15, 2010. Companies can elect to
      apply this guidance (1) prospectively to new or materially modified
      arrangements after the effective date or (2) retrospectively for all
      periods presented. The Company is currently assessing the impact of
      adoption of ASU 2009-14 and does not currently plan to early
  adopt.                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | In January 2010, the FASB issued ASU 2010-06,
      Improving Disclosures about Fair Value Measurements,which is
      included in the ASC in Topic 820 (Fair Value Measurements and
      Disclosures). ASU 2010-06 requires new disclosures on the amount and
      reason for transfers in and out of Level 1 and 2 fair value measurements.
      ASU 2010-06 also requires disclosure of activities, including purchases,
      sales, issuances, and settlements within the Level 3 fair value
      measurements and clarifies existing disclosure requirements on levels of
      disaggregation and disclosures about inputs and valuation techniques. ASU
      2010-06 is effective for interim and annual reporting periods beginning
      after December 15, 2009. The Company is currently assessing the impact of
      adoption of ASU 2009-14 and does not currently plan to early
  adopt.                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | d) | Derivative Instruments and Hedging
    Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | ASC 815. The Company adopted the provisions of Statement
      of Financial Accounting Standards No. 161, Disclosures about Derivative
      Instruments and Hedging Activities  an amendment of FASB Statement No.
      133 (SFAS 161), effective at the beginning of the first quarter of
      fiscal year 2010. SFAS No. 161 was incorporated into ASC 815,
      Derivatives and Hedging(ASC 815). ASC 815 expands financial
      reporting about derivative instruments and hedging activities by requiring
      enhanced disclosures to enable investors to better understand their
      effects on an entitys financial position, results of operations and cash
      flows. ASC 815 also requires qualitative disclosures about objectives and
      strategies for using derivatives, quantitative disclosures about fair
      value amounts of and gains and losses on derivative instruments, and
      disclosures about credit-risk-related contingent features in derivative
      agreements. Because ASC 815 only requires additional disclosure, the
      adoption of ASC 815 did not impact the Companys financial position,
      results of operations, and cash flows (see Note 10, Derivative
      Instruments and Hedging Activities, of the Notes to Interim Consolidated
      Financial Statements).
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | 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.
      Statement of Financial Accounting Standards ASC 350, Goodwill and Other
      Intangible Assets (SFAS ASC 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. The
      impairment test requires management to estimate the fair value of the
      Company's overall business enterprise down to the reporting unit level
      which is CounterPath Corporation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

13

---

|COUNTERPATH CORPORATION                                     
|------------------------------------------------------------
|NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
      STATEMENTS
|January 31, 2010                                            
|(Unaudited)                                                 

|Note 2 | Significant Accounting Policies and Going
      Concern - (contd)
|------ | ------------------------------------------------------------------

| | e) | Goodwill and Intangible Assets 
(contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | 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 January 31, 2010 was
      $6,267,114 (CDN$6,704,947) (April 30, 2009-$5,540,968) and $1,947,366
      (CDN$2,083,752) (April 30, 2009-$1,721,733), respectively. Management will
      perform its annual impairment test in its fiscal fourth quarter. No
      impairment charges were recorded to the nine months ended January 31, 2010
      (2009 - $nil).                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | The Company also evaluates goodwill for impairment
      whenever events or changes in circumstances indicate that the carrying
      amount may not be recoverable. 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. Reporting units represent
      components of the Company for which discrete financial information is
      available that is regularly reviewed by management. Management has
      determined that the Company currently has one reporting unit. 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.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | In accordance with Financial Accounting Standards Board
      (FASB) Statement of Financial Accounting Standards ASC 360, Accounting
      for the Impairment or Disposal of Long-Lived Assets, the carrying value
      of intangible assets and other long-lived assets are reviewed on a regular
      basis for the existence of facts or circumstances that may suggest
      impairment. 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

14

---

|COUNTERPATH CORPORATION                                     
|------------------------------------------------------------
|NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
      STATEMENTS
|January 31, 2010                                            
|(Unaudited)                                                 

|Note 2 | Significant Accounting Policies and Going
      Concern - (contd)
|------ | ------------------------------------------------------------------

| | e) | Goodwill and Intangible Assets 
(contd)                                                                                                                                                                                                                                                                                                    
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                              
| |    | 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
      January 31, 2010 is as follows:                                                                                                                                                                                                                                                  

| |                       |   |           |  |   |              |  |   | Accumulated |  |   |              | 
| | --------------------- | - | --------- |  | - | ------------ |  | - | ----------- |  | - | ------------ | 
| |                       |   |           |  |   | Accumulated  |  |   | Impairment  |  |   | Net Carrying | 
| |                       |   | Cost      |  |   | Amortization |  |   | Charge      |  |   | Amount       | 
| | Acquired technologies | $ | 6,498,582 |  | $ | 3,192,888    |  | $ | 1,636,114   |  | $ | 1,669,580    | 
| | Customer assets       |   | 2,862,831 |  |   | 825,233      |  |   | 1,119,219   |  |   | 918,379      | 
| | Intangible assets     | $ | 9,361,413 |  | $ | 4,018,121    |  | $ | 2,755,333   |  | $ | 2,587,959    | 

| | f) | Comparative Figures                                                                                      
| | -- | ---------------------------------------------------------------------------------------------------------
| |    |                                                                                                          
| |    | Certain comparative figures have been reclassified to
      conform to the current periods presentation.

|Note 3 | Related Party Transactions
|------ | --------------------------

During the three and nine months ended
January 31, 2010 and 2009, the Company incurred the following lease expense to a
company with a director in common with the Company:

| |               |   | Three Months Ended |  |  | Nine Months Ended | 
| | ------------- | - | ------------------ |  |  | ----------------- | 
| |               |   | January 31,        |  |  |                   | 
| |               |   | 2010               |  |  | 2009              | 
| |               |   |                    |  |  |                   | 
| | Lease payment | $ | Nil $              |  |  | Nil               | 

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

The Companys Chairman is the Chairman
and founding shareholder of Mitel Networks Corporation (Mitel). NewHeights
Software Corporation entered into a distribution agreement with Mitel on June
15, 2004 and amended such agreement on August 7, 2007. NewHeights was acquired
by the Company on August 2, 2007 and was amalgamated on February 5, 2008 with
the Companys wholly-owned subsidiary, CounterPath Solutions R&D Inc. under
the name CounterPath Technologies Inc. The distribution agreement with Mitel
renews automatically for one-year periods and contains termination rights of
both parties. Under the terms of the distribution agreement, the Company earns a
specified fee from Mitel based on the number of product licenses sold to
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 are ongoing license fees to be 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.

15

---

|COUNTERPATH CORPORATION                                     
|------------------------------------------------------------
|NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
      STATEMENTS
|January 31, 2010                                            
|(Unaudited)                                                 

|Note 3 | Related Party Transactions 
      (contd)
|------ | -------------------------------------------

The Companys software license revenue
for the three and nine months ended January 31, 2010, pursuant to the terms of
these agreements, was $138,346 and $407,487 (2009 - $221,748 and $909,256),
respectively.

As at January 31, 2010, the Company
had an accounts receivable balance from Mitel of $122,156 (April 30, 2009 -
$155,208).

During the three and nine months ended
January 31, 2010, the Company through its wholly owned subsidiary, FirstHand
Technologies Inc., paid $18,680 and $56,040 (2009 - $67,970 and $200,910)
respectively to Kanata Research Park Corporation (KRP) for leased office
space. KRP is controlled by the Companys Chairman. As at January 31, 2010, the
Company had an accounts payable balance to KRP of $18,250 (April 30, 2009
-$13,210).

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

|Note 4 | Exchangeable Shares
|------ | -------------------

On August 2, 2007, the Company entered
into a voting and exchange trust agreement among its subsidiary, 6789722 Canada
Inc., and Valiant Trust Company whereby the Company issued and deposited with
Valiant Trust a special preferred voting share of the Company in order to enable
Valiant Trust to execute certain voting and exchange rights as trustee from time
to time for and on behalf of the registered holders of the preferred shares of
6789722 Canada Inc. Each preferred share of 6789722 Canada Inc. is exchangeable
into one share of common stock of the Company at the election of the
shareholder, or, in certain circumstances, of the Company.

On May 11, 2009 the Company issued
50,000 shares of common stock pursuant to a holder of 50,000 shares of
exchangeable preferred shares of its subsidiary 6789722 Canada Inc. exercising
their exchange rights. On December 16, 2009 the Company issued 154,546 shares of
common stock pursuant to a holder of 154,546 shares of exchangeable preferred
shares of its subsidiary 6789722 Canada Inc. exercising their exchange rights
There were 65,295 outstanding exchangeable shares as of January 31, 2010 (April
30, 2009 - 269,841). As the exchangeable shares have already been recognized in
connection with the acquisition of NewHeights, the value ascribed to these
shares on exchange is $nil.

|Note 5 | Common Stock
|------ | ------------

On March 19, 2008, the Companys Board
of Directors approved a five for one common stock consolidation. As a result,
the Company's authorized capital decreased from 415,384,500 shares of common
stock to 83,076,900 shares of common stock. All per share amounts and
outstanding shares, including all common stock equivalents (stock options and
warrants) have been retroactively adjusted in the Consolidated Financial
Statements and in the Notes to the Consolidated Financial Statements for all
periods presented to reflect the stock consolidation.

On July 17, 2009, in connection with a
research agreement and omnibus agreement under which the Company licensed
certain technologies from Columbia University, the Company entered into a debt
conversion agreement and an amended omnibus agreement with The Trustees of
Columbia University (Columbia), whereby as a result of the restructuring of
certain terms and obligations of the existing research and licensing agreements,
the Company issued 527,370 shares of common stock to Columbia to settle all
outstanding amounts due to Columbia under such agreements and rights to certain
technologies have reverted back to Columbia. The common stock was issued at
$0.75 (CDN$0.84) per share.

16

---

|COUNTERPATH CORPORATION                                     
|------------------------------------------------------------
|NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
      STATEMENTS
|January 31, 2010                                            
|(Unaudited)                                                 

|Note 5 | Common Stock  (contd)
|------ | -----------------------

On October 29, 2009, the Company
issued 3,333,334 units at a price of $0.56 (CDN$0.60) per unit for gross
proceeds of approximately $1,867,762 (CDN$2,000,000). The Company incurred
$14,636 of transaction costs. Each unit consists of one share of common stock in
the capital of the Company and one-half of one non-transferable common share
purchase warrant. Each warrant entitles the holder thereof to purchase one share
of common stock in the capital of the Company for a period of two years
commencing from October 29, 2009 at an exercise price of $0.90 per warrant.

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 stock option plans are 800,000 under the 2004
Stock option plan and 5,060,000 under the 2005 Stock option plan.

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 178 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 SAB No. 110, Share-Based Payment. For non-employees, 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 nine month period ended January 31, 2010 and 2009 in determining the
expense recorded in the accompanying consolidated statement of operations.

17

---

|COUNTERPATH CORPORATION                                     
|------------------------------------------------------------
|NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
      STATEMENTS
|January 31, 2010                                            
|(Unaudited)                                                 

|Note 5 | Common Stock  (contd)
|------ | -----------------------

Stock Options  (contd)

The weighted-average fair value of
options granted during the nine months ended January 31, 2010 was $0.35 (2009 -
$0.50) . The weighted-average assumptions utilized to determine such values are
presented in the following table:

| |                             | Nine Months Ended |  | Nine Months Ended | 
| | --------------------------- | ----------------- |  | ----------------- | 
| |                             | January 31, 2010  |  | January 31, 2009  | 
| | Risk-free interest rate     | 2.30%             |  | 2.26%             | 
| | Expected volatility         | 84.6%             |  | 68.8%             | 
| | Expected term               | 3.7 yrs           |  | 3.7 yrs           | 
| | Dividend yield              | 0%                |  | 0%                | 
| | Weighted average fair value | $0.35             |  | $0.50             | 

The following is a summary of the
status of the Companys stock options as of January 31, 2010 and the stock
option activity during the nine months ended January 31, 2010:

| |                                 |  |           |   | Weighted-      | 
| | ------------------------------- |  | --------- | - | -------------- | 
| |                                 |  |           |   | average        | 
| |                                 |  | Number of |   | Exercise Price | 
| |                                 |  | Options   |   | per Share      | 
| | Outstanding at April 30, 2009   |  | 4,650,768 |   | $1.13          | 
| | Granted                         |  | 800,000   |   | $0.60          | 
| | Forfeited / Cancelled           |  | (802,894  | ) | $1.23          | 
| | Exercised                       |  | (25,875   | ) | $0.46          | 
| | Expired                         |  | (66,400   | ) | $0.81          | 
| | Outstanding at January 31, 2010 |  | 4,555,599 |   | $1.04          | 
| |                                 |  |           |   |                | 
| | Exercisable at January 31, 2010 |  | 2,613,581 |   | $1.29          | 
| | Exercisable at April 30, 2009   |  | 2,474,207 |   | $1.41          | 

18

---

|COUNTERPATH CORPORATION                                     
|------------------------------------------------------------
|NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
      STATEMENTS
|January 31, 2010                                            
|(Unaudited)                                                 

|Note 5 | Common Stock  (contd)
|------ | -----------------------

Stock Options  (contd)

The following table summarizes
information regarding stock purchase options outstanding as of January 31,
2010:

Number of
    
    
    **Aggregate**
    
    
    
    
    
    Number of
    
    
    **Aggregate**Exercise
    
    Options
    
    
    Intrinsic
    
    
    
    
    
    Options
    
    
    IntrinsicPrice
    
    Outstanding
    
    
    Value
    
    
    Expiry Date
    
    
    Exercisable
    
    
    Value$0.44
    
    536,333
    
    $
    32,180
    
    
    December 15, 2013
    
    
    147,809
    
    $
    8,869$0.47
    
    1,048,547
    
    
    31,456
    
    
    February 22, 2010
      to September 26, 2016
    
    
    962,811
    
    
    28,884$0.60
    
    600,000
    
    
    
    
    
    December 14, 2014
    
    
    20,000
    
    
    $0.62
    
    850,000
    
    
    
    
    
    April 17, 2014
    
    
    159,375
    
    
    $1.75
    
    250,000
    
    
    
    
    
    May 14, 2013
    
    
    104,167
    
    
    $1.90
    
    66,719
    
    
    
    
    
    March 8, 2015
    
    
    66,719
    
    
    $1.95
    
    582,400
    
    
    
    
    
    September 7, 2010
      to January 10, 2016
    
    
    582,400
    
    
    $2.00
    
    246,000
    
    
    
    
    
    January 1, 2011 to February 28, 2015
    
    
    246,000
    
    
    $2.15
    
    240,000
    
    
    
    
    
    September 7, 2016
    
    
    200,000
    
    
    $3.05
    
    135,600
    
    
    
    
    
    May
      23, 2016
    
    
    124,300
    
    
    January 31, 2010
    
    4,555,599
    
    $
    63,636
    
    
    
    
    
    2,613,581
    
    $
    37,753April 30, 2009
    
    4,650,768
    
    $
    494,764
    
    
    
    
    
    2,474,207
    
    $
    214,046


The aggregate intrinsic value in the
preceding table represents the total intrinsic value, based on the Companys
closing stock price of $0.50 per share as of January 31, 2010 (April 30, 2009 
$0.69), 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 January 31, 2010 was 1,110,620
(April 30, 2009  972,936). The total intrinsic value of options exercised
during the nine months ended January 31, 2010 was $960 (2009 $nil). The grant
date fair value of options vested during the nine months ended January 31, 2010
was $597,022 (2009  $938,301).

The following table summarizes
information regarding the non-vested stock purchase options outstanding as of
January 31, 2010.

| |                                        |  |           |   | Weighted Average | 
| | -------------------------------------- |  | --------- | - | ---------------- | 
| |                                        |  | Number of |   | Grant-Date Fair  | 
| |                                        |  | Options   |   | Value            | 
| | Non-vested options at April 30, 2009   |  | 2,176,561 |   | $0.64            | 
| | Granted                                |  | 800,000   |   | $0.35            | 
| | Vested                                 |  | (682,242  | ) | $0.88            | 
| | Forfeited                              |  | (352,301  | ) | $0.47            | 
| | Non-vested options at January 31, 2010 |  | 1,942,018 |   | $0.44            | 

As of January 31, 2010 there was
$736,752 (2009  $1,278,035) 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 2.65 years (2009 
0.96 years).

19

---

|COUNTERPATH CORPORATION                                     
|------------------------------------------------------------
|NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
      STATEMENTS
|January 31, 2010                                            
|(Unaudited)                                                 

|Note 5 | Common Stock  (contd)
|------ | -----------------------

Stock Options  (contd)

Employee and non-employee stock-based
compensation amounts classified in the Companys consolidated statements of
operations for the three and nine months ended January 31, 2010 and 2009 are as
follows:

| |                                |   | Three Months Ended |  |   | Nine Months Ended | 
| | ------------------------------ | - | ------------------ |  | - | ----------------- | 
| |                                |   | January 31,        |  |   | January 31,       | 
| |                                |   | 2010               |  |   | 2009              | 
| |                                |   |                    |  |   |                   | 
| | Cost of sales                  | $ | 9,748              |  | $ | 18,305            | 
| | Sales and marketing            |   | 18,590             |  |   | 27,465            | 
| | Research and development       |   | 12,962             |  |   | 41,448            | 
| | General and administrative     |   | 116,897            |  |   | 169,914           | 
| | Total stock-based compensation | $ | 158,197            |  | $ | 257,132           | 

Warrants

During the nine months ended January
31, 2010, the Company entered into a warrant surrender agreement with a warrant
holder whereby the holder surrendered, and the Company cancelled 750, 000
warrants. In addition, the Company issued 1,666,667 warrants as part of a unit
offering which closed on October 29, 2009 (2008 1,216,720). The fair value of
the stock purchase warrants issued was $412,414 (2008  $391,831). The warrants
enable the holders thereof the right to purchase up to 1,666,667 shares of the
Companys common stock, exercisable for two years from October 29, 2009. The
assumptions utilized to determine such values are presented in the following
table:

| |                             | Nine Months Ended |  | Nine Months Ended | 
| | --------------------------- | ----------------- |  | ----------------- | 
| |                             | January 31, 2010  |  | January 31, 2009  | 
| |                             |                   |  |                   | 
| | Risk-free interest rate     | 0.90%             |  | 1.58% - 2.52%     | 
| | Expected volatility         | 79.94%            |  | 48.54% - 66.34%   | 
| | Expected term               | 2 yrs             |  | 2 yrs             | 
| | Dividend yield              | 0%                |  | 0%                | 
| | Weighted average fair value | $0.23             |  | $0.31-$0.44       | 

The following table summarizes
information regarding the warrants outstanding as of January 31, 2010:

| |                              |  |           |   | Weighted       |  |  |                                         | 
| | ---------------------------- |  | --------- | - | -------------- |  |  | --------------------------------------- | 
| |                              |  | Number of |   | Average        |  |  |                                         | 
| |                              |  | Warrants  |   | Exercise Price |  |  | Expiry Dates                            | 
| |                              |  |           |   |                |  |  |                                         | 
| |                              |  |           |   |                |  |  | November 30, 2009 to                    | 
| | Warrants at April 30, 2009   |  | 2,265,421 |   | $3.04          |  |  | October 24,
      2010                  | 
| | Granted                      |  | 1,666,667 |   | $0.90          |  |  | October 29, 2011                        | 
| | Forfeited / Cancelled        |  | (750,000  | ) | $4.00          |  |  | November 30,
      2009                 | 
| | Expired                      |  | (250,000  | ) | $4.00          |  |  | November 30, 2009                       | 
| | Warrants at January 31, 2010 |  | 2,932,088 |   | $1.50          |  |  | July 31, 2010
      to October 29, 2011 | 

The warrant holder for 750,000
warrants due to expire on November 30, 2009 surrendered his warrants on
September 30, 2009.

20

---

|COUNTERPATH CORPORATION                                     
|------------------------------------------------------------
|NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
      STATEMENTS
|January 31, 2010                                            
|(Unaudited)                                                 

|Note 5 | Common Stock  (contd)
|------ | -----------------------

Employee Stock Purchase
Plan

As of February 1, 2009 the Company
offers an Employee Stock Purchase Plan (ESPP) to all regular salaried
(non-probationary) employees. Shares of common stock issued to employees as a
result of purchases or exercises under these plans will generally be issued from
shares acquired in the market or shares issued from treasury.

Under the terms of the ESPP, all
regular salaried (non-probationary) employees can purchase up to 6% of their
base salary in shares of common stock of the Company at market price. The
Company will match 50% of the shares purchased by issuing 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 amended on October 22, 2009. As of
January 31, 2010, a total of 673,340 shares were available for issuance under
the ESPP. During the nine months ended January 31, 2010, 26,660 shares were
issued from treasury to employees under the ESPP.

Deferred Share Unit Plan

As of October 22, 2009 the Company
offers a deferred share unit plan (DSUP) to non-employee directors and senior
officers of the Company or any of our subsidiaries.

Under the terms of 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
in the period of grant.

A total of 1,500,000 shares have been
reserved for issuance under the DSUP. During the nine months ended January 31,
2010, 520,161 deferred share units were issued under the DSUP, of which 241,935
were granted to officers and 278,226 were granted to directors. As of January
31, 2010, a total of 1,500,000 shares were available for issuance under the
DSUP.

The following table summarizes the
Companys outstanding DSU awards as of January 31, 2010, and changes during the
period then ended:

| |                                 |  |                 |  | Weighted Average | 
| | ------------------------------- |  | --------------- |  | ---------------- | 
| |                                 |  |                 |  | grant date Fair  | 
| |                                 |  | Number of DSUs |  | value per unit   | 
| |                                 |  |                 |  |                  | 
| |                                 |  |                 |  |                  | 
| | DSUs at April 30, 2009         |  |                |  | $               | 
| | Granted                         |  | 520,161         |  | $ 0.35           | 
| | Conversions                     |  |                |  | $               | 
| | Outstanding at January 31, 2010 |  | 520,161         |  | $ 0.35           | 

21

---

|COUNTERPATH CORPORATION                                     
|------------------------------------------------------------
|NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
      STATEMENTS
|January 31, 2010                                            
|(Unaudited)                                                 

|Note 5 | Common Stock  (contd)
|------ | -----------------------

Deferred Share Unit Plan 
(contd)

As of January 31, 2010 there was
$133,497 (2009  $nil) 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 2.87 years (2009 
nil).

Employee and non-employee deferred
share unit based compensation amounts classified in the Companys consolidated
statements of operations for the three and nine months ended January 31, 2010
and 2009 are as follows:

| |                                              |   | Three Months Ended |  |   | Nine Months Ended | 
| | -------------------------------------------- | - | ------------------ |  | - | ----------------- | 
| |                                              |   | January 31,        |  |   | January31,        | 
| |                                              |   | 2010               |  |   | 2009              | 
| |                                              |   |                    |  |   |                   | 
| | General and administrative                   | $ | 178,600            |  | $ |                  | 
| | Total deferred share unit-based compensation | $ | 178,600            |  | $ |                  | 

|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 and nine months ended January 31, 2010
and 2009:

| |                 |   | Three Months Ended |  |   | Nine Months Ended | 
| | --------------- | - | ------------------ |  | - | ----------------- | 
| |                 |   | January 31,        |  |   | January 31,       | 
| |                 |   | 2010               |  |   | 2009              | 
| | North America   | $ | 676,666            |  | $ | 1,106,684         | 
| | Europe          |   | 399,652            |  |   | 556,985           | 
| | Asia and Africa |   | 110,580            |  |   | 214,739           | 
| | Latin America   |   | 176,520            |  |   | 151,653           | 
| |                 | $ | 1,363,418          |  | $ | 2,030,061         | 

Contained within the results of North
America for the three and nine months ended January 31, 2010 are revenues from
the United States of $508,416 and $2,588,256 (2009 - $709,371 and $3,201,514)
respectively and from Canada of $168,250 and $484,742 (2009 - $397,313 and
$1,110,987) respectively.

Contained within the results of Europe
for the three and nine months ended January 31, 2010 are revenues from the
United Kingdom of $102,057 and $275,276 (2009 - $131,991 and $514,706)
respectively, from Germany of $40,837 and $245,753 (2009 - $210,753 and
$512,055) respectively, from the Netherlands of $10,601 and $146,257 (2009 -
$34,193 and $48,271) respectively, from Switzerland of $89,767 and $125,865
(2009 -$6,710 and $17,596) respectively, and from Slovenia of $9,563 and
$111,819 (2009 - $Nil and $Nil) respectively.

22



---



|COUNTERPATH CORPORATION                                     
|------------------------------------------------------------
|NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
      STATEMENTS
|January 31, 2010                                            
|(Unaudited)                                                 

|Note 6 | Segmented Information  (contd)
|------ | --------------------------------

Contained within the results of Asia
and Africa for the three and nine months ended January 31, 2010 are revenues
from Nigeria of $6,450 and $170,250 (2009 - $Nil and $Nil) respectively, from
Israel of $24,796 and $89,558 (2009 - $2,517and $52,892) respectively, from
Australia of $25,221 and $51,402 (2009 - $Nil and $5,594) respectively, from the
Philippines of $1,107 and $33,351 (2009 - $Nil and $Nil) respectively, and from
Japan of $5,873 and $30,730 (2009 - $138,692 and $220,751) respectively.

Contained within the results of Latin
America for the three and nine months ended January 31, 2010 are revenues from
Mexico of $166,829 and $288,259 (2009 - $22,381 and $225,584) respectively, from
Colombia of $5,899 and $37,912 (2009 - $42,053 and $50,123) respectively, from
Brazil of $3,607 and $31,189 (2009 -$14,521 and $117,983) respectively, from
Argentina of $1,898 and $14,859 (2009 - $8,279 and $26,228) respectively, and
from Chile of $4,087 and $13,095 (2009 - $Nil and $25,181) respectively,.

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       | 
| | ------------- | - | ----------- | 
| |               |   | January 31, | 
| |               |   | 2010        | 
| |               |   |             | 
| | Canada        | $ | 11,061,982  | 
| | United States |   | 11,007      | 
| | Total         | $ | 11,072,989  | 

Revenue from significant customers for
the three and nine months ended January 31, 2010 and 2009 is summarized as
follows:

| |            |  | Three Months Ended |  |  | Nine Months Ended | 
| | ---------- |  | ------------------ |  |  | ----------------- | 
| |            |  | January 31,        |  |  | January 31,       | 
| |            |  | 2010               |  |  | 2009              | 
| |            |  |                    |  |  |                   | 
| | Customer A |  | 10%                |  |  | 19%               | 
| | Customer B |  | 1%                 |  |  | 10%               | 
| | Customer C |  | 10%                |  |  | -%                | 
| |            |  | 21%                |  |  | 29%               | 

Accounts receivable balances for
Customer A were $122,156 as at January 31, 2010 (April 30, 2009 -$155,208).
Accounts receivable balances for Customer B were $Nil as at January 31, 2010
(April 30, 2009 -$323,285). Accounts receivable balances for Customer C were
$Nil as at January 31, 2010 (April 30, 2009 -$7,025).

23

---

|COUNTERPATH CORPORATION                                     
|------------------------------------------------------------
|NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
      STATEMENTS
|January 31, 2010                                            
|(Unaudited)                                                 

|Note 7 | Commitments
|------ | -----------

| | a) | On March 14, 2008 the Company entered into a lease for
      accommodation which commenced on April 1, 2008 and expired on March 31,
      2009. On February 5, 2009, the Company entered into an extension agreement
      on this lease which commenced on April 1, 2009 and expired on September
      30, 2009. On July 28, 2009, the Company entered into another extension
      agreement on this lease which commenced on October 1, 2009 and expires on
      March 31, 2010. The monthly lease payment under the new extension
      agreement is $2,225. On January 14, 2010, the Company entered into another
      extension agreement on this lease which commences on April 1, 2010 and
      expires March 31, 2011. The monthly lease payment under the new extension
      agreement is $2,339.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | b) | 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 $9,280 was made. The monthly
      lease payment under this agreement is $9,280 plus $7,411 in operating
      costs. The Company is subleasing part of these premises for a monthly
      charge of $7,436. The sublease commenced on August 1, 2007 and expires on
      September 30, 2012. On July 17, 2009, the Company signed a new subleasing
      agreement for another part of these premises, which commenced on August 1,
      2009 and expires September 30, 2012. The monthly charge under this
      subleasing agreement is $3,006 (CDN$3,216) plus $2,964 (CDN$3,171) in
      operating costs.               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | c) | On May 1, 2009 the Company modified its existing lease
      agreement for office premises, as a result of which it surrendered a
      substantial part of the previously leased area. The new agreement
      commenced on May 1, 2009 and expires on April 20, 2012. The monthly lease
      payment under this agreement is $6,227.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 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 at total of $462,677
      (CDN$495,000) over 45 months at a rate of CDN$11,000 per month and pay for
      health benefits for 21 months from the date of the agreement.                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | Total payable over the term of the agreements for the
      years ended April 30 are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

| |      |   | Office        |  |   | Office Leases |  |   |           |   |   |              |  |   |            | 
| | ---- | - | ------------- |  | - | ------------- |  | - | --------- | - | - | ------------ |  | - | ---------- | 
| |      |   | Leases       |  |   |  Unrelated   |  |   | Sub Lease |   |   | Total Office |  |   | Settlement | 
| |      |   | Related Party |  |   | Party         |  |   | Income    |   |   | Leases       |  |   | Agreement  | 
| | 2010 | $ | 18,680        |  | $ | 218,170       |  | $ | (40,219   | ) | $ | 196,631      |  | $ | 30,845     | 
| | 2011 |   | 74,720        |  |   | 761,755       |  |   | (160,878  | ) |   | 675,597      |  |   | 123,380    | 
| | 2012 |   | 74,720        |  |   | 412,015       |  |   | (160,878  | ) |   | 325,857      |  |   | 123,380    | 
| | 2013 |   |              |  |   | 83,456        |  |   | (67,032   | ) |   | 16,424       |  |   | 77,113     | 
| |      | $ | 168,120       |  | $ | 1,475,396     |  | $ | (429,007  | ) | $ | 1,214,509    |  | $ | 354,718    | 

|Note 8 | Contingent Liability
|------ | --------------------

On February 17, 2006, a competitor
filed a statement of claim in the Supreme Court of British Columbia claiming
among other things, general, punitive and aggravated damages of unspecified
amounts with respect to alleged business ethics matters. Management of the
Company believes that the claim is without foundation or merit. Any loss as a
result of this claim will be recorded in the period that the loss is probable
and measurable.

24

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|COUNTERPATH CORPORATION                                     
|------------------------------------------------------------
|NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
      STATEMENTS
|January 31, 2010                                            
|(Unaudited)                                                 

|Note 9 | Restructuring
|------ | -------------

As a result of the Companys post
acquisition activities, the Company incurred restructuring costs of $nil (2009 
$26,268) and $44,912 (2009  $959,264) during the three and nine months ended
January 31, 2010, respectively. Restructuring costs were related to employee
severance arrangements as a result of the consolidation of administrative,
sales, marketing, and research and development departments after the close of
acquisitions of NewHeights Software Corporation, FirstHand Technologies Inc. and
BridgePort Networks, Inc. These charges are shown as a separate line item in the
consolidated statement of operations.

|Note 10 | Derivative Instruments and Hedging
      Activities
|------- | ---------------------------------------------------

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.

Foreign Currency Exchange Rate
Risk

A majority of the Companys revenue
activities are transacted in U.S. dollars. However, the Company is exposed to
foreign currency exchange rate risk inherent in conducting business globally in
numerous currencies, of which the most significant to its operations for the
nine months ended January 31, 2010 is the Canadian dollar. The Company is
primarily exposed to a strengthening Canadian dollar as its operating expenses
are primarily denominated in Canadian dollars while its revenues are primarily
denominated in U.S. dollars. 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.

Volume of Derivative
Activity

Total gross notional amounts for
foreign currency forward contracts, presented by currency, are as follows:

| |                 |   | Nine Months Ended | 
| | --------------- | - | ----------------- | 
| | In U.S. dollars |   | January 31,       | 
| |                 |   | 2010              | 
| |                 |   |                   | 
| | Canadian dollar | $ | 500,000           | 
| | Total           | $ | 500,000           | 

The fair value of forward contracts as
of January 31, 2010 was $521,654.

|Note 11 | Subsequent Events
|------- | -----------------

| | a) | On February 9, 2010, the Company granted stock options to
      an employee to purchase 200,000 shares of common stock at an exercise
      price of $0.45 per share. On March 11, 2010, the Company granted stock
      options to an employee to purchase 20,000 shares of common stock at an
      exercise price of $0.49 per share. The stock options are exercisable for a
      period of five years pursuant to the Companys 2005 Amended and Restated
      Stock Option Plan. 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.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations.

Forward-Looking Statements

This quarterly report contains
forward-looking statements as that term is defined in Section 27A of the United
States Securities Act of 1933 and Section 21E of the United States Securities
Exchange Act of 1934. These statements relate to future events or our future
financial performance. In some cases, you can identify forward-looking
statements by terminology such as may, should, intends, expects,
plans, anticipates, believes, estimates, predicts, potential, or
continue or the negative of these terms or other comparable terminology. These
statements are only predictions and involve known and unknown risks,
uncertainties and other factors, including the risks in the section entitled
Risk Factors, which may cause our or our industrys actual results, levels of
activity or performance to be materially different from any future results,
levels of activity or performance expressed or implied by these forward-looking
statements.

Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity or performance. Except as
required by applicable law, including the securities laws of the United States,
we do not intend to update any of the forward-looking statements to conform
these statements to actual results.

Our financial statements are
stated in United States dollars and are prepared in accordance with United
States generally accepted accounting principles. All references to common
shares refer to our shares of common stock. As used in this quarterly report,
the terms we, us and our means CounterPath Corporation, unless otherwise
indicated.

The following discussion and
analysis should be read in conjunction with the financial statements and related
notes and the other financial information appearing elsewhere in this quarterly
report. This discussion and analysis contains forward-looking statements that
involve risk, uncertainties and assumptions.

Background

We were incorporated under the
laws of the State of Nevada on April 18, 2003. Following incorporation, we
commenced the business of operating an entertainment advertising website.

On April 30, 2004, we changed our
business following the merger of our company with Xten Networks, Inc., a private
Nevada company. Xten Networks was incorporated under the laws of the State of
Nevada on October 28, 2002. As a result of the merger, we acquired all of the
issued and outstanding shares in Xten Networks in exchange for agreeing to issue
3,600,000 shares of our common stock to the stockholders of Xten Networks. The
stockholders of Xten Networks were entitled to receive two shares of our common
stock for each one share of Xten Networks.

On August 26, 2005, we entered
into an agreement and plan of merger with Ineen, Inc., our wholly-owned
subsidiary, whereby Ineen merged with and into our company, with our company
carrying on as the surviving corporation under the name CounterPath Solutions,
Inc.

On August 2, 2007, we acquired
all of the shares of NewHeights Software Corporation through the issuance of
7,680,168 shares of our common stock and 369,836 preferred shares issued from a
subsidiary of our company, which preferred shares are exchangeable into 369,836
shares of common stock. On October 17, 2007, we changed our name from
CounterPath Solutions, Inc. to CounterPath Corporation.

On February 1, 2008, we acquired
all of the shares of FirstHand Technologies Inc. through the issuance of
5,900,014 shares of our common stock. On February 1, 2008, we acquired all of
the issued and outstanding shares of BridgePort Networks, Inc. by way of merger
in consideration for the assumption of all of the assets and liabilities of
BridgePort Networks.

26

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On March 19, 2008, our board of
directors approved a five for one common stock consolidation. As a result, our
authorized capital decreased from 415,384,500 shares of common stock to
83,076,900 shares of common stock.

Business of CounterPath

Our business focuses on the
design, development, marketing and sales of desktop and mobile application
software, gateway server software and related professional services, such as pre
and post sales technical support and customization services. Our software
products are sold into the telecommunications sector, specifically the voice
over Internet protocol (VoIP), unified communications and fixed-mobile
convergence markets. VoIP, unified communications and fixed-mobile convergence
are general terms for technologies that use Internet or mobile protocols for the
transmission of packets of data which may include voice, video, text, fax, and
other forms of information that have traditionally been carried over the
dedicated circuit-switched connections of the public switched telephone
network.

Our strategy is to sell our
software to our customers to allow such customers to deliver session initiation
protocol and voice over Internet protocol (VoIP) services. Customers that we are
targeting include: (1) large incumbent telecommunications service providers,
Internet telephony service providers and content providers, (2) original
equipment manufacturers serving the telecommunication market, (3) small, medium
and large sized businesses and (4) end users. Our software enables voice
communication from the end user through the network to another end user and
enables the service provider to deliver other streaming content to end users
such as video, radio or the weather. Our acquisitions of FirstHand Technologies
Inc. and BridgePort Networks, Inc. in February 2008, expanded our product
portfolio of our company to include fixed-mobile-convergence applications for
the enterprise and telecom service provider markets.

Revenue

We derive revenue from the sale
of software licenses and software customization and services associated with
software such as technical support services, implementation and training. We
recognize software and services revenue at the time of delivery, provided all
other revenue recognition criteria have been met.

Post contract customer support
services include e-mail and telephone support, unspecified rights to bug fixes
and product updates and upgrades and enhancements available on a when-and-if
available basis, and are recognized ratably over the term of the service period,
which is generally twelve months.

We offer our products and
services directly through our sales force and indirectly through distribution
partners. Our distribution partners include networking and telecommunications
equipment vendors throughout the world.

The amount of product
configuration and customization, which reflects the requested features,
determines the price for each sale. The number of software licenses purchased
will have a direct impact on the average selling price. Services may vary
depending upon a customer's requirements for technical support, implementation
and training.

We believe that our revenue and
results of operations may vary significantly from quarter to quarter as a result
of long sales and deployment cycles, new product introductions and variations in
customer ordering patterns.

Operating Expenses

Operating expenses consist of
cost of sales, sales and marketing, research and development, general and
administrative expenses, and restructuring costs. Personnel-related costs are
generally the most significant component of each of these expense categories.

27

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Cost of sales primarily consists
of: (a) salaries and related personnel costs including stock-based compensation,
(b) related overhead, (c) amortization of intangible assets, (d) billable and
non-billable travel, lodging, and other out-of-pocket expenses, (e) payments to
third party vendors for compression/decompression software known as codecs, (f)
amortization of capitalized software that is implemented into our products and
(g) warranty expense. Amortization of intangible assets consists of the
amortization expense related to the intangible assets acquired from NewHeights
Software Corporation, FirstHand Technologies Inc. and BridgePort Networks, Inc.
comprising acquired technologies and customer assets. 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.

Sales and marketing expense
consists primarily of: (a) salaries and related personnel costs including
stock-based compensation, (b) commissions, (c) travel, lodging and other
out-of-pocket expenses, (d) marketing programs such as trade shows and (e) other
related overhead. Commissions are recorded as expense when earned by the
employee. We expect increases in sales and marketing expense for the foreseeable
future as we further increase the number of sales professionals and increase our
marketing activities with the intent to grow our revenue. We expect sales and
marketing expense to decrease as a percentage of total revenue, however, as we
leverage our current sales and marketing personnel as well as our distribution
partnerships.

Research and development expense
consists primarily of: (a) salaries and related personnel costs including
stock-based compensation, (b) payments to suppliers for design and consulting
services, (c) costs relating to the design and development of new products and
enhancement of existing products, (d) quality assurance and testing and (e)
other related overhead. To date, all of our research and development costs have
been expensed as incurred.

General and administrative
expense consists primarily of: (a) salaries and related personnel costs
including stock-based compensation related to our executive, finance, human
resource and information technology functions, (b) accounting, legal and
regulatory fees and (c) other related overhead.

Restructuring costs are post
acquisition activities related to the acquisition of NewHeights Software
Corporation, FirstHand Technologies Inc. and Bridgeport Networks, Inc. We
incurred restructuring costs related to employee severance agreements as a
result of post acquisition consolidation of administration, sales and marketing
and research and development departments. At January 31, 2010 we have a
restructuring accrual for severance of $nil.

Application of Critical Accounting Policies and Use of
Estimates

Our consolidated financial
statements are prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements
requires that we make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. We base our estimates on historical
experience and on various other assumptions that we believe to be reasonable
under the circumstances. We evaluate our estimates and assumptions on an ongoing
basis. Our actual results may differ significantly from these estimates under
different assumptions or conditions. There have been no material changes to
these estimates for the periods presented in this quarterly report.

We believe that of our
significant accounting policies, which are described in Note 2 to our annual
financial statements, the following accounting policies involve a greater degree
of judgment and complexity. Accordingly, the following policies are the most
critical to aid in fully understanding and evaluating our financial condition
and results of operations.

Basis of Presentation

The consolidated financial
statements include the accounts of our company and our wholly-owned
subsidiaries, CounterPath Technologies Inc., a company existing under the laws
of the province of British Columbia, Canada, FirstHand Technologies Inc.,
continued under laws of the province of British Columbia, BridgePort

28

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Networks, Inc. incorporated under the laws of the state of
Delaware and 6789722 Canada Inc., incorporated under the Canada Business
Corporations Act. The results of NewHeights Software Corporation (which
subsequently merged with another subsidiary to become CounterPath Technologies
Inc.) are included from August 2, 2007, the date of acquisition. The results of
FirstHand 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

The information presented in the
accompanying interim consolidated financial statements is without audit pursuant
to the rules and regulations of the SEC. Certain information and footnote
disclosures normally included in the interim consolidated financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although we believe
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, the interim
consolidated financial statements follow the same accounting policies and
methods of their application as our April 30, 2009 annual consolidated financial
statements. All adjustments are of a normal recurring nature. It is suggested
that these interim consolidated financial statements be read in conjunction with
our April 30, 2009 annual consolidated financial statements.

Operating results for the nine
months ended January 31, 2010 are not necessarily indicative of the results that
can be expected for the year ending April 30, 2010.

Revenue Recognition

We recognize revenue in
accordance with the American Institute of Certified Public Accountants (AICPA)
ASC 985-605 Software Revenue Recognition, as amended by SOP 98-9 Modification
of SOP 97-2, Software Revenue Recognition with Respect to Certain
Transactions.

In all of our arrangements, we do
not recognize any revenue until we can determine that persuasive evidence of an
arrangement exists, delivery has occurred, the fee is fixed or determinable, and
we deem collection to be probable. For distribution and reseller arrangements,
fees are fixed or determinable and collection probable when there are no rights
to exchange or return and fees are not dependable upon payment from the
end-user. If any of these criteria are not met, revenue is deferred until such
time that all criteria have been met.

A substantial percentage of our
revenue is generated by multiple-element arrangements, such as products,
maintenance and support, professional services and training. When arrangements
include multiple elements, we allocate the total fee among the various elements
using the residual method. Under the residual method, revenue is recognized when
vendor-specific objective evidence, or VSOE, of fair value exists for all of the
undelivered elements of the arrangement, but does not exist for one or more of
the delivered elements of the arrangement. Each arrangement requires us to
analyze the individual elements in the transaction and to estimate the fair
value of each undelivered element, which typically includes maintenance and
services. Revenue is allocated to each of the undelivered elements based on its
respective fair value, with the fair value determined by the price charged when
that element is sold separately.

For contracts with elements
related to customized network solutions and certain network build-outs, we apply
FASB Emerging Issues Task Force Issue ASC 605-25, Revenue Arrangements with
Multiple Deliverables and revenues are recognized under ASC 605-35, Accounting
for Performance of Construction-Type and Certain Production-Type Contracts,
generally using the percentage-of-completion method.

In using the
percentage-of-completion method, revenues are generally recorded based on a
completion of milestones as described in the agreement. Profit estimates on
long-term contracts are revised periodically based on changes in circumstances
and any losses on contracts are recognized in the period that such losses become
known.

29

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Post contract customer support
(PCS) services include e-mail and telephone support, unspecified rights to bug
fixes and product updates and upgrades and enhancements available on a
when-and-if available basis, and are recognized ratably over the term of the
service period, which is generally twelve months.

PCS service revenue generally is
deferred until the related product has been accepted and all other revenue
recognition criteria have been met. Professional services and training revenue
is recognized as the related service is performed.

We have set up a warranty
provision in the amount of 2% of software sales, which is amortized over a
twelve-month term. We recognize this deferred revenue evenly over a twelve-month
period from the date of the sale.

Stock-Based Compensation

Stock options granted are
accounted for under ASC 718 Share-Based Payment and are recognized at the fair
value of the options as determined by an option pricing model as the related
services are provided and the options earned. ASC 178 replaces existing
requirements under FAS 123 and APB 25, and requires public companies to
recognize the cost of employee services received in exchange for equity
instruments, based on the fair value of those instruments on the measurement
date which generally is the grant date, with limited exceptions.

Stock-based compensation
represents the cost related to stock-based awards granted to employees and
non-employee consultants. We measure stock-based compensation cost at
measurement date, based on the estimated fair value of the award, and generally
recognize the cost as expense on a straight-line basis (net of estimated
forfeitures) over the employee requisite service period or the period during
which the related services are provided by the non-employee consultants and the
options are earned. We estimate the fair value of stock options using a
Black-Scholes option valuation model.

The expected volatility of
options granted has been determined using the volatility of our company's stock.
The expected life of options granted after April 30, 2006 has been determined
utilizing the simplified method as prescribed by the SEC's Staff Accounting
Bulletin No. 107, Share-Based Payment. We have not paid and do not anticipate
paying cash dividends on our shares of common stock; therefore, the expected
dividend yield is assumed to be zero. In addition, ASC 718 requires companies to
utilize an estimated forfeiture rate when calculating the expense for the
period. We applied an estimated forfeiture rate of 15.0% in the nine months ended
January 31, 2010 in determining the expense recorded in our consolidated
statement of operations.

Cost of sales and operating
expenses include stock-based compensation expense, and deferred share unit plan
expense. For the nine months ended January 31, 2010, we recorded an expense of
$747,198 in connection with share-based payment awards. A future expense of
non-vested options of $736,752 is expected to be recognized over a
weighted-average period of 2.65 years. A future expense of non-vested deferred
share units of $133,497 is expected to be recognized over a weighted-average
period of 2.87 years.

Research and Development Expense for Software
Products

Research and development expense
includes costs incurred to develop intellectual property. The costs for the
development of new software and substantial enhancements to existing software
are expensed as incurred until technological feasibility has been established,
at which time any additional costs would be capitalized. We have determined that
technological feasibility is established at the time a working model of software
is completed. Because we believe our current process for developing software
will be essentially completed concurrently with the establishment of
technological feasibility, no costs have been capitalized to date.

Accounts Receivable and Allowance for Doubtful Accounts

We extend credit to our customers
based on evaluation of an individual customer's financial condition and
collateral is generally not required. Accounts outstanding beyond the
contractual payment terms are considered past due. We determine our allowance
for doubtful accounts by considering a number of factors, including the length
of time accounts receivable are beyond the contractual payment terms, our
previous loss history, and a customer's

30

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current ability to pay its obligation to us. We write-off
accounts receivable when they are identified as uncollectible. All outstanding
accounts receivable accounts are periodically reviewed for collectibility on an
individual basis.

Goodwill and Intangible Assets

We have a significant amount of
goodwill and intangible assets on our balance sheet related to the acquisitions
of NewHeights Software Corporation, FirstHand Technologies Inc. and BridgePort
Networks, Inc. Intangible assets are carried and reported at acquisition cost,
net of accumulated amortization subsequent to acquisition. The intangible assets
acquired are comprised of acquired technologies and customer assets relating to
customer relationships. 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 assets. The intangible assets are reviewed for impairment whenever
events or circumstances indicate impairment might exist in accordance with ASC
360, Accounting for the Impairment or Disposal of Long-Lived Assets. Projected
undiscounted net cash flows expected to be derived from the use of those assets
are compared to the respective net carrying amounts to determine whether any
impairment exists. Impairment, if any, is based on the excess of the carrying
amount over the fair value of those assets.

The determination of the net
carrying value of goodwill and intangible assets and the extent to which, if
any, there is impairment, are dependent on material estimates and judgments on
our part, including the useful life over which the intangible assets are to be
amortized and the estimates of the value of future net cash flows, which are
based upon further estimates of future revenues, expenses and operating
margins.

Goodwill and Intangible AssetsImpairment
Assessments

We review goodwill for impairment
annually and whenever events or changes in circumstances indicate its carrying
value may not be recoverable in accordance with ASC 350, Goodwill and Other
Intangible Assets. The provisions of ASC 350 require that a two-step
impairment test be performed on goodwill. In the first step, we compare the fair
value of our reporting unit to its carrying value. If the fair value of the
reporting unit exceeds the carrying value of the net assets assigned to that
unit, goodwill is not considered impaired and we are not required to perform
further testing. If the carrying value of the net assets assigned to the
reporting unit exceeds the fair value of the reporting unit, then we must
perform the second step of the impairment test in order to determine the implied
fair value of the reporting units goodwill. If the carrying value of our
reporting units goodwill exceeds its implied fair value, then we would record
an impairment loss equal to the difference.

Determining the fair value of our
reporting unit involves the use of significant estimates and assumptions. These
estimates and assumptions include future economic and market conditions and
determination of appropriate market comparables. We base our fair value
estimates on assumptions we believe to be reasonable but that are unpredictable
and inherently uncertain. Actual future results may differ from those estimates.
In addition, we make certain judgments and assumptions in allocating shared
assets and liabilities to determine the carrying values for our reporting unit.
Our most recent annual goodwill impairment analysis, which was performed during
the fourth quarter of fiscal 2009, did not result in an impairment charge, nor
did we record any goodwill impairment for the nine months ending January 31,
2010.

We make judgments about the
recoverability of purchased intangible assets whenever events or changes in
circumstances indicate that an other- than- temporary impairment may exist. Each
period we evaluate the estimated remaining useful lives of purchased intangible
assets and whether events or changes in circumstances warrant a revision to the
remaining periods of amortization. In accordance with ASC 360, Accounting for
the Impairment or Disposal of Long-Lived Assets, recoverability of these
assets is measured by comparison of the carrying amount of the asset to the
future undiscounted cash flows the asset is expected to generate. If the asset
is considered to be impaired, the amount of any impairment is measured as the
difference between the carrying value and the fair value of the impaired asset.

Assumptions and estimates about
future values and remaining useful lives of our intangible and other long-lived
assets are complex and subjective. They can be affected by a variety of factors,
including external factors such

31

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as industry and economic trends, and internal factors such as
changes in our business strategy and our internal forecasts. These estimates and
assumptions include revenue growth rates and operating margins used to calculate
projected future cash flows and risk adjusted discounted rates and future
economic and market conditions. During the fourth quarter of fiscal 2009, we
recorded an impairment charge of $2.75 million consisting of $1.75 million for
the intangible assets of NewHeights and $1.0 million for the intangible assets
of FirstHand. During the most recent quarter ended January 31, 2010, management
concluded that there was no further impairment charge related to our intangible
assets.

Use of Estimates

The preparation of our financial
statements in conformity with generally accepted accounting principles in the
United States requires our management to make estimates and assumptions which
affect the amounts reported in these consolidated financial statements, the
notes thereto, and the disclosure of contingent assets and liabilities at the
date of the financial statements. Actual results could differ from those
estimates.

Results of Operations

Our operating activities during
the three and nine months ended January 31, 2010 consisted primarily of selling
our IP telephony software and related services to service providers and original
equipment manufacturers serving the telecom industry, and the continued
development of our IP telephony software products.

Selected Consolidated Financial Information

The following tables set out
selected consolidated unaudited financial information for the periods indicated.
The selected consolidated financial information set out below for the three and
nine months ended January 31, 2010 and 2009, and as at January 31, 2010 and
April 30, 2009 has been derived from the consolidated unaudited financial
statements and accompanying notes for the three and nine months ended January
31, 2010 and 2009 and fiscal year ended April 30, 2009. Each investor should
read the following information in conjunction with those statements and the
related notes thereto. We believe the presentation of Non-GAAP operating
expenses provides useful information to our investors. In particular, we
disclose that we utilize Non-GAAP operating expenses to CounterPath Corporation
internally measure our operating performance and also present such measure to
allow investors to analyze our operating performance utilizing the same measure
as used by our management.

|Selected Consolidated Statements of Operations Data |   | Three Months Ended January 31, |  
|--------------------------------------------------- | - | ------------------------------ | -
|                                                    |   | 2010                           |  
|                                                    |   |                                |  
|                                                    |   |                                |  
|                                                    |   | Amount                         |  
|                                                    |   |                                |  
|Revenue                                             | $ | 1,363,418                      |  
|                                                    |   |                                |  
|Non-GAAP operating expenses1                        |   | 2,593,875                      |  
|Stock-based compensation                            |   | 336,796                        |  
|Amortization of intangible assets                   |   | 220,369                        |  
|GAAP operating expenses                             |   | 3,151,040                      |  
|                                                    |   |                                |  
|Loss from operations                                |   | (1,787,622                     | )
|Interest income, net                                |   | 52,554                         |  
|Foreign exchange gain (loss)                        |   | (46,516                        | )
|Net loss                                            |   | ($1,781,584                    | )
|                                                    |   |                                |  
|Loss per share                                      |   | ($0.06                         | )
|                                                    |   |                                |  
|Weighted average common shares outstanding          |   | 30,710,069                     |  

______________

1. Non-GAAP operating expense is equal
to GAAP operating expense less stock-based compensation and amortization of intangible assets.

32

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|Selected Consolidated Statements of Operations Data |   | Nine Months Ended January 31, |  
|--------------------------------------------------- | - | ----------------------------- | -
|                                                    |   | 2010                          |  
|                                                    |   |                               |  
|                                                    |   |                               |  
|                                                    |   | Amount                        |  
|                                                    |   |                               |  
|Revenue                                             | $ | 5,314,482                     |  
|                                                    |   |                               |  
|Non-GAAP operating expenses1                        |   | 8,346,012                     |  
|Stock-based compensation                            |   | 747,198                       |  
|Amortization of intangible assets                   |   | 642,925                       |  
|GAAP operating expenses                             |   | 9,736,135                     |  
|                                                    |   |                               |  
|Loss from operations                                |   | (4,421,653                    | )
|Interest income (expense), net                      |   | 112,457                       |  
|Foreign exchange loss                               |   | (468,277                      | )
|Net loss                                            |   | ($4,777,473                   | )
|                                                    |   |                               |  
|Loss per share                                      |   | ($0.16                        | )
|                                                    |   |                               |  
|Weighted average common shares outstanding          |   | 30,395,799                    |  

| |    |                                                                                                                                               
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | Non-GAAP operating expense is equal to GAAP operating
      expense less stock-based compensation and amortization of intangible
      assets.

|                                         |   | January 31, |  |   | April 30,  | 
|---------------------------------------- | - | ----------- |  | - | ---------- | 
|Selected Consolidated Balance Sheet Data |   | 2010        |  |   | 2009       | 
|                                         |   |             |  |   |            | 
|Cash                                     | $ | 2,351,791   |  | $ | 2,931,932  | 
|Current assets                           |   | 4,855,568   |  |   | 5,909,760  | 
|Current liabilities                      |   | 3,791,682   |  |   | 4,343,277  | 
|Total liabilities                        |   | 3,899,876   |  |   | 4,496,868  | 
|Total assets                             | $ | 16,030,095  |  | $ | 15,839,165 | 

|Revenue         |   |                                |  |  |          |  |   |                         |  |  |          |  |  |           |   |  |            |  
|--------------- | - | ------------------------------ |  |  | -------- |  | - | ----------------------- |  |  | -------- |  |  | --------- | - |  | ---------- | -
|                |   |                                |  |  |          |  |   |                         |  |  |          |  |  |           |   |  |            |  
|                |   | Three Months Ended January 31, |  |  |          |  |   |                         | 
|                |   | 2010                           |  |  | 2009     |  |   | Period-to-Period Change | 
|                |   |                                |  |  | Percent  |  |   |                         |  |  | Percent  |  |  |           |   |  | Percent    |  
|                |   |                                |  |  | of Total |  |   |                         |  |  | of Total |  |  |           |   |  | Increase / |  
|                |   | Amount                         |  |  | Revenue  |  |   | Amount                  |  |  | Revenue  |  |  | Amount    |   |  | (Decrease) |  
|Revenue by Type |   |                                |  |  |          |  |   |                         |  |  |          |  |  |           |   |  |            |  
|Software        | $ | 1,030,004                      |  |  | 76%      |  | $ | 1,305,303               |  |  | 64%      |  |  | ($275,299 | ) |  | (21%       | )
|Service         |   | 333,414                        |  |  | 24%      |  |   | 724,758                 |  |  | 36%      |  |  | (391,344  | ) |  | (54%       | )
|Total revenue   | $ | 1,363,418                      |  |  | 100%     |  | $ | 2,030,061               |  |  | 100%     |  |  | ($666,643 | ) |  | (33%       | )

33

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|                  |   | Three Months Ended January 31, |  |  |          |  |   |                         | 
|----------------- | - | ------------------------------ |  |  | -------- |  | - | ----------------------- | 
|                  |   | 2010                           |  |  | 2009     |  |   | Period-to-Period Change | 
|                  |   |                                |  |  | Percent  |  |   |                         | 
|                  |   |                                |  |  | of Total |  |   |                         | 
|                  |   | Amount                         |  |  | Revenue  |  |   | Amount                  | 
|Revenue by Region |   |                                |  |  |          |  |   |                         | 
|International     | $ | 686,752                        |  |  | 50%      |  | $ | 923,377                 | 
|North America     |   | 676,666                        |  |  | 50%      |  |   | 1,106,684               | 
|Total revenue     | $ | 1,363,418                      |  |  | 100%     |  | $ | 2,030,061               | 

For the three months ended
January 31, 2010, we generated $1,363,418 in revenue compared to $2,030,061 for
the three months ended January 31, 2009. This represents a decrease of $666,643
or 33% from the same period last year. We generated $1,030,004 in software
revenue for the three months ended January 31, 2010 compared to $1,305,303 for
the three months ended January 31, 2009, representing a decrease of $275,299 or
21%. The decrease in software revenue was primarily due to fewer large sales
derived from our customer base, particularly among the original equipment
manufacturer segment, during the three months ended January 31, 2010 compared to
the three months ended January 31, 2009. For the three months ended January 31,
2010, service revenue was $333,414 compared to $724,758 for the three months
ended January 31, 2009. The decrease of $391,344 in service revenue was
primarily due to the decrease in software sales as service revenue is typically
correlated to the amount of software sales in the period. International revenue
outside of North America decreased by 26% during the three months ended January
31, 2010 compared to the three months ended January 31, 2009, due to an overall
decrease in sales in the period. North American revenue decreased by 39%,
compared to the three months ended January 31, 2009, due primarily to a decrease
in sales of software and services to North American original equipment
manufacturers.

|                  |   | Nine Months Ended January 31, |  |  |          |  |   |                         | 
|----------------- | - | ----------------------------- |  |  | -------- |  | - | ----------------------- | 
|                  |   | 2010                          |  |  | 2009     |  |   | Period-to-Period Change | 
|                  |   |                               |  |  | Percent  |  |   |                         | 
|                  |   |                               |  |  | of Total |  |   |                         | 
|                  |   | Amount                        |  |  | Revenue  |  |   | Amount                  | 
|Revenue by Type   |   |                               |  |  |          |  |   |                         | 
|Software          | $ | 3,623,173                     |  |  | 68%      |  | $ | 5,267,225               | 
|Service           |   | 1,691,309                     |  |  | 32%      |  |   | 2,392,426               | 
|Total revenue     | $ | 5,314,482                     |  |  | 100%     |  | $ | 7,659,651               | 
|                  |   |                               |  |  |          |  |   |                         | 
|Revenue by Region |   |                               |  |  |          |  |   |                         | 
|International     | $ | 2,241,484                     |  |  | 42%      |  | $ | 3,347,151               | 
|North America     |   | 3,072,998                     |  |  | 58%      |  |   | 4,312,500               | 
|Total revenue     | $ | 5,314,482                     |  |  | 100%     |  | $ | 7,659,651               | 

For the nine months ended January
31, 2010, we generated $5,314,482 in revenue compared to $7,659,651 for the nine
months ended January 31, 2009. This represents a decrease of $2,345,169 or 31%
from the same period last year. We generated $3,623,172 in software revenue for
the nine months ended January 31, 2010 compared to $5,267,225 for the nine
months ended January 31, 2009, representing a decrease of $1,644,052 or 31%. The
decrease in software revenue was primarily due to fewer large sales derived from
our customer base, particularly among the original equipment manufacturer
segment, during the nine months ended January 31, 2010 compared to the nine
months ended January 31, 2009. For the nine months ended January 31, 2010,
service revenue was $1,691,309 compared to $2,392,426 for the nine months ended
January 31, 2009. The decrease of $701,117 in service revenue was primarily due
to the decrease in software sales as service revenue is typically correlated to
the amount of software sales in the period. International revenue outside of
North America decreased by 33% during the nine months ended January 31, 2010
compared to the nine months ended January 31, 2009, primarily caused by lower
software sales in Latin America and Europe. North American revenue decreased by
29% compared to the nine months ended January 31, 2009, caused primarily by
lower sales of software and services to North American original equipment
manufacturers.

34

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Operating Expenses

Cost of Sales

Cost of sales for the three and nine months ended January 31,
2010 and 2009 were as follows:

|                   |   | January 31, 2010 |  |  | January 31, 2009 |  |   | Period-to-Period Change | 
|------------------ | - | ---------------- |  |  | ---------------- |  | - | ----------------------- | 
|                   |   |                  |  |  | Percent          |  |   |                         | 
|                   |   |                  |  |  | of               |  |   |                         | 
|                   |   | Amount           |  |  | Revenue          |  |   | Amount                  | 
|Three months ended | $ | 794,364          |  |  | 58%              |  | $ | 863,573                 | 
|Nine months ended  | $ | 2,164,966        |  |  | 41%              |  | $ | 3,327,619               | 

Cost of sales was $794,364 for
the three months ended January 31, 2010 compared to $863,573 for the three
months ended January 31, 2009. The decrease of $69,209 was primarily
attributable to a decrease in the amortization of intangible assets of
approximately $239,000. The decrease was partially offset by an increase in
personnel and associated wages of approximately $24,000 and an increase in
third-party royalties and hardware used with our products of approximately
$150,000.

Cost of sales was $2,164,966 for
the nine months ended January 31, 2010 compared to $3,327,619 for the nine
months ended January 31, 2009. The decrease of $1,162,653 was primarily
attributable to a decrease in the amortization of intangible assets of
approximately $871,000, a decrease in personnel and associated wages of
approximately $257,000 as a result of restructuring in the second quarter of
fiscal year 2009, a decrease in travel related expenses of approximately
$27,000, and a net decrease in other expenses of approximately $133,000. The
decrease was partially offset by an increase in the cost of third-party
royalties and hardware used with our products of approximately $126,000.

Sales and Marketing

Sales and marketing expenses for
the three and nine months ended January 31, 2010 and 2009 were as follows:

|                   |   | January 31, 2010 |  |  | January 31, 2009 |  |   | Period-to-Period Change | 
|------------------ | - | ---------------- |  |  | ---------------- |  | - | ----------------------- | 
|                   |   |                  |  |  | Percent          |  |   |                         | 
|                   |   |                  |  |  | of               |  |   |                         | 
|                   |   | Amount           |  |  | Revenue          |  |   | Amount                  | 
|Three months ended | $ | 644,212          |  |  | 47%              |  | $ | 762,398                 | 
|Nine months ended  | $ | 2,093,768        |  |  | 39%              |  | $ | 3,431,062               | 

Sales and marketing expenses were
$644,212 for the three months ended January 31, 2010 compared to $762,398 for
the three months ended January 31, 2009. The decrease of $118,186 was primarily
attributable to an approximate decrease of $110,000 in sales and marketing
personnel and associated wages and commissions as well as decreases in
professional and consulting fees resulting from employee restructuring during
fiscal year 2010. Other expenses decreased by a net amount of approximately
$8,000.

Sales and marketing expenses were
$2,093,768 for the nine months ended January 31, 2010 compared to $3,431,062 for
the nine months ended January 31, 2009. The decrease of $1,337,294 was primarily
attributable to a decrease in sales and marketing personnel and associated wages
and commissions of approximately $1,178,000 resulting from employee
restructuring during fiscal year 2009. Travel expenses and stock based
compensation also decreased by approximately $130,000 and $28,000,
respectively.

35

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Research and Development

Research and development expenses
for the three and nine months ended January 31, 2010 and 2009 were as follows:

|                   |   | January 31, 2010 |  |  | January 31, 2009 |  |   | Period-to-Period Change | 
|------------------ | - | ---------------- |  |  | ---------------- |  | - | ----------------------- | 
|                   |   |                  |  |  | Percent          |  |   |                         | 
|                   |   |                  |  |  | of               |  |   |                         | 
|                   |   | Amount           |  |  | Revenue          |  |   | Amount                  | 
|Three months ended | $ | 797,162          |  |  | 58%              |  | $ | 1,142,497               | 
|Nine months ended  | $ | 2,621,884        |  |  | 49%              |  | $ | 6,263,594               | 

Research and development expenses
were $797,162 for the three months ended January 31, 2010 compared to $1,142,497
for the three months ended January 31, 2009. The decrease of $345,335 was
primarily attributable to a decrease in research and development personnel and
associated wages resulting from employee restructuring during fiscal year 2009.
For the three months ended January 31, 2010, research and development related
wages decreased by approximately $247,000, stock based compensation decreased by
approximately $28,000 and other expenses decreased by approximately $67,000.

Research and development expenses
were $2,621,884 for the nine months ended January 31, 2010 compared to
$6,263,594 for the nine months ended January 31, 2009. The decrease of
$3,641,710 was primarily attributable to a decrease in research and development
personnel and associated wages as well as decreases in professional and
consulting fees resulting from employee restructuring during fiscal year 2009.
For the nine months ended January 31, 2010, research and development related
wages decreased by approximately $3,000,000, professional services and
consulting fees related to research and development decreased by approximately
$460,000, stock based compensation decreased by approximately $138,000, and
other expenses decreased by approximately $44,000 compared to the nine months
ended January 31, 2009.

General and Administrative

General and administrative
expenses for the three and nine months ended January 31, 2010 and 2009 were as
follows:

|                   |   | January 31, 2010 |  |  | January 31, 2009 |  |   | Period-to-Period Change | 
|------------------ | - | ---------------- |  |  | ---------------- |  | - | ----------------------- | 
|                   |   |                  |  |  | Percent          |  |   |                         | 
|                   |   |                  |  |  | of               |  |   |                         | 
|                   |   | Amount           |  |  | Revenue          |  |   | Amount                  | 
|Three months ended | $ | 915,302          |  |  | 67%              |  | $ | 1,524,559               | 
|Nine months ended  | $ | 2,810,605        |  |  | 53%              |  | $ | 5,312,358               | 

General and administrative
expenses were $915,302 for the three months ended January 31, 2010 compared to
$1,524,559 for the three months ended January 31, 2009. The decrease of $609,257
in general and administrative expenses was primarily attributable to a decrease
in personnel related costs of approximately $230,000 resulting from employee
restructuring during fiscal year 2009, a decrease in provision for bad debts of
approximately $346,000, a decrease in professional fees of approximately
$100,000, a decrease in other expenses of approximately $52,000, partially
offset by an increase of approximately $118,000 in stock based compensation
expense.

General and administrative
expenses were $2,810,605 for the nine months ended January 31, 2010 compared to
$5,312,358 for the nine months ended January 31, 2009. The decrease of $
2,501,753 in general and administrative expenses was primarily attributable to
decreases in personnel related costs resulting from employee restructuring
during fiscal year 2009. For the nine months ended January 31, 2010 compared to
the nine months ended January 31, 2009, wages, stock-based compensation,
provision for bad debts, and professional fees related to general and
administrative expenses decreased by approximately $804,000, $162,000, $254,000
and $587,000, respectively. In addition, rent and related insurance cost
decreased by approximately $104,000 due to a reduction in office space required.
Amortization of capital assets decreased by approximately $255,000 during the
nine months ended January 31, 2010 compared to the nine months ended January 31,
2009 due to a charge taken to intangible

36

---

assets at the end of fiscal year 2009. Travel , patent related
costs and communication expenses decreased by approximately $91,000, $145,000
and $41,000, respectively, due to cost saving policies implemented during fiscal
2010, and other office expenses, which include supplies, utilities, office
repairs, and maintenance decreased by approximately $68,000.

Restructuring Charges

Restructuring charges for the three and nine months ended
January 31, 2010 and 2009 were as follows:

|                   |   | January 31, 2010 |  |  | January 31, 2009 |  |   | Period-to-Period Change | 
|------------------ | - | ---------------- |  |  | ---------------- |  | - | ----------------------- | 
|                   |   |                  |  |  | Percent          |  |   |                         | 
|                   |   |                  |  |  | of               |  |   |                         | 
|                   |   | Amount           |  |  | Revenue          |  |   | Amount                  | 
|Three months ended | $ | Nil              |  |  | Nil%             |  | $ | 26,268                  | 
|Nine months ended  | $ | 44,912           |  |  | 1%               |  | $ | 959,264                 | 

Restructuring charges for the
three months ended January 31, 2010 were $Nil compared to $26,268 for the three
months ended January 31, 2009. The restructuring charges pertain to the employee
restructuring activity for the three months ended January 31, 2009 as a result
of the consolidation of administrative, sales, marketing, and research and
development departments after the close of acquisitions of NewHeights, FirstHand
and BridgePort.

Restructuring charges for the
nine months ended January 31, 2010 were $44,912 compared to $959,264 for the
nine months ended January 31, 2009. These costs were related to employee
severance arrangements as a result of the consolidation of administrative, sales
and marketing, and research and development departments after the close of
acquisitions of NewHeights, FirstHand and BridgePort.

Interest and Other Income

Interest income for the three
months ended January 31, 2010 was $53,239 compared to $33,627 for the three
months ended January 31, 2009. Interest expense for the three months ended
January 31, 2010 was $685 compared to $1,278 for the three months ended January
31, 2009.

Interest income for the nine
months ended January 31, 2010 was $114,813 compared to $83,893 for the nine
months ended January 31, 2009. Interest expense for the nine months ended
January 31, 2010 was $2,356 compared to $11,713 for the nine months ended
January 31, 2009.

Foreign exchange loss for the
three months ended January 31, 2010 was $46,516 compared to a foreign exchange
gain of $19,360 for the three months ended January 31, 2009. Foreign exchange
loss for the nine months ended January 31, 2010 was $468,277 compared to a loss
of $55,335 for the nine months ended January 31, 2009. The foreign exchange
gain/loss represents the gain/loss on account of translation of the inter
company accounts of subsidiaries who maintain their records in currencies other
than U.S. dollars as well as transactional losses and gains.

Liquidity and Capital Resources

As of January 31, 2010, we had
$2,351,791 in cash compared to $2,931,932 at April 30, 2009, representing a
decrease of $580,141. Our working capital was $1,063,886 at January 31, 2010
compared to $1,566,483 at April 30, 2009, representing a decrease of
$502,597.

Presently, our cash flow
generated from operations is not sufficient to meet operating and capital
expenses. We have incurred operating losses since inception, and we project this
to continue for the next nine to twelve months. At January 31, 2010, we had cash
of approximately $2.35 million and working capital of approximately $1.06
million; however, our management projects that under our current operating plan,
we will require approximately $11-13 million to fund our ongoing operating
expenses and working capital requirements for the next twelve months. We
anticipate that this will be funded through cash flow generated from operations,
working capital, external financing and potential rationalization.

37

---

Operating Activities

Our operating activities resulted
in a net cash outflow of $2,554,878 for the nine months ended January 31, 2010.
This compares with a net cash outflow of $6,263,290 for the same period last
year and represents a $3,708,412 decrease in cash outflow from operations
compared to the same period last year. The net cash outflow from operating
activities for the nine months ended January 31, 2010 was primarily a result of
a net loss of $4,777,473, a $529,867 decrease in other current assets related to
a forward contract settlement, a $151,112 decrease in accounts payable, and a
$207,339 decrease in unearned revenue partially offset by a $1,066,118 decrease
in accounts receivable. The net cash outflow was further offset by adjustments
for non-cash expenses including $468,277 for foreign exchange loss, $568,598 for
stock-based compensation, $642,925 for amortization of intangible assets, and
$220,219 for depreciation and amortization.

The net cash outflow of
$6,263,290 from operating activities for the nine months ended January 31, 2009
was primarily a result of a net loss of $11,617,401 partially offset by non-cash
charges including stock-based compensation under ASC 718 of $1,077,085,
depreciation of $510,907, and amortization of intangible assets of $1,514,515. A
decrease in accounts payable of $765,453 due to the payout of accrued legal and
professional fees consumed cash. This use of cash was partially offset by cash
provided by a decrease in accounts receivable of $2,827,038 that includes
receipt of investment tax credits of $1,061,133.

Investing Activities

Investing activities resulted in
a net cash outflow of $3,712 for the nine months ended January 31, 2010
primarily from purchases of equipment. This compares with a net cash outflow
from investing activities of $30,854 for the same period last year from
purchases of equipment and deposits. At January 31, 2010, we did not have any
material commitments for future capital expenditures.

Financing Activities

Financing activities resulted in
a net cash inflow of $1,881,854 for the nine months ended January 31, 2010
compared to a net cash inflow of $3,752,835 for the nine months ended January
31, 2009.

On October 29, 2009 we issued
3,333,334 units at a price of $0.56 (CDN$0.60) per unit for gross proceeds of
approximately $1,867,762 (CDN$2,000,000). Each unit consists of one share of
common stock in the capital of our company and one-half of one non-transferable
common share purchase warrant. Each warrant entitles the holder thereof to
purchase one share of common stock in the capital of our company for a period of
two years commencing from October 29, 2009 at an exercise price of US$0.90 per
warrant.

We intend to seek additional
funding through public or private financings to fund our operations through
fiscal 2010 and beyond. However, if we are unable to raise additional capital
when required or on acceptable terms, or achieve cash flow positive operations,
we may have to significantly delay product development and scale back operations
both of which may affect our ability to continue as a going concern. There is no
assurance that we will be able to obtain financing on terms deemed acceptable to
our company.

Off-Balance Sheet Arrangements

We do not have, and do not have any
present plans to implement, any off-balance sheet arrangements.

New Accounting Pronouncements

ASC 855. In May 2009, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards (SFAS) No. 165,
Subsequent Events (SFAS No. 165). This statement was incorporate into ASC
855, Subsequent Events (ASC 855). ASC 855 requires the disclosure of
the date through which an entity has evaluated subsequent events for potential
recognition or disclosure in the financial statements and whether that date
represents the date the financial statements were issued or were available to be
issued. This standard also provides clarification about circumstances under
which an entity should recognize events or transactions occurring

38

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after the balance sheet date in its financial statements and
the disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. This standard was in effect for our interim and annual periods beginning with the interim three month period ended July 31, 2009. The adoption of this standard did not have a material impact on our consolidated financial statements.

ASC 860. In June of 2009, the
FASB issued Statement No. 166, Accounting for Transfers of Financial Assets,an amendment of Statement No. 140, Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities. Statement No. 166
removes the concept of a qualifying special-purpose entity. This statement was
incorporated into ASC 860, Accounting for Transfers of Financial Assets(ASC 860). Therefore, all entities should be evaluated for consolidation
in accordance with applicable consolidation guidance. Statement ASC 860 requires
identification of any involvements with transferred assets and prevents
de-recognition until all requirements for sale accounting have been met.
Enhanced disclosures are required to provide greater transparency about any
transferors continuing involvement with transferred assets. ASC 860 is
effective as of each reporting entitys first annual reporting period which
begins after November 15, 2009 and for all interim periods within that first
annual period. We have no current involvement with transferred assets but will
comply should the situation arise.

ASC 105. In June 2009, the FASB
issued SFAS No. 168, The FASB Accounting Standards Codificationand the Hierarchy of Generally Accepting Accounting PrinciplesA
Replacement of FASB Statement No. 162 (FAS 168) which established the FASB Accounting Standards
Codification (Codification) as the single source of authoritative
nongovernmental U.S. GAAP which was launched on July 1, 2009. This statement was
incorporated into ASC 105, Generally Accepted Accounting Principlesunder
the new FASB codification which became effective on July 1, 2009. The
Codification does not change current U.S. GAAP, but is intended to simplify user
access to all authoritative U.S. GAAP by providing all the authoritative
literature related to a particular topic in one place. All existing accounting
standard documents will be superseded and all other accounting literature not
included in the Codification will be considered nonauthoritative. The
Codification is effective for interim and annual periods ending after September
15, 2009 and will not have an impact on our companys financial condition or
results of operations. We are currently evaluating the impact to our financial
reporting process of providing Codification references in our public filings.

ASC 260. FASB Staff Position
(FSP) EITF 03-06-1, Participating securities and instruments granted in
share-based payment transactions. Under the new FASB codification this FSP
was incorporated into ASC 260, Earnings Per Share(ASC 260). ASC 260
addresses whether instruments granted in share-based payment transactions are
participating securities prior to vesting that should be included in the
earnings allocation in computing earnings per share under the two-class method
described, Earnings per Share.ASC 260 is effective for years beginning
after December 15, 2008, and interim periods within those years. The adoption of
this standard did not have a material impact on our financial statements.

In October 2009, the FASB issued
Accounting Standards Update (ASU) No. 2009-13, Multiple-Deliverable Revenue
Arrangements a consensus of the FASB Emerging Issues Task Force, (ASU
2009-13). ASU 2009-13 addresses the accounting for multiple-deliverable
arrangements and requires that the overall arrangement consideration be
allocated to each deliverable in a revenue arrangement based on an estimated
selling price when vendor specific objective evidence or third-party evidence of
fair value is not available. This guidance also eliminates the residual method
of allocation and requires that arrangement consideration be allocated to all
deliverables using the relative selling price method. This will result in more
revenue arrangements being separated into separate units of accounting. ASU
2009-13 is effective for fiscal years beginning on or after June 15, 2010.
Companies can elect to apply this guidance (1) prospectively to new or
materially modified arrangements after the effective date or (2) retrospectively
for all periods presented. We are currently assessing the impact of adoption of
ASU 2009-13 and do not currently plan to early adopt.

In October 2009, the FASB issued
ASU No. 2009-14, Certain Revenue Arrangements That Include Software Elements,
(ASU 2009-14). ASU 2009-14 changes the accounting model for revenue
arrangements that include both tangible products and software elements. Tangible
products containing both software and non-software components that function
together to deliver the products essential functionality will no longer be
within the scope of ASC 985-605 Software Revenue Recognition (ASC 985-605).
The entire product (including the software and non-software deliverables) will
therefore be accounted for under accounting literature found in ASC 605. ASU

39

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2009-14 is effective for fiscal years beginning on or after
June 15, 2010. Companies can elect to apply this guidance (1) prospectively to
new or materially modified arrangements after the effective date or (2)
retrospectively for all periods presented. We are currently assessing the impact
of adoption of ASU 2009-14 and do not currently plan to early adopt.

Item 4T. Controls and Procedures.

Disclosure Controls and Procedures

Disclosure controls and
procedures and other procedures that are designed to ensure that information
required to be disclosed in our reports filed or submitted under the Exchange
Act is recorded, processed, summarized and reported, within the time period
specified in the SEC's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed in our reports filed under the Exchange Act
is accumulated and communicated to management including our Chief Executive
Officer and Chief Financial Officer as appropriate, to allow timely decisions
regarding required disclosure.

In connection with this quarterly
report, as required by Rule 13a-15 under the Securities Exchange Act of 1934, we
have carried out an evaluation of the effectiveness of the design and operation
of our company's disclosure controls and procedures. This evaluation was carried
out under the supervision and with the participation of our company's
management, including our company's Chief Executive Officer and Chief Financial
Officer. Based upon that evaluation, our company's Chief Executive Officer and
Chief Financial Officer concluded that subject to the inherent limitations noted
in Part II, Item 9A(T) of our annual report on Form 10-K filed with the SEC on
July 28, 2009, for the year ended April 30, 2009, our disclosure controls and
procedures are effective as at the end of the period covered by this report.

Changes in Internal Control over Financial
Reporting

There were no changes in our
internal control over financial reporting that occurred during the quarter ended
January 31, 2010 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.

PART II

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

Much of the information included
in this quarterly report includes or is based upon estimates, projections or
other forward looking statements. Such forward looking statements include any
projections or estimates made by us and our management in connection with our
business operations. While these forward-looking statements, and any assumptions
upon which they are based, are made in good faith and reflect our current
judgment regarding the direction of our business, actual results will almost
always vary, sometimes materially, from any estimates, predictions, projections,
assumption or other future performance suggested herein.

Such estimates, projections or
other forward looking statements involve various risks and uncertainties as
outlined below. We caution the reader that important factors in some cases have
affected and, in the future, could materially affect actual results and cause
actual results to differ materially from the results expressed in any such
estimates, projections or other forward looking statements.

40

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Risks Associated with our Business and Industry

Lack of cash flow which may affect
our ability to continue as a going concern.

Since inception, our company has
had negative cash flows from operations. Our business plan calls for continued
research and development of our products and expansion of our market share. We
will require additional financing to finance working capital and pay for
operating expenses and capital requirements until we achieve a positive cash
flow. However, there is no assurance that actual cash requirements will not
exceed our estimates. In particular, additional capital may be required in the
event that:

- we incur delays and additional expenses as a result of technology failure;
- we are unable to create a substantial market for our products; or
- we incur any significant unanticipated expenses.

The occurrence of any of the
aforementioned events could adversely affect our ability to meet our proposed
business plans.

We depend on a mix of revenues
and outside capital to pay for the continued development of our technology and
the marketing of our products. Such outside capital may include the sale of
additional stock and/or commercial borrowing. There can be no assurance that
capital will continue to be available if necessary to meet these continuing
development costs or, if the capital is available, that it will be on terms
acceptable to us. Disruptions in financial markets and challenging economic
conditions have and may continue to affect our ability to raise capital. The
issuance of additional equity securities by us would result in a dilution,
possibly a significant dilution, in the equity interests of our current
stockholders. Obtaining commercial loans, assuming those loans would be
available, will increase our liabilities and future cash commitments.

If we are unable to obtain
financing in the amounts and on terms deemed acceptable to us, our business and
future success may be adversely affected and, as indicated in the audit report
included in our annual report on Form 10-K for the year ended April 30, 2009
filed with the SEC on July 28, 2009, raise substantial doubt on our ability to
continue as a going concern. Our financial statements included in this Form 10-Q
do not include any adjustments to the recoverability and classification of
recorded asset amounts and classification of liabilities that might be necessary
should we be unable to continue as a going concern.

The current economic
environment has adversely affected business spending patterns, which may have an
adverse effect on our business.

The disruptions in the financial
markets and challenging economic conditions have adversely affected the United
States and world economy, and in particular, reduced consumer spending and
reduced spending by businesses. Turmoil in global credit markets and recent
turmoil in the geopolitical environment in many parts of the world and other
disruptions, such as changes in energy costs are and may continue to put
pressure on global economic conditions. Our operating results in one or more
segments may also be affected by uncertain or changing economic conditions
particularly germane to that segment or to particular customer markets within
that segment. The challenges we have seen in the United States have expanded
overseas. If our customers delay or cancel spending on their IT infrastructure,
that decision could result in reductions in sales of our products, longer sales
cycles and increased price competition. There can be no assurances that
government responses to the disruptions in the financial markets will restore
spending to previous levels. If global economic and market conditions, or
economic conditions in the United States or other key markets, remain uncertain
or persist, spread, or deteriorate further, we may experience material impacts
on our business, operating results, and financial condition.

We are subject to the credit
risk of our customers, which could have a material adverse effect on our
financial condition, results of operations and liquidity.

We are subject to the credit risk
of our customers. Businesses that are good credit risks at the time of sale may
become bad credit risks over time. In times of economic recession, the number of
our customers who default on payments owed to us tends to increase. If we fail
to adequately assess and monitor our credit risks, we could experience longer payment cycles, increased collection costs
and higher bad debt expense.

41

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Additionally, to the degree that the ongoing
turmoil in the credit markets makes it more difficult for some customers to
obtain financing, those customers ability to pay could be adversely impacted,
which in turn could have a material adverse impact on our business, operating
results, and financial condition.

A decline in the price of our
common stock could affect our ability to raise further working capital and
adversely impact our operations.

A prolonged decline in the price
of our common stock could result in a reduction in the liquidity of our common
stock and a reduction in our ability to raise capital. Because our operations
have been partially financed through the sale of equity securities, a decline in
the price of our common stock could be especially detrimental to our liquidity
and our continued operations. Any reduction in our ability to raise equity
capital in the future would force us to reallocate funds from other planned uses
and would have a significant negative effect on our business plans and
operations, including our ability to develop new products and continue our
current operations. If our stock price declines, there can be no assurance that
we can raise additional capital or generate funds from operations sufficient to
meet our obligations.

The majority of our directors
and officers are located outside the United States, with the result that it may
be difficult for investors to enforce within the United States any judgments
obtained against us or some of our directors or officers.

The majority of our directors and
officers are nationals and/or residents of countries other than the United
States, and all or a substantial portion of such persons' assets are located
outside the United States. As a result, it may be difficult for investors to
enforce within the United States any judgments obtained against us or our
officers or directors, including judgments predicated upon the civil liability
provisions of the securities laws of the United States or any state thereof.
Consequently, investors may be effectively prevented from pursuing remedies
under United States federal securities laws against some of our directors or
officers.

We may in the future be
subject to damaging and disruptive intellectual property litigation that could
materially and adversely affect our business, results of operations and
financial condition, as well as the continued viability of our company.

We may be unaware of filed patent
applications and issued patents that could relate to our products and services.
Intellectual property litigation, if determined against us, could:

- result in the loss of a substantial number of existing customers or
  prohibit the acquisition of new customers;
- cause us to lose access to key distribution channels;
- result in substantial employee layoffs or risk the permanent loss of
  highly-valued employees;
- materially and adversely affect our brand in the market place and cause a
  substantial loss of goodwill;
- cause our stock price to decline significantly; and
- lead to the bankruptcy or liquidation of our company.

Parties making claims of
infringement may be able to obtain injunctive or other equitable relief that
could effectively block our ability to provide our services and could cause us
to pay substantial royalties, licensing fees or damages. The defense of any
lawsuit could result in time-consuming and expensive litigation, regardless of
the merits of such claims.

42

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We could lose our competitive
advantages if we are not able to protect any proprietary technology and
intellectual property rights against infringement, and any related litigation
could be time-consuming and costly.

Our success and ability to
compete depends to a significant degree on our proprietary technology
incorporated in our software. If any of our competitors' copies or otherwise
gains access to our proprietary technology or develops similar technologies
independently, we would not be able to compete as effectively. We also consider
our family of registered and unregistered trademarks including CounterPath,
Bria, eyeBeam, X-Pro and X-Lite, invaluable to our ability to continue to
develop and maintain the goodwill and recognition associated with our brand. The
measures we take to protect the proprietary technology software, and other
intellectual property rights, which presently are based upon a combination of
patents, patents pending, copyright, trade secret and trademark laws, may not be
adequate to prevent their unauthorized use. Further, the laws of foreign
countries may provide inadequate protection of such intellectual property
rights.

We may need to bring legal claims
to enforce or protect such intellectual property rights. Any litigation, whether
successful or unsuccessful, could result in substantial costs and diversions of
resources. In addition, notwithstanding any rights we have secured in our
intellectual property, other persons may bring claims against us that we have
infringed on their intellectual property rights, including claims based upon the
content we license from third parties or claims that our intellectual property
right interests are not valid. Any claims against us, with or without merit,
could be time consuming and costly to defend or litigate, divert our attention
and resources, result in the loss of goodwill associated with our service marks
or require us to make changes to our website or other of our technologies.

Our products may become
obsolete and unmarketable if we are unable to respond adequately to rapidly
changing technology and customer demands.

Our industry is characterized by
rapid changes in technology and customer demands. As a result, our products may
quickly become obsolete and unmarketable. Our future success will depend on our
ability to adapt to technological advances, anticipate customer demands, develop
new products and enhance our current products on a timely and cost-effective
basis. Further, our products must remain competitive with those of other
companies with substantially greater resources. We may experience technical or
other difficulties that could delay or prevent the development, introduction or
marketing of new products or enhanced versions of existing products. Also, we
may not be able to adapt new or enhanced services to emerging industry
standards, and our new products may not be favorably received.

Unless we can establish market
acceptance of our current products, our potential revenues may be significantly
reduced.

We expect that a substantial
portion of our future revenue will be derived from the sale of our software
products. We expect that these product offerings and their extensions and
derivatives will account for a majority of our revenue for the foreseeable
future. Broad market acceptance of our software products is, therefore, critical
to our future success and our ability to continue to generate revenues. Failure
to achieve broad market acceptance of our software products as a result of
competition, technological change, or otherwise, would significantly harm our
business. Our future financial performance will depend primarily on the
continued market acceptance of our current software product offerings and on the
development, introduction and market acceptance of any future enhancements.
There can be no assurance that we will be successful in marketing our current
product offerings or any new product offerings, applications or enhancements,
and any failure to do so would significantly harm our business.

We face larger and
better-financed competitors, which may affect our ability to operate our
business and achieve profitability.

Management is aware of similar
products which compete directly with our products and some of the companies
developing these similar products are larger and better-financed than us and may
develop products superior to those of our company. Such competition will
potentially affect our chances of achieving profitability and ultimately
adversely affect our ability to continue as a going concern.

43

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Any prolonged activity in
respect of the integration of the recently acquired businesses with our business
could be time consuming and costly and adversely affect our financial results
and stock price.

We completed the acquisition of
NewHeights Software Corporation, a private Canada corporation, FirstHand
Technologies Inc., a private Ontario corporation, and BridgePort Networks, Inc.,
a private Delaware corporation. The integration of the business of each
respective company with our business has been, and will continue to be, a time
consuming and expensive process. Any prolonged activity in respect of the
integration of the acquired businesses with our business could divert financial
and other resources from our planned operations, which could negatively affect
our results of operations, lower employee morale, and result in customers
cancelling existing orders or choosing not to place new ones. In addition, the
combined operations of our company and the acquired businesses may not achieve
anticipated synergies or other benefits. If the anticipated benefits of the
combined operations are not realized or do not meet the expectations of
financial or industry analysts, the market price of our common stock may
decline.

Risks Associated with our Common Stock

If we issue additional shares
of common stock in the future this may result in dilution to our existing
stockholders.

We are authorized to issue
83,076,900 shares of common stock. Our board of directors has the authority to
issue additional shares of common stock up to the authorized capital stated in
the certificate of incorporation. Our board of directors may choose to issue
some or all of such shares to acquire one or more businesses or to provide
additional financing in the future. The issuance of any such shares may result
in a reduction of the book value or market price of the outstanding shares of
our common stock. If we do issue any such additional shares, such issuance will
cause a reduction in the proportionate ownership and voting power of all other
stockholders. Further, any such issuance may result in a change of control of
our corporation.

Penny stock rules will limit the ability of our stockholders
to sell their shares of common stock.

The SEC has adopted regulations
which generally define penny stock to be any equity security that has a market
price (as defined) less than $5.00 per share or an exercise price of less than
$5.00 per share, subject to certain exceptions. Our securities are covered by
the penny stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
accredited investors. The term accredited investor refers generally to
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the SEC which
provides information about penny stocks and the nature and level of risks in the
penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction and monthly account
statements showing the market value of each penny stock held in the customer's
account. The bid and offer quotations, and the broker-dealer and salesperson
compensation information, must be given to the customer orally or in writing
prior to effecting the transaction and must be given to the customer in writing
before or with the customer's confirmation.

In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from these rules, the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of our common stock.

The Financial Industry
Regulatory Authority, or FINRA, has adopted sales practice requirements, which
may limit a stockholder's ability to buy and/or sell shares of our common
stock.

44

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In addition to the penny stock
rules described above, the FINRA has adopted rules that require that in
recommending an investment to a customer, a broker-dealer must have reasonable
grounds for believing that the investment is suitable for that customer. Prior
to recommending speculative low priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information
about the customer's financial status, tax status, investment objectives and
other information. Under interpretations of these rules, the FINRA believes that
there is a high probability that speculative low priced securities will not be
suitable for at least some customers. The FINRA requirements make it more
difficult for broker-dealers to recommend that their customers buy our common
stock, which may limit your ability to buy and sell our stock and have an
adverse effect on the market for its shares.

Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds.

On February 9, 2010, we granted
stock options to an employee to purchase an aggregate of 200,000 shares of our
common stock at an exercise price of $0.45 per share, exercisable for a period
of five years pursuant to our 2005 Amended and Restated Stock Option Plan. 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. We issued the stock options
to a U.S. person (as that term is defined in Regulation S of the Securities Act
of 1933) in reliance upon Rule 506 of Regulation D and/or Section 4(2) of the
Securities Act of 1933, as applicable.

On March 11, 2010, we granted
stock options to an employee to purchase 20,000 shares of our common stock at an
exercise price of $0.49 per share, exercisable for a period of five years
pursuant to our 2005 Amended and Restated Stock Option Plan. 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. We issued the stock options to a U.S. person
(as that term is defined in Regulation S of the Securities Act of 1933) in
reliance upon Rule 506 of Regulation D and/or Section 4(2) of the Securities Act
of 1933, as applicable.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibits required by Item 601 of Regulation
S-B

|(3) | Articles of Incorporation
      and By-laws                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                 
|3.1 | Articles of Incorporation (incorporated by reference from
      our Registration Statement on Form SB-2 filed on July 16, 2003).
|    |                                                                                                                                 
|3.2 | Bylaws (incorporated by reference from our Registration
      Statement on Form SB-2 filed on July 16, 2003).                   
|    |                                                                                                                                 
|3.3 | Amended Bylaws (incorporated by reference from our
      Registration Statement on Form SB-2/A filed on September 3, 2003).     

45

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|3.4   | Articles of Merger (incorporated by reference from our
      Current Report on Form 8-K filed on September 15, 2005).                                                                                                                                                                                                     
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                           
|3.5   | Amended Bylaws (incorporated by reference from our
      Current Report on Form 8-K filed on April 28, 2006).                                                                                                                                                                                                             
|      |                                                                                                                                                                                                                                                                                                                           
|3.6   | Amended Bylaws (incorporated by reference from our
      Current Report on Form 8-K filed on April 22, 2008).                                                                                                                                                                                                             
|      |                                                                                                                                                                                                                                                                                                                           
|(10)  | Material Contracts                                                                                                                                                                                                                                                                                                        
|      |                                                                                                                                                                                                                                                                                                                           
|10.1  | 2004 Stock Option Plan effective May 18, 2004
      (incorporated by reference from our Registration Statement on Form S-8
      filed on June 14, 2005).                                                                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                           
|10.2  | Form of Stock Option Agreement for 2004 Stock Option Plan
      (incorporated by reference from our Registration Statement on Form S-8
      filed on June 14, 2005).                                                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                           
|10.3  | 2005 Stock Option Plan effective March 4, 2005
      (incorporated by reference from our Registration Statement on Form S-8
      filed on June 14, 2005).                                                                                                                                                                
|      |                                                                                                                                                                                                                                                                                                                           
|10.4  | Form of Stock Option Agreement for 2005 Stock Option Plan
      (incorporated by reference from our Registration Statement on Form S-8
      filed on June 14, 2005).                                                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                           
|10.5  | Form of Amended & Restated Stock Option and
      Subscription Agreement (Canadian) (incorporated by reference from our
      Current Report on Form 8-K filed On October 14, 2005).                                                                                                                                      
|      |                                                                                                                                                                                                                                                                                                                           
|10.6  | Form of Amended & Restated Stock Option and
      Subscription Agreement (US) (incorporated by reference from our Current
      Report on Form 8-K filed On October 14, 2005).                                                                                                                                            
|      |                                                                                                                                                                                                                                                                                                                           
|10.7  | Employment Agreement between CounterPath Solutions, Inc.
      and David Karp dated September 11, 2006 (incorporated by reference from
      our Quarterly Report on Form 10-QSB filed on September 14, 2006).                                                                                                            
|      |                                                                                                                                                                                                                                                                                                                           
|10.8  | Arrangement Agreement among CounterPath Solutions, Inc.,
      6789722 Canada Inc., a wholly owned subsidiary of CounterPath Solutions,
      Inc. and NewHeights Software Corporation dated as of June 15, 2007
      (incorporated by reference from our Current Report on Form 8-K filed on
      June 18, 2007).      
|      |                                                                                                                                                                                                                                                                                                                           
|10.9  | Exchangeable Share Support Agreement between CounterPath
      Solutions, Inc. and 6789722 Canada Inc., a wholly owned subsidiary of
      CounterPath Solutions, Inc. dated as of August 2, 2007 (incorporated by
      reference from our Current Report on Form 8-K filed on August 8, 2007).                          
|      |                                                                                                                                                                                                                                                                                                                           
|10.10 | Voting and Exchange Trust Agreement among CounterPath
      Solutions, Inc., 6789722 Canada Inc., a wholly owned subsidiary of
      CounterPath Solutions, Inc. and Valiant Trust Company dated as of August
      2, 2007 (incorporated by reference from our Current Report on Form 8-K
      filed on August 8, 2007).
|      |                                                                                                                                                                                                                                                                                                                           
|10.11 | Piggyback Registrations Rights Agreement among our
      company and various shareholders, dated as of August 2, 2007 (incorporated
      by reference from our Current Report on Form 8-K filed on August 8, 2007).                                                                                                      
|      |                                                                                                                                                                                                                                                                                                                           
|10.12 | Form of Stock Option and Subscription Agreement dated
      August 2, 2007, between our company and each of the former optionees of
      NewHeights Software Corporation (incorporated by reference from our
      Current Report on Form 8-K filed on August 8, 2007).                                                  

46

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|10.13 | Amended Employment Agreement between Donovan Jones and
      CounterPath Solutions R&D Inc., a wholly owned subsidiary of
      CounterPath Solutions, Inc. dated September 13, 2007 (incorporated by
      reference from our Quarterly Report on Form 10-QSB filed on September 14,
      2007).                        
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                           
|10.14 | Share Exchange Agreement dated January 28, 2008 among
      CounterPath Corporation, FirstHand Technologies Inc. and certain
      shareholders of FirstHand Technologies Inc. (incorporated by reference
      from our Current Report on Form 8-K filed on January 29, 2008).                                           
|      |                                                                                                                                                                                                                                                                                                                           
|10.15 | Escrow Agreement dated February 1, 2008 among CounterPath
      Corporation, FirstHand Technologies Inc. and certain shareholders of
      FirstHand Technologies Inc. (incorporated by reference from our Current
      Report on Form 8-K filed on February 5, 2008).                                                   
|      |                                                                                                                                                                                                                                                                                                                           
|10.16 | Agreement of Merger and Plan of Reorganization dated
      February 1, 2008 among our company, CounterPath Acquisition Corp.,
      BridgePort Networks, Inc. and certain shareholders of BridgePort Networks,
      Inc. (incorporated by reference from our Current Report on Form 8-K filed
      on February 5, 2008).
|      |                                                                                                                                                                                                                                                                                                                           
|10.17 | Form of Subscription Agreement dated July 31, 2008
      between our company and various investors (incorporated by reference from
      our Quarterly Report on Form 10-Q filed on September 15, 2008).                                                                                                                  
|      |                                                                                                                                                                                                                                                                                                                           
|10.18 | Form of Subscription Agreement dated October 28, 2008
      between our company and an investor (incorporated by reference from our
      Quarterly Report on Form 10-Q filed on December 15, 2008).                                                                                                                      
|      |                                                                                                                                                                                                                                                                                                                           
|10.19 | Settlement Agreement amongst Greg Pelling, CounterPath
      Corporation and CounterPath Technologies Inc. dated October 31, 2008
      (incorporated by reference from our Quarterly Report on Form 10-Q filed on
      December 15, 2008).                                                                              
|      |                                                                                                                                                                                                                                                                                                                           
|10.20 | 2005 Amended and Restated Stock Option Plan effective
      January 10, 2006 (incorporated by reference from our Post-Effective
      Amendment No.1 to the Registration Statement on Form S-8 filed on January
      30, 2009).                                                                                          
|      |                                                                                                                                                                                                                                                                                                                           
|10.21 | Employee Share Purchase Plan adopted October 1, 2008, and
      amended November 6, 2008 (incorporated by reference from our Registration
      Statement on Form S-8 filed on January 30, 2009).                                                                                                                         
|      |                                                                                                                                                                                                                                                                                                                           
|10.22 | Settlement Agreement amongst Mark Bruk, CounterPath
      Corporation, and CounterPath Technologies Inc. dated March 12, 2009
      (incorporated by reference from our Quarterly Report on Form 10-Q filed on
      March 12, 2009).                                                                                     
|      |                                                                                                                                                                                                                                                                                                                           
|10.23 | Form of Debt Conversion Agreement dated July 17, 2009
      between our company and The Trustees of Columbia University in the City of
      New York (incorporated by reference from our Annual Report on Form 10-K
      filed on July 28, 2009).                                                                       
|      |                                                                                                                                                                                                                                                                                                                           
|10.24 | Deferred Share Unit Plan effective October 22, 2009
      (incorporated by reference from our Definitive Proxy Statement on Schedule
      14A filed on September 8, 2009).                                                                                                                                               
|      |                                                                                                                                                                                                                                                                                                                           
|10.25 | Form of Subscription Agreement dated October 29, 2009
      between our company and various investors (incorporated by reference from
      our Current Report on Form 8-K filed on November 4, 2009).                                                                                                                    
|      |                                                                                                                                                                                                                                                                                                                           
|(14)  | Code of Ethics                                                                                                                                                                                                                                                                                                            
|      |                                                                                                                                                                                                                                                                                                                           
|14.1  | Code of Business Conduct and Ethics (incorporated by
      reference from our Annual Report on Form 10- KSB filed on July 29, 2004).                                                                                                                                                                                      

47

---

|14.2 | Code of Business Conduct and Ethics
      and Compliance Program (incorporated by reference from our Quarterly Report
      on Form 10-QSB filed on September 15, 2008).                                                                                                                                                                                                                                                                                                                                                 
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(21) | Subsidiaries of CounterPath
      Corporation 
      CounterPath Technologies Inc. (incorporated in the Province of British Columbia,
      Canada) 
      6789722 Canada Inc. (incorporated in Canada) 
      FirstHand Technologies Inc. (continued into the Province of British Columbia,
      Canada) 
      BridgePort Networks, Inc. (incorporated in the state of Delaware) 
      BridgePort Networks (Europe) Ltd. (incorporated in the United Kingdom) 
      BridgePort Networks K.K. (incorporated in Japan)
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(31) | Section 302 Certifications                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|31.1 | Section
      302 Certification of Donovan Jones (filed herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|31.2 | Section
      302 Certification of David Karp (filed herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(32) | Section 906 Certifications                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|     | Section
      906 Certification of Donovan Jones (filed herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|     | Section
      906 Certification of David Karp (filed herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                                          

48

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SIGNATURES

In accordance with Section 13 or
15(d) of the Exchange Act, the registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

COUNTERPATH CORPORATION

|By: | /s/ Donovan Jones                                      | 
|--- | ------------------------------------------------------ | 
|    | Donovan Jones                                          | 
|    | President, Chief Executive
      Officer and Director  | 
|    | Date: March 12, 2010                                   | 
|    |                                                        | 
|    |                                                        | 
|    | /s/ David Karp                                         | 
|    | David Karp                                             | 
|    | Chief Financial Officer,
      Treasurer and Secretary | 
|    | Date: March 12, 2010                                   | 

49

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