---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended October 31, 2008

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

For the transition period from ______________ to
______________

Commission file number 000-50346

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

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

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

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

Securities registered pursuant to Section 12(b) of the Act:

|Title of each class | Name of each exchange on which registered
|------------------- | -----------------------------------------
|Nil                 | Nil                                      

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.001

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

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

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

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

---

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practicable date:
28,552,638 shares of common stock issued and outstanding as of December 15,
2008.









2

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COUNTERPATH CORPORATION(Formerly CounterPath
Solutions, Inc.)OCTOBER 31, 2008 QUARTERLY REPORT ON FORM
10-Q

INDEX





|         |                                                                                              | Page
|-------- | -------------------------------------------------------------------------------------------- | ----
|         |                                                                                              |     
|         | Part I                                                                                       |     
|         |                                                                                              |     
|Item 1.  | Financial Statements.                                                                        | 4   
|         |                                                                                              |     
|Item 2.  | Managements Discussion and Analysis of Financial
      Condition and Results of Operations. | 20  
|         |                                                                                              |     
|Item 4T. | Controls and Procedures.                                                                     | 31  
|         |                                                                                              |     
|         | Part II                                                                                      |     
|         |                                                                                              |     
|Item 1.  | Legal Proceedings.                                                                           | 32  
|         |                                                                                              |     
|Item 1A. | Risk Factors.                                                                                | 32  
|         |                                                                                              |     
|Item 2.  | Unregistered Sales of Equity Securities and Use of
      Proceeds.                           | 36  
|         |                                                                                              |     
|Item 3.  | Defaults Upon Senior Securities.                                                             | 36  
|         |                                                                                              |     
|Item 4.  | Submission of Matters to a Vote of Security Holders.                                         | 36  
|         |                                                                                              |     
|Item 5.  | Other Information.                                                                           | 37  
|         |                                                                                              |     
|Item 6.  | Exhibits.                                                                                    | 37  

3

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PART I

Item 1. Financial Statements.

It is the opinion of management that the interim consolidated
financial statements for the quarter ended October 31, 2008 include all
adjustments necessary in order to ensure that the interim consolidated financial
statements are not misleading.

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





COUNTERPATH CORPORATION(Formerly CounterPath
Solutions, Inc.)INDEX TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS October 31, 2008 (Unaudited)(Stated in U.S. Dollars)





|                                                                           | Page        
|-------------------------------------------------------------------------- | ------------
|                                                                           |             
|Interim
      Consolidated Balance Sheets                                  | 5           
|                                                                           |             
|Interim
      Consolidated Statements of Operations and Comprehensive Loss | 6           
|                                                                           |             
|Interim
      Consolidated Statements of Cash Flows                        | 7           
|                                                                           |             
|Interim
      Consolidated Statements of Changes in Stockholders Equity   | 8           
|                                                                           |             
|Notes
      to the Interim Consolidated Financial Statements               | 9
      - 19

4

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

|                                                                           |   | October 31, |   |   | April 30,   |  
|-------------------------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|                                                                           |   | 2008        |   |   | 2008        |  
|Assets                                                                     |   | (Unaudited) |   |   |             |  
|Current assets:                                                            |   |             |   |   |             |  
|Cash                                                                       | $ | 3,244,741   |   | $ | 6,223,613   |  
|Accounts receivable (net of allowance
      for doubtful accounts of       |   |             |   |   |             |  
|$562,580 and $407,050,
      respectively)                                 |   | 5,605,362   |   |   | 5,409,658   |  
|Investment tax credits recoverable                                         |   |            |   |   | 1,061,133   |  
|Prepaid expenses and
      deposits                                        |   | 442,348     |   |   | 646,679     |  
|Total current assets                                                       |   | 9,292,451   |   |   | 13,341,083  |  
|                                                                           |   |             |   |   |             |  
|Deposits                                                                   |   | 154,855     |   |   | 103,017     |  
|Equipment                                                                  |   | 368,663     |   |   | 736,854     |  
|Intangible assets (net of accumulated amortization of
      $2,420,009     |   |             |   |   |             |  
|and $1,364,365)  Note 2(d)                                                |   | 5,923,815   |   |   | 8,534,666   |  
|Goodwill  Note 2(d)                                                       |   | 7,273,247   |   |   | 8,674,990   |  
|Other assets                                                               |   | 100,942     |   |   | 177,749     |  
|Total Assets                                                               | $ | 23,113,973  |   | $ | 31,568,359  |  
|                                                                           |   |             |   |   |             |  
|Liabilities and Stockholders Equity                                       |   |             |   |   |             |  
|Current liabilities:                                                       |   |             |   |   |             |  
|Accounts payable and accrued
      liabilities                             | $ | 3,888,637   |   | $ | 4,529,201   |  
|Unearned revenue                                                           |   | 1,065,406   |   |   | 936,343     |  
|Customer deposits                                                          |   | 5,917       |   |   | 85,283      |  
|Warranty accrual                                                           |   | 156,787     |   |   | 144,347     |  
|Total current liabilities                                                  |   | 5,116,747   |   |   | 5,695,174   |  
|                                                                           |   |             |   |   |             |  
|Deferred lease inducements                                                 |   | 60,724      |   |   | 97,734      |  
|Unrecognized tax benefit                                                   |   | 98,575      |   |   | 98,575      |  
|Total liabilities                                                          |   | 5,276,046   |   |   | 5,891,483   |  
|                                                                           |   |             |   |   |             |  
|Stockholders equity:                                                      |   |             |   |   |             |  
|Preferred stock, $0.001 par value 
      Note 7                           |   |             |   |   |             |  
|Authorized: 100,000,000                                                    |   |             |   |   |             |  
|Issued and outstanding:
      October 31, 2008  1; April 30, 2008  1     |   |             |   |   |             |  
|Common stock, $0.001 par value  Note 5                                    |   |             |   |   |             |  
|Authorized:
      415,384,500                                              |   |             |   |   |             |  
|Issued and outstanding:                                                    |   |             |   |   |             |  
|October 31, 2008
       28,502,638 ; April 30, 2008  25,921,797          |   | 28,502      |   |   | 25,921      |  
|Additional paid-in capital                                                 |   | 47,969,056  |   |   | 43,398,849  |  
|Accumulated deficit                                                        |   | (27,859,359 | ) |   | (18,479,483 | )
|Accumulated other comprehensive income (loss)
       currency translation |   |             |   |   |             |  
|adjustment                                                                 |   | (2,300,272  | ) |   | 731,589     |  
|Total stockholders
      equity                                           |   | 17,837,927  |   |   | 25,676,876  |  
|Liabilities and Stockholders Equity                                       | $ | 23,113,973  |   | $ | 31,568,359  |  
|                                                                           |   |             |   |   |             |  
|Going concern  Note 2                                                     |   |             |   |   |             |  
|Commitments and contingent liability  Notes 7 and 8                       |   |             |   |   |             |  

See accompanying notes to the consolidated financial
statements

5

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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, |  
|                                                       |   | 2008               |   |   | 2007              |  
|Revenue  Note 6:                                      |   |                    |   |   |                   |  
|Software                                               | $ | 2,113,617          |   | $ | 2,042,133         |  
|Service                                                |   | 903,213            |   |   | 402,578           |  
|Total revenue                                          |   | 3,016,830          |   |   | 2,444,711         |  
|Operating expenses:                                    |   |                    |   |   |                   |  
|Cost of sales (includes depreciation of $36,862 and    |   |                    |   |   |                   |  
|$73,273 and amortization of intangible
      assets of |   |                    |   |   |                   |  
|$1,055,644 and $295,231  Note 2(d))                   |   | 1,086,203          |   |   | 701,371           |  
|Sales and marketing                                    |   | 1,186,713          |   |   | 1,112,119         |  
|Research and development                               |   | 2,103,685          |   |   | 1,633,445         |  
|General and administrative                             |   | 1,559,672          |   |   | 1,831,642         |  
|Restructuring costs  Note 9                           |   | 742,035            |   |   | 182,107           |  
|Total
      operating expenses                         |   | 6,678,308          |   |   | 5,460,684         |  
|Loss from operations                                   |   | (3,661,478         | ) |   | (3,015,973        | )
|Interest and other income (expense), net               |   |                    |   |   |                   |  
|Interest income                                        |   | 32,198             |   |   | 33,554            |  
|Interest expense  Note 3                              |   | (3,140             | ) |   | (547,975          | )
|Foreign exchange gain (loss)                           |   | 108,346            |   |   | 53,516            |  
|Net loss for the period                                | $ | (3,524,074         | ) | $ | (3,476,878        | )
|Other comprehensive income (loss):                     |   |                    |   |   |                   |  
|Foreign currency translation adjustments               |   |                    |   |   |                   |  
|                                                       |   | (3,052,311         | ) |   | 1,694,235         |  
|Comprehensive loss                                     | $ | (6,576,385         | ) | $ | (1,782,643        | )
|Net loss per share:                                    |   |                    |   |   |                   |  
|Basic and diluted                                      | $ | (0.12              | ) | $ | (0.19             | )
|                                                       |   |                    |   |   |                   |  
|Weighted average common shares outstanding:            |   | 28,682,680         |   |   | 17,900,447        |  

See accompanying notes to the consolidated financial
statements

6

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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, |  
|                                                                   |   | 2008              |  
|Cash flows from operating activities:                              |   |                   |  
|Net loss for the period                                            | $ | (9,379,876        | )
|Adjustments to reconcile net loss to net
      cash used in        |   |                   |  
|operating activities:                                              |   |                   |  
|Depreciation and amortization                                      |   | 411,273           |  
|Amortization
      of intangible assets                            |   | 1,055,644         |  
|Stock-based compensation
       Note 5                            |   | 819,953           |  
|Accretion
      of convertible debenture discount                  |   |                  |  
|Loss on conversion of convertible
      debentures                 |   |                  |  
|Foreign exchange
      loss                                        |   | 74,695            |  
|Changes in assets and liabilities:                                 |   |                   |  
|Accounts
      receivable                                          |   | 539,443           |  
|Prepaid expenses and deposits                                      |   | 178,715           |  
|Accounts
      payable and accrued liabilities                     |   | (255,459          | )
|Unearned revenue                                                   |   | 129,063           |  
|Customer
      deposits                                            |   | (79,366           | )
|Warranty payable                                                   |   | 12,440            |  
|Net cash used in operating activities                              |   | (6,493,475        | )
|                                                                   |   |                   |  
|Cash flows from investing activities:                              |   |                   |  
|Cash acquired on acquisition of NewHeights                         |   |                  |  
|Purchase of equipment                                              |   | (81,308           | )
|Deposits                                                           |   | (71,016           | )
|Decrease (increase) in other assets                                |   | 76,777            |  
|Net cash provided by investing activities                          |   | (75,547           | )
|                                                                   |   |                   |  
|Cash flows from financing activities:                              |   |                   |  
|Common stock issued, net of transaction
      costs                |   | 3,752,835         |  
|Decrease in due to related parties                                 |   |                  |  
|Net cash provided by financing activities                          |   | 3,752,835         |  
|                                                                   |   |                   |  
|Foreign exchange effect on cash                                    |   | (162,685          | )
|                                                                   |   |                   |  
|Increase (decrease) in cash                                        |   | (2,978,872        | )
|                                                                   |   |                   |  
|Cash, beginning of the period                                      |   | 6,223,613         |  
|Cash, end of the period                                            | $ | 3,244,741         |  
|                                                                   |   |                   |  
|Supplemental disclosure of cash flow information                   |   |                   |  
|Cash paid for:                                                     |   |                   |  
|Interest                                                           | $ | 10,435            |  
|Common stock and stock options issued
      in connection with the | $ |                  |  
|acquisition of NewHeights Software Corporation                     |   |                   |  
|Convertible debentures converted into
      common stock           | $ |                  |  

See accompanying notes to the consolidated financial
statements

7

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COUNTERPATHCORPORATION(Formerly CounterPath Solutions, Inc.)INTERIMCONSOLIDATEDSTATEMENTSOFCHANGESINSTOCKHOLDERSEQUITYfor the SixMonthsEndedOctober31, 2008 (Stated in
U.S. Dollars)

|                                        |  | Common
      shares |  |   | Preferred
      Shares |  |  |        |  |   |           |  |   |            |   |   |             |  
|--------------------------------------- |  | ------------------- |  | - | ---------------------- |  |  | ------ |  | - | --------- |  | - | ---------- | - | - | ----------- | -
|                                        |  |                     |  |   |                        |  |  |        |  |   |           |  |   |            |   |   |             |  
|                                        |  | Number              |  |   |                        |  |  | Number |  |   |           |  |   | Additional |   |   |             |  
|                                        |  | of                  |  |   |                        |  |  | of     |  |   |           |  |   | Paid-in    |   |   | Accumulated |  
|                                        |  | Shares              |  |   | Par Value              |  |  | Shares |  |   | Par Value |  |   | Capital    |   |   | Deficit     |  
|Balance, April 30, 2008                 |  | 25,921,797          |  | $ | 25,921                 |  |  | 1      |  | $ |          |  | $ | 43,398,849 |   | $ | (18,479,483 | )
|                                        |  |                     |  |   |                        |  |  |        |  |   |           |  |   |            |   |   |             |  
|Shares issued:                          |  |                     |  |   |                        |  |  |        |  |   |           |  |   |            |   |   |             |  
|Private placement  Note 5              |  | 2,530,841           |  |   | 2,531                  |  |  |       |  |   |          |  |   | 3,750,304  |   |   |            |  
|Exchange of subsidiary preferred        |  |                     |  |   |                        |  |  |        |  |   |           |  |   |            |   |   |             |  
|shares- Note 4                          |  | 50,000              |  |   | 50                     |  |  |       |  |   |          |  |   | (50        | ) |   |            |  
|Stock-based compensation - Note 5       |  |                    |  |   |                       |  |  |       |  |   |          |  |   | 819,953    |   |   |            |  
|Net loss for the period                 |  |                    |  |   |                       |  |  |       |  |   |          |  |   |           |   |   | (9,379,876  | )
|Foreign currency translation adjustment |  |                    |  |   |                       |  |  |       |  |   |          |  |   |           |   |   |            |  
|Balance, October 31, 2008 (unaudited)   |  | 28,502,638          |  | $ | 28,502                 |  |  | 1      |  | $ |          |  | $ | 47,969,056 |   | $ | (27,859,359 | )

Seeaccompanyingnotes to theconsolidatedfinancialstatements

8

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COUNTERPATH CORPORATION(Formerly CounterPath
Solutions, Inc.)NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
STATEMENTS

|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 and the TSX Venture Exchange in Canada.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | On August 2, 2007, the Company acquired of all of the
      shares of NewHeights Software Corporation (NewHeights) through the
      issuance of 7,680,168 shares of the Companys common stock and 369,836
      preferred shares issued from a subsidiary of the Company that are
      exchangeable into 369,836 shares of common stock of the Company. For
      accounting purposes, the Company was deemed to be the acquirer of
      NewHeights based on certain factors including the number of common shares
      issued in the transaction as a proportion of the total common shares
      outstanding, and the composition of the board after the transaction.                                                                                                                                                                                                                                                                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | On February 1, 2008, the Company acquired FirstHand
      Technologies Inc., (FirstHand) a private Ontario, Canada corporation,
      through the issuance of 5,900,014 shares of the Companys common stock.
      For accounting purposes, the Company was deemed to be the acquirer of
      FirstHand based on certain factors including the number of common shares
      issued in the transaction as a proportion of the total common shares
      outstanding, and the composition of the board after the transaction.                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | On February 1, 2008, the Company acquired BridgePort
      Networks, Inc. (BridgePort), a private Delaware corporation, by way of
      merger in consideration for the assumption of all of the assets and
      liabilities of BridgePort. For accounting purposes, the Company was deemed
      to be the acquirer of BridgePort based on certain factors primarily being
      the composition of the board after the transaction.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | On February 5, 2008, the Company's wholly-owned
      subsidiaries, NewHeights and CounterPath Solutions R&D Inc. were
      merged as a wholly-owned subsidiary of the Company under the name
      CounterPath Technologies Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | On March 19, 2008, the Companys Board of Directors
      approved a five for one common stock consolidation. As a result, the
      Company's authorized capital decreased from 415,384,500 shares of common
      stock to 83,076,900 shares of common stock. The par value of the common
      stock was unaffected by the stock consolidation and remains at $0.001 per
      share. All per share amounts and outstanding shares, including all common
      stock equivalents (stock options and warrants) have been retroactively
      adjusted in the Consolidated Financial Statements and in the Notes to the
      Consolidated Financial Statements for all periods presented to reflect the
      stock consolidation.                                                                                                                                                                                                                               
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | The Company focuses on the design, development, marketing
      and sales of desktop and mobile communications application software,
      conferencing software, gateway (server) software and related professional
      services, such as pre and post sales technical support and customization
      services. The Companys products are sold into the Voice over Internet
      Protocol (VoIP) market primarily to carriers, infrastructure manufacturers
      and businesses in North America, Central and South America, Europe and
      Asia.                                                                                                                                                                                                                                                                                                                                                                                                         
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Note 2 | Significant Accounting Policies and Going
      Concern                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | These interim consolidated financial statements have been
      prepared in accordance with generally accepted accounting principles in
      the United States of America and are stated in U.S. dollars except where
      otherwise disclosed. Because a precise determination of many assets and
      liabilities is dependent upon future events, the preparation of financial
      statements for the period necessarily involves the use of estimates, which
      have been made using careful judgment. Actual results may vary from these
      estimates.                                                                                                                                                                                                                                                                                                                                                                                             
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | 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,
      2008, the Company has not yet achieved profitable operations and had an
      accumulated deficit of $27,859,359 since incorporation. These factors
      raise substantial doubt regarding the Companys ability to continue as a
      going concern.

9

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COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

|Note 2 | Significant Accounting
      Policies and Going Concern - (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       | Management is implementing a plan to address these
      uncertainties to enable the Company to continue as a going concern through
      the end of fiscal 2010 and beyond. This plan includes new equity financing
      in amounts sufficient to sustain operations, such as the private placement
      discussed in Note 5, and to increase revenues 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 as follows:

| | a) | Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | These consolidated financial statements include the
      accounts of the Company and its wholly-owned subsidiaries, CounterPath
      Technologies Inc., a company existing under the laws of the province of
      British Columbia, Canada, FirstHand Technologies Inc., continued under
      laws of the province of British Columbia, BridgePort Networks, Inc.
      incorporated under the laws of the state of Delaware and 6789722 Canada
      Inc., incorporated under the Canada Business Corporations Act. The results
      of NewHeights Software Corporation (which subsequently merged with another
      subsidiary to become CounterPath Technologies Inc.) are included from
      August 2, 2007, the date of acquisition. The results of FirstHand
      Technologies Inc. and BridgePort Networks, Inc. are included from February
      1, 2008, the date of acquisition. All inter-company transactions and
      balances have been eliminated.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | b) | Interim Reporting                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | The information presented in the accompanying interim
      consolidated financial statements is without audit pursuant to the rules
      and regulations of the Securities and Exchange Commission. Certain
      information and footnote disclosures normally included in the financial
      statements prepared in accordance with generally accepted accounting
      principles have been condensed or omitted pursuant to such rules and
      regulations, although the Company believes that the disclosures are
      adequate to make the information presented not misleading.                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | These statements reflect all adjustments, which are, in
      the opinion of management, necessary to present fairly the financial
      position, results of operations and cash flows for the interim periods
      presented in accordance with accounting principles generally accepted in
      the United States of America. Except where noted, these interim financial
      statements follow the same accounting policies and methods of their
      application as the Companys April 30, 2008 annual consolidated financial
      statements. All adjustments are of a normal recurring nature. It is
      suggested that these interim financial statements be read in conjunction
      with the Companys April 30, 2008 annual consolidated financial
      statements.                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | Operating results for the six months ended October 31,
      2008 are not necessarily indicative of the results that can be expected
      for the year ending April 30, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | c) | New Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | 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. The adoption of this statement did not
      have an impact on the Companys consolidated financial
  statements.                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | In February 2007, the FASB issued Statement of Financial
      Accounting Standards 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. The adoption of this
      statement did not have an impact on the Companys consolidated financial
      statements.                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | In December 2007, the FASB issued Statement of Financial
      Accounting Standards No. 141 (revised 2007), Business Combinations(SFAS No. 141R). This standard replaces SFAS141 and establishes
      principles and requirements for how an acquirer recognizes and measures in
      its financial statement the identifiable assets acquired and liabilities
      assumed, any non-controlling interest in the acquiree, and the goodwill
      acquired.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

10

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COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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

| | c) | New Accounting Pronouncements  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | This standard also establishes disclosure requirements
      which will enable users to evaluate the nature and financial effects of
      the business combination. This standard is effective for financial
      statements issued for fiscal years beginning after December 15, 2008. The
      Company is currently evaluating the impact of this statement.                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | In December 2007, the FASB issued Statement of Financial
      Accounting Standards No. 160, Non controlling Interests In Consolidated
      Financial Statements  an amendment to ARB No.51(SFAS No. 160).
      This standard Amends ARB 51 to establish accounting and reporting
      standards for a non-controlling interest in a subsidiary and for
      deconsolidation of a subsidiary. This standard applies prospectively to
      business combinations for which the acquisition date is on or after the
      beginning of the first annual reporting period beginning on or after
      December 15, 2008. This standard may not be applied before that date. The
      Company is currently evaluating the impact of this statement.                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | In March 2008, the Financial Accounting Standards Board
      (FASB) issued Statement of Financial Accounting Standards No. 161,
      Disclosures about Derivative Instruments and Hedging Activities  an
      amendment of FASB Statement No. 133 (FAS 161). FAS 161 modifies
      existing requirements to include qualitative disclosures regarding the
      objectives and strategies for using derivatives, fair value amounts of
      gains and losses on derivative instruments and disclosures about
      credit-risk-related contingent features in derivative agreements. The
      pronouncement also requires the cross-referencing of derivative
      disclosures within the financial statements and notes thereto. The Company
      is currently evaluating the impact of this statement.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | In May 2008, the FASB issued Statement of Financial
      Accounting Standards No. 162, The Hierarchy of Generally Accepted
      Accounting Principles (FAS 162). FAS 162 is effective 60 days following
      the SECs approval of the Public Company Accounting Oversight Board
      Auditing amendments to AU Section, 411 The Meaning of Present Fairly
      in Conformity with Generally Accepted Accounting Principles. The
      statement is intended to improve financial reporting by identifying a
      consistent hierarchy for selecting accounting principles to be used in
      preparing financial statements that are presented in conformity with U.S.
      generally accepted accounting principles (GAAP). The Company is currently
      evaluating the impact of this statement.    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | d) | Goodwill and Intangible Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | Goodwill represents the excess purchase price over the
      estimated fair value of net assets acquired as of the acquisition date.
      Statement of Financial Accounting Standards No. 142, Goodwill and Other
      Intangible Assets (SFAS No. 142) SFAS No. 142 requires goodwill to be
      tested for impairment annually or more frequently if an event occurs or
      circumstances change that would more likely than not reduce the fair value
      of the Company's business enterprise below its carrying value. The
      impairment test requires management to estimate the fair value of the
      Company's overall business enterprise down to the reporting unit level
      which is CounterPath Corporation.                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | Goodwill of $6,339,717 (CDN$6,704,947), and $2,083,960
      (CDN$2,083,752) was initially recorded in connection with the acquisition
      of NewHeights Software Corporation on August 2, 2007 and FirstHand
      Technologies Inc. on February 1, 2008. Translated to U.S. dollars using
      the period end rate, the goodwill balance at October 31, 2008 (April 30,
      2008) was $5,549,014 (CDN$6,704,947) and $1,724,233 (CDN$2,083,752),
      respectively. Management will perform its annual impairment test in its
      fiscal fourth quarter. No impairment charges were recorded in the six
      months ended October 31, 2008 (2007 - $nil).                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | Intangible assets include the intangibles purchased in
      connection with the acquisition of NewHeights Software Corporation on
      August 2, 2007 and FirstHand Technologies Inc. and BridgePort Networks,
      Inc. on February 1, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | The intangible assets of NewHeights are being carried and
      reported at acquisition cost and include amounts initially allocated to
      acquired technologies of $3,454,839 (CDN$3,678,100) and customer asset of
      $2,283,908 (CDN$2,431,500). The acquired technologies are amortized based
      on their estimated useful life of four years and the customer asset is
      amortized on the basis of Managements estimate of the future cash flows
      from this asset over approximately five years, which is Managements
      estimate of the useful life of the customer asset.                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | The intangible assets of FirstHand are being carried and
      reported at acquisition cost and include amounts initially allocated to
      acquired technologies of $2,804,700 (CDN$2,804,700) and customer asset of
      $587,000 (CDN$587,000). The acquired technologies is amortized based on
      their estimated useful life of four years and the customer asset is
      amortized on the basis of Managements estimate of the future cash flows
      from this asset over approximately five years, which is Managements
      estimate of the useful life of the customer asset.                                                                                                                                                                                                                      

11

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COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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

| | d) | Goodwill and Intangible Assets 
(contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | The intangible assets of BridgePort are being carried and
      reported at acquisition cost and include amounts initially allocated to
      acquired technologies of $476,703 and customer asset of $43,594. The
      acquired technologies are amortized based on their estimated useful life
      of four years and the customer asset is amortized on the basis of
      Managements estimate of the future cash flows from this asset over
      approximately five years, which is Managements estimate of the useful
      life of the customer asset.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | Statement of Financial Accounting Standard No. 144, The
      Impairment or Disposal of Long-Lived Assets (SFAS No. 144), SFAS No.
      144 requires the Company to review the carrying value of intangibles and
      other long-lived assets for impairment at least annually or whenever
      events or changes in circumstances indicate that the carrying amount of an
      asset may not be recoverable. No impairment charges were recorded for the
      six months ended October 31, 2008 (2007 - $nil).                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | A summary of the Companys intangible assets, net, at
      October 31, 2008 is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

| |                                     |   |           |  |   | Accumulated  |  |   | Net Carrying | 
| | ----------------------------------- | - | --------- |  | - | ------------ |  | - | ------------ | 
| |                                     |   | Cost      |  |   | Amortization |  |   | Amount       | 
| | Acquired technologies               | $ | 5,804,273 |  | $ | 1,986,331    |  | $ | 3,817,942    | 
| | Customer assets                     |   | 2,539,551 |  |   | 433,678      |  |   | 2,105,873    | 
| | Intangible assets, October 31, 2008 | $ | 8,343,824 |  | $ | 2,420,009    |  | $ | 5,923,815    | 

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

|Note 3 | Related Party
      Transactions                                                                                                                                                                                                                                                            
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                             
|       | During the three months ended October 31, 2008 and 2007,
      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, | 
| |                                   |   | 2008               |  |   | 2007              | 
| | Interest on convertible debenture | $ | Nil                |  | $ | 1,667             | 
| | Lease payment                     | $ | Nil                |  | $ | 28,933            | 

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

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

On July 31, 2008 the Company entered
into a source code license agreement whereby the Company licensed to Mitel the
source code for the Your Assistant product in consideration of a payment of
$650,000. Associated with the agreement are ongoing license fees to be paid by
Mitel of $12.00 per copy deployed, declining to $7.50 per copy deployed after
two years and declining from $7.50 to nil after four years. In addition, the
agreement provides Mitel with a first right to match any third party offer to
purchase the source code software and related intellectual property.

12

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COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

|Note 3 | Related Party Transactions  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       | The Companys software license revenue for the six months
      ended October 31, 2008, pursuant to the terms of these agreements, was
      $687,508 (2007 - $980,500).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       | As at October 31, 2008, the Company has an accounts
      receivable balance from Mitel of $706,471 (April 30, 2008 - $1,177,000).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       | During the three and six months ended October 31, 2008,
      the Company through its wholly owned subsidiary, FirstHand Technologies
      Inc., paid $69,199 (2007 - $nil) and $138,398 (2007 - $nil), respectively,
      to Kanata Research Park Corporation (KRP) for leased office space. KRP
      is controlled by the Companys Chairman. As at October 31, 2008, the
      Company had an accounts payable balance to KRP of $11,538 (April 30, 2008
      - $2,656).                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Note 4 | Exchangeable Shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       | On August 2, 2007, the Company entered into a voting and
      exchange trust agreement among its subsidiary, 6789722 Canada Inc., and
      Valiant Trust Company whereby the Company issued and deposited with
      Valiant Trust a special preferred voting share of the Company in order to
      enable Valiant Trust to execute certain voting and exchange rights as
      trustee 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.                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       | On October 9, 2008, the Company issued 50,000 shares of
      common stock pursuant to a holder of 50,000 shares of exchangeable
      preferred shares of its subsidiary 6789722 Canada Inc. exercising their
      exchange rights. As the exchangeable shares have already been recognized
      in connection with the acquisition of NewHeights, the value ascribed to
      these shares on exchange is $nil.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Note 5 | Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       | On March 19, 2008, the Companys Board of Directors
      approved a five for one common stock consolidation. As a result, the
      Company's authorized capital decreased from 415,384,500 shares of common
      stock to 83,076,900 shares of common stock. All per share amounts and
      outstanding shares, including all common stock equivalents (stock options
      and warrants) have been retroactively adjusted in the Consolidated
      Financial Statements and in the Notes to the Consolidated Financial
      Statements for all periods presented to reflect the stock consolidation.                                                                                                                                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       | On April 11, 2008, certain officers, directors and
      affiliates of the Company entered into an escrow agreement with the TSX- V
      whereby a total of 11,489,635 shares of common stock in the Company were
      deposited into escrow with Valiant Trust acting as escrow agent as a
      condition to listing of the Companys shares of common stock on the TSX-V.
      The shares are released as to 25% upon entering in to the agreement and
      25% on each date that is 6, 12 and 18 months from the date of the escrow
      agreement.                                                                                                                                                                                                                                                                                                                                                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       | On July 30, 2008, the Company announced a private
      placement of up to approximately 3.3 million units at a price of $1.50
      (CDN$1.54) per unit for gross proceeds of up to approximately $5 million
      (CDN$5.1 million). On July 31, 2008 and October 24, 2008, the Company
      issued 2,433,439 units and 97,402 units, respectively, at a price of $1.50
      (CDN$1.54) per unit for gross proceeds of $3,784,439 (CDN$3,897,497). The
      Company incurred $31,604 of transaction costs. Each unit consists of one
      share of common stock in the capital of CounterPath and one-half of one
      non-transferable common share purchase warrant. Each warrant shall entitle
      the holder thereof to purchase one share of common stock in the capital of
      CounterPath for a period of two years commencing from the date of issue at
      an exercise price of $2.25 per warrant share.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       | Certain officers and directors of the Company subscribed
      for 759,559 units at a price of $1.50 (CDN$1.54) per unit, including
      warrants entitling the holders thereof to purchase one share of common
      stock in the capital of CounterPath for a period of two years commencing
      from the date of issue at an exercise price of $2.25 per warrant share for
      gross proceeds of $1,142,306 (CDN$1,169,721). As the unit price of $1.50
      (CDN$1.54) per unit was below the closing market price of $1.60 (CDN$1.64)
      per share of the Companys common stock on the date of the transaction and
      included one-half of one common share purchase warrant, the Company
      recorded a compensatory charge to general and administrative expenses for
      the six months ending October 31, 2008 of $195,293 (Note 3).                                                                

13

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

|Note 5 | Common Stock  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | Stock Options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | The Company has a stock option plan under which options
      to purchase common shares of the Company may be granted to employees,
      directors and consultants. Stock options entitle the holder to purchase
      common stock at a subscription price determined by the Board of Directors
      of the Company at the time of the grant. The options generally vest in the
      amount of 12.5% on the date which is six months from the date of grant and
      then beginning in the seventh month at 1/42 per month for 42 months, at
      which time the options are fully vested.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | The maximum number of shares of common stock authorized
      by the stockholders and reserved for issuance by the Board of Directors of
      the Company under the stock option plans are 800,000 under the 2004 Stock
      option plan and 4,260,000 under the 2005 Stock option plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | The Company has elected to use the Black-Scholes option
      pricing model to determine the fair value of stock options granted. In
      accordance with 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 period 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 2009 and 2008 in determining
      the expense recorded in the accompanying consolidated statement of
      operations.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | The weighted-average fair value of options granted during
      the six months ended October 31, 2008 was $0.86. The weighted-average
      assumptions utilized to determine such values are presented in the
      following table:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

| |                             |   | Six Months Ended |  |   | Six Months Ended | 
| | --------------------------- | - | ---------------- |  | - | ---------------- | 
| |                             |   | October 31, 2008 |  |   | October 31, 2007 | 
| | Risk-free interest rate     |   | 3.23%            |  |   | 4.79%            | 
| | Expected volatility         |   | 66.8%            |  |   | 69.7%            | 
| | Expected term               |   | 4.4 yrs          |  |   | 4.5 yrs          | 
| | Dividend yield              |   | 0%               |  |   | 0%               | 
| | Weighted average fair value | $ | 0.86             |  | $ | 1.10             | 

14

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

|Note 5 | Common Stock  (contd)                                                                                                                                                               
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                       
|       | Stock Options  (contd)                                                                                                                                                              
|       |                                                                                                                                                                                       
|       | The following is a summary of the status of the Companys
      stock options as of October 31, 2008 and the stock option activity during
      the six months ended October 31, 2008:

| |                                 |  |           |   |  | Weighted-average | 
| | ------------------------------- |  | --------- | - |  | ---------------- | 
| |                                 |  | Number of |   |  | Exercise Price   | 
| |                                 |  | Options   |   |  | per Share        | 
| | Outstanding at April 30, 2008   |  | 3,794,263 |   |  | $2.20            | 
| | Granted                         |  | 564,000   |   |  | $1.71            | 
| | Exercised                       |  |          |   |  |                 | 
| | Forfeited / Cancelled           |  | (318,410  | ) |  | $1.97            | 
| | Expired                         |  | (168,855  | ) |  | $2.00            | 
| | Outstanding at October 31, 2008 |  | 3,870,998 |   |  | $2.18            | 
| |                                 |  |           |   |  |                  | 
| | Exercisable at October 31, 2008 |  | 2,466,789 |   |  | $2.29            | 
| | Exercisable at April 30, 2008   |  | 2,360,979 |   |  | $2.30            | 

The following table summarizes
information regarding stock purchase options outstanding as of October 31, 2008:

Number of
    Aggregate
    
    Number of
    AggregateExercise
    Options
    Intrinsic
    
    Options
    IntrinsicPrice
    Outstanding
    Value
    Expiry Date
    Exercisable
    Value$1.50
    40,000
    
    August 1, 2016
    21,667
    $1.55
    100,000
    
    October 30, 2013
    
    $1.64
    40,000
    
    June 3, 2013
    -
    $1.70
    35,000
    
    May 1, 2012
    12,396
    $1.75
    370,000
    
    May 14, 2013
    -
    $1.80
    40,000
    
    August 20, 2013
    40,000
    $1.85
    149,534
    
    February 2, 2013
    113,365
    October 1, 2011 to$1.90
    249,268
    
    June 26, 2017
    202,291
    September 7, 2010 to January 10,
    
    $1.95
    1,539,330
    
    2016
    1,197,414December 15,2008 to March 18,$2.00
    561,443
    
    2015
    394,637$2.15
    240,000
    
    September 7, 2016
    125,000
    $2.25
    13,918
    
    December 13, 2012
    5,208
    $2.80
    50,000
    
    February 20, 2016
    33,333
    $2.95
    60,000
    
    October 26, 2016
    33,750
    $3.05
    187,297
    
    May 23, 2016
    117,520
    June 13, 2010 to October 11,
    
    $3.35
    55,000
    
    2016
    37,500$3.40
    20,000
    
    April 10, 2016
    12,500
    $3.75
    5,208
    
    March 3, 2016
    5,208
    $5.35
    30,000
    
    March 29, 2010
    30,000
    $5.85
    35,000
    
    February 22, 2010
    35,000
    $7.90
    30,000
    
    October 24, 2009
    30,000
    $9.35
    20,000
    
    October 21, 2009
    20,000
    October 31, 2008
    3,870,998
    $
    
    2,466,789
    $April 30, 2008
    3,794,263
    $17,333
    
    2,360,979
    $7,635


15

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

|Note 5 | Common Stock  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       | Stock Options  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       | The aggregate intrinsic value in the preceding table
      represents the total intrinsic value, based on the Companys closing stock
      price of $1.02 per share as of October 31, 2008 (April 30, 2008  $1.80),
      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, 2008 was nil
      (April 30, 2008  43,021). The total intrinsic value of options exercised
      during the six months ended October 31, 2008 was $nil (2007  $341). The
      grant date fair value of options vested during the six months ended
      October 31, 2008 was $556,308 (April 30, 2008  $1,817,972).
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       | The following table summarizes information regarding the
      non-vested stock purchase options outstanding as of October 31, 2008:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

| |                                        |  |                   |   |  | Weighted Average      | 
| | -------------------------------------- |  | ----------------- | - |  | --------------------- | 
| |                                        |  | Number of Options |   |  | Grant-Date Fair Value | 
| | Non-vested options at April 30, 2008   |  | 1,433,284         |   |  | $1.48                 | 
| | Granted                                |  | 564,000           |   |  | $0.86                 | 
| | Vested                                 |  | (388,109          | ) |  | $1.47                 | 
| | Forfeited                              |  | (204,966          | ) |  | $1.61                 | 
| | Non-vested options at October 31, 2008 |  | 1,404,209         |   |  | $1.27                 | 

As of October 31, 2008 there was
$1,517,367 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 1.01 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, 2008 and 2007 are as
follows:

| |                                |   | Three Months Ended |  |   | Six Months Ended  | 
| | ------------------------------ | - | ------------------ |  | - | ----------------- | 
| |                                |   | October
      31,  |  |   | October
      31, | 
| |                                |   | 2008               |  |   | 2007              | 
| |                                |   |                    |  |   |                   | 
| | Cost of sales                  | $ | 18,601             |  | $ | 31,673            | 
| | Sales and marketing            |   | 40,702             |  |   | 91,175            | 
| | Research and development       |   | 77,036             |  |   | 197,310           | 
| | General and administrative     |   | 175,626            |  |   | 386,738           | 
| | Total stock-based compensation | $ | 311,965            |  | $ | 706,896           | 

Warrants

During the six months ended October
31, 2008, the Company issued 1,216,720 warrants on July 31, 2008 and 48,701
warrants on October 28, 2008 as part of a unit offering. The fair value of the
stock purchase warrants granted was $394,372. The warrants enable the holders
the right to purchase up to 1,265,421 shares of the Companys common stock,
exercisable for two years from the date of issue. The assumptions utilized to
determine such values are presented in the following table:

| |                                         | Six Months Ended
| | --------------------------------------- | ----------------
| |                                         | October 31, 2008
| |                                         |                 
| | Risk-free interest rate                 | 1.58% - 2.52%   
| | Expected volatility                     | 48.54% - 66.34% 
| | Expected term                           | 2 yrs           
| | Dividend yield                          | 0%              
| | Weighted average fair value per warrant | $0.31 - $0.44   

16

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

|Note 5 | Common Stock  (contd)                                                                                    
|------ | -----------------------------------------------------------------------------------------------------------
|       |                                                                                                            
|       | Warrants  (contd)                                                                                        
|       |                                                                                                            
|       | The following table summarizes information
      regarding the warrants outstanding as of October 31, 2008.

| |                              | Number of |  | Weighted Average
| | ---------------------------- | --------- |  | ----------------
| |                              | Options   |  | Exercise Price  
| | Warrants at April 30, 2008   | 1,000,000 |  | $4.00           
| | Granted                      | 1,265,421 |  | $2.25           
| | Exercised                    |          |  |                
| | Expired                      |          |  |                
| | Warrants at October 31, 2008 | 2,265,421 |  | $3.04           

|Note 6 | 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, 2008 and
      2007:                                                                                                                                          

| |                           |   | Three Months Ended |  |   | Six Months Ended  | 
| | ------------------------- | - | ------------------ |  | - | ----------------- | 
| |                           |   | October
      31,  |  |   | October
      31, | 
| |                           |   | 2008               |  |   | 2007              | 
| | North America             | $ | 1,710,996          |  | $ | 1,557,729         | 
| | Europe                    |   | 812,944            |  |   | 707,302           | 
| | Asia                      |   | 285,782            |  |   | 73,560            | 
| | Central and South America |   | 207,108            |  |   | 102,876           | 
| | Other                     |   |                   |  |   | 3,244             | 
| |                           | $ | 3,016,830          |  | $ | 2,444,711         | 

Contained within the results of North
America for the three and six months ended October 31, 2008 are revenues from
the United States of $1,628,016 and $2,669,992 (2007 - $380,012 and $946,146)
respectively and from Canada of $82,980 and $762,546 (2007 - $1,177,717 and
$1,058,137) respectively.

Contained within the results of Europe
for the three and six months ended October 31, 2008 are revenues from the United
Kingdom of $267,215 and $382,714 (2007 - $219,459 and $571,895) respectively,
from Germany of $199,186 and $301,302 (2007 - $73,023 and $154,991)
respectively, from Denmark of $108,449 and $278,493 (2007 - $nil) respectively,
and from Portugal of $91,792 and $150,202 (2007 - $nil) respectively.

Contained within the results of South
America for the three and six months ended October 31, 2008 are revenues from
Brazil of $97,500 and $113,688 (2007 - $18,718 and $33,124) respectively, from
Mexico of $78,840 and $202,203 (2007 - $6,132 and $112,325) respectively and
from the Dominican Republic of $nil and $60,837 (2007 - $nil and $55,698)
respectively.

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

| |               |   | **As
      at** | 
| | ------------- | - | --------------- | 
| |               |   | October 31,     | 
| |               |   | 2008            | 
| |               |   |                 | 
| | Canada        | $ | 6,270,456       | 
| | United States |   | 122,964         | 
| | Total         | $ | 6,393,420       | 

17

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

|Note 6 | Segmented Information 
      (contd)                                                                                         
|------ | -------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                
|       | Revenue from significant customers for the three and six
      months ended October 31, 2008 and 2007 is summarized as follows:

| |            |  | **Three Months Ended** |  |  | Six Months Ended  | 
| | ---------- |  | ---------------------- |  |  | ----------------- | 
| |            |  | October
      31,      |  |  | October
      31, | 
| |            |  | 2008                   |  |  | **2007**          | 
| |            |  |                        |  |  |                   | 
| | Customer A |  | 20%                    |  |  | 3%                | 
| | Customer B |  | 17%                    |  |  |                  | 
| | Customer C |  | 4%                     |  |  | 42%               | 
| | Customer D |  | 5%                     |  |  | 7%                | 
| |            |  | 46%                    |  |  | 52%               | 

|       | Accounts receivable balances for Customer A were $904,248
      as at October 31, 2008 (April 30, 2008 - $432,019). Accounts receivable
      balances for Customer B were $411,062 as at October 31, 2008 (April 30,
      2008 - $46,796). Accounts receivable balances for Customer C were $706,471
      as at October 31, 2008 (April 30, 2008 - $1,177,000). Accounts receivable
      balances for Customer D were $287,500 as at October 31, 2008 (April 30,
      2008 - $400,000).
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Note 7 | Commitments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

| | a) | On June 28, 2005, the Company entered into a software
      development consulting agreement extension, which commenced on June 30,
      2006 and expires June 30, 2009. The payment schedule is tied to specific
      milestones as they are completed and requires total payments of $109,000
      in fiscal year 2009 and $109,000 in fiscal year 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | b) | The Company is subject to a license agreement ("Amended
      Omnibus Agreement") and a sponsored research agreement ("Amended Research
      Agreement") with Columbia University pertaining to certain technologies
      acquired in the acquisition of FirstHand Technologies Inc. on February 1,
      2008. Pursuant to the Amended Omnibus Agreement and the Amended Research
      Agreement, the Company is required to provide financial support for SIP
      (Session Initiation Protocol) research in the field of Internet/Ethernet
      Telephony conducted at Columbias Department of Computer Science. Subject
      to certain limitations, the Company is entitled to an exclusive license
      from Columbia University for all inventions and research information
      directly relating to the field of Internet/Ethernet Telephony. In exchange
      for the continuing rights granted under the Amended Research Agreement,
      the Company is required to make a future payment for research of $109,000
      payable on January 1, 2009. Commencing on the one year anniversary date of
      the of the termination or expiration of the Amended Research Agreement,
      the Company shall be required to pay a minimum annual royalty of $100,000
      to Columbia University net of any royalties paid to Columbia University
      under the Amended Omnibus Agreement.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | Total payable over the term of the agreements for the
      years ended April 30 are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

| |      |   |                 |  |   |               |  |   |           |   |   |              |  |   |             |  |   |           | 
| | ---- | - | --------------- |  | - | ------------- |  | - | --------- | - | - | ------------ |  | - | ----------- |  | - | --------- | 
| |      |   | Office Leases  |  |   | Office Leases |  |   |           |   |   |              |  |   | Software    |  |   |           | 
| |      |   | Related         |  |   |  Unrelated   |  |   | Sub Lease |   |   | Total Office |  |   | Development |  |   | Research  | 
| |      |   | Party           |  |   | Party         |  |   | Income    |   |   | Leases       |  |   | Contracts   |  |   | Agreement | 
| | 2009 | $ | 139,455         |  | $ | 374,035       |  | $ | (39,506   | ) | $ | 473,984      |  | $ | 84,800      |  | $ | 109,000   | 
| | 2010 |   | 265,359         |  |   | 726,322       |  |   | (79,011   | ) |   | 912,670      |  |   | 109,000     |  |   |          | 
| | 2011 |   |                |  |   | 654,853       |  |   | (79,011   | ) |   | 575,842      |  |   |            |  |   |          | 
| | 2012 |   |                |  |   | 364,806       |  |   | (79,011   | ) |   | 285,795      |  |   |            |  |   |          | 
| | 2013 |   |                |  |   | 73,893        |  |   | (32,921   | ) |   | 40,972       |  |   |            |  |   |          | 
| |      | $ | 404,814         |  | $ | 2,193,909     |  | $ | 309,460   | ) | $ | 2,289,263    |  | $ | 193,800     |  | $ | 109,000   | 

18

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

|Note 8  | Contingent
      Liability                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | On February 17, 2006, a competitor filed a statement of
      claim in the Supreme Court of British Columbia claiming among other
      things, general, punitive and aggravated damages of unspecified amounts
      with respect to alleged business ethics matters. Management of the Company
      believes that the claim is without foundation or merit. Any loss as a
      result of this claim will be recorded in the period that the loss is
      probable and measurable.                                                                                                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Note 9  | Restructuring                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | As a result of the Companys post acquisition activities,
      the Company incurred restructuring costs of $742,035 (2007  $182,107) and
      $932,996 (2007  $182,107) during the three and six months ended October
      31, 2008, respectively. Restructuring costs were related to employee
      severance arrangements as a result of the consolidation of administrative,
      sales, marketing, and research and development departments after the close
      of acquisitions of NewHeights Software Corporation, FirstHand Technologies
      Inc. and BridgePort Networks, Inc. These charges are shown as a separate
      line item in the consolidated statement of operations.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Note 10 | Subsequent Events                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | On November 19, 2008, the Company issued 50,000 shares of
      common stock pursuant to a holder of 50,000 shares of exchangeable
      preferred shares of its subsidiary 6789722 Canada Inc. exercising their
      exchange rights. As the exchangeable shares have already been recognized
      in connection with the acquisition of NewHeights, the value ascribed to
      these shares on exchange will be $nil.                                                                                                                                                                                                                                                                         
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | On December 15, 2008, the Company granted incentive stock
      options to two officers and a number of employees of the Company for the
      purchase of a total of 732,000 common shares of the Company, pursuant to
      its stock option plan. The options are exercisable on or before December
      15, 2013, at a price of $0.44 (CDN $0.55) per common share.                                                                                                                                                                                                                                                                                                                           

19

---

PART II

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

Forward-Looking Statements

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

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

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

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

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 issued and outstanding shares in Xten Networks in
exchange for issuing 3,600,000 shares of our common stock to the stockholders of
Xten Networks. The stockholders of Xten Networks were entitled to receive two
shares of our common stock for each one share of Xten Networks.

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

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

On
February 1, 2008, we acquired all of the shares of FirstHand Technologies Inc.
through the issuance of 5.9 million shares of our common stock. On February 1,
2008, we acquired all of the issued and outstanding shares

20

---

of BridgePort Networks, Inc. by way of merger in consideration
for the assumption of all of the assets and liabilities of BridgePort Networks.

On
February 5, 2008, NewHeights and our subsidiary CounterPath Solutions R&D
Inc. were merged as a wholly-owned subsidiary under the name CounterPath
Technologies Inc.

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

Business of CounterPath

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

Our
strategy is to sell our software to our customers to allow such customers to
deliver session initiation protocol and 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 voice communication from the end user through
the network to another end user and enables the service provider to deliver
other streaming content to end users such as video, radio or the weather. Our
recent acquisitions of FirstHand Technologies Inc. and BridgePort Networks, Inc.
expand the product portfolio of our company to include fixed-mobile-convergence
applications for the enterprise and telecom service provider markets.

Revenue

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

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

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

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

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

21

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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.

Cost
of sales primarily consists of (a) salaries and benefits related to personnel,
(b) related overhead, (c) amortization of intangible assets (d) billable and
non-billable travel, lodging, and other out-of-pocket expenses, (e) payments to
third party vendors for compression/decompression software known as codecs, (f)
amortization of capitalized software that is implemented into our products, and
(g) warranty expense. Amortization of intangible assets consists of the
amortization expense related to the intangible assets acquired from NewHeights
Software Corporation, FirstHand Technologies Inc. and BridgePort Networks, Inc.
comprising acquired technologies and customer assets. The acquired technologies
are amortized based on their estimated useful life of four years and the
customer assets are amortized on the basis of management's estimate of the
future cash flows from these assets over approximately five years, which is
management's estimate of the useful life of the customer assets.

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

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

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

Restructuring
costs are post acquisition activities related to the acquisition of NewHeights
Software Corporation, FirstHand Technologies Inc. and BridgePort Networks, Inc.
We incurred restructuring costs related to employee severance agreements as a
result of post acquisition consolidation of administration, sales and marketing
and research and development departments. At October 31, 2008 we have a
restructuring accrual for severance of approximately $65,000.

Critical Accounting Policies

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.

22

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Basis of Presentation

The
consolidated financial statements include the accounts of our company and our
wholly-owned subsidiaries, CounterPath Technologies Inc., a company existing
under the laws of the province of British Columbia, Canada, FirstHand
Technologies Inc., continued under laws of the province of British Columbia,
BridgePort Networks, Inc. incorporated under the laws of the state of Delaware
and 6789722 Canada Inc., incorporated under the Canada Business Corporations
Act. The results of NewHeights Software Corporation (which subsequently merged
with another subsidiary to become CounterPath Technologies Inc.) are included
from August 2, 2007, the date of acquisition. The results of FirstHand
Technologies Inc. and BridgePort Networks, Inc. are included from February 1,
2008, the date of acquisition. All inter-company transactions and balances have
been eliminated.

Interim Reporting

The
information presented in the accompanying interim consolidated financial
statements is without audit pursuant to the rules and regulations of the SEC.
Certain information and footnote disclosures normally included in the interim
consolidated financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although we believe that the disclosures are adequate to make the
information presented not misleading.

These
statements reflect all adjustments, which are, in the opinion of management,
necessary to present fairly the financial position, results of operations and
cash flows for the interim periods presented in accordance with accounting
principles generally accepted in the United States of America. Except where
noted, the interim consolidated financial statements follow the same accounting
policies and methods of their application our April 30, 2008 annual consolidated
financial statements. All adjustments are of a normal recurring nature. It is
suggested that these interim consolidated financial statements be read in
conjunction with our April 30, 2008 annual consolidated financial statements.

Operating
results for the three months ended October 31, 2008 are not necessarily
indicative of the results that can be expected for the year ending April 30,
2009.

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
distribution and reseller arrangements, fees are fixed or determinable and
collection probable when there are no rights to exchange or return and fees are
not dependable upon payment from the end-user. If any of these criteria are not
met, revenue is deferred until such time that all criteria have been met.

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

For
contracts with elements related to customized network solutions and certain
network build-outs, we apply FASB Emerging Issues Task Force Issue No. 00-21,
"Revenue Arrangements with Multiple Deliverables" and

23

---

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.

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

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

Stock-Based Compensation

Stock
options granted are accounted for under 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
three months ended October 31, 2008 was 67.0% . 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, 2008 was 4.4 years. For the six months ended October
31, 2008, the weighted-average risk free interest rate used was 3.23% . 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
three months ended October 31, 2008 in determining the expense recorded in our
consolidated statement of operations.

Cost
of sales and operating expenses include stock-based compensation expense. For
the six months ended October 31, 2008, we recorded an expense of $819,953 in
connection with share-based payment awards. A future expense of non-vested
options of $1,517,367 is expected to be recognized over a weighted-average
period of 1.01 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

24

---

determined that technological feasibility is established at the
time a working model of software is completed. Because we believe our current
process for developing software will be essentially completed concurrently with
the establishment of technological feasibility, no costs have been capitalized
to date.

Accounts Receivable and Allowance for Doubtful
Accounts

We
extend credit to our customers based on evaluation of an individual customer's
financial condition and collateral is generally not required. Accounts
outstanding beyond the contractual payment terms are considered past due. We
determine our allowance for doubtful accounts by considering a number of
factors, including the length of time accounts receivable are beyond the
contractual payment terms, our previous loss history, and a customer's current
ability to pay its obligation to us. We write-off accounts receivable when they
are identified as uncollectible. All outstanding accounts receivable accounts
are periodically reviewed for collectibility on an individual basis.

Goodwill and Intangible Assets

We
have a significant amount of goodwill and intangible assets on our balance sheet
related to the acquisitions of NewHeights Software Corporation, FirstHand
Technologies Inc. and BridgePort Networks, Inc. Intangible assets are carried
and reported at acquisition cost, net of accumulated amortization subsequent to
acquisition. The intangible assets acquired are comprised of acquired
technologies and customer assets relating to customer relationships. The
acquired technologies are amortized based on their estimated useful life of four
years and the customer asset is amortized on the basis of Management's estimate
of the future cash flows from this asset over approximately five years, which is
Management's estimate of the useful life of the customer assets. The intangible
assets are reviewed for impairment whenever events or circumstances indicate
impairment might exist in accordance with 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.

Use of Estimates

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

Results of Operations

Our
operating activities during the three and six months ended October 31, 2008
consisted primarily of selling our IP telephony software to service providers
and original equipment manufacturers serving the telecom industry, and the
continued development of our IP telephony software products.

25

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Revenue

|                  | **Three
      Months Ended October 31,** |  |          |  |                              
|----------------- | ---------------------------------------- |  | -------- |  | -----------------------------
|                  | 2008                                     |  | 2007     |  | Period-to-Period
      Change
|                  |                                          |  | Percent  |  |                              
|                  |                                          |  | of Total |  |                              
|                  | Amount                                   |  | Revenue  |  | Amount                       
|Revenue by Type   |                                          |  |          |  |                              
|Software          | $2,113,617                               |  | 70%      |  | $2,042,133                   
|Service           | 903,213                                  |  | 30%      |  | 402,578                      
|Total revenue     | $3,016,830                               |  | 100%     |  | $2,444,711                   
|                  |                                          |  |          |  |                              
|Revenue by Region |                                          |  |          |  |                              
|International     | $1,305,834                               |  | 43%      |  | $886,982                     
|North America     | 1,710,996                                |  | 57%      |  | 1,557,729                    
|Total revenue     | $3,016,830                               |  | 100%     |  | $2,444,711                   

For
the three months ended October 31, 2008, we generated $3,016,830 in revenue
compared to $2,444,711 for the three months ended October 31, 2007. This
represents an increase of $572,119 from the same period last year. We generated
$2,113,617 in software revenue for the three months ended October 31, 2008
compared to $2,042,133 for the three months ended October 31, 2007, representing
an increase of $71,484 or 4%. The increase in software revenue was due to higher
sales through our original equipment manufacturers channel. For the three months
ended October 31, 2008, service revenue was $903,213 compared to $402,578 for
the three months ended October 31, 2007. The increase of $500,635 or 124% in
service revenue was primarily due to professional services and support required
to implement our software to new customers, particularly those customers
acquired in the FirstHand and BridgePort acquisitions. International revenue
outside of North America increased by 47% during the three months ended October
31, 2008 compared to the three months ended October 31, 2007, largely due to
increased sales in Latin America and Europe. North American revenue increase by
10%, compared to the three months ended October 31, 2007, primarily due to
increased revenue from original equipment manufacturers channel.

|                  | **Six
      Months Ended October 31,** |  |          |  |                              
|----------------- | -------------------------------------- |  | -------- |  | -----------------------------
|                  | 2008                                   |  | 2007     |  | Period-to-Period
      Change
|                  |                                        |  | Percent  |  |                              
|                  |                                        |  | of Total |  |                              
|                  | Amount                                 |  | Revenue  |  | Amount                       
|Revenue by Type   |                                        |  |          |  |                              
|Software          | $3,961,922                             |  | 70%      |  | $2,811,141                   
|Service           | 1,667,668                              |  | 30%      |  | 860,361                      
|Total revenue     | $5,629,590                             |  | 100%     |  | $3,671,502                   
|                  |                                        |  |          |  |                              
|Revenue by Region |                                        |  |          |  |                              
|International     | $2,197,051                             |  | 39%      |  | $1,667,219                   
|North America     | 3,432,539                              |  | 61%      |  | 2,004,283                    
|Total revenue     | $5,629,590                             |  | 100%     |  | $3,671,502                   

For
the six months ended October 31, 2008, we generated $5,629,590 in revenue
compared to $3,671,502 for the six months ended October 31, 2007. This
represents an increase of $1,958,088 or 53% from the same period last year. We
generated $3,961,922 in software revenue for the six months ended October 31,
2008 compared to $2,811,141 for the six months ended October 31, 2007,
representing an increase of $1,150,781 or 41%. The increase in software revenue
was driven by sales to customers of BridgePort and FirstHand that were acquired
in February 2008, and from continued growth in sales of our consumer oriented
softphone software as well as sales of our enterprise oriented softphone
software. For the six months ended October 31, 2008, service revenue was
$1,667,668 compared to $860,361 for the six months ended October 31, 2007. The
increase of $807,307 in service revenue was primarily due to increase in service
revenue from customers of BridgePort and FirstHand acquired in February 2008,
and professional services related to implementation of our solutions.
International revenue outside of North America grew by32% during the six months
ended October 31, 2008 compared to the six months ended

26

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October 31, 2007, driven by Latin American and European
software sales. North American revenue increased 71%, compared to the six months
ended October 31, 2007, driven primarily by sales of software and services to
North American original equipment manufacturers.

Operating Expenses

Cost of Sales

Cost
of sales for the three and six months ended October 31, 2008 and 2007 were as
follows:

|                   | October
      31, 2008 |  | October
      31, 2007 |  | Period-to-Period
      Change
|------------------ | ---------------------- |  | ---------------------- |  | -----------------------------
|                   |                        |  | Percent                |  |                              
|                   |                        |  | of                     |  |                              
|                   | Amount                 |  | Revenue                |  | Amount                       
|Three months ended | $1,086,203             |  | 36%                    |  | $701,371                     
|Six months ended   | $2,464,046             |  | 44%                    |  | $1,062,529                   

Cost
of sales was $1,086,203 for the three months ended October 31, 2008 compared to
$701,371 recorded for the three months ended October 31, 2007. The increase of
$384,832 was primarily attributable to the amortization of intangible assets
amounting to $510,171 (October 31, 2007  $295,231), increases in personnel and
associated wages on account of acquisition of BridgePort and FirstHand,
third-party software royalties used with our products, and third-party hardware
used with our products.

Cost
of sales was $2,464,046 for the six months ended October 31, 2008 compared to
$1,062,529 for the six months ended October 31, 2007. The increase of $1,401,517
was primarily attributable to the amortization of intangible assets of
$1,055,644 (October 31, 2007  $295,231). The increase in cost of sales was also
attributable to increases in personnel and associated wages on account of
acquisition of BridgePort and FirstHand, third-party software royalties used
with our products, and third-party hardware used with our products.

Sales and Marketing

Sales
and marketing expenses for the three and six months ended October 31, 2008 and
2007 were as follows:

|                   | October
      31, 2008 |  | October
      31, 2007 |  | Period-to-Period
      Change
|------------------ | ---------------------- |  | ---------------------- |  | -----------------------------
|                   |                        |  | Percent                |  |                              
|                   |                        |  | of                     |  |                              
|                   | Amount                 |  | Revenue                |  | Amount                       
|Three months ended | $1,186,713             |  | 39%                    |  | $1,112,119                   
|Six months ended   | $2,668,664             |  | 47%                    |  | $1,567,002                   

Sales and marketing expenses were $1,186,713 for the three
months ended October 31, 2008 compared to $1,112,119 recorded for the three
months ended October 31, 2007. The increase of $74,594 was primarily
attributable to increases in sales and marketing personnel and associated wages
and commissions due to the acquisitions of Firsthand and BridgePort offset by a
reduction in professional fees, advertising, and other charges during the three
months ended October 31, 2008.

Sales and marketing expenses were $2,668,664 for the six months
ended October 31, 2008 compared to $1,567,002 recorded for the six months ended
October 31, 2007. The increase of $1,101,662 was primarily attributable to
increases in sales and marketing personnel and associated wages and commissions
due to the acquisitions of FirstHand and BridgePort.

27

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Research and Development

Research
and development expenses for the three and six months ended October 31, 2008 and
2007 were as follows:

|                   | October
      31, 2008 |  | October
      31, 2007 |  | Period-to-Period
      Change
|------------------ | ---------------------- |  | ---------------------- |  | -----------------------------
|                   |                        |  | Percent                |  |                              
|                   |                        |  | of                     |  |                              
|                   | Amount                 |  | Revenue                |  | Amount                       
|Three months ended | $2,103,685             |  | 70%                    |  | $1,633,445                   
|Six months ended   | $5,121,097             |  | 91%                    |  | $2,399,912                   

Research
and development expenses were $2,103,685 for the three months ended October 31,
2008 compared to $1,633,445 for the three months ended October 31, 2007. The
increase of $470,240 was primarily attributable to increases in research and
development personnel and associated wages and non-cash stock based
compensation. Research and development personal were acquired through the
acquisitions of FirstHand and BridgePort.

Research
and development expenses were $5,121,097 for the six months ended October 31,
2008 compared to $2,399,912 for the six months ended October 31, 2007. The
increase of $2,721,185 was primarily attributable to increases in research and
development personnel and associated wages and non-cash stock based
compensation. Research and development personnel were acquired through the
acquisitions of FirstHand and BridgePort. There was also a significant increase
in the professional services and consulting expenses as a result of combining
the technologies of our company with the technologies of NewHeights, FirstHand,
and BridgePort.

General and Administrative

General
and administrative expenses for the three and six months ended October 31, 2008
and 2007 were as follows:

|                   | October
      31, 2008 |  | October
      31, 2007 |  | Period-to-Period
      Change
|------------------ | ---------------------- |  | ---------------------- |  | -----------------------------
|                   |                        |  | Percent                |  |                              
|                   |                        |  | of                     |  |                              
|                   | Amount                 |  | Revenue                |  | Amount                       
|Three months ended | $1,559,672             |  | 52%                    |  | $1,831,642                   
|Six months ended   | $3,787,799             |  | 67%                    |  | $2,556,168                   

General
and administrative expenses were $1,559,672 for the three months ended October
31, 2008 compared to $1,831,642 for the three months ended October 31, 2007. The
decrease of $271,970 was primarily attributable to a decrease in personnel
related costs as a result of restructuring and a decrease in bad debt
expense.

General
and administrative expenses were $3,787,799 for the six months ended October 31,
2008 compared to $2,556,168 for the six months ended October 31, 2007. The
increase of $1,231,631 year over year was primarily attributable to increase in
general and administrative personnel related costs due to acquisition of
FirstHand and BridgePort, partly offset by a reduction in costs due to
restructuring. Other increases in expenses occurred in professional services,
non-cash amortization expenses, as well as office rent, non-cash stock-based
compensation and communication expenses.

28

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Restructuring Charges

Restructuring
charges for the three months ended October 31, 2008 and 2007 were as
follows:

October
        31, 2008
      
      October
        31, 2007
      
      Period-to-Period
        ChangePercent
      
      
      
      Percent
      
      
      
      Percentof
      
      
      
      of
      
      
      
      Increase/Amount
      
      Revenue
      
      Amount
      
      Revenue
      
      Amount
      
      (Decrease)Three months ended
      $742,035
      
      25%
      
      $182,107
      
      7%
      
      $559,928
      
      n/aSix months ended
      $932,996
      
      17%
      
      $182,107
      
      5%
      
      $750,889
      
      n/a


Restructuring
charges for the three months ended October 31, 2008 were $742,035 compared to
$182,107 for the three months ended October 31, 2007. These costs were related
to employee severance arrangements as a result of the consolidation of
administrative, sales, marketing, and research and development departments after
the integration of the acquisitions of NewHeights, FirstHand and BridgePort.

Restructuring
charges for the six months ended October 31, 2008 were $932,996 compared to
$182,107 for the six months ended October 31, 2007. These costs were related to
employee severance arrangements as a result of the consolidation of
administrative, sales, marketing, and research and development departments after
the close of acquisitions of NewHeights, FirstHand and BridgePort.

Interest and Other Income

Interest
income for the three months ended October 31, 2008 was $32,198 compared to
$33,554 for the same period in 2007. Interest expense for the three months ended
October 31, 2008 was $3,140 compared to $547,975 for the three months ended
October 31, 2007. Interest expense for the three months ended October 31, 2007
included both a cash interest component of $2,222 and a non-cash component of
$540,200 relating to the expensing of the unaccreted debt discount on the date
of the conversion.

Interest
income for the six months ended October 31, 2008 was $50,266 compared to $49,078
for the same respective period in 2007. Interest expense for the six months
ended October 31, 2008 was $10,435 compared to $688,522 for the six months ended
October 31, 2007. Interest expense for the six months ended October 31, 2007
included both a cash interest component of $52,228 and a non-cash component of
$90,570 relating to the accretion of the discount on our convertible debenture,
and $540,200 relating to the expensing of unaccreted debt discount on the date
of conversion. On August 2, 2007, in conjunction with the acquisition of
NewHeights, our convertible debenture holders converted their existing
debentures in the amount of $4,000,000 into 2,000,000 shares of common stock at
a conversion price of $2.00 per share.

Liquidity and Capital Resources

As
of October 31, 2008 we had $3,244,741 in cash compared to $6,223,613 at April
30, 2008, representing a decrease of $2,978,872. Our working capital was
$4,175,704 at October 31, 2008 compared to $7,645,909 at April 30, 2008,
representing a decrease of $3,470,205.

Presently,
our cash flow generated from operations is not sufficient to meet operating and
capital expenses. We have incurred operating losses since inception, and we
project this to continue for the next nine to twelve months. At October 31,
2008, we had cash of approximately $3.2 million and working capital of $4.1
million; however, as our management projects that under our current operating
plan, we will require approximately $15-17 million to fund our ongoing operating
expenses and working capital requirements for the next twelve months. We
anticipate that this will be funded through cash flow generated from operations,
working capital, potential employee rationalization beyond the completed
employee rationalization and external financing. On July 31, 2008 and October
28, 2008, our company issued 2,433,439 units and 97,402 units, respectively, at
a price of $1.50 (CDN$1.54) per unit for gross proceeds of $3,784,439
(CDN$3,897,497). Each unit consists of one share of common stock in the capital
of our company and one-half of one non-transferable common share purchase
warrant. Each warrant entitles the holder thereof to purchase one share of
common stock in the capital of our company for a

29

---

period of two years commencing from the date of grant at an
exercise price of US$2.25 per warrant share.

Operating Activities

Our
operating activities resulted in a net cash outflow of $6,493,475 for the six
months ended October 31, 2008. This compares with a net cash outflow of
$3,083,962 for the same period last year and represents a $3,409,513 increase in
cash outflows from operations compared to the same period last year. The net
cash outflow from operating activities for the six months ended October 31, 2008
was primarily a result of a net loss of $9,379,876 compared to a net loss of
$4,682,174 in the same period last year. Net cash used in operating activities
was primarily due to our net loss partially offset by non-cash charges including
stock-based compensation under SFAS 123R of $819,953, depreciation of $411,273,
and amortization of intangible assets of $1,055,644. Cash was used by a decrease
in accounts payable of $255,459 due to the payout of accrued legal and
professional fees. This use of cash was partially offset by cash provided by a
decrease in accounts receivable of $539,443 and receipt of investment tax
credits of $1,061,133.

Investing Activities

Investing
activities resulted in a net cash outflow of $75,547 for the six months ended
October 31, 2008 resulting primarily from a decrease in deposits and other
assets. This compares with a net cash inflow of $2,428,983 for the same period
last year which was resulted primarily from cash acquired on the acquisition of
NewHeights offset by purchases of equipment other assets consisting of costs
related to the NewHeights transaction. At October 31, 2008, we did not have any
material commitments for future capital expenditures.

Financing Activities

Financing
activities resulted in a net cash inflow of $3,752,835 for the six months ended
October 31, 2008 compared to a net cash inflow of $1,798,051 for the same period
last year. On July 31, 2008 and October 28, 2008, our company issued 2,433,439
units and 97,402 units, respectively, at a price of $1.50 (CDN$1.54) per unit
for gross proceeds of $3,784,439 (CDN$3,897,497). Each unit consists of one
share of common stock in the capital of our company and one-half of one
non-transferable common share purchase warrant. Each warrant entitles the holder
thereof to purchase one share of common stock in the capital of our company for
a period of two years commencing from the date of grant at an exercise price of
US$2.25 per warrant share.

We
intend to seek additional funding through public or private financings to fund
our operations through fiscal 2010 and beyond. However, if we are unable to
raise additional capital when required or on acceptable terms, or achieve cash
flow positive operations, we may have to significantly delay product development
and scale back operations both of which may affect our ability to continue as a
going concern.

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
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. The adoption of this
statement did not have an impact on our companys consolidated financial
statements.

In
February 2007, the FASB issued Statement of Financial Accounting Standards 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

30

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November 15, 2007. The adoption of this statement did not have
an impact on our companys consolidated financial statements.

In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
141 (revised 2007), Business Combinations("SFAS No. 141R"). This
standard replaces SFAS141 and establishes principles and requirements for an
acquirer recognizes and measures in its financial statement the identifiable
assets acquired and liabilities assumed, any non-controlling interest in the
acquiree, and the goodwill acquired. This standard also establishes disclosure
requirements which will enable users to evaluate the nature and financial
effects of the business combination. This standard is effective for financial
statements issued for fiscal years beginning after December 15, 2008. We are
currently evaluating the impact of this statement on our companys consolidated
financial statements.

In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
160, Non controlling Interests In Consolidated Financial Statements  an
amendment to ARB No.51 ("SFAS No. 160"). This standard Amends ARB 51 to
establish accounting and reporting standards for a non-controlling interest in a
subsidiary and for deconsolidation of a subsidiary. This standard applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. This standard may not be applied before that date. We are
currently evaluating the impact of this statement.

In
March 2008, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 161, Disclosures about Derivative
Instruments and Hedging Activities  an amendment of FASB Statement No. 133
(FAS 161). FAS 161 modifies existing requirements to include qualitative
disclosures regarding the objectives and strategies for using derivatives, fair
value amounts of gains and losses on derivative instruments and disclosures
about credit-risk-related contingent features in derivative agreements. The
pronouncement also requires the cross-referencing of derivative disclosures
within the financial statements and notes thereto. The adoption of FAS 161 will
not have an impact on our companys financial statements.

In
May 2008, the FASB issued Statement of Financial Accounting Standards No. 162,
The Hierarchy of Generally Accepted Accounting Principles (FAS 162). FAS 162
is effective 60 days following the SECs approval of the Public Company
Accounting Oversight Board Auditing amendments to AU Section, 411 The Meaning
of Present Fairly in Conformity with Generally Accepted Accounting Principles. The statement is intended to improve financial reporting by identifying a
consistent hierarchy for selecting accounting principles to be used in preparing
financial statements that are presented in conformity with U.S. generally
accepted accounting principles (GAAP). We have not completed our evaluation of
the effects, if any, that FAS 162 may have on our consolidated financial
position, results of operations and cash flows.

Item 4T. Controls and Procedures.

Disclosure Controls and Procedures

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

In
connection with this quarterly report, as required by Rule 13a-15 under the
Securities Exchange Act of 1934, we have carried out an evaluation of the
effectiveness of the design and operation of our company's disclosure controls
and procedures. This evaluation was carried out under the supervision and with
the participation of our company's management, including our company's Chief
Executive Officer and Chief Financial Officer. Based upon that evaluation, our
company's Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures are effective as at the end of the period
covered by this report.

31

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Changes in Internal Control Over Financial Reporting

During
  the quarter ended October 31, 2008 we added additional accounting staff in order
  to provide greater segregation of duties within our transaction processing system.
  In addition, we determined that greater segregation of duties amongst our existing
  administrative staff is feasible and implemented processes to segregate duties
  in various administrative functions effecting financial reporting. Aside from
  changes resulting from reassigning duties among staff, there were no other changes
  in our internal control over financial reporting.

PART II  OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

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

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

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.

32

---

If
we are unable to obtain financing in the amounts and on terms deemed acceptable
to us, our business and future success may be adversely affected and, as
indicated in the audit report included in our annual report on Form 10-KSB/A
filed on September 3, 2008, raise substantial doubt on our ability to continue
as a going concern. Our financial statements included in this Form 10-Q do not
include any adjustments to the recoverability and classification of recorded
asset amounts and classification of liabilities that might be necessary should
we be unable to continue as a going concern.

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.

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

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

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

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

-      result
in the loss of a substantial number of existing customers or prohibit the
acquisition of new customers;

-      cause
us to lose access to key distribution channels;

-     
result in substantial employee layoffs or risk the permanent loss of
highly-valued employees;

-      materially
and adversely affect our brand in the market place and cause a substantial loss
of goodwill;

-      cause
our stock price to decline significantly; and

-      lead
to the bankruptcy or liquidation of our company.

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

33

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

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

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

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

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

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

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

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

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

34

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

During
the year ended April 30, 2008, we completed the acquisition of NewHeights
Software Corporation, a private Canada corporation, FirstHand Technologies Inc.,
a private Ontario corporation, and BridgePort Networks, Inc., a private Delaware
corporation. The integration of the business of each respective company with our
business has been, and will continue to be, a time consuming and expensive
process. Any prolonged activity in respect of the integration of the acquired
businesses with our business could divert financial and other resources from our
planned operations, which could negatively affect our results of operations,
lower employee morale, and result in customers cancelling existing orders or
choosing not to place new ones. In addition, the combined operations of our
company and the acquired businesses may not achieve anticipated synergies or
other benefits. If the anticipated benefits of the combined operations are not
realized or do not meet the expectations of financial or industry analysts, the
market price of our common stock may decline.

Risks Associated with our Common Stock

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

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

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

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

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

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

In
addition to the penny stock rules described above, the FINRA has adopted rules
that require that in

35

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

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

On
August 20, 2008, we granted stock options to two consultants to purchase an
aggregate of 40,000 shares of our common stock at an exercise price of $1.80 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 August 20, 2008. We issued the stock
options to two 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.

On
October 28, 2008 we issued 97,402 units at a price of $1.50 (CDN$1.54) per unit
for gross proceeds of $124,059 (CDN$150,000). Each unit consists of one share of
common stock in the capital of our company and one-half of one non-transferable
common share purchase warrant. Each warrant entitles the holder thereof to
purchase one share of common stock in the capital of our company for a period of
two years commencing from October 28, 2008 at an exercise price of US$2.25 per
Warrant share. The 97,402 units were issued to one non-U.S. person (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.

We held
our annual and special meeting of shareholders on October 1, 2008 in Vancouver,
British Columbia, Canada. There were 28,355,236 common shares of our company,
and 369,841 series A exchangeable shares of our subsidiary, 6789722 Canada Inc.,
entitled to vote at the meeting, of which a total of 21,378,949 (74.43%) were
represented at the meeting either in person or by proxy.

Four
proposals were approved by the shareholders at the annual and special meeting.
The first resolution asked shareholders to elect Mark Bruk, Peter Charbonneau,
Chris Cooper, William Jin, Donovan Jones, Owen Matthews, Terence Matthews, Greg
Pelling and Larry Timlick as directors for a one-year term expiring on the day
of the 2009 annual meeting of shareholders.

DIRECTORS
    VOTES FOR
    VOTES WITHHELDMark Bruk
    21,367,823
    11,126Peter Charbonneau
    21,369,599
    9,350Chris Cooper
    21,369,599
    9,350William Jin
    21,366,939
    12,010Donovan Jones
    21,368,003
    10,946Owen Matthews
    21,369,503
    9,446Terence Matthews
    21,369,403
    9,546Greg Pelling
    21,369,599
    9,350Larry Timlick
    21,369,439
    9,510


36

---

The
second proposal asked shareholders to ratify the appointment of BDO Dunwoody
LLP, Chartered Accountants, as our independent registered public accounting firm
for the year ending April 30, 2009 and to authorize the board of directors to
fix the remuneration payable to the independent accountants.

PROPOSAL
    VOTES FOR
    VOTES AGAINST
    VOTES WITHHELDRatify appointment
    21,374,989
    n/a
    3,960Fix remuneration
    21,367,358
    11,591
    n/a


The
third proposal asked shareholders to confirm, ratify and approve the adoption of
the Employee Share Purchase Plan and to confirm, ratify and approve the increase
to the number of common shares that may be issued under the Employee Share
Purchase Plan from 1,000,000 to 1,500,000 common shares of our company.

PROPOSAL
    VOTES FOR
    VOTES AGAINSTApprove the Plan
    19,270,958
    16,118Approve the increase
    21,378,949
    nil


The
fourth proposal asked shareholders to approve Terence Matthews, the chairman of
the board of directors of our company, to vote certain common shares of our
company which were issued to Wesley Clover Corporation, a company controlled by
Mr. Matthews, pursuant to a non-brokered private placement of units which closed
on July 31, 2008.

PROPOSAL
    VOTES FOR
    VOTES AGAINSTApprove right to vote
    19,269,715
    17,361


Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibits required by Item 601 of Regulation S-B

|(3) | Articles of
      Incorporation and By-laws                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                 
|3.1 | Articles of Incorporation (incorporated by reference from
      our Registration Statement on Form SB-2 filed on July 16, 2003).
|    |                                                                                                                                 
|3.2 | Bylaws (incorporated by reference from our Registration
      Statement on Form SB-2 filed on July 16, 2003).                   
|    |                                                                                                                                 
|3.3 | Amended Bylaws (incorporated by reference from our
      Registration Statement on Form SB-2/A filed on September 3, 2003).     
|    |                                                                                                                                 
|3.4 | Articles of Merger (incorporated by reference from our
      Current Report on Form 8-K filed on September 15, 2005).           
|    |                                                                                                                                 
|3.5 | Amended Bylaws (incorporated by reference from our
      Current Report on Form 8-K filed on April 28, 2006).                   
|    |                                                                                                                                 
|3.6 | Amended Bylaws (incorporated by reference from our
      Current Report on Form 8-K filed on April 22, 2008).                   

37

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|(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).                                                                                                                                                          
|      |                                                                                                                                                                                                                                                                                                                     
|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  | 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).                                                                                                               
|      |                                                                                                                                                                                                                                                                                                                     
|10.2  | 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).                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                     
|10.3  | Employment Agreement between CounterPath Solutions, Inc.
      and David Karp dated September 11, 2006 (incorporated by reference from
      our Quarterly Report on Form 10-QSB filed on September 14, 2006).                                                                                                      
|      |                                                                                                                                                                                                                                                                                                                     
|10.4  | 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).                                                                                                            
|      |                                                                                                                                                                                                                                                                                                                     
|10.5  | 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).                                                                                                    
|      |                                                                                                                                                                                                                                                                                                                     
|10.6  | Form of Convertible Note dated November 30, 2006
      (incorporated by reference from our Current Report on Form 8-K filed on
      December 7, 2006).                                                                                                                                                             
|      |                                                                                                                                                                                                                                                                                                                     
|10.7  | Form of Warrant Certificate dated November 30, 2006
      (incorporated by reference from our Current Report on Form 8-K filed on
      December 7, 2006).                                                                                                                                                          
|      |                                                                                                                                                                                                                                                                                                                     
|10.8  | Amended Employment Agreement between Donovan Jones and
      CounterPath Solutions R&D Inc., a wholly owned subsidiary of
      CounterPath Solutions, Inc. dated February 1, 2007 (incorporated by
      reference from our Quarterly Report on Form 10QSB filed on March 9, 2007).                                
|      |                                                                                                                                                                                                                                                                                                                     
|10.9  | 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 10QSB filed on March 9, 2007).                                               
|      |                                                                                                                                                                                                                                                                                                                     
|10.10 | Arrangement Agreement among CounterPath Solutions, Inc.,
      6789722 CANADA INC., a wholly owned subsidiary of CounterPath Solutions,
      Inc. and NewHeights Software Corporation dated as of June 15, 2007
      (incorporated by reference from our Current Report on Form 8-K filed on
      June 18, 2007).

38

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|10.11 | 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
      8-K filed on June 18, 2007).                                                                         
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                           
|10.12 | Subscription Agreement between CounterPath Solutions, Inc
      and Wesley Clover dated as of June 15, 2007 (incorporated by reference
      from our Current Report on Form 8-K filed on June 18, 2007).                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                           
|10.13 | Amended Employment Agreement between Mark Bruk and
      CounterPath Solutions R&D Inc., a wholly owned subsidiary of
      CounterPath Solutions, Inc. dated July 24, 2007 (incorporated by reference
      from our Annual Report on Form 10-KSB/A filed on July 30, 2007).                                             
|      |                                                                                                                                                                                                                                                                                                                           
|10.14 | 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).                      
|      |                                                                                                                                                                                                                                                                                                                           
|10.15 | 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).
|      |                                                                                                                                                                                                                                                                                                                           
|10.16 | 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).                                                                                                
|      |                                                                                                                                                                                                                                                                                                                           
|10.17 | 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).                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                                           
|10.18 | 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).                                                                                                                   
|      |                                                                                                                                                                                                                                                                                                                           
|10.19 | 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).                                                                                                                            
|      |                                                                                                                                                                                                                                                                                                                           
|10.20 | 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).                                                  
|      |                                                                                                                                                                                                                                                                                                                           
|10.21 | 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).                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                           
|10.22 | Employment Agreement between Greg Pelling 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).                                       
|      |                                                                                                                                                                                                                                                                                                                           
|10.23 | 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).                        
|      |                                                                                                                                                                                                                                                                                                                           
|10.24 | Employment Agreement between Mark Bruk and CounterPath
      Corporation dated December 13, 2007 (incorporated by reference from our
      Quarterly Report on Form 10-QSB filed on December 17, 2007).                                                                                                                   
|      |                                                                                                                                                                                                                                                                                                                           
|10.25 | Share Exchange Agreement dated January 28, 2008 among
      CounterPath Corporation, FirstHand Technologies Inc. and certain
      shareholders of FirstHand Technologies Inc. (incorporated by reference
      from our Current Report on Form 8-K filed on January 29,
  2008).                                         

39

---

|10.26 | Escrow Agreement
        dated February 1, 2008 among CounterPath Corporation, FirstHand Technologies
        Inc. and certain shareholders of FirstHand Technologies Inc. (incorporated
        by reference from our Current Report on Form 8-K filed on February 5,
        2008).                                             
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                   
|10.27 | Agreement of
        Merger and Plan of Reorganization dated February 1, 2008 among our company,
        CounterPath Acquisition Corp., BridgePort Networks, Inc. and certain shareholders
        of BridgePort Networks, Inc. (incorporated by reference from our Current
        Report on Form 8-K filed on February 5, 2008).
|      |                                                                                                                                                                                                                                                                                                                                   
|10.28 | Form of Subscription
        Agreement dated July 31, 2008 between our company and various investors
        (incorporated by reference from our Quarterly Report on Form 10-QSB filed
        on September 15, 2008).                                                                                                            
|      |                                                                                                                                                                                                                                                                                                                                   
|10.29 | Form
        of Subscription Agreement dated October 28, 2008 between our company and
        an investor (filed herewith).                                                                                                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                                                   
|10.30 | Settlement
        Agreement amongst Greg Pelling, CounterPath Corporation, and CounterPath
        Technologies, Inc. dated October 31, 2008 (filed herewith).                                                                                                                                                                   
|      |                                                                                                                                                                                                                                                                                                                                   
|(14)  | Code of Ethics                                                                                                                                                                                                                                                                                                                    
|      |                                                                                                                                                                                                                                                                                                                                   
|14.1  | Code of Business
        Conduct and Ethics (incorporated by reference from our Annual Report on
        Form 10-KSB filed on July 29, 2004).                                                                                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                                   
|14.2  | Code of Business
        Conduct and Ethics and Compliance Program (incorporated by reference from
        our Quarterly Report on Form 10-QSB filed on September 15, 2008).                                                                                                                                                      
|      |                                                                                                                                                                                                                                                                                                                                   
|(21)  | **Subsidiaries
        of CounterPath Corporation**                                                                                                                                                                                                                                                                               
|      |                                                                                                                                                                                                                                                                                                                                   
|      | CounterPath
        Technologies Inc. (incorporated in the Province of British Columbia, Canada)                                                                                                                                                                                                                                  
|      |                                                                                                                                                                                                                                                                                                                                   
|      | 6789722 Canada
        Inc. (incorporated in Canada)                                                                                                                                                                                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                                   
|      | FirstHand Technologies
        Inc. (continued into the Province of British Columbia, Canada)                                                                                                                                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                                   
|      | BridgePort Networks,
        Inc. (incorporated in the state of Delaware)                                                                                                                                                                                                                                                         
|      |                                                                                                                                                                                                                                                                                                                                   
|      | BridgePort Networks
        (Europe) Ltd. (incorporated in the United Kingdom)                                                                                                                                                                                                                                                    
|      |                                                                                                                                                                                                                                                                                                                                   
|      | BridgePort Networks
        K.K. (incorporated in Japan)                                                                                                                                                                                                                                                                          
|      |                                                                                                                                                                                                                                                                                                                                   
|(31)  | Section 302
        Certification                                                                                                                                                                                                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                                   
|31.1  | Section
        302 Certification of Donovan Jones (filed herewith).                                                                                                                                                                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                                   
|31.2  | Section
        302 Certification of David Karp (filed herewith).                                                                                                                                                                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                                   
|(32)  | Section 906
        Certification                                                                                                                                                                                                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                                   
|32.1  | Section
        906 Certification of Donovan Jones (filed herewith).                                                                                                                                                                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                                   
|32.2  | Section
    906 Certification of David Karp (filed herewith).                                                                                                                                                                                                                                                                     

40

---

SIGNATURES

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

COUNTERPATH CORPORATION

|By: | /s/ Donovan Jones                                      | 
|--- | ------------------------------------------------------ | 
|    | Donovan Jones                                          | 
|    | President, Chief Executive
      Officer & Director    | 
|    | Date: December 15, 2008                                | 
|    |                                                        | 
|    |                                                        | 
|    | /s/ David Karp                                         | 
|    | David Karp                                             | 
|    | Chief Financial Officer,
      Treasurer and Secretary | 
|    | Date: December 15, 2008                                | 

41

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