---

UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

(Mark One)

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

For the quarterly period ended October 31, 2007

[ ] TRANSITION REPORT UNDER 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(Name of small business issuer as 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 of principal
executive offices)

(604) 320-3344(Issuers telephone number)

Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 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 is a shell company
(as defined in Rule 12b-2 of the Exchange Act). (Check one): Yes [ ] No [X]

As of December 13, 2007, there were 95,108,887 shares of the
issuers common stock issued and outstanding, par value $0.001.

Transitional Small Business Disclosure Format (Check one): Yes [
] No [X]

1

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COUNTERPATH CORPORATION(Formerly CounterPath
Solutions, Inc.)OCTOBER 31, 2007 QUARTERLY REPORT ON FORM 10-QSB

INDEX

|            | ****                                                                                   | **Page**
|----------- | -------------------------------------------------------------------------------------- | --------
|            |                                                                                        |         
|            | Part I                                                                                 |         
|Item 1.     | Financial Statements                                                                   | 3       
|Item 2.     | Managements
      Discussion and Analysis or Plan of Operation                        | 22      
|Item 3(A)T. | Controls and Procedures                                                                | 35      
|            | Part II                                                                                |         
|Item 1.     | Legal Proceedings                                                                      | 35      
|Item 2.     | Unregistered Sales
      of Equity Securities and Use of Proceeds                      | 35      
|Item 3.     | Defaults Upon Senior Securities                                                        | 36      
|Item 4.     | Submission of Matters
      to a Vote of Security Holders                              | 36      
|Item 5.     | Other Information                                                                      | 36      
|Item 6.     | Exhibits                                                                               | 36      
|            | Exhibits                                                                               |         
|31          | Section 302 Certification
      of Chief Executive Officer and Chief Financial Officer | 39      
|32          | Certification Pursuant to U.S.C.
      18 Section 1350                                 | 39      

---

|PART I - FINANCIAL INFORMATION                    
|--------------------------------------------------
|                                                  
|Item 1. Financial Statements.                     
|                                                  
|COUNTERPATH CORPORATION                           
|(Formerly CounterPath Solutions, Inc.)            
|INDEX TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|October 31, 2007                                  
|(Unaudited)                                       
|(Stated in U.S. Dollars)                          

|                                                                                           | **Page**
|------------------------------------------------------------------------------------------ | --------
|                                                                                           |         
|Interim Consolidated Balance Sheets                                                        | 4       
|                                                                                           |         
|Interim Consolidated Statements of Operations and Comprehensive
      Loss                 | 5       
|                                                                                           |         
|Interim Consolidated Statements of Cash Flows                                              | 6       
|                                                                                           |         
|Interim Consolidated Statements of Changes in Stockholders
      Equity (Capital Deficit) | 7       
|                                                                                           |         
|Notes to the Interim Consolidated Financial Statements                                     | 8 - 21  

3

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|COUNTERPATH CORPORATION               
|--------------------------------------
|(Formerly CounterPath Solutions, Inc.)
|INTERIM CONSOLIDATED BALANCE SHEETS   
|(Stated in U.S. Dollars)              

|                                                                                     |   | October 31, |   |   | April 30,  |  
|------------------------------------------------------------------------------------ | - | ----------- | - | - | ---------- | -
|                                                                                     |   | 2007        |   |   | 2007       |  
|                                                                                     |   | (Unaudited) |   |   |            |  
|Assets                                                                               |   |             |   |   |            |  
|Current assets:                                                                      |   |             |   |   |            |  
|Cash                                                                                 | $ | 3,223,986   |   | $ | 1,680,220  |  
|Accounts receivable (net of allowance
      for doubtful accounts of                 |   |             |   |   |            |  
|$158,208 and $56,817
      respectively)                                             |   | 4,144,253   |   |   | 1,924,899  |  
|Prepaid expenses and deposits                                                        |   | 236,237     |   |   | 129,534    |  
|Total
      current assets                                                           |   | 7,604,476   |   |   | 3,734,653  |  
|                                                                                     |   |             |   |   |            |  
|Deposits - Note 9                                                                    |   | 108,199     |   |   | 74,613     |  
|Equipment                                                                            |   | 481,432     |   |   | 276,599    |  
|Intangible assets (net of accumulated
      amortization of $295,231 and $nil  Note |   |             |   |   |            |  
|2(d) and 3)                                                                          |   | 6,106,408   |   |   |           |  
|Investment tax credits recoverable                                                   |   | 218,794     |   |   |           |  
|Goodwill  Note 3                                                                    |   | 7,025,444   |   |   |           |  
|Other assets                                                                         |   | 40,013      |   |   | 25,716     |  
|Total Assets                                                                         | $ | 21,584,766  |   | $ | 4,111,581  |  
|                                                                                     |   |             |   |   |            |  
|Liabilities and Stockholders Equity (Capital
      Deficit)                         |   |             |   |   |            |  
|Current liabilities:                                                                 |   |             |   |   |            |  
|Accounts payable and accrued
      liabilities                                       | $ | 2,520,573   |   | $ | 1,314,083  |  
|Due to related parties                                                               |   | 21,522      |   |   | 25,417     |  
|Unearned revenue                                                                     |   | 513,838     |   |   | 408,188    |  
|Customer deposits                                                                    |   | 91,522      |   |   | 5,615      |  
|Warranty payable                                                                     |   | 64,858      |   |   | 83,769     |  
|Total
      current liabilities                                                      |   | 3,212,313   |   |   | 1,837,072  |  
|                                                                                     |   |             |   |   |            |  
|Convertible debentures  Note 5                                                      |   |            |   |   | 3,369,230  |  
|Unrecognized tax benefit  Note 2(c)                                                 |   | 317,369     |   |   |           |  
|Total
      liabilities                                                              |   | 3,529,682   |   |   | 5,206,302  |  
|                                                                                     |   |             |   |   |            |  
|Stockholders equity (capital
      deficit):                                        |   |             |   |   |            |  
|Preferred stock, $0.001 par value  Note 6                                           |   |             |   |   |            |  
|Authorized: 100,000,000                                                              |   |             |   |   |            |  
|Issued and outstanding: October 31,
      2007  1; April 30, 2007  Nil             |   |            |   |   |           |  
|Common stock, $0.001 par value
       Note 7                                        |   |             |   |   |            |  
|Authorized: 415,384,500                                                              |   |             |   |   |            |  
|Issued and
      outstanding:                                                        |   |             |   |   |            |  
|October 31, 2007  90,846,669; April
      30, 2007  37,940,983                     |   | 90,847      |   |   | 37,941     |  
|Additional paid-in capital                                                           |   | 26,983,260  |   |   | 4,820,069  |  
|Accumulated deficit                                                                  |   | (10,626,738 | ) |   | (5,872,151 | )
|Accumulated other
      comprehensive income (loss)  currency translation           |   |             |   |   |            |  
|adjustment                                                                           |   | 1,607,715   |   |   | (80,580    | )
|Total
      stockholders equity (capital deficit)                                   |   | 18,055,084  |   |   | (1,094,721 | )
|Liabilities and Stockholders Equity                                                 | $ | 21,584,766  |   | $ | 4,111,581  |  
|                                                                                     |   |             |   |   |            |  
|Going concern (Note 2)                                                               |   |             |   |   |            |  
|New accounting pronouncements (Note 2(c))                                            |   |             |   |   |            |  
|Commitments and contingent liability (Notes
      9 and 10)                          |   |             |   |   |            |  
|Subsequent events (Note 12)                                                          |   |             |   |   |            |  

See accompanying notes to the consolidated financial
statements

4

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

|                                               |   | Three Months Ended |   |   | Six Months Ended |  
|---------------------------------------------- | - | ------------------ | - | - | ---------------- | -
|                                               |   | October 31,        |   |   | October 31,      |  
|                                               |   | 2007               |   |   | 2006             |  
|Revenue  Note 8:                              |   |                    |   |   |                  |  
|Software                                       | $ | 2,042,133          |   | $ | 1,276,065        |  
|Service                                        |   | 402,578            |   |   | 396,728          |  
|Total revenue                                  |   | 2,444,711          |   |   | 1,672,793        |  
|Operating expenses:                            |   |                    |   |   |                  |  
|Cost of sales
      (includes amortization of  |   |                    |   |   |                  |  
|intangibles
      of $295,231-Note 2(d))       |   | 701,371            |   |   | 353,364          |  
|Sales and marketing                            |   | 1,112,119          |   |   | 436,329          |  
|Research and development                       |   | 1,633,445          |   |   | 539,910          |  
|General and administrative                     |   | 1,831,642          |   |   | 543,613          |  
|Restructuring cost - Note 11                   |   | 182,107            |   |   |                 |  
|Total operating expenses                       |   | 5,460,684          |   |   | 1,873,216        |  
|Loss from
      operations                     |   | (3,015,973         | ) |   | (200,423         | )
|Interest and other income (expense), net       |   |                    |   |   |                  |  
|Interest income                                |   | 33,554             |   |   | 8,567            |  
|Interest expense
      - Notes 4 and 5         |   | (547,975           | ) |   | (42,793          | )
|Foreign exchange gain                          |   | 53,516             |   |   |                 |  
|Net loss for the period                        | $ | (3,476,878         | ) | $ | (234,649         | )
|Other comprehensive income:                    |   |                    |   |   |                  |  
|Foreign currency
      translation adjustments |   | 1,694,235          |   |   | 9,985            |  
|Comprehensive loss                             | $ | (1,782,643         | ) | $ | (224,664         | )
|Net loss per share:                            |   |                    |   |   |                  |  
|Basic and diluted                              | $ | (0.04              | ) | $ | (0.01            | )
|Weighted average common                        |   |                    |   |   |                  |  
|shares outstanding:                            |   | 89,502,235         |   |   | 37,940,983       |  

See accompanying notes to the consolidated financial
statements

5

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|COUNTERPATH CORPORATION                      
|---------------------------------------------
|(Formerly CounterPath Solutions, Inc.)       
|INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
|(Stated in U.S. Dollars)                     
|(Unaudited)                                  

|                                                                   |   | Six Months Ended |  
|------------------------------------------------------------------ | - | ---------------- | -
|                                                                   |   | October 31,      |  
|                                                                   |   | 2007             |  
|Cash flows from operating activities:                              |   |                  |  
|Net loss for the period                                            | $ | (4,682,174       | )
|Adjustments to reconcile net loss to
      net cash used in        |   |                  |  
|operating
      activities:                                        |   |                  |  
|Depreciation and
      amortization                                |   | 153,149          |  
|Amortization of intangible assets                                  |   | 295,231          |  
|Stock-based compensation
      -Note 7                             |   | 936,810          |  
|Accretion
      of convertible debenture discount - Note 5         |   | 90,570           |  
|Loss on conversion of
      convertible debentures                 |   | 540,200          |  
|Changes in assets and liabilities:                                 |   |                  |  
|Accounts receivable                                                |   | (728,635         | )
|Prepaid
      expenses and deposits                                |   | (95,089          | )
|Accounts payable and
      accrued liabilities                     |   | 240,276          |  
|Unearned
      revenue                                             |   | 105,650          |  
|Customer deposits                                                  |   | 78,961           |  
|Warranty
      payable                                             |   | (18,911          | )
|Net cash used in operating activities                              |   | (3,083,962       | )
|                                                                   |   |                  |  
|Cash flows from investing activities:                              |   |                  |  
|Cash acquired
      on acquisition of NewHeights                   |   | 2,517,365        |  
|Purchase of equipment                                              |   | (42,773          | )
|Deposits                                                           |   | (33,587          | )
|Increase in other assets                                           |   | (12,022          | )
|Net cash provided by (used in) investing
      activities          |   | 2,428,983        |  
|                                                                   |   |                  |  
|Cash flows from financing
      activities:                        |   |                  |  
|Common stock issued                                                |   | 1,801,946        |  
|Decrease in due
      to related parties                           |   | (3,895           | )
|Net cash provided by (used in) financing activities                |   | 1,798,051        |  
|                                                                   |   |                  |  
|Foreign currency translation effect on cash                        |   | 400,694          |  
|                                                                   |   |                  |  
|Increase (decrease) in cash                                        |   | 1,543,766        |  
|                                                                   |   |                  |  
|Cash, beginning of the period                                      |   | 1,680,220        |  
|Cash, end of the period                                            | $ | 3,223,986        |  
|                                                                   |   |                  |  
|Supplemental disclosure of cash flow
      information             |   |                  |  
|Cash paid for:                                                     |   |                  |  
|Interest                                                           | $ | 2,222            |  
|Common stock and stock options issued in
      connection with the |   |                  |  
|acquisition
      of NewHeights Software Corporation               | $ | 15,477,343       |  
|Convertible debentures converted into common
      stock           | $ | 4,000,000        |  

See accompanying notes to the consolidated financial
statements

6

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|COUNTERPATH CORPORATION                                                           
|----------------------------------------------------------------------------------
|(Formerly CounterPath Solutions, Inc.)                                            
|CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
      EQUITY (CAPITAL DEFICIT)
|for the Six Months Ended October 31, 2007                                         
|(Stated in U.S. Dollars)                                                          

|                                               |  | Common shares |  |   | Preferred Shares |  |  |        |  |   |           |  |  | Accumulated |  |   |             |  
|---------------------------------------------- |  | ------------- |  | - | ---------------- |  |  | ------ |  | - | --------- |  |  | ----------- |  | - | ----------- | -
|                                               |  | Number        |  |   |                  |  |  | Number |  |   |           |  |  | Additional  |  |   |             |  
|                                               |  | of            |  |   |                  |  |  | of     |  |   |           |  |  | Paid-in     |  |   | Accumulated |  
|                                               |  | Shares        |  |   | Par Value        |  |  | Shares |  |   | Par Value |  |  | Capital     |  |   | Deficit     |  
|                                               |  |               |  |   |                  |  |  |        |  |   |           |  |  |             |  |   |             |  
|Balance, May 1, 2007                           |  | 37,940,983    |  | $ | 37,941           |  |  |       |  | $ |  $       |  |  | 4,820,069   |  | $ | (5,872,151  | )
|Shares issued: Common                          |  |               |  |   |                  |  |  |        |  |   |           |  |  |             |  |   |             |  
|Acquisition of NewHeights
       Note 3       |  | 38,400,820    |  |   | 38,401           |  |  |        |  |   |           |  |  | 15,138,460  |  |   |             |  
|Conversion of debentures  Note 5              |  | 10,000,000    |  |   | 10,000           |  |  |        |  |   |           |  |  | 3,990,000   |  |   |             |  
|Private placement 
      Note 3               |  | 4,500,000     |  |   | 4,500            |  |  |        |  |   |           |  |  | 1,795,500   |  |   |             |  
|Exercise of stock options                      |  | 4,866         |  |   | 5                |  |  |        |  |   |           |  |  | 1,941       |  |   |            |  
|Fair value of vested stock
      options       |  |               |  |   |                  |  |  |        |  |   |           |  |  | 300,482     |  |   |            |  
|exchanged  Note 3                             |  |               |  |   |                  |  |  |        |  |   |           |  |  |             |  |   |             |  
|Shares issued: Preferred                       |  |               |  |   |                  |  |  | 1      |  |   |          |  |  |            |  |   |            |  
|Stock-based compensation - Note 7              |  |               |  |   |                  |  |  |        |  |   |           |  |  | 936,810     |  |   |            |  
|Net loss for the period                        |  |               |  |   |                  |  |  |        |  |   |           |  |  |             |  |   | (4,682,174  | )
|Foreign currency translation adjustment        |  |               |  |   |                  |  |  |        |  |   |           |  |  |             |  |   |            |  
|Cumulative-effect adjustment 
      Note 2(c) |  |               |  |   |                  |  |  |        |  |   |           |  |  |             |  |   | (72,413     | )
|                                               |  |               |  |   |                  |  |  |        |  |   |           |  |  |             |  |   |             |  
|Balance, October 31, 2007 (Unaudited)          |  | 90,846,669    |  | $ | 90,847           |  |  | 1      |  | $ |  $       |  |  | 26,983,260  |  | $ | (10,626,738 | )

See accompanying notes to the consolidated financial
statement

7

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|COUNTERPATH CORPORATION                       
|----------------------------------------------
|(Formerly CounterPath Solutions, Inc.)        
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      
|(Unaudited)                                   

|Note 1 | Nature of Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | CounterPath Corporation (formerly CounterPath Solutions,
      Inc.) (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. On August 2, 2007, the Company completed the
      acquisition of all of the shares of NewHeights Software Corporation
      (NewHeights) through the issuance of 38,400,820 shares of the Companys
      common stock and 1,849,180 preferred shares issued from a wholly-owned
      subsidiary of the Company that are exchangeable into 1,849,180 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 (Note 3).                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | The Company provides Voice over Internet Protocol
      software and related services to customers in North America, 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | 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 October 31,
      2007, the Company has not yet achieved profitable operations and has
      generated an accumulated deficit of $10,626,738 since incorporation. These
      factors raise substantial doubt regarding the Companys ability to
      continue as a going concern. Management is implementing a plan to address
      these uncertainties to enable the Company to continue as a going concern
      through the end of fiscal 2009 and beyond. This plan includes new equity
      financing in amounts sufficient to sustain operations, and increase
      revenues 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
      interim consolidated financial statements have, in managements opinion,
      been properly prepared within the framework of the significant accounting
      policies summarized below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

8

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|COUNTERPATH CORPORATION                       
|----------------------------------------------
|(Formerly CounterPath Solutions, Inc.)        
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      
|(Unaudited)                                   

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

9

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|COUNTERPATH CORPORATION                       
|----------------------------------------------
|(Formerly CounterPath Solutions, Inc.)        
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      
|(Unaudited)                                   

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

10

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|COUNTERPATH CORPORATION                       
|----------------------------------------------
|(Formerly CounterPath Solutions, Inc.)        
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      
|(Unaudited)                                   

|Note 2 | Significant Accounting Policies and Going Concern (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       | d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       | e)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Note 3 | Business Combination                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       | On August 2, 2007, the Company
        acquired all of the shares of NewHeights Software Corporation (NewHeights)
        through the issuance of 38,400,820 shares of the Companys common
        stock and 1,849,180 preferred shares issued from 6789722 Canada Inc.,
        a wholly-owned subsidiary of the Company, that are exchangeable into 1,849,180
        shares of common stock of the Company. Upon closing, the Companys
        convertible debenture holders converted their existing debentures in the
        amount of $4 million into 10 million shares of common stock pursuant to
        the terms of the convertible debenture agreement (Note 5). In addition,
        the Company completed a private placement of $1.3 million and $0.5 million
        on August 2, 2007 and September 30, 2007, respectively, issuing a total
        of 4.5 million shares of common stock at $0.40. The Company also entered
        into subscription agreements with investors to raise an additional $3.7
        million through the issuance of 9.25 million shares of common stock at
        $0.40 per share. The additional subscription agreements of $3.7 million
        are scheduled to close over a five month period ending March 2, 2008.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       | Concurrent with the transaction,
        the Company issued 4,288,504 replacement employee options to former optionees
        of NewHeights. Included in the three months ending October 31, 2007 statement
        of operations is a $388,786 compensation charge (being the incremental
        fair value of the vested options) recorded in association with the issuance
        of these options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       | The Company acquired NewHeights
        to gain access to NewHeights technology and customer base. NewHeights
        has a portfolio of standards based software applications aimed at simplifying
        and enhancing real-time communications over the internet.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       | The Company accounted for the
        acquisition using the purchase method of accounting in accordance with
        Statement of Financial Accounting Standards No. 141, Business Combinations.
        Accordingly, the purchase price has been allocated to the tangible and
        intangible assets acquired and the liabilities assumed on the basis of
        their respective fair values on the acquisition date. Purchase price in
        excess of fair value of the net tangible and identifiable intangible assets
        acquired has been allocated to goodwill. Any goodwill allocated on the
        acquisition will not be deductible for tax purposes. The Companys
        consolidated statements of operations and comprehensive loss include the
        operating results of NewHeights from August 2, 2007, the date of acquisition.
        The functional currency of NewHeights is the Canadian dollar hence the
        values of the assets and liabilities of NewHeights including goodwill
        will fluctuate with changes in exchange rates.                                                                                                                                                                                        

11

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|(Formerly CounterPath Solutions, Inc.)        
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      
|(Unaudited)                                   

|Note 3 | Business Combination
      (contd)                                                                                                                                                                      
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                           
|       | The following table summarizes the allocation
      of the purchase price and related transaction costs to the fair value of
      the assets acquired and liabilities assumed at the date of acquisition.

Cash
    $
    2,634,910Working capital (other than cash)
    
    618,146Equipment
    
    261,092Acquired technologies
    
    3,454,839Customer asset
    
    2,283,908Goodwill
    
    6,339,717Other assets
    
    2,276Total net assets acquired
    $
    15,594,888Consideration:Purchase price - fair value of shares issued
    $
    15,176,861Fair value of the surrendered options of
        NewHeights
    
    300,482Transaction costs
    
    117,545Total
    $
    15,594,888


The fair value of common shares issued
  is based on the weighted average closing common share price for the five trading
  days prior to, and the five trading days after the announcement of acquisition.
  The Black-Scholes option pricing model has been used to determine the fair value
  of the surrendered options of NewHeights granted to former optionees of NewHeights
  as of the transaction date of August 2, 2007.

The equipment acquired in the
acquisition of NewHeights primarily consists of computer equipment, furniture
and fixtures and have been recorded at fair value, which approximates net book
value. These assets will be amortized on the basis of declining balances. The
acquired technologies and customer asset represent finite life intangible
assets. The customer asset represents a relationship with an existing customer
of NewHeights. The acquired technologies will be amortized based on their
estimated useful life of four years and the customer asset will be 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 following table presents unaudited
pro forma results of operations for the three and six months ended October 31,
2007, as if the acquisition had occurred on May 1, 2006.

| |                         |   | Three Months Ended |   |   | Six Months Ended |  
| | ----------------------- | - | ------------------ | - | - | ---------------- | -
| |                         |   | October 31         |   |   | October 31       |  
| |                         |   | 2007               |   |   | 2006             |  
| |                         |   |                    |   |   |                  |  
| | Revenue                 | $ | 2,444,711          |   | $ | 2,049,001        |  
| |                         |   |                    |   |   |                  |  
| | Net loss for the period | $ | (3,476,878         | ) | $ | (2,416,212       | )
| |                         |   |                    |   |   |                  |  
| | Net loss per share:     |   |                    |   |   |                  |  
| | Basic and diluted       | $ | (0.04              | ) | $ | (0.03            | )

12

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|(Formerly CounterPath Solutions, Inc.)        
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      
|(Unaudited)                                   

|Note 4 | Related Party Transactions                                                                                                                                                                                                                                                                                
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                           
|       | During the three and six months ended October
      31, 2007 and 2006, the Company incurred the following lease expense to a
      company with a director in common with the Company and interest expenses
      to a company controlled by the spouse of a significant shareholder of the
      Company:

| |                                   |   | Three Months Ended |  |   | Six Months Ended | 
| | --------------------------------- | - | ------------------ |  | - | ---------------- | 
| |                                   |   | October 31,        |  |   | October 31,      | 
| |                                   |   | 2007               |  |   | 2006             | 
| |                                   |   |                    |  |   |                  | 
| | Interest on convertible debenture | $ | 1,667              |  | $ | 25,556           | 
| | Lease payment                     | $ | 28,933             |  | $ | Nil              | 

The above transactions are in the normal
  course of operations and are recorded at amounts established and agreed to between
  the related parties. The amounts due to these related parties at October 31,
  2007 are unsecured, non-interest bearing and have no stated terms of repayment.

The Companys Chairman is the Chairman
  and founding shareholder of Mitel Networks Corporation (Mitel).
  The Companys wholly-owned subsidiary, NewHeights has entered into a distribution
  agreement with Mitel on June 15, 2004 and has amended such agreement on August
  7, 2007. The agreement renews automatically for one-year periods and contains
  termination rights of both parties. Under the terms of this distribution agreement,
  the Company earns a specified fee from Mitel based on the number of product
  licenses sold by Mitel.

The Company, through its wholly-owned
  subsidiary, NewHeights receives royalties of $0.52 (CDN$0.50) for each phone
  product sold by Mitel with session initiation protocol technology that was transferred
  to Mitel in April 2006 by NewHeights up to a maximum of approximately US$1,362,100
  (CDN$1,300,000).

The Companys software license revenue
  for the three and six months ended October 31, 2007, pursuant to the terms of
  this distribution agreement, was $980,500.

As at October 31, 2007, the Company has
  an accounts receivable balance from Mitel of $1,098,282 (April 30, 2007 - $nil).

In addition, during the three and six
  months ended October 31, 2007, the Company reimbursed Mitel for certain expenses
  on behalf of the Company and another related corporation to Mitel totaling $28,933
  (April 30, 2007 - $nil) and the Company was paid $11,284 by the related corporation
  to Mitel. As at October 31, 2007, the Company had an accounts payable balance
  to Mitel of $20,140 (April 30, 2007 - $nil).

13

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|(Formerly CounterPath Solutions, Inc.)        
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      
|(Unaudited)                                   

|Note 5 | Convertible Debentures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       | On November 30, 2006, the
        Company completed the issuance of convertible debentures in the principal
        amount of $4,000,000 to a group of investors including a company controlled
        by the spouse of a significant shareholder of the Company. The debentures
        are unsecured, bear interest at 5% per annum with interest payable quarterly
        and mature on November 30, 2008. The investors may convert the debentures
        at any time, and from time to time, in whole or in part into common shares
        of the Company at a conversion price of $0.40 per share. Consideration
        for $2,000,000 of the $4,000,000 convertible debentures was the cancellation
        of the $2,000,000 debenture originally issued on December 13, 2005. In
        addition, the outstanding share purchase warrants for the purchase of
        up to 2,500,000 shares of common stock at a price of $0.80 per share,
        which were issued in connection with the December 2005 debenture were
        cancelled on closing. The new debentures rank senior to the Companys
        other existing and future indebtedness as long as they remain outstanding.
        Under the terms of the private placement, the investors also received
        share purchase warrants for the purchase of up to 5,000,000 shares of
        the Companys common stock, exercisable for three years at a price
        of $0.80 per share
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       | The $4,000,000 convertible
        debenture was recorded on the date of issuance at its fair value which
        is estimated to approximate its face value with the proceeds raised allocated
        between the convertible debenture, and share purchase warrants based on
        their relative fair values and the beneficial conversion feature based
        on its intrinsic value in accordance with EITF 00-27, Application
        of Issue No. 98-5 to Certain Convertible Instruments (EITF
        00-27). The Company used the Black-Scholes option pricing model
        to determine the fair value of the share purchase warrants using the Companys
        historical prices and the following assumptions (i) risk-free interest
        rate of 4.52%, (ii) expected volatility of 82.02%, (iii) expected life
        of 3 years, and (iv) a dividend yield of nil. At the date of issuance
        of the $4,000,000 debenture, the Company allocated $3,227,590 to the convertible
        debenture $336,205 to the share purchase warrants issued in connection
        with the convertible debenture and $436,206 to the beneficial conversion
        feature. The amounts allocated to the share purchase warrants and beneficial
        conversion feature represents a discount on the debt financing which is
        accreted to income over the term of the debt.                                                             
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       | On August 2, 2007, in conjunction
        with the acquisition of NewHeights Software Corporation (Note 3) the Companys
        convertible debenture holders converted their existing debentures in the
        amount of $4,000,000 into 10,000,000 shares of common stock at a conversion
        price of $0.40 per share. As a result, the remaining balance of the unaccreted
        debt discount on the date of conversion of $540,200 was recorded in the
        consolidated statement of operations as additional interest expense.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       | The convertible debenture and debt discount are
      summarized as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

| |                                                        |   | Face       |   |   |          |   |   | Carrying   |  
| | ------------------------------------------------------ | - | ---------- | - | - | -------- | - | - | ---------- | -
| |                                                        |   | Amount     |   |   | Discount |   |   | Value      |  
| |                                                        |   |            |   |   |          |   |   |            |  
| | Convertible debenture at April 30, 2007                | $ | 4,000,000  |   | $ | 630,770  |   | $ | 3,369,230  |  
| | Accretion of debt
      discount to date of conversion |   |           |   |   | (90,570  | ) |   | 90,570     |  
| | Conversion of debenture on August 2, 2007              |   | (4,000,000 | ) |   | (540,200 | ) |   | (3,459,800 | )
| |                                                        | $ |           |   | $ |         |   |   |           |  

During the three and six months ended
October 31, 2007, the Company recorded an accretion expense of $nil (2006 -
$17,491) and $90,570 (2006 - $34,593) respectively on this discount.

14

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|(Formerly CounterPath Solutions, Inc.)        
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      
|(Unaudited)                                   

|Note 6 | Preferred Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | On August 2, 2007, the Company
        entered into a voting and exchange trust agreement among its wholly- owned
        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 for and on behalf of the registered
        holders from time to time 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Note 7 | Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | 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 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. On August 2, 2007,
        the Company issued 4,288,504 stock options to former optionees of NewHeights
        Software Corporation to replace their existing options. The replacement
        options were granted at $0.40 per share and generally vest in the amount
        of 33.3% after each of three years from the original date of grant at
        which time the options are fully vested. The fair value of the surrendered
        NewHeights options were $300,482 was included in the purchase price of
        NewHeights and a compensation charge of $388,786 (being the incremental
        fair value of the options which have vested) was recorded in the statement
        of operations in association with the issuance of these options. The maximum
        number of shares of common stock authorized by the stockholders and reserved
        for issuance by the Board of Directors under the stock option plans are
        4,000,000 under the 2004 Stock option plan and 15,000,000 under the 2005
        Stock option plan.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | Effective May 1, 2006, with
        the adoption of SFAS No. 123R, the Company has elected to use the Black-
        Scholes option pricing model to determine the fair value of stock options
        granted. In accordance with SFAS No. 123R 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 SFAS
        No. 123R using the historical stock price. The expected term of options
        granted to employees in the current fiscal year has been determined utilizing
        the simplified method as prescribed by SAB No. 107, 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, SFAS No. 123R requires companies
        to utilize an estimated forfeiture rate when calculating the expense for
        the period, whereas prior to the adoption of SFAS No. 123R 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% in fiscal 2007 in determining the expense recorded
        in the accompanying consolidated statement of operations.                                                                                                                                                                                                                            

15

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|(Formerly CounterPath Solutions, Inc.)        
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      
|(Unaudited)                                   

|Note 7 | Common Stock (contd)                                                                                                                                                                                                                                                
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                       
|       | Stock Options (contd)                                                                                                                                                                                                                                               
|       |                                                                                                                                                                                                                                                                       
|       | The weighted-average fair value of options
      granted during the six months ended October 31, 2007 and 2006 were $0.22
      and $0.35 respectively. The weighted-average assumptions utilized to
      determine such values are presented in the following table:

| |                             |   | Six Months Ended |  |   | Six Months Ended | 
| | --------------------------- | - | ---------------- |  | - | ---------------- | 
| |                             |   | October 31, 2007 |  |   | October 31, 2006 | 
| | Risk-free interest rate     |   | 4.79%            |  |   | 4.83%            | 
| | Expected volatility         |   | 69.7%            |  |   | 83.5%            | 
| | Expected term               |   | 4.5yrs           |  |   | 5.8 yrs          | 
| | Dividend yield              |   | 0%               |  |   | 0%               | 
| | Weighted average fair value | $ | 0.22             |  | $ | 0.35             | 

The following is a summary of the
status of the Companys stock options as of October 31, 2007 and the stock
option activity during the six months ended October 31, 2007:

| |                                        |  |            |   |   | Weighted-average | 
| | -------------------------------------- |  | ---------- | - | - | ---------------- | 
| |                                        |  | Number of  |   |   | Exercise Price   | 
| |                                        |  | Options    |   |   | per Share        | 
| | Outstanding at April 30, 2007          |  | 13,468,100 |   | $ | 0.46             | 
| | Granted                                |  | 810,000    |   | $ | 0.36             | 
| | Issued to NewHeights former optionees |  | 4,288,504  |   | $ | 0.40             | 
| | Exercised                              |  | (4,866     | ) | $ | 0.40             | 
| | Forfeited                              |  | (315,625   | ) | $ | 0.38             | 
| | Cancelled                              |  | (97,439    | ) | $ | 0.38             | 
| | Outstanding at October 31, 2007        |  | 18,148,674 |   | $ | 0.45             | 
| |                                        |  |            |   |   |                  | 
| | Exercisable at October 31, 2007        |  | 8,742,112  |   | $ | 0.48             | 
| | Exercisable at April 30, 2007          |  | 4,664,437  |   | $ | 0.54             | 

16

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|(Formerly CounterPath Solutions, Inc.)        
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      
|(Unaudited)                                   

|Note 7 | Common Stock (contd)                                                                                               
|------ | ---------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                      
|       | Stock Options (contd)                                                                                              
|       |                                                                                                                      
|       | The following table summarizes information
      regarding stock purchase options outstanding as of October 31, 2007.

| |                  | Number of   | **Aggregate** |                              | Number of   | **Aggregate**
| | ---------------- | ----------- | ------------- | ---------------------------- | ----------- | -------------
| | Exercise         | Options     | Intrinsic     |                              | Options     | Intrinsic    
| | Price            | Outstanding | Value         | Expiry Date                  | Exercisable | Value        
| | $0.30            | 255,000     | $43,350       | August 1, 2016               | 74,375      | $12,644      
| | $0.34            | 575,000     | 74,750        | May 1, 2012                  |             |              
| | $0.38            | 265,000     | 23,850        | October 1, 2011              | 66,250      | 5,963        
| |                  |             |               | Sept. 7, 2010 to January 10, |             |              
| | $0.39            | 8,820,000   | 705,600       | 2016                         | 4,380,738   | 350,459      
| | $0.40            | 4,500,574   | 315,040       | March 2, 2008 to June        | 2,579,860   | 180,590      
| |                  |             |               | 15,2015                      |             |              
| | $0.43            | 1,200,000   | 48,000        | September 7, 2016            | 325,000     | 13,000       
| | $0.56            | 250,000     |              | February 20, 2016            | 104,166     |             
| | $0.59            | 300,000     |              | July 26, 2016                | 93,750      |             
| | $0.61            | 983,100     |              | May 23, 2016                 | 348,181     |             
| |                  |             |               | June 13, 2010 to July 11,    |             |              
| | $0.67            | 275,000     |              | 2016                         | 137,500     |             
| | $0.68            | 100,000     |              | April 10, 2016               | 37,500      |             
| | $0.75            | 50,000      |              | March 3, 2016                | 19,792      |             
| | $1.07            | 150,000     |              | March 29, 2010               | 150,000     |             
| | $1.17            | 175,000     |              | February 22, 2010            | 175,000     |             
| | $1.58            | 150,000     |              | October 24, 2009             | 150,000     |             
| | $1.87            | 100,000     |              | July 21, 2009                | 100,000     |             
| |                  |             |               |                              |             |              
| | October 31, 2007 | 18,148,674  | $1,210,590    |                              | 8,742,112   | $562,656     
| |                  |             |               |                              |             |              
| | April 30, 2007   | 13,468,100  | $10,200       |                              | 4,664,437   | $1,700       

The aggregate intrinsic value in the preceding table
  represents the total intrinsic value, based on the Companys closing stock
  price of $0.47 per share as of October 31, 2007 (April, 2007  $0.34),
  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 October 31, 2007 was 7,426,223 (April 30, 2007
   42,500). As of October 31, 2007 approximately 8.7 million outstanding
  options (April 30, 2007  4.7 million) were vested and exercisable, and
  the weighted average exercise price was $0.48 (April 30, 2007  $0.54)
  . The total intrinsic value of options exercised during the six months ended
  October 31, 2007 was $341 (2006  $nil). The grant date fair value of options
  vested during the six months ended October 31, 2007 was $1,003,195 (April 30,
  2007  $1,323,055).

17

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|COUNTERPATH CORPORATION                       
|----------------------------------------------
|(Formerly CounterPath Solutions, Inc.)        
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      
|(Unaudited)                                   

|Note 7 | Common Stock (contd)                                                                                                                    
|------ | ------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                           
|       | Stock Options (contd)                                                                                                                   
|       |                                                                                                                                           
|       | The following table summarizes information
      regarding the non-vested stock purchase options outstanding as of October
      31, 2007.

| |                                        |  |                   |   | Weighted Average      | 
| | -------------------------------------- |  | ----------------- | - | --------------------- | 
| |                                        |  | Number of Options |   | Grant-Date Fair Value | 
| | Non-vested options at April 30, 2007   |  | 8,803,663         |   | $ 0.32                | 
| | Granted                                |  | 5,098,504         |   | $ 0.22                | 
| | Vested                                 |  | (4,179,980        | ) | $ 0.24                | 
| | Forfeited                              |  | (315,625          | ) | $
      0.25          | 
| | Non-vested options at October 31, 2007 |  | 9,406,562         |   | $ 0.30                | 

As of October 31, 2007 there was $2,798,689
  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 1.3 years.

Employee and non-employee stock-based
compensation amounts classified in the Companys consolidated statements of
operations for the three and six months ended October 31, 2007 and 2006 are as
follows:

| |                                |   | Three Months Ended |  |   | Six Months Ended | 
| | ------------------------------ | - | ------------------ |  | - | ---------------- | 
| |                                |   | October 31,        |  |   | October 31,      | 
| |                                |   | 2007               |  |   | 2006             | 
| |                                |   |                    |  |   |                  | 
| |                                |   |                    |  |   |                  | 
| | Cost of sales                  | $ | 31,673             |  | $ | 17,210           | 
| | Sales and marketing            |   | 91,175             |  |   | 17,240           | 
| | Research and development       |   | 197,310            |  |   | 78,101           | 
| | General and administrative     |   | 386,738            |  |   | 115,738          | 
| | Total stock-based compensation | $ | 706,536            |  | $ | 228,289          | 

18

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|COUNTERPATH CORPORATION                       
|----------------------------------------------
|(Formerly CounterPath Solutions, Inc.)        
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      
|(Unaudited)                                   

|Note 8 | Segmented Information                                                                                                                                                                                                                                                                                                                                                      
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                            
|       | Our 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, we have concluded that we have 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 six months ended October 31,
      2007 and 2006:                                                                                                                                                

| |               |   | Three Months Ended |  |   | Six Months Ended | 
| | ------------- | - | ------------------ |  | - | ---------------- | 
| |               |   | October 31,        |  |   | October 31,      | 
| |               |   | 2007               |  |   | 2006             | 
| | North America | $ | 1,557,729          |  | $ | 627,959          | 
| | Europe        |   | 707,302            |  |   | 703,146          | 
| | Asia          |   | 73,560             |  |   | 234,128          | 
| | South America |   | 102,876            |  |   | 101,493          | 
| | Other         |   | 3,244              |  |   | 6,067            | 
| |               | $ | 2,444,711          |  | $ | 1,672,793        | 

Contained within the results for North
America are revenues from the United States of $380,012 and $563,120 for the
three months ended October 31, 2007 and 2006, respectively. Contained within the
results of Europe are revenues from the United Kingdom of $219,455 and $504,374
for the three months ended October 31, 2007 and 2006, respectively.

All of the Companys long-lived assets
are located in Canada.

Revenue from significant customers for
the three and six months ended October 31, 2007 and 2006 is summarized as
follows:

| |            |  | **Three Months Ended** |  |  | Six Months Ended | 
| | ---------- |  | ---------------------- |  |  | ---------------- | 
| |            |  | **October 31,**        |  |  | October 31,      | 
| |            |  | **2007**               |  |  | **2006**         | 
| |            |  |                        |  |  |                  | 
| | Customer A |  | 42%                    |  |  | -%               | 
| | Customer B |  | 12%                    |  |  | -%               | 
| | Customer C |  | 7%                     |  |  | 14%              | 
| |            |  | 61%                    |  |  | 14%              | 

Accounts receivable balances for
Customer A were $1,098,282 as at October 31, 2007 and $nil as at April 30, 2007.
Accounts receivable balances for Customer B were $344,000 as at October 31, 2007
and $nil as at April 30, 2007. Accounts receivable balances for Customer C were
$298,171 as at October 31, 2007 and $371,485 as at April 30, 2007.

19

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|COUNTERPATH CORPORATION                       
|----------------------------------------------
|(Formerly CounterPath Solutions, Inc.)        
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      
|(Unaudited)                                   

|Note 9 | Commitments
|------ | -----------
|       |            
|       | a)         
|       |            
|       | b)         
|       |            
|       | c)         
|       |            
|       | d)         
|       |            
|       |            

| |      |   |              |  |   | Investor   |  |   | Public     |  | 
| | ---- | - | ------------ |  | - | ---------- |  | - | ---------- |  | 
| |      |   | Office Lease |  |   | Relations  |  |   | Relations  |  | 
| |      |   |              |  |   | Consulting |  |   | Consulting |  | 
| | 2008 | $ | 380,771      |  | $ | 10,800     |  | $ | 12,574     |  | 
| | 2009 |   | 761,541      |  |   |           |  |   |           |  | 
| | 2010 |   | 780,561      |  |   |           |  |   |           |  | 
| | 2011 |   | 794,147      |  |   |           |  |   |           |  | 
| | 2012 |   | 461,870      |  |   |           |  |   |           |  | 
| | 2013 |   | 93,554       |  |   |           |  |   |           |  | 
| |      | $ | 3,272,443    |  | $ | 10,800     |  | $ | 12,574     |  | 

|Note 10 | 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.                                                                                                                                                                                                                                                                                               
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Note 11 | Restructuring                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        | The Company accounts for our restructuring activities in
      accordance with Statement of Financial Accounting Standards No. 146,
      Accounting for Costs Associated with Exit or Disposal Activities.As a result of the Companys post acquisition activities, we incurred
      restructuring costs of $182,107 during the three months and six months
      ended October 31, 2007. Restructuring costs of $182,107 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 the NewHeights Software Corporation acquisition. At
      October 31, 2007, we had a restructuring accrual for severance in the
      amount of $nil.

20

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|COUNTERPATH CORPORATION                       
|----------------------------------------------
|(Formerly CounterPath Solutions, Inc.)        
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      
|(Unaudited)                                   

|Note 12 | Subsequent Events
|------- | -----------------
|        |                  
|        | a)               
|        |                  
|        | b)               
|        |                  
|        | c)               

21

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Item 2. Managements Discussion and Analysis or Plan of
Operation.

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.

In some cases, you can identify
forward-looking statements by terminology such as may, will, should,
expects, plans, anticipates, believes, estimates, predicts,
potential or continue or the negative of these terms or other comparable
terminology. Our actual results could differ materially from those anticipated
in the forward-looking statements as a result of many factors, including those
identified below, in "Risk Factors" and elsewhere in this quarterly report.
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.

Overview

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
9,000,000 issued and outstanding shares in Xten Networks in exchange for
agreeing to issue 18,000,000 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
38,400,820 shares of our common stock and 1,849,180 preferred shares issued from
a wholly-owned subsidiary of our company, which preferred shares are
exchangeable into 1,849,180 shares of common stock. On October 17, 2007, we
changed our name from CounterPath Solutions, Inc. to CounterPath
Corporation.

Business of CounterPath

Our business focuses on the
design, development and sale of multimedia application software. Our software
applications are based on session initiation protocol which is the recognized
standard for interactive end points that involve multimedia elements such as
voice, video, instant messaging, and presence (the ability to monitor a person's
availability). Users of our software in combination with voice over internet
protocol service are able to communicate and make voice and video calls from a
device running our software. Our software has been designed to run in multiple
operating environments such as Windows 2000, Windows XP, Mac OS X, Linux and
Windows Mobile 5 (used for personal digital assistants or PDA's).

We are focused on the development
of technology that takes advantage of the market known as the voice over
internet protocol (VoIP) market. VoIP is a general term for technologies that
use internet protocol for transmission of packets of data which 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 (PSTN). 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 large
incumbent telecom providers, telecom original equipment manufacturers, large
equipment providers and internet telephony service providers. Our software
enables

22

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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.

Revenue

We derive revenue from the sale
of software licenses and software development kits, USB sticks on which our
software operates 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, and general and
administrative expenses, and restructuring costs. Personnel-related costs are
the most significant component of each of these expense categories. We expect to
continue to hire a number of new employees to support our growth.

Cost of sales primarily consists
  of (a) payments to third party vendors for compression/decompression software
  known as codecs, (b) salaries and benefits related to personnel, (c) related
  overhead, (d) costs of USB sticks on which our software resides, (e) billable
  and non-billable travel, lodging, and other out-of-pocket expenses, (f) amortization
  of capitalized software that is implemented into our products, (g) amortization
  of intangible assets, and (h) warranty expense. Amortization of intangible assets
  consists of the amortization expense related to the intangible assets acquired
  from NewHeights Software Corporation comprising acquired technologies and customer
  asset. The acquired technologies are amortized over four years on a straight-line
  basis and the customer assets are amortized based on the Company’s estimate
  of cash flows from those technologies, which is approximately five years.

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 expense has
been expensed as incurred. We intend to continue to invest in our research and
development efforts, which we believe are essential to maintaining our
competitive position. We expect research and development expense to increase for
the foreseeable future and to decrease as a percentage of total revenue in the
future.

General and administrative
expense consists primarily of (a) salaries and 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. We expect general and administrative expense to
continue to

23

---

increase for the foreseeable future as we invest in personnel
to support continued growth and incur expenses related to being a publicly
traded company.

Restructuring costs are post
acquisition activities related to the acquisition of NewHeights Software
Corporation. 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 October 31,
2007 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.

Revenue Recognition

We recognize revenue in
accordance with the American Institute of Certified Public Accountants (AICPA)
Statement of Position (SOP) 97-2 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 reseller arrangements, fees are fixed or
determinable and collection probable as 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 No. 00-21, Revenue Arrangements with
Multiple Deliverables and revenues are recognized under SOP 81-1, 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.

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.

24

---

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 provide a one year warranty on
software products. 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.

Our products and services are
distributed indirectly through distribution partners and directly through our
sales force. Revenue arrangements with distribution partners are recognized when
the above criteria are met and only when we receive evidence that the
distribution partner has an order from an end-user customer or an irrevocable
purchase by the distribution partner.

Stock-Based Compensation

Stock options granted are
accounted for under SFAS No. 123R 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. SFAS No.123R 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 volatility for options granted during the six months ended October
31, 2007 was 69.7% . 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. The expected term
of options granted during the six months ended October 31, 2007 was 4.8 years.
For the six months ended October 31, 2007, the weighted-average risk free
interest rate used was 4.79% . The risk-free interest rate is based on a
treasury instrument whose term is consistent with the expected term of the stock
options. 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, SFAS No. 123R 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 six months ended October 31, 2007 in
determining the expense recorded in our consolidated statement of operations.

Cost of revenue and operating expenses
  include stock-based compensation expense. For the three months ended October
  31, 2007, we recorded an expense of $706,536 in connection with share-based
  payment awards. A future expense of non-vested options of $2,798,689 is expected
  to be recognized over a weighted-average period of 1.3 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.

25

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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 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 acquisition
of NewHeights Software Corporation (see Note 3 in the accompanying financial
statements). 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 a customer asset relating to
a customer relationship. The acquired technologies are being amortized over
their estimated useful life of four years and the customer asset is being
amortized over approximately five years based on our estimate of cash flows from
the asset. The intangible assets are reviewed for impairment whenever events or
circumstances indicate impairment might exist in accordance with SFAS No. 144,

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.
In applying SFAS No. 142, Goodwill and Other Intangible Assets,we
review our goodwill annually for impairment or more frequently when indicators
of impairment are present.

Results of Operations

Our operating activities during
the three months ended October 31, 2007 consisted primarily of selling our IP
telephony software to telecom companies and IP telephony service providers,
which provide IP telephony services to end users, and the continued development
of our IP telephony software products.

Revenue

|                  |   | Three Months Ended October 31, |  |  |            |  |   |                         | 
|----------------- | - | ------------------------------ |  |  | ---------- |  | - | ----------------------- | 
|                  |   | 2007                           |  |  | 2006       |  |   | Period-to-Period Change | 
|                  |   |                                |  |  | Percent of |  |   |                         | 
|                  |   |                                |  |  | Total      |  |   |                         | 
|                  |   | Amount                         |  |  | Revenue    |  |   | Amount                  | 
|Revenue by Type   |   |                                |  |  |            |  |   |                         | 
|Software          | $ | 2,042,133                      |  |  | 84%        |  | $ | 1,276,065               | 
|Service           |   | 402,578                        |  |  | 16%        |  |   | 396,728                 | 
|Total revenue     | $ | 2,444,711                      |  |  | 100%       |  | $ | 1,672,793               | 
|                  |   |                                |  |  |            |  |   |                         | 
|Revenue by Region |   |                                |  |  |            |  |   |                         | 
|International     | $ | 886,982                        |  |  | 36%        |  | $ | 1,044,834               | 
|North America     |   | 1,557,729                      |  |  | 64%        |  |   | 627,959                 | 
|Total revenue     | $ | 2,444,711                      |  |  | 100%       |  | $ | 1,672,793               | 

For the three months ended
October 31, 2007, we recognized $2,441,711 in revenue compared to $1,672,793 for
the three months ended October 31, 2006. This represents an increase of $771,918
or 46% from the same period last year, primarily attributable to the addition of
software revenue from the acquisition of NewHeights. We recognized $2,042,133 in
software revenue for the three months ended October 31, 2007 compared to
$1,276,065 for the three months ended October 31, 2006, representing an increase
of $766,068 or 60%, primarily attributable to the addition of software revenue
from the acquisition of NewHeights. For the three months ended October 31, 2007,
service revenue was $402,578 compared to $396,728 for the three months ended
October 31, 2006. Service revenue was relatively flat quarter over quarter with
NewHeights adding an insignificant amount of service revenue to the period.
International

26

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revenue outside of North America decreased by 15% during the
three months ended October 31, 2007 compared to the three months ended October
31, 2006, primarily due to fewer software sales in Europe. North American
revenue increased by 148%, compared to the three months ended October 31, 2006,
as a result of the addition of software revenue from the acquisition of
NewHeights whose sales are focused on a North American customer.

|                  |   | Six Months Ended October 31, |  |  |            |  |   |                         | 
|----------------- | - | ---------------------------- |  |  | ---------- |  | - | ----------------------- | 
|                  |   | 2007                         |  |  | 2006       |  |   | Period-to-Period Change | 
|                  |   |                              |  |  | Percent of |  |   |                         | 
|                  |   |                              |  |  | Total      |  |   |                         | 
|                  |   | Amount                       |  |  | Revenue    |  |   | Amount                  | 
|Revenue by Type   |   |                              |  |  |            |  |   |                         | 
|Software          | $ | 2,811,141                    |  |  | 77%        |  | $ | 2,685,784               | 
|Service           |   | 860,361                      |  |  | 23%        |  |   | 747,890                 | 
|Total revenue     | $ | 3,671,502                    |  |  | 100%       |  | $ | 3,433,674               | 
|                  |   |                              |  |  |            |  |   |                         | 
|Revenue by Region |   |                              |  |  |            |  |   |                         | 
|International     | $ | 1,667,219                    |  |  | 45%        |  | $ | 1,992,407               | 
|North America     |   | 2,004,283                    |  |  | 55%        |  |   | 1,441,267               | 
|Total revenue     | $ | 3,671,502                    |  |  | 100%       |  | $ | 3,433,674               | 

For the six months ended October
  31, 2007, we recognized $3,671,502 in revenue compared to $3,433,674 for the
  six months ended October 31, 2006. This represents an increase of $237,828 or
  7% from the same period last year. We recognized $2,811,141 in software revenue
  for the six months ended October 31, 2007 compared to $2,685,784 for the six
  months ended October 31, 2006, representing an increase of $125,357 or 5%. The
  slight increase in software revenue was due to the addition of software revenue
  from the acquisition of NewHeights offset by fewer large sales to major telecom
  companies compared to the same period last year. For the six months ended October
  31, 2007, service revenue was $860,361 compared to $747,890 for the six months
  ended October 31, 2006. The increase of $112,471 in service revenue reflects
  the increase in services we provide primarily to our larger customers to support
  their deployed software. International revenue outside of North America declined
  by 16% during the six months ended October 31, 2007 compared to the six months
  ended October 31, 2006, being most impacted by fewer European software sales.
  North American revenue in the six months ended October 31, 2007 increased by
  39% compared to the six months ended October 31, 2006, primarily as a result
  of the NewHeights acquisition and the associated software sales in this region.

Operating Expenses

Cost of Sales

Cost of sales for the three and six months ended October 31,
2007 and 2006 were as follows:

|                   |   | October 31, 2007 |  |  | October 31, 2006 |  |   | Period-to-Period Change | 
|------------------ | - | ---------------- |  |  | ---------------- |  | - | ----------------------- | 
|                   |   |                  |  |  | Percent          |  |   |                         | 
|                   |   |                  |  |  | of               |  |   |                         | 
|                   |   | Amount           |  |  | Revenue          |  |   | Amount                  | 
|Three months ended | $ | 701,371          |  |  | 29%              |  | $ | 353,364                 | 
|Six months ended   | $ | 1,062,529        |  |  | 28%              |  | $ | 798,212                 | 

Cost of sales was $701,371 for
the three months ended October 31, 2007 compared to $353,364 recorded for the
three months ended October 31, 2006. The increase in cost of sales of $348,007
was primarily due to the amortization of intangible assets of $295,231 included
in the cost of sales, additional stock based compensation, and also due to a
strengthening Canadian dollar which results in higher recorded U.S. dollar costs
for costs incurred in Canadian dollars, offset by lower use of third party
licensed technology.

Cost of sales was $1,062,529 for
the six months ended October 31, 2007 compared to $798,212 recorded for the six
months ended October 31, 2006. The increase in cost of sales of $264,317 was
primarily due to the amortization of intangible assets of $295,231, additional
stock based compensation, and also due to a strengthening Canadian dollar which
results in higher recorded U.S. dollar costs for costs incurred in Canadian
dollars, offset by lower use of third party licensed technology.

27

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Sales and Marketing

Sales and marketing expenses for the three and six months ended
October 31, 2007 and 2006 were as follows:

|                   |   | October 31, 2007 |  |  | October 31, 2006 |  |   | Period-to-Period Change | 
|------------------ | - | ---------------- |  |  | ---------------- |  | - | ----------------------- | 
|                   |   |                  |  |  | Percent          |  |   |                         | 
|                   |   |                  |  |  | of               |  |   |                         | 
|                   |   | Amount           |  |  | Revenue          |  |   | Amount                  | 
|Three months ended | $ | 1,112,119        |  |  | 45%              |  | $ | 436,329                 | 
|Six months ended   | $ | 1,567,002        |  |  | 43%              |  | $ | 754,937                 | 

Sales and marketing expenses were
$1,112,119 for the three months ended October 31, 2007 compared to $436,329
recorded for the three months ended October 31, 2006. The increase of $675,790
was primarily attributable to increases in consulting fees, wages, stock based
compensation and travel related expenses primarily due to the acquisition of
NewHeights, as well as the strengthening of the Canadian dollar vis-à-vis the US
dollar.

Sales and marketing expenses were
$1,567,002 for the six months ended October 31, 2007 compared to $754,937
recorded for the six months ended October 31, 2006. The increase of $812,065 was
primarily attributable to increases in consulting fees, wages, stock based
compensation and travel related expenses primarily due to the acquisition of
NewHeights, as well as the strengthening of the Canadian dollar vis-à-vis the US
dollar.

Research and Development

Research and development expenses
for the three and six months ended October 31, 2007 and 2006 were as
follows:

|                   |   | October 31, 2007 |  |  | October 31, 2006 |  |   | Period-to-Period Change | 
|------------------ | - | ---------------- |  |  | ---------------- |  | - | ----------------------- | 
|                   |   |                  |  |  | Percent          |  |   |                         | 
|                   |   |                  |  |  | of               |  |   |                         | 
|                   |   | Amount           |  |  | Revenue          |  |   | Amount                  | 
|Three months ended | $ | 1,633,445        |  |  | 67%              |  | $ | 539,910                 | 
|Six months ended   | $ | 2,399,912        |  |  | 65%              |  | $ | 1,294,844               | 

Research and development expenses
were $1,633,445 for the three months ended October 31, 2007 compared to $539,910
for the three months ended October 31, 2006. Research and development expenses
including wages and benefits, consulting, and stock-based compensation increased
significantly compared to the prior period primarily with the addition of
research and development personnel primarily as a result of the acquisition of
NewHeights.

Research and development expenses
were $2,399,912 for the six months ended October 31, 2007 compared to $1,294,844
for the six months ended October 31, 2006. Research and development expenses
including wages and benefits, consulting, and stock-based compensation increased
significantly compared to the prior period primarily as a result of the
acquisition of NewHeights and the additional research and development personnel.

28

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General and Administrative

General and administrative
expenses for the three and six months ended October 31, 2007 and 2006 were as
follows:

|                   |   | October 31, 2007 |  |  | October 31, 2006 |  |   | Period-to-Period Change | 
|------------------ | - | ---------------- |  |  | ---------------- |  | - | ----------------------- | 
|                   |   |                  |  |  | Percent          |  |   |                         | 
|                   |   |                  |  |  | of               |  |   |                         | 
|                   |   | Amount           |  |  | Revenue          |  |   | Amount                  | 
|Three months ended | $ | 1,831,642        |  |  | 75%              |  | $ | 543,613                 | 
|Six months ended   | $ | 2,556,168        |  |  | 70%              |  | $ | 1,233,285               | 

General and administrative
expenses for the three months ended October 31, 2007 were $1,831,642 compared to
$543,613 for the three months ended October 31, 2006. The increase of $1,288,029
in general and administrative expenses was primarily attributable to increases
in personnel and the associated compensation of personnel, and stock based
compensation due to the acquisition of NewHeights.

General and administrative
expenses for the six months ended October 31, 2007 were $2,556,168 compared to
$1,233,285 for the six months ended October 31, 2006. The increase of $1,322,883
in general and administrative expenses was primarily attributable to increases
in personnel and the associated compensation of personnel, and stock based
compensation due to the acquisition of NewHeights.

Restructuring Costs

During the three and six months
ended October 31, 2007, we recorded a restructuring charge of $182,107.
Restructuring costs of $182,107 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 the NewHeights
acquisition. There were no restructuring costs for the comparable three or six
months ending October 31, 2006.

Interest and Other Income

Interest income for the three
months ended October 31, 2007 was $33,554 compared to $8,567 for the three
months ended October 31, 2006 relating to higher average cash balances. Interest
expense for the three months ended October 31, 2007 was $547,975 compared to
$42,793 for the three months ended October 31, 2006. Interest expense during
fiscal 2008 includes both a cash interest component of $2,222 and a non-cash
component of $540,200 relating to the unaccreted debt discount on the date of
conversion recorded as an additional interest expense.

Interest income for the six
months ended October 31, 2007 was $49,078 compared to $20,602 for the six months
ended October 31, 2006. The increase relates to higher average cash balances.
Interest expense for the six months ended October 31, 2007 was $688,552 compared
to $85,789 for the six months ended October 31, 2006. Interest expense during
fiscal 2008 includes both a cash interest component of $52,228 and a non-cash
components of $90,570 relating to the accretion of the discount on the
convertible debenture and $540,200 relating to the unaccreted debt discount on
the date of conversion recorded as an additional interest expense.

Liquidity and Capital Resources

As of October 31, 2007, we had
$3,223,986 in cash compared to $1,680,220 at April 30, 2007, representing an
increase of $1,543,766. Our working capital was $4,392,163 at October 31, 2007
compared to $1,897,581 at April 30, 2007, representing an increase of
$2,494,582. Current assets increased by $3,869,823, during the six months ended
October 31, 2007, while current liabilities increased by $1,375,241.

Operating Activities

Our operating activities resulted
in a net cash outflow of $3,083,962 for the six months ended October 31, 2007.
This compares with a net cash outflow of $1,078,849 for the same period last
year and represents a $2,005,113 increase in cash outflows from operations
compared to the same period last year. The net cash outflow from operating
activities

29

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for the six months ended October 31, 2007 was primarily a
result of a net loss of $4,682,174 and an increase in receivables of $728,635,
offset by a decrease in accounts payable of $240,276 and other non-cash items
such as depreciation and amortization of $448,380, stock based compensation of
$936,810 and a loss on the extinguishment of convertible debentures of $540,200.
The convertible debentures were converted into shares of common stock on the
close of the acquisition of NewHeights, requiring a write-off of the remaining
discount at which the convertible debentures were recorded. Cash flows from
operations include the cash flows from NewHeights from August 2, 2007, the date
of acquisition.

Investing Activities

Investing activities resulted in
a net cash inflow of $2,428,983 for the six months ended October 31, 2007
primarily from cash acquired on acquisition of NewHeights, purchases of
equipment and an increase in other assets consisting of costs related to the
NewHeights transaction. This compares with a net cash outflow from investing
activities of $210,791 for the same period last year which was primarily for
purchases of equipment and deposits. At October 31, 2007, we did not have any
material commitments for future capital expenditures.

Financing Activities

Financing activities resulted in
a net cash inflow of $1,798,051 for the six months ended October 31, 2007
compared to a net cash outflow of $3,244 for the same period last year.

On August 2, 2007, we announced
the closing of the acquisition of NewHeights As part of the transaction, our
investors completed an investment of $1,300,000 for 3.25 million shares of
common stock at $0.40 per share, and entered into subscription agreements to
raise an additional $4.2 million through the issuance of 10.5 million shares of
common stock at $0.40 per share. On September 30, 2007 and November 2, 2007,
$0.5 million and $1.7 million was invested with the remaining $1.0 million
scheduled to be invested in each of two closings on February 2, 2008 and March
2, 2008.

We believe that our current
working capital and anticipated proceeds from the investments as part of the
NewHeights transaction and our cash flows will be sufficient to fund our
combined operations for the next eighteen months. However, our forecast of the
period of time through which our financial resources will be adequate to support
our operations is a forward-looking statement that involves risks and
uncertainties, and actual results could vary materially. 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.

We intend to seek additional
funding through public or private financings, but our business and shareholders
investment are at risk if we are unable to obtain additional financing on
acceptable terms or at all which raise substantial doubt on our ability to
continue as a going concern.

Long Term Obligations

On October 10, 2006, we entered
into a lease for office premises, which commenced on December 1, 2006 and
expires on September 29, 2011 for which a deposit of $78,084 was made. On April
29, 2005, we entered into a lease for office premises, which commenced on
October 1, 2005 and expires on September 30, 2012 for which a deposit of $10,403
was made.On June 7, 2007, we entered into an agreement for investor
relations consulting services, which commenced on June 7, 2007 and expires on
December 7, 2007. On February 8, 2007, we entered into an agreement for public
relations consulting services, which commenced on February 2007 and expires on
January 31, 2008.

30

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Total rent and consultancy fees
payable over the term of the agreements for the years ended April 30 is as
follows

| |      |   | Office    |  |   | Investor  |  |   | Public    |  | 
| | ---- | - | --------- |  | - | --------- |  | - | --------- |  | 
| |      |   | Lease     |  |   | Relations |  |   | Relations |  | 
| | 2008 | $ | 380,771   |  | $ | 10,800    |  | $ | 12,574    |  | 
| | 2009 |   | 761,541   |  |   |          |  |   |          |  | 
| | 2010 |   | 780,561   |  |   |          |  |   |          |  | 
| | 2011 |   | 794,147   |  |   |          |  |   |          |  | 
| | 2012 |   | 461,870   |  |   |          |  |   |          |  | 
| | 2013 |   | 93,554    |  |   |          |  |   |          |  | 
| |      | $ | 3,272,444 |  | $ | 10,800    |  | $ | 12,574    |  | 

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

In October 2006, the Financial
Accounting Standards Board (FASB) issued interpretation No. 48, Accounting
for Uncertainty in Income Taxes-an Interpretation of FASB Statement No. 109 (FAS
No. 109) (FIN 48). This interpretation prescribes a recognition threshold
and measurement attribute for tax positions taken or expected to be taken in a
tax return. This interpretation also provides guidance on de-recognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition. The evaluation of a tax position in accordance with
this interpretation is a two-step process. In the first step, recognition, our
company determines whether it is more-likely-than-not that a tax position will
be sustained upon examination, including resolution of any related appeals or
litigation processes, based on the technical merits of the position. The second
step addresses measurement of a tax position that meets the more-likely-than-not
criteria. The tax position is measured at the largest amount of benefit that is
greater than 50 percent likely of being realized upon ultimate settlement.
Differences between tax positions taken in a tax return and amounts recognized
in the financial statements will generally result in a) an increase in a
liability for income taxes payable or a reduction of an income tax refund
receivable, b) a reduction in a deferred tax asset or an increase in a deferred
tax liability or c) both a and b. Tax positions that previously failed to meet
the more-likely-than-not recognition threshold should be recognized in the first
subsequent financial reporting period in which that threshold is met. Previously
recognized tax positions that no longer meet the more-likely-than-not
recognition threshold should be de-recognized in the first subsequent financial
reporting period in which that threshold is no longer met. Use of a valuation
allowance as described in FAS No. 109 is not an appropriate substitute for the
de-recognition of a tax position. The requirement to assess the need for a
valuation allowance for deferred tax assets based on sufficiency of future
taxable income is unchanged by this interpretation. This interpretation is
effective for fiscal years beginning after December 15, 2006. The cumulative
effect of adopting FIN 48 of $72,413 was recorded as a reduction to retained
earnings. The total amount of unrecognized tax benefits as of the date of
adoption was $245,362. Of this amount, $245,362 represents the amount that would
reduce our effective income tax rate, if recognized in future periods. We
recognize interest and penalties accrued on unrecognized tax benefits within
income tax expense. As of October 31, 2007 , we had $103,000 of interest and
penalties accrued associated with unrecognized tax benefits. We are subject to
taxation in the U.S. and Canada. We are subject to tax examinations by tax
authorities for all taxation years commencing in or after 2002. As of October
31, 2007, the amount of unrecognized tax benefits had increased by $72,007.

In September 2006, FASB issued Statement of Financial
Accounting Standards No. 157, Fair Value Measurements (SFAS No. 157). This
standard clarifies the principle that fair value should be based on the
assumptions that market participants would use when pricing an asset or
liability. Additionally, it establishes a fair value hierarchy that prioritizes
the information used to develop those assumptions. This standard is effective
for financial statements issued for fiscal years beginning after November 15,
2007. We are currently evaluating the impact of this statement.

In February 2007, the FASB issued FASB Statement No. 159, The
Fair Value Option for Financial Assets and Financial Liabilities  Including an
Amendment of FASB Statement No. 115. (SFAS No. 159). This standard permits an
entity to choose to measure many financial instruments and certain other items
at fair value. This standard is effective for financial statements issued for
fiscal years beginning after November 15, 2007. We are currently evaluating the
impact of this statement.

31

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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".

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
may 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. 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 raise substantial doubt on our
ability to continue as a going concern.

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 primarily 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.

32

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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 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. Other than registering the domain names:
www.counterpath.com and www.xten.com, among others, applying to register the
trademarks eyeBeamTM and BriaTM, among others, and filing
one patent on a process for configuring audio and video devices with a
softphone, we have not taken any action to protect our proprietary technology.
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, X-Lite,
X-Web, X-Tunnels, X-Look, X-Cipher and X.Net, 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 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 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

33

---

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.

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
415,384,500 shares of common stock and 100,000,000 shares of preferred 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 Sales Practice
Requirements of the Financial Industry Regulatory Authority, or FINRA may also
limit a stockholder's ability to buy and sell our stock.

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.

34

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Item 3(A)T. Controls and Procedures

As required by Rule 13a-15 under
the Exchange Act, we have carried out an evaluation of the effectiveness of the
design and operation of our companys disclosure controls and procedures as of
the end of the period covered by this quarterly report, being October 31, 2007.
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 our companys
disclosure controls and procedures are effective as at the end of the period
covered by this quarterly report. There have been no significant changes in our
internal controls over financial reporting that occurred during our most recent
fiscal quarter that have materially affected, or are reasonably likely to
materially affect our internal controls over financial reporting.

Disclosure controls and
procedures are controls and other procedures that are designed to ensure that
information required to be disclosed in our companys reports filed or submitted
under the Exchange Act is recorded, processed, summarized and reported, within
the time periods specified in the Securities and Exchange Commission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 companys reports filed under the Exchange Act is accumulated and
communicated to management, including our companys president as appropriate, to
allow timely decisions regarding required disclosure.

PART II  OTHER INFORMATION

Item 1. Legal Proceedings.

Except as set out below, we know
of no material, active, or pending legal proceeding against our company, nor are
we involved as a plaintiff in any material proceeding or pending litigation
where such claims or action involves damages for a value of more than 10% of our
assets as of October 31, 2007, or any proceeding in which any of our company's
directors, officers, or affiliates, or any registered or beneficial
shareholders, is an adverse party or has a material interest advance to our
company's interest.

On February 17, 2006, Eyeball
Networks Inc., filed a statement of claim in the Supreme Court of British
Columbia (Action No. S-061080, Vancouver Registry) against our company, Mr. Mark
Bruk, and two employees, alleging breach of (i) confidentiality, and (ii)
previous employment agreements between the two employees (Dr. Joseph Vass and
Mark Klagenberg) and Eyeball. Eyeball is seeking an injunction requiring our
company, Mr. Bruk, and the two employees, to deliver to Eyeball any confidential
information they have in their possession, power or control relating to Eyeball
and its business, restraining our company from developing, manufacturing or
marketing power meters, although we do not currently develop, manufacture or
market power meters. Among other things, Eyeball is claiming general, punitive
and aggravated damages of unspecified amounts. Management of our company has
filed a Statement of Defence denying all allegations, and strongly believes that
any allegations made by Eyeball in connection with our company's current
business operations are without foundation or merit. We intend to continue to
vigorously defend these proceedings.

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

On October 4, 2007, we issued
4,866 shares of our common stock to a former employee of a subsidiary of our
company upon the exercise of stock options at a price of $0.40 per share for
proceeds of $1,946 in accordance with the terms of a stock option and
subscription agreement dated August 2, 2007. The 4,866 shares of our common
stock were issued in reliance upon Regulation S and/or Section 4(2) of the
Securities Act of 1933 in an offshore transaction to a non-U.S. Person (as that
term is defined in Regulation S under the Securities Act of 1933).

On November 2, 2007, we issued
500,000 shares of our common stock to Nairbo Investments Inc. at a price $0.40
per share for proceeds of $200,000 in accordance with the terms of a private
placement subscription agreement. The 500,000 shares of our common stock were
issued in reliance upon Rule 506 of Regulation D and/or Section 4(2) of the
Securities Act of 1933.

On November 2, 2007 we issued
3,750,000 shares of our common stock to Wesley Clover Corporation at a price of
$0.40 per share for proceeds of $1,500,000 in accordance with the terms of a
subscription agreement dated June 15, 2007. The 3,750,000 shares of common stock
of our company were issued in reliance upon Rule 506 of Regulation D and/or
Section 4(2) of the Securities Act of 1933.

35

---

On November 6, 2007, we issued
12,218 shares of our common stock to a former employee of a subsidiary of our
company upon the exercise of stock options at a price of $0.40 per share for
proceeds of $4,887 in accordance with the terms of a stock option and
subscription agreement dated August 2, 2007. The 12,218 shares of our common
stock were issued in reliance upon Regulation S and/or Section 4(2) of the
Securities Act of 1933 in an offshore transaction to a non-U.S. Person (as that
term is defined in Regulation S under the Securities Act of 1933).

On December 13, 2007, we granted
stock options to four employees to purchase an aggregate of 190,000 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 are subject to vesting provisions as set forth in the stock
option agreements dated December 13, 2007. We issued the stock options three
non-U.S. persons (as that term is defined in Regulation S of the Securities Act
of 1933), in an offshore transaction relying on Regulation S and/or Section 4(2)
of the Securities Act of 1933.

Item 3. Defaults Upon Senior Securities.

None.

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

None.

Item 5. Other Information.

On December 13, 2007, we entered
  into an employment agreement with Mark Bruk whereby we agreed to employ Mr.
  Bruk as the executive vice-chairman of our company, to assist our board of directors,
  our chief operating officer and our president with, among other things, formulating
  plans and developing conceptual strategies for expanding our business, advising
  on the implementation of such strategies, and advising on the development of
  new products and services, in consideration for: (i) an annual salary of CDN$180,000;
  (ii) the eligibility to receive incentive stock options and other equity incentives;
  (iii) entitlement to receive an annual cash bonus upon the achievement of certain
  milestones and objectives; (iv) benefits and perquisites commensurate with those
  received by other senior executive of our company; and (v) the reimbursement
  of certain prescribed expenses. The employment agreement may be terminated by:
  (i) our board of directors upon providing the prescribed notice and making the
  prescribed payments; or (ii) by our company upon the occurrence of certain prescribed
  events. Mr. Bruk may terminate the employment agreement for any reason upon
  providing us with six months’ written notice.

Please review the employment agreement,
  attached hereto as Exhibit 10.38, for a complete description of all the terms
  and conditions of the employment agreement.

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).                                    
|    |                                                                                                                                                                      
|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 | Certificate of Amendment to the
      Articles of Incorporation, dated August 9, 2007.                                                                               
|    |                                                                                                                                                                      
|3.7 | Certificate of Designation,
      dated August 9, 2007.                                                                                                              
|    |                                                                                                                                                                      
|(4) | Instruments defining the
      rights of security holders, including indentures                                                                                      
|    |                                                                                                                                                                      
|4.1 | 2004 Stock Option Plan
      effective May 18, 2004 (incorporated by reference from our Registration
      Statement on Form S-8 filed on June 14, 2005).            
|    |                                                                                                                                                                      
|4.2 | 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).
|    |                                                                                                                                                                      
|4.3 | 2005 Stock Option Plan
      effective March 4, 2005 (incorporated by reference from our Registration
      Statement on Form S-8 filed on June 14, 2005).           

36

---

|4.4   | 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).                                                                                   
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                         
|4.5   | 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).                                                                    
|      |                                                                                                                                                                                                                                                         
|4.6   | 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)  | Material Contracts                                                                                                                                                                                                                                      
|      |                                                                                                                                                                                                                                                         
|10.1  | Domain Name Assignment
      Agreement, dated May 2, 2003, between Broad Scope Enterprises, Inc. and
      Hon Kit Ng (incorporated by reference from our Registration Statement on
      Form SB-2 filed on July 16, 2003).                            
|      |                                                                                                                                                                                                                                                         
|10.2  | Subscription Agreement, dated
      April 20, 2003, between Broad Scope Enterprises Inc. and Hon Kit Ng
      (incorporated by reference from our Registration Statement on Form SB-2
      filed on July 16, 2003).                                    
|      |                                                                                                                                                                                                                                                         
|10.3  | Subscription Agreement, dated
      May 1, 2003, between Broad Scope Enterprises Inc. and Hon Kit Ng
      (incorporated by reference from our Registration Statement on Form SB-2
      filed on July 16, 2003).                                       
|      |                                                                                                                                                                                                                                                         
|10.4  | Subscription Agreement, dated
      May 2, 2003, between Broad Scope Enterprises Inc. and Simon Au
      (incorporated by reference from our Registration Statement on Form SB-2
      filed on July 16, 2003).                                         
|      |                                                                                                                                                                                                                                                         
|10.5  | Form of Subscription Agreement
      between Broad Scope Enterprises Inc. and various private placement placees
      (incorporated by reference from our Registration Statement on Form SB-2
      filed on July 16, 2003).                            
|      |                                                                                                                                                                                                                                                         
|10.6  | Agreement and Plan of Merger
      among Broad Scope Enterprises Inc., Xten Networks, Inc., Broad Scope
      Acquisition Corp. and Mark Bruk (incorporated by reference from our
      Current Report on Form 8-K filed on May 10, 2004).              
|      |                                                                                                                                                                                                                                                         
|10.7  | Agreement and Plan of Merger
      between Broad Scope Enterprises Inc. and Xten Networks, Inc. (incorporated
      by reference from our Current Report on Form 8-K filed on May 10, 2004).                                                            
|      |                                                                                                                                                                                                                                                         
|10.8  | Software Development Agreement
      between Xten Networks, Inc. (formerly Evove, Inc.) and Xten Networks
      (Canada) Inc. (formerly Xten Networks Inc.) (incorporated by reference
      from our Current Report on Form 8-K filed on May 10, 2004).
|      |                                                                                                                                                                                                                                                         
|10.9  | Debt Settlement and
      Subscription Agreement dated April 19, 2005 between Xten Networks, Inc.
      and Steven Bruk (incorporated by reference from our Annual Report on Form
      10-KSB filed on July 29, 2005).                                 
|      |                                                                                                                                                                                                                                                         
|10.10 | Employment
      Agreement dated June 16, 2005 between Xten Networks R&D Inc. and Larry
      Timlick (incorporated by reference from our Annual Report on Form 10-KSB
      filed on July 29, 2005).                                                   
|      |                                                                                                                                                                                                                                                         
|10.11 | Settlement
      Agreement and Release dated June 29, 2005 between Xtend Communications
      Corp. and Xten Networks, Inc. (incorporated by reference from our Annual
      Report on Form 10-KSB filed on July 29, 2005).                             
|      |                                                                                                                                                                                                                                                         
|10.12 | Form of Amendment
      to Stock Option and Subscription Agreement (incorporated by reference from
      our Current Report on Form 8-K filed on July 17, 2006).                                                                                        
|      |                                                                                                                                                                                                                                                         
|10.13 | Form of Stock
      Option and Subscription Agreement for U.S. Persons (incorporated by
      reference from our Current Report on Form 8-K filed on July 17, 2006).                                                                                    
|      |                                                                                                                                                                                                                                                         
|10.14 | Form of Stock
      Option and Subscription Agreement for Non-U.S. Persons (incorporated by
      reference from our Current Report on Form 8-K filed on July 17, 2006).                                                                                
|      |                                                                                                                                                                                                                                                         
|10.15 | Employment
      Agreement between CounterPath Solutions, Inc. and Jason Fischl dated
      August 29, 2005 (incorporated by reference from our Annual Report on Form
      10-KSB filed on July 31, 2006).                                             
|      |                                                                                                                                                                                                                                                         
|10.16 | Employment
      Agreement between CounterPath Solutions, Inc. and Donovan Jones dated June
      1, 2005 (incorporated by reference from our Annual Report on Form 10-KSB
      filed on July 31, 2006).                                               
|      |                                                                                                                                                                                                                                                         
|10.17 | Employment
      Agreement between CounterPath Solutions, Inc. and David Karp dated
      September 11, 2006                                                                                                                                            

37

---

|      | (incorporated by reference from
      our Quarterly Report on Form 10-QSB filed on September 14, 2006).                                                                                                                                                                                                                   
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                           
|10.18 | Form of
      Subscription Agreement dated November 30, 2006, between our company and
      various investors (incorporated by reference from our Current Report on
      Form 8-K filed on December 7, 2006).                                                                                                            
|      |                                                                                                                                                                                                                                                                                                                           
|10.19 | Form of
      Subscription Agreement dated November 30, 2006, between our company and
      KMB Trac Two Holdings Ltd (incorporated by reference from our Current
      Report on Form 8-K filed on December 7, 2006).                                                                                                    
|      |                                                                                                                                                                                                                                                                                                                           
|10.20 | Form of
      Convertible Note dated November 30, 2006 (incorporated by reference from
      our Current Report on Form 8-K filed on December 7, 2006).                                                                                                                                                                   
|      |                                                                                                                                                                                                                                                                                                                           
|10.21 | Form of Warrant
      Certificate dated November 30, 2006 (incorporated by reference from our
      Current Report on Form 8-K filed on December 7, 2006).                                                                                                                                                                
|      |                                                                                                                                                                                                                                                                                                                           
|10.22 | Amended
      Employment Agreement between Donovan Jones and CounterPath Solutions
      R&D Inc., a wholly owned subsidiary of CounterPath Solutions, Inc.
      dated January 1, 2007 (incorporated by reference from our Quarterly Report
      on Form 10-QSB filed on March 9, 2007).                                
|      |                                                                                                                                                                                                                                                                                                                           
|10.23 | Employment
      Agreement between Mark Bruk and CounterPath Solutions R&D Inc., a
      wholly owned subsidiary of CounterPath Solutions, Inc. dated March 8, 2007
      (incorporated by reference from our Quarterly Report on Form 10-QSB filed
      on March 9, 2007).                                              
|      |                                                                                                                                                                                                                                                                                                                           
|10.24 | 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 8K filed on June 18, 2007)        
|      |                                                                                                                                                                                                                                                                                                                           
|10.25 | Support and Lock Up Agreements
      between CounterPath Solutions, Inc and each of Owen Matthews and Wesley
      Clover dated as of June 15, 2007 (incorporated by reference from our
      Current Report on Form 8K filed on June 18, 2007)                                                                           
|      |                                                                                                                                                                                                                                                                                                                           
|10.26 | Subscription Agreement between
      CounterPath Solutions, Inc and Wesley Clover dated as of June 15, 2007
      (incorporated by reference from our Current Report on Form 8K filed on
      June 18, 2007)                                                                                                             
|      |                                                                                                                                                                                                                                                                                                                           
|10.27 | Amended Employment Agreement
      between Mark Bruk and CounterPath Solutions R&D Inc., a wholly owned
      subsidiary of CounterPath Solutions, Inc. dated July 24, 2007.                                                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                           
|10.28 | 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).                    
|      |                                                                                                                                                                                                                                                                                                                           
|10.29 | 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).
|      |                                                                                                                                                                                                                                                                                                                           
|10.30 | 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).                                                                                                
|      |                                                                                                                                                                                                                                                                                                                           
|10.31 | Form of Subscription Agreement
      dated August 2, 2007, between our company and various investors
      (incorporated by reference from our Current Report on Form 8-K filed on
      August 8, 2007).                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                           
|10.32 | Installment Subscription
      Agreement dated August 2, 2007, between our company and various investors
      (incorporated by reference from our Current Report on Form 8-K filed on
      August 8, 2007).                                                                                                             
|      |                                                                                                                                                                                                                                                                                                                           
|10.33 | Loan Conversion Agreement dated
      August 2, 2007, between our company and various investors (incorporated by
      reference from our Current Report on Form 8-K filed on August 8, 2007).                                                                                                                            
|      |                                                                                                                                                                                                                                                                                                                           
|10.34 | 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).                                                  
|      |                                                                                                                                                                                                                                                                                                                           
|10.35 | Escrow Agreement among our
      company, Owen Matthews, Wesley Clover and Clark Wilson LLP dated as of
      August 2, 2007 (incorporated by reference from our Current Report on Form
      8-K filed on August 8, 2007).                                                                                               

38

---

|10.36  | Employment Agreement between
      Greg Pelling and CounterPath Solutions R&D Inc., a wholly owned
      subsidiary of CounterPath Solutions, Inc. dated September 13, 2007 our
      Quarterly Report on Form 10-QSB filed on September 14, 2007).                                               
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                   
|10.37  | 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).
|       |                                                                                                                                                                                                                                                                                                   
|10.38* | Employment
      Agreement between Mark Bruk and CounterPath Corporation dated December 13,
      2007.                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                   
|(21)   | Subsidiaries of CounterPath
      Corporation.                                                                                                                                                                                                                                                    
|       |                                                                                                                                                                                                                                                                                                   
|       | CounterPath Solutions R&D
      Inc. (incorporated in the Province of British Columbia, Canada)                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                   
|       | NewHeights Software Corporation
      (incorporated in the Province of British Columbia, Canada)                                                                                                                                                                                                  
|       |                                                                                                                                                                                                                                                                                                   
|       | 6789722 Canada Inc.
      (incorporated under the Canadian Business Corporations Act)                                                                                                                                                                                                             
|       |                                                                                                                                                                                                                                                                                                   
|(31)   | Section 302
      Certification                                                                                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                   
|31.1*  | Section
      302 Certification of Chief Executive Officer.                                                                                                                                                                                                                                       
|       |                                                                                                                                                                                                                                                                                                   
|31.2*  | Section
      302 Certification of Chief Financial Officer.                                                                                                                                                                                                                                       
|       |                                                                                                                                                                                                                                                                                                   
|(32)   | Section 906
      Certification                                                                                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                   
|32.1*  | Section
      906 Certification of Chief Executive Officer.                                                                                                                                                                                                                                       
|       |                                                                                                                                                                                                                                                                                                   
|32.2*  | Section
      906 Certification of Chief Financial Officer.                                                                                                                                                                                                                                       

* filed herewith

39

---

SIGNATURES

In accordance with the requirements 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/Greg Pelling                                                     
|--- | --------------------------------------------------------------------
|    | Greg Pelling                                                        
|    | Chief Executive Officer & Director                                  
|    | (Principal Executive Officer)                                       
|    | Date: December 17, 2007                                             
|    |                                                                     
|    |                                                                     
|By: | /s/David Karp                                                       
|    | David Karp                                                          
|    | Chief Financial Officer, Secretary &
      Treasurer                
|    | (Principal Financial Officer and Principal
      Accounting Officer)
|    | Date: December 17, 2007                                             

40

---