---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q /AAmendment No.1

(Mark One)

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

For the quarterly period ended July 31, 2010

OR

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

For the transition period from ______________to
______________

Commission file number 000-50346

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

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

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

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

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

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

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

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

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

---

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practicable date: 33,115,451
shares of common stock issued and outstanding as of September 13, 2010.

2

---

EXPLANATORY NOTE

This amended quarterly report on
  Form 10-Q/A for the period ended July 31, 2010 discloses and discusses the
  impact and effect of a restatement of our previously filed financial statements
  as at July 31, 2010 and the related consolidated balance sheet as at July 31,
  2010 and the consolidated statements of operations and comprehensive loss,
  stockholders equity and cash flows for the quarters ended July 31, 2010 and
  2009 for the effects of a computational error in accounting for the foreign
  currency translation adjustments to our Canadian dollar denominated intangible
  assets, and an overstatement of accrued liabilities due to an overstatement of
  estimated cost of sales for certain third party software.

On December 3, 2010, we announced
  that following an internal review by our management, auditors and audit
  committee of our accounting for our intangible assets and certain accrued
  liabilities, we would restate our historical financial statements. Accordingly,
  management concluded, and our audit committee agreed, that our financial
  statements and all earnings press releases and similar communications issued by
  us relating to quarters ended July 31, 2010 and July 31, 2009 should no longer
  be relied upon.

As a result of the review, our
  company concluded that a computational error occurred in translating Canadian
  dollar denominated intangible assets to United States dollar denominated assets.
  Therefore, we are restating previously issued financial statements to properly
  record the period end amounts of intangible assets and accumulated other
  comprehensive loss  foreign currency translation adjustments and the related
  revision to the impairment of intangible assets charge taken in fiscal year 2009
  and related tax effects. These adjustments result in an increase in the net loss
  for the quarter ended July 31, 2010 of $2,832 (2009 - $1,475). These adjustments
  result in a decrease in comprehensive loss of $199,593 for the three months
  ended July 31, 2010 (2009 - decrease in comprehensive income of $682,699). The
  adjustments also result in a decrease in the carrying amount of intangible
  assets by $1,056,664 as at July 31, 2010. In addition, we recorded an increase
  of $358,439 in accumulated deficit as of July 31, 2010 and an increase of
  $698,225 in accumulated other comprehensive loss  foreign currency translation
  adjustments as of July 31, 2010 to reflect the cumulative effect of the error.
  This restatement has no effect on our reported taxes, cash flows or
  liquidity.

In addition, the Company
  determined through its recent investigation that it overstated the accrual of
  its estimated royalty costs for certain third party software. Therefore, we are
  restating previously issued financial statements to reverse the overstated
  amount of the cost of sales and the accrued liabilities. These adjustments
  result in a decrease in net loss for the quarter ended July 31, 2009 of $18,482.
  In addition we recorded a decrease of $354,309 in accumulated deficit as of
  July31, 2010 to reflect the cumulative effect of the error. This restatement has
  no effect on our reported taxes, cash flows or liquidity

These combined changes did not
  affect our basic and diluted loss per share for the quarters ended July 31, 2010
  and July 31, 2009. The combined effect of the restated figures on our companys
  consolidated balance sheet as of July 31, 2010 is a decrease in intangible
  assets of $1,056,664, a decrease in accounts payable and accrued liabilities of
  $354,309, an increase in accumulated deficit of $4,130 and an increase in
  accumulated other comprehensive loss  currency translation adjustment of
  $698,225.

This amended quarterly report on
  Form 10-Q/A for the quarter ended July 31, 2010 amends and restates only those
  items of the previously filed annual report on Form 10-Q for the quarter ended
  July31, 2010 which have been affected by the restatement. In order to preserve
  the nature and character of the disclosures set forth in such items as
  originally filed, no attempt has been made in this amendment (i) to modify or
  update such disclosures except as required to reflect the effects of the
  restatement or (ii) to make revisions to the Notes to the Consolidated Financial
  Statements except for those which are required by or result from the effects of
  the restatement. For additional information regarding the restatement, see Note
  12 to our Interim Unaudited Consolidated Financial Statements included in Part I
  - Item 1. No other information contained in our previously filed Form 10-Q for
  the quarter ended July 31, 2010 has been updated or amended.

3

---

COUNTERPATH CORPORATIONJULY 31, 2010 QUARTERLY
REPORT ON FORM 10-Q /A

INDEX

|               |                                                                                              | Page
|-------------- | -------------------------------------------------------------------------------------------- | ----
|               | Part I                                                                                       |     
|Item
      1.  | Financial
      Statements.                                                                  | 5   
|               |                                                                                              |     
|Item
      2.  | Managements
      Discussion and Analysis of Financial Condition and Results of Operations. | 26  
|               |                                                                                              |     
|Item
      4T. | Controls
      and Procedures.                                                               | 37  
|               | Part II                                                                                      |     
|Item
      1.  | Legal
      Proceedings.                                                                     | 39  
|               |                                                                                              |     
|Item
      1A. | Risk
      Factors.                                                                          | 39  
|               |                                                                                              |     
|Item
      2.  | Unregistered
      Sales of Equity Securities and Use of Proceeds.                           | 44  
|               |                                                                                              |     
|Item
      3.  | Defaults
      Upon Senior Securities.                                                       | 44  
|               |                                                                                              |     
|Item
      4.  | Removed
      and Reserved.                                                                  | 44  
|               |                                                                                              |     
|Item
      5.  | Other
      Information.                                                                     | 44  
|               |                                                                                              |     
|Item
      6.  | Exhibits.                                                                                    | 44  

4

---

PART I

Item 1. Financial Statements.

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

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

|COUNTERPATH CORPORATION                           
|--------------------------------------------------
|INDEX TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|July 31, 2010                                     
|(Unaudited)                                       
|(Stated in U.S. Dollars)                          

|                                                                           | Page         
|-------------------------------------------------------------------------- | -------------
|                                                                           |              
|Interim
      Consolidated Balance Sheets                                  | 6            
|                                                                           |              
|Interim
      Consolidated Statements of Operations and Comprehensive Loss | 7            
|                                                                           |              
|Interim
      Consolidated Statements of Cash Flows                        | 8            
|                                                                           |              
|Interim
      Consolidated Statements of Changes in Stockholders Equity   | 9            
|                                                                           |              
|Notes
      to the Interim Consolidated Financial Statements               | 10
      - 25

5

---

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

|                                                                                                                                               |   | July 31,           |   |   | April 30,          |  
|---------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------------ | - | - | ------------------ | -
|                                                                                                                                               |   | 2010               |   |   | 2010               |  
|                                                                                                                                               |   | Restated  Note 12 |   |   | Restated  Note 12 |  
|Assets                                                                                                                                         |   | (Unaudited)        |   |   |                    |  
|Current assets:                                                                                                                                |   |                    |   |   |                    |  
|Cash                                                                                                                                           | $ | 1,209,989          |   | $ | 1,556,813          |  
|Accounts receivable
      (net of allowance for doubtful accounts of
      
                 
      $1,111,698 and $1,116,119, respectively)   |   | 2,458,703          |   |   | 2,345,633          |  
|Investment tax
      credits recoverable                                                                                                       |   | 125,970            |   |   | 129,285            |  
|Other current assets                                                                                                                           |   | 140,333            |   |   | 221,041            |  
|Total current assets                                                                                                                           |   | 3,934,995          |   |   | 4,252,772          |  
|                                                                                                                                               |   |                    |   |   |                    |  
|Deposits                                                                                                                                       |   | 99,972             |   |   | 101,994            |  
|Equipment                                                                                                                                      |   | 115,979            |   |   | 111,150            |  
|Intangible assets (net of
      accumulated amortization of $4,458,366 and
      
                 
      $4,249,894 respectively)  Note 2(e) |   | 1,426,029          |   |   | 1,674,359          |  
|Goodwill  Note 2(e)                                                                                                                           |   | 8,515,922          |   |   | 8,740,025          |  
|Other assets                                                                                                                                   |   | 53,434             |   |   | 58,817             |  
|Total Assets                                                                                                                                   | $ | 14,146,331         |   | $ | 14,939,117         |  
|                                                                                                                                               |   |                    |   |   |                    |  
|Liabilities and Stockholders Equity                                                                                                           |   |                    |   |   |                    |  
|Current liabilities:                                                                                                                           |   |                    |   |   |                    |  
|Accounts payable and accrued
      liabilities                                                                                                 | $ | 2,150,671          |   | $ | 2,313,688          |  
|Unearned revenue                                                                                                                               |   | 726,348            |   |   | 655,361            |  
|Customer deposits                                                                                                                              |   | 2,018              |   |   | 5,127              |  
|Accrued warranty                                                                                                                               |   | 126,811            |   |   | 120,963            |  
|Total current
      liabilities                                                                                                                |   | 3,005,848          |   |   | 3,095,139          |  
|                                                                                                                                               |   |                    |   |   |                    |  
|Deferred lease inducements                                                                                                                     |   | 3,987              |   |   | 4,677              |  
|Convertible debentures  Note
      4                                                                                                          |   | 483,300            |   |   |                   |  
|Unrecognized tax benefit                                                                                                                       |   | 98,575             |   |   | 98,575             |  
|Total
      liabilities                                                                                                                        |   | 3,591,710          |   |   | 3,198,391          |  
|                                                                                                                                               |   |                    |   |   |                    |  
|Stockholders equity:                                                                                                                          |   |                    |   |   |                    |  
|Preferred stock, $0.001 par value                                                                                                              |   |                    |   |   |                    |  
|Authorized:
      100,000,000                                                                                                                  |   |                    |   |   |                    |  
|Issued and outstanding: July 31,
      2010  1; April 30, 2010  1                                                                            |   |                   |   |   |                   |  
|Common stock, $0.001 par value
       Note 6                                                                                                  |   |                    |   |   |                    |  
|Authorized: 83,076,900                                                                                                                         |   |                    |   |   |                    |  
|Issued
      and outstanding:                                                                                                                  |   |                    |   |   |                    |  
|July 31, 2010
      33,088,375; April 30, 2010  33,015,627                                                                                   |   | 33,088             |   |   | 33,016             |  
|Additional paid-in capital                                                                                                                     |   | 52,363,560         |   |   | 51,902,471         |  
|Accumulated deficit                                                                                                                            |   | (41,211,336        | ) |   | (39,781,079        | )
|Accumulated other comprehensive loss 
      currency translation adjustment                                                                   |   | (630,691           | ) |   | (413,682           | )
|Total
      stockholders equity                                                                                                               |   | 10,554,621         |   |   | 11,740,726         |  
|Liabilities and Stockholders Equity                                                                                                           | $ | 14,146,331         |   | $ | 14,939,117         |  

Going concern  Note 2 Commitments and contingent liability
 Notes 8 and 9

See accompanying notes to the consolidated financial
statements

6

---

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

|                                                                                                                                                                                                                                         |   | Three Months Ended |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------------ | -
|                                                                                                                                                                                                                                         |   | July 31,           |  
|                                                                                                                                                                                                                                         |   | 2010               |  
|                                                                                                                                                                                                                                         |   | Restated Note 12   |  
|Revenue  Note 7:                                                                                                                                                                                                                        |   |                    |  
|Software                                                                                                                                                                                                                                 | $ | 1,819,152          |  
|Service                                                                                                                                                                                                                                  |   | 400,433            |  
|Total revenue                                                                                                                                                                                                                            |   | 2,219,585          |  
|Operating expenses:                                                                                                                                                                                                                      |   |                    |  
|Cost of sales (includes
      depreciation of $3,994 and $2,121 and 
         amortization of
      intangible assets of $208,473 and $207,447    for three
      months ended July 31, 2010 and 2009 respectively     Note
      2(e)) |   | 748,862            |  
|Sales and marketing                                                                                                                                                                                                                      |   | 865,683            |  
|Research and development                                                                                                                                                                                                                 |   | 1,063,647          |  
|General and administrative                                                                                                                                                                                                               |   | 995,462            |  
|Restructuring costs  Note 10                                                                                                                                                                                                            |   |                   |  
|Total
      operating expenses                                                                                                                                                                                                           |   | 3,673,654          |  
|Loss from operations                                                                                                                                                                                                                     |   | (1,454,069         | )
|Interest and other income (expense), net:                                                                                                                                                                                                |   |                    |  
|Interest income                                                                                                                                                                                                                          |   | 52,079             |  
|Interest expense                                                                                                                                                                                                                         |   | (221               | )
|Foreign exchange loss                                                                                                                                                                                                                    |   | (28,046            | )
|Net loss for the period                                                                                                                                                                                                                  | $ | (1,430,257         | )
|Other comprehensive income (loss):                                                                                                                                                                                                       |   |                    |  
|Foreign currency translation adjustments                                                                                                                                                                                                 |   | (217,009           | )
|Comprehensive income (loss)                                                                                                                                                                                                              | $ | (1,647,266         | )
|Net loss per share:                                                                                                                                                                                                                      |   |                    |  
|Basic and diluted                                                                                                                                                                                                                        | $ | (0.04              | )
|                                                                                                                                                                                                                                         |   |                    |  
|Weighted average common shares
      outstanding:                                                                                                                                                                                        |   | 33,066,204         |  

See accompanying notes to the consolidated financial
statements

7

---

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

|                                                                                            |   | Three Months Ended |  
|------------------------------------------------------------------------------------------- | - | ------------------ | -
|                                                                                            |   | July 31,           |  
|                                                                                            |   | 2010               |  
|                                                                                            |   | Restated - Note 12 |  
|Cash flows from operating activities:                                                       |   |                    |  
|Net loss for the
      period                                                               | $ | (1,430,257         | )
|Adjustments to reconcile net loss
      to net cash used in 
         operating activities: |   |                    |  
|Depreciation and amortization                                                               |   | 34,509             |  
|Amortization of
      intangible assets                                                     |   | 208,473            |  
|Stock-based compensation  Note 6                                                           |   | 300,485            |  
|Share purchase
      warrants  Note 6                                                      |   | 136,934            |  
|Shares issued as part of share purchase plan                                                |   | 7,941              |  
|Foreign exchange
      loss                                                                 |   | 28,046             |  
|Changes in assets and
      liabilities:                                                    |   |                    |  
|Accounts
      receivable                                                                   |   | (116,599           | )
|Other current assets                                                                        |   | 78,323             |  
|Decrease in other
      assets                                                              |   | (7,117             | )
|Accounts payable and accrued liabilities                                                    |   | (132,963           | )
|Unearned revenue                                                                            |   | 70,987             |  
|Customer deposits                                                                           |   | (3,109             | )
|Accrued warranty                                                                            |   | 5,848              |  
|Net cash used in operating activities                                                       |   | (818,499           | )
|                                                                                            |   |                    |  
|Cash flows from investing
      activities:                                                 |   |                    |  
|Purchase of equipment                                                                       |   | (28,457            | )
|Deposits                                                                                    |   | 661                |  
|Net cash used in investing activities                                                       |   | (27,796            | )
|                                                                                            |   |                    |  
|Cash flows from financing activities:                                                       |   |                    |  
|Common stock issued, net of
      transaction costs                                         |   | 15,802             |  
|Convertible debentures issued                                                               |   | 483,300            |  
|Net cash provided by financing activities                                                   |   | 499,102            |  
|                                                                                            |   |                    |  
|Foreign exchange effect on cash                                                             |   | 369                |  
|                                                                                            |   |                    |  
|Decrease in cash                                                                            |   | (346,824           | )
|                                                                                            |   |                    |  
|Cash, beginning of the period                                                               |   | 1,556,813          |  
|Cash, end of the period                                                                     | $ | 1,209,989          |  
|                                                                                            |   |                    |  
|Supplemental disclosure of cash flow information                                            |   |                    |  
|Cash paid for:                                                                              |   |                    |  
|Interest                                                                                    | $ | 221                |  
|Taxes                                                                                       |   |                   |  
|Non cash
      transactions  Note 5                                                        |   |                    |  

See accompanying notes to the consolidated financial
statements

8

---

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

|                                                       |  | Common shares |  |   | Preferred Shares |  |  |        |  |   |                 |  |   |            |   |   |                    |  
|------------------------------------------------------ |  | ------------- |  | - | ---------------- |  |  | ------ |  | - | --------------- |  | - | ---------- | - | - | ------------------ | -
|                                                       |  |               |  |   |                  |  |  |        |  |   |                 |  |   |            |   |   |                    |  
|                                                       |  |               |  |   |                  |  |  |        |  |   |                 |  |   |            |   |   |                    |  
|                                                       |  |               |  |   |                  |  |  |        |  |   |                 |  |   |            |   |   |                    |  
|                                                       |  | Number        |  |   |                  |  |  | Number |  |   |                 |  |   | Additional |   |   | Accumulated        |  
|                                                       |  | of            |  |   |                  |  |  | of     |  |   |                 |  |   | Paid-in    |   |   | Deficit            |  
|                                                       |  | Shares        |  |   | Par
      Value  |  |  | Shares |  |   | Par
      Value |  |   | Capital    |   |   | Restated - Note 12 |  
|Balance, May 1, 2010                                   |  | 33,015,627    |  | $ | 33,016           |  |  | 1      |  | $ |                |  | $ | 51,902,471 |   | $ | (39,781,079        | )
|                                                       |  |               |  |   |                  |  |  |        |  |   |                 |  |   |            |   |   |                    |  
|Shares issued:                                         |  |               |  |   |                  |  |  |        |  |   |                 |  |   |            |   |   |                    |  
|Employee share purchase plan                           |  | 22,748        |  |   | 22               |  |  | −      |  |   | −               |  |   | 23,720     |   |   | −                  |  
|Exchange of subsidiary
      preferred shares  Note 6 |  | 50,000        |  |   | 50               |  |  |       |  |   |                |  |   | (50        | ) |   |                   |  
|Stock-based compensation  Note 6                      |  |              |  |   |                 |  |  |       |  |   |                |  |   | 300,485    |   |   |                   |  
|Share purchase warrants 
      Note 6                 |  |              |  |   |                 |  |  |       |  |   |                |  |   | 136,934    |   |   |                   |  
|Net loss for the period                                |  |              |  |   |                 |  |  |       |  |   |                |  |   |           |   |   | (1,430,257         | )
|Foreign currency translation
      adjustment          |  |              |  |   |                 |  |  |       |  |   |                |  |   |           |   |   |                   |  
|Balance, July 31, 2010 (Unaudited)                     |  | 33,088,375    |  | $ | 33,088           |  |  | 1      |  | $ |                |  | $ | 52,363,560 |   | $ | (41,211,336        | )

See accompanying notes to the consolidated financial
statements

9

---

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

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

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

On August 2, 2007, the Company
acquired of all of the shares of NewHeights Software Corporation (NewHeights)
through the issuance of 7,680,168 shares of the Companys common stock and
369,836 preferred shares issued from a subsidiary of the Company that are
exchangeable into 369,836 shares of common stock of the Company. For accounting
purposes, the Company was deemed to be the acquirer of NewHeights based on
certain factors including the number of common shares issued in the transaction
as a proportion of the total common shares outstanding, and the composition of
the board after the transaction.

On February 1, 2008, the Company
acquired FirstHand Technologies Inc. (FirstHand), a private Ontario, Canada
corporation, through the issuance of 5,900,014 shares of the Companys common
stock. For accounting purposes, the Company was deemed to be the acquirer of
FirstHand based on certain factors including the number of common shares issued
in the transaction as a proportion of the total common shares outstanding, and
the composition of the board after the transaction.

On February 1, 2008, the Company
acquired BridgePort Networks, Inc. (BridgePort), a private Delaware
corporation, by way of merger in consideration for the assumption of all of the
assets and liabilities of BridgePort. For accounting purposes, the Company was
deemed to be the acquirer of BridgePort based on certain factors primarily being
the composition of the board after the transaction.

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

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

The Company focuses on the design,
development, marketing and sales of desktop and mobile communications
application software, gateway (server) software and related professional
services, such as pre and post sales technical support and customization
services. The Companys products are sold into the Voice over Internet Protocol
(VoIP) market primarily to carriers, original equipment manufacturers and
businesses in North America, Central and South America, Europe and Asia.

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

These interim consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles in the United States of America and are stated in U.S. dollars except
where otherwise disclosed. Because a precise determination of many assets and
liabilities is dependent upon future events, the preparation of financial
statements for the period necessarily involves the use of estimates, which have
been made using careful judgment. Actual results may vary from these estimates.

10

---

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

|Note 2 | Significant Accounting Policies and Going
      Concern - (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | These interim consolidated financial statements
      have been prepared on a going concern basis, which implies the Company
      will continue to realize its assets and discharge its liabilities and
      commitments in the normal course of business. The continuation of the
      Company as a going concern is dependent upon the continued financial
      support from its stockholders, the ability of the Company to obtain
      necessary equity financing to continue operations and to generate
      sustainable significant revenue. There is no guarantee that the Company
      will be able to raise any equity financing or generate profitable
      operations. As at July 31, 2010, the Company has not yet achieved
      profitable operations and had an accumulated deficit of $41,211,336 since
      incorporation. These factors raise substantial doubt regarding the
      Companys ability to continue as a going concern.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | Under its current operating plan the Company
      will require approximately $11-$13 million to fund ongoing operations and
      working capital requirements through July 31, 2011. Management is
      implementing a plan to address these uncertainties to enable the Company
      to continue as a going concern through the end of fiscal 2011 and beyond.
      This plan includes new equity financing in amounts sufficient to sustain
      operations, such as the private placement discussed in Note 4, and to
      increase revenues and decrease costs from operations.                                                                                                                                                                                                                                                                                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | Realizable values may be substantially
      different from carrying values as shown in these financial statements
      should the Company be unable to continue as a going concern. These
      financial statements do not include any adjustments to the recoverability
      and classification of recorded asset amounts and classification of
      liabilities that might be necessary should the Company be unable to
      continue as a going concern. The consolidated financial statements have
      been properly prepared within the framework of the significant accounting
      policies as follows:                                                                                                                                                                                                                                                                                                                                         

| | a) | Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | These consolidated financial statements include the
      accounts of the Company and its wholly-owned subsidiaries, CounterPath
      Technologies Inc., a company existing under the laws of the province of
      British Columbia, Canada, FirstHand Technologies Inc., continued under
      laws of the province of British Columbia, BridgePort Networks, Inc.
      incorporated under the laws of the state of Delaware and 6789722 Canada
      Inc., incorporated under the Canada Business Corporations Act. The results
      of NewHeights Software Corporation (which subsequently merged with another
      subsidiary to become CounterPath Technologies Inc.) are included from
      August 2, 2007, the date of acquisition. The results of FirstHand
      Technologies Inc. and BridgePort Networks, Inc. are included from February
      1, 2008, the date of acquisition. All inter-company transactions and
      balances have been eliminated.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | b) | Interim Reporting                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | The information presented in the accompanying interim
      consolidated financial statements is without audit pursuant to the rules
      and regulations of the Securities and Exchange Commission. Certain
      information and footnote disclosures normally included in the financial
      statements prepared in accordance with generally accepted accounting
      principles have been condensed or omitted pursuant to such rules and
      regulations, although the Company believes that the disclosures are
      adequate to make the information presented not misleading.                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | These statements reflect all adjustments, which are, in
      the opinion of management, necessary to present fairly the financial
      position, results of operations and cash flows for the interim periods
      presented in accordance with accounting principles generally accepted in
      the United States of America. Except where noted, these interim financial
      statements follow the same accounting policies and methods of their
      application as the Companys April 30, 2010 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, 2010 annual consolidated financial
      statements.                                                                                                                                                                                 

11

---

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

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

| | b) | Interim Reporting  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | Operating results for the three months ended July 31,
      2010 are not necessarily indicative of the results that can be expected
      for the year ending April 30, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | c) | New Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | The Company has evaluated subsequent events as at
      September 13, 2010 for potential recognition and disclosure in the
      financial statements. This date represents the date the financial
      statements are available to be issued.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | In October 2009, the FASB issued Accounting Standards
      Update (ASU) No. 2009-13, Multiple- Deliverable Revenue Arrangements a
      consensus of the FASB Emerging Issues Task Force, (ASU 2009- 13). ASU
      2009-13 addresses the accounting for multiple-deliverable arrangements and
      requires that the overall arrangement consideration be allocated to each
      deliverable in a revenue arrangement based on an estimated selling price
      when vendor specific objective evidence or third-party evidence of fair
      value is not available. This guidance also eliminates the residual method
      of allocation and requires that arrangement consideration be allocated to
      all deliverables using the relative selling price method. This will result
      in more revenue arrangements being separated into separate units of
      accounting. ASU 2009-13 is effective for fiscal years beginning on or
      after June 15, 2010. Companies can elect to apply this guidance (1)
      prospectively to new or materially modified arrangements after the
      effective date or (2) retrospectively for all periods presented. The
      Company is currently assessing the impact of adoption of ASU 2009-13 and
      does not currently plan to early adopt.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | In October 2009, the FASB issued ASU No. 2009-14,
      Certain Revenue Arrangements That Include Software Elements, (ASU
      2009-14). ASU 2009-14 changes the accounting model for revenue
      arrangements that include both tangible products and software elements.
      Tangible products containing both software and non-software components
      that function together to deliver the products essential functionality
      will no longer be within the scope of ASC 985-605 Software Revenue
      Recognition (ASC 985-605). The entire product (including the software
      and non-software deliverables) will therefore be accounted for under
      accounting literature found in ASC 605. ASU 2009-14 is effective for
      fiscal years beginning on or after June 15, 2010. Companies can elect to
      apply this guidance (1) prospectively to new or materially modified
      arrangements after the effective date or (2) retrospectively for all
      periods presented. The Company is currently assessing the impact of
      adoption of ASU 2009-14 and does not currently plan to early
  adopt.                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | In January 2010, the FASB issued ASU 2010-06,
      Improving Disclosures about Fair Value Measurements,which is
      included in the ASC in Topic 820 (Fair Value Measurements and
      Disclosures). ASU 2010-06 requires new disclosures on the amount and
      reason for transfers in and out of Level 1 and 2 fair value measurements.
      ASU 2010-06 also requires disclosure of activities, including purchases,
      sales, issuances, and settlements within the Level 3 fair value
      measurements and clarifies existing disclosure requirements on levels of
      disaggregation and disclosures about inputs and valuation techniques. ASU
      2010-06 is effective for interim and annual reporting periods beginning
      after December 15, 2009. The Company is currently assessing the impact of
      adoption of ASU 2009-14 and does not currently plan to early
  adopt.                                                                                                                                                                                                                                                                                                                                                                                                      

12

---

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

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

| | d) | Derivative Instruments and Hedging
    Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | ASC 815: The Company adopted the provisions of Statement
      of Financial Accounting Standards No. 161, Disclosures about Derivative
      Instruments and Hedging Activities  an amendment of FASB Statement No.
      133 (SFAS 161), effective at the beginning of the first quarter of
      fiscal year 2010. SFAS No. 161 was incorporated into ASC 815,
      Derivatives and Hedging(ASC 815). ASC 815 expands financial
      reporting about derivative instruments and hedging activities by requiring
      enhanced disclosures to enable investors to better understand their
      effects on an entitys financial position, results of operations and cash
      flows. ASC 815 also requires qualitative disclosures about objectives and
      strategies for using derivatives, quantitative disclosures about fair
      value amounts of gains and losses on derivative instruments, and
      disclosures about credit-risk-related contingent features in derivative
      agreements. Because ASC 815 only requires additional disclosure, the
      adoption of ASC 815 did not impact the Companys financial position,
      results of operations, and cash flows (see Note 11, Derivative
      Instruments and Hedging Activities, of the Notes to Interim Consolidated
      Financial Statements).
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | e) | Goodwill and Intangible Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | Goodwill represents the excess purchase price over the
      estimated fair value of net assets acquired as of the acquisition date.
      Statement of Financial Accounting Standards ASC 350, Goodwill and Other
      Intangible Assets (SFAS ASC 350) ASC 350 requires goodwill to be tested
      for impairment annually or more frequently if an event occurs or
      circumstances change that would more likely than not reduce the fair value
      of the Company's business enterprise below its carrying value. The
      impairment test requires management to estimate the fair value of the
      Company's overall business enterprise down to the reporting unit level
      which is CounterPath Corporation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | 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 July 31, 2010 was $6,497,094
      (CDN$6,704,947) (April 30, 2010-$6,668,070) and $2,018,828 (CDN$2,083,752)
      (April 30, 2010-$2,071,956), respectively. Management will perform its
      annual impairment test in its fiscal fourth quarter. No impairment charges
      were recorded for the three months ended July 31, 2010 and 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | The Company also evaluates goodwill for impairment
      whenever events or changes in circumstances indicate that the carrying
      amount may not be recoverable. These events or circumstances could include
      a significant change in the business climate, legal factors, operating
      performance indicators, competition, or sale or disposition of a
      significant portion of a reporting unit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | Recoverability of goodwill is measured at the reporting
      unit level by comparing the reporting units carrying amount, including
      goodwill, to the fair value of the reporting unit, which is measured based
      upon, among other factors, market multiples for comparable companies as
      well as a discounted cash flow analysis. Reporting units represent
      components of the Company for which discrete financial information is
      available that is regularly reviewed by management. Management has
      determined that the Company currently has one reporting unit. If the
      recorded value of the assets, including goodwill, and liabilities (net
      book value) of the reporting unit exceeds its fair value, an impairment
      loss may be required.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | In accordance with Financial Accounting Standards Board
      (FASB) Statement of Financial Accounting Standards ASC 360, Accounting
      for the Impairment or Disposal of Long-Lived Assets, the carrying value
      of intangible assets and other long-lived assets are reviewed on a regular
      basis for the existence of facts or circumstances that may suggest
      impairment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

13

---

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

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

| | e) | Goodwill and Intangible Assets 
(contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | The Company recognizes impairment when the sum of the
      expected undiscounted future cash flows is less than the carrying amount
      of the asset. Impairment losses, if any, are measured as the excess of the
      carrying amount of the asset over its estimated fair value.                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | Intangible assets include the intangibles purchased in
      connection with the acquisition of NewHeights Software Corporation on
      August 2, 2007 and FirstHand Technologies Inc. and BridgePort Networks,
      Inc. on February 1, 2008.                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | The intangible assets of NewHeights are reported at
      acquisition cost and include amounts initially allocated to acquired
      technologies of $3,454,839 (CDN$3,678,100) and customer asset of
      $2,283,908 (CDN$2,431,500). The acquired technologies are amortized based
      on their estimated useful life of four years and the customer asset is
      amortized on the basis of Managements estimate of the future cash flows
      from this asset over approximately five years, which is Managements
      estimate of the useful life of the customer asset.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | The intangible assets of FirstHand are reported at
      acquisition cost and include amounts initially allocated to acquired
      technologies of $2,804,700 (CDN$2,804,700) and customer asset of $587,000
      (CDN$587,000). The acquired technologies are amortized based on their
      estimated useful life of four years and the customer asset is amortized on
      the basis of Managements estimate of the future cash flows from this
      asset over approximately five years, which is Managements estimate of the
      useful life of the customer asset.     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | The intangible assets of BridgePort are being carried and
      reported at acquisition cost and include amounts initially allocated to
      acquired technologies of $476,703 and customer asset of $43,594.                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | The acquired technologies are amortized based on their
      estimated useful life of four years and the customer asset is amortized on
      the basis of Managements estimate of the future cash flows from this
      asset over approximately five years, which is Managements estimate of the
      useful life of the customer asset.                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | A summary of the Companys intangible assets, net, at
      July 31, 2010 is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

| |                       |   |                    |  |   |                    |  |   | Accumulated        |  |   |                    | 
| | --------------------- | - | ------------------ |  | - | ------------------ |  | - | ------------------ |  | - | ------------------ | 
| |                       |   |                    |  |   | Accumulated        |  |   | Impairment         |  |   | Net Carrying       | 
| |                       |   | Cost               |  |   | Amortization       |  |   | Charge             |  |   | Amount             | 
| |                       |   | Restated  Note 12 |  |   | Restated  Note 12 |  |   | Restated  Note 12 |  |   | Restated  Note 12 | 
| | Acquired technologies | $ | 6,280,151          |  | $ | 3,534,196          |  | $ | 1,888,658          |  | $ | 857,297            | 
| | Customer assets       |   | 2,708,930          |  |   | 924,170            |  |   | 1,216,028          |  |   | 568,732            | 
| | Intangible assets     | $ | 8,989,081          |  | $ | 4,458,366          |  | $ | 3,104,686          |  | $ | 1,426,029          | 

14

---

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

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

The Companys Chairman is the Chairman
and founding shareholder of Mitel Networks Corporation (Mitel). On July 31,
2008 the Company entered into a source code license agreement whereby the
Company licensed to Mitel the source code for the Your Assistant product in
consideration of a payment of $650,000. Associated with the agreement are
ongoing license fees to be paid by Mitel of $13.50 per copy deployed, declining
to $9.00 per copy deployed after two years and declining from $9.00 to nil after
four years. In addition, the agreement provides Mitel with a first right to
match any third party offer to purchase the source code software and related
intellectual property. The Companys software license revenue for the three
months ended July 31, 2010, pursuant to the terms of these agreements, was
$152,745 (2009 - $134,238), respectively. As at July 31, 2010, the Company had
an accounts receivable balance from Mitel of $176,162 (April 30, 2010 -
$170,802).

During the three months ended July 31,
2010, the Company through its wholly owned subsidiary, FirstHand Technologies
Inc., paid $19,365 (2009 - $18,404) to Kanata Research Park Corporation (KRP)
for leased office space. KRP is controlled by the Companys Chairman.

In connection with a non-brokered
private placement of 3,333,334 units which closed on October 29, 2009, Wesley
Clover Corporation, a company controlled by the Chairman of the Company,
purchased 1,666,667 units, at a price of $0.56 (CDN$0.60) per unit, for
aggregate proceeds of $933,881 (CDN$1,000,000). Each unit consisted of one share
of common stock and one-half of one non-transferable common share purchase
warrant. Each whole warrant entitles the holder to purchase one share of common
stock at a price of $0.90 for a period of two years from the closing of the
private placement.

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

|Note 4 | Convertible Debentures
|------ | ----------------------

On July 30, 2010, the Company
completed the issuance of a convertible debenture in the principal amount of
$483,300 to a company controlled by the spouse of a significant shareholder of
the Company. The convertible debenture is unsecured, bearing interest at the
prime bank rate as quoted by the Bank of Montreal with interest payable monthly
and maturing on July 30, 2012. The debenture is convertible by the holder, at
any time prior to maturity, in whole or in part into common shares of the
Company at a conversion price of $1.00 per share. The convertible debenture may
all be prepaid in whole or in part by the Company by paying 105% of the
principal to be prepaid together with accrued and unpaid interest on or before
July 30, 2011, or by paying 102.5% of the principal to be prepaid together with
accrued and unpaid interest between July 31, 2011 and April 30, 2012.

|Note 5 | Exchangeable Shares
|------ | -------------------

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

On April 27, 2010, the Company issued
4,424 shares of common stock pursuant to a holder of 4,424 shares of
exchangeable preferred shares of its subsidiary 6789722 Canada Inc. exercising
their exchange rights. On May 14, 2010, 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.

15

---

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

|Note 5 | Exchangeable Shares  (contd)
|------ | ------------------------------

There were 10,871 outstanding
exchangeable shares as of July 31, 2010 (April 30, 2009  60,871). 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 6 | 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.

Stock Options

The Company has a stock option plan
under which options to purchase common shares of the Company may be granted to
employees, directors and consultants. Stock options entitle the holder to
purchase common stock at a subscription price determined by the Board of
Directors of the Company at the time of the grant. The options generally vest in
the amount of 12.5% on the date which is six months from the date of grant and
then beginning in the seventh month at 1/42 per month for 42 months, at which
time the options are fully vested.

The maximum number of shares of common
stock authorized by the stockholders and reserved for issuance by the Board of
Directors of the Company under the stock option plans are 800,000 under the 2004
Stock option plan and 5,060,000 under the 2005 Stock option plan.

The Company has elected to use the
Black-Scholes option pricing model to determine the fair value of stock options
granted. In accordance with ASC 718 for employees, the compensation expense is
amortized on a straight-line basis over the requisite service period which
approximates the vesting period. Compensation expense for stock options granted
to non-employees is amortized over the vesting period or, if none exists, over
the service period. Compensation associated with unvested options granted to
non-employees is remeasured on each balance sheet date using the Black-Scholes
option pricing model.

The expected volatility of options
granted has been determined using the method described under ASC 718 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 ASC 718 Share-Based Payment. For non-employees, the expected term
of the options approximates the full term of the options. The risk-free interest
rate is based on a treasury instrument whose term is consistent with the
expected term of the stock options. The Company has not paid and does not
anticipate paying dividends on its common stock; therefore, the expected
dividend yield is assumed to be zero. In addition, ASC 718 requires companies to
utilize an estimated forfeiture rate when calculating the expense for the
period, whereas prior to the adoption of ASC 718 the Company recorded
forfeitures based on actual forfeitures and recorded a compensation expense
recovery in the period when the awards were forfeited. As a result, based on the
Companys experience, the Company applied an estimated forfeiture rate of 15%
for the three month period ended July 31, 2010 and 2009 in determining the
expense recorded in the accompanying consolidated statement of operations.

16

---

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

|Note 6 | Common Stock  (contd)
|------ | -----------------------

Stock Options (contd)

The weighted-average fair value of
options granted during the three months ended July 31, 2010 was $0.66 (2009 -
$nil). The weighted-average assumptions utilized to determine such values are
presented in the following table:

| |                             |   | Three Months  |  |  | Three Months Ended | 
| | --------------------------- | - | ------------- |  |  | ------------------ | 
| |                             |   | Ended         |  |  |                    | 
| |                             |   | July 31, 2010 |  |  | July 31, 2009      | 
| | Risk-free interest rate     |   | 1.60%         |  |  | n/a                | 
| | Expected volatility         |   | 84.7%         |  |  | n/a                | 
| | Expected term               |   | 3.7 yrs       |  |  | n/a                | 
| | Dividend yield              |   | 0%            |  |  | n/a                | 
| | Weighted average fair value | $ | 0.66          |  |  | n/a                | 

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

| |                               |  |           |   |   | Weighted-average | 
| | ----------------------------- |  | --------- | - | - | ---------------- | 
| |                               |  | Number of |   |   | Exercise Price   | 
| |                               |  | Options   |   |   | per Share        | 
| | Outstanding at April 30, 2010 |  | 4,617,707 |   | $ | 1.03             | 
| | Granted                       |  | 20,000    |   | $ | 1.10             | 
| | Expired                       |  | (15,000   | ) | $ | 0.47             | 
| | Outstanding at July 31, 2010  |  | 4,622,707 |   | $ | 1.05             | 
| |                               |  |           |   |   |                  | 
| | Exercisable at July 31, 2010  |  | 2,803,768 |   | $ | 1.29             | 
| | Exercisable at April 30, 2010 |  | 2,602,619 |   | $ | 1.32             | 

17

---

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

|Note 6 | Common Stock  (contd)                                                                                           
|------ | ------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                   
|       | Stock Options  (contd)                                                                                          
|       |                                                                                                                   
|       | The following table summarizes information
      regarding stock purchase options outstanding as of July 31, 2010:

| |                |  |  | Number of   |  |   | Aggregate |  |  |                                              |  |  | Number of   |  |   | Aggregate | 
| | -------------- |  |  | ----------- |  | - | --------- |  |  | -------------------------------------------- |  |  | ----------- |  | - | --------- | 
| | Exercise       |  |  | Options     |  |   | Intrinsic |  |  |                                              |  |  | Options     |  |   | Intrinsic | 
| | Price          |  |  | Outstanding |  |   | Value     |  |  | Expiry Date                                  |  |  | Exercisable |  |   | Value     | 
| | $ 0.44         |  |  | 527,125     |  | $ | 295,190   |  |  | December 15, 2013                            |  |  | 211,243     |  | $ | 118,296   | 
| | $ 0.45         |  |  | 200,000     |  |   | 112,000   |  |  | February 9, 2015                             |  |  |            |  |   |          | 
| | $ 0.47         |  |  | 834,863     |  |   | 443,537   |  |  | October 10, 2010 to September
      26, 2016 |  |  | 789,090     |  |   | 418,218   | 
| | $ 0.49         |  |  | 20,000      |  |   | 10,200    |  |  | March 11, 2015                               |  |  |            |  |   |          | 
| | $ 0.60         |  |  | 580,000     |  |   | 232,000   |  |  | December 14, 2014                            |  |  | 101,674     |  |   | 40,670    | 
| | $ 0.62         |  |  | 850,000     |  |   | 323,000   |  |  | April 17, 2014                               |  |  | 265,625     |  |   | 100,938   | 
| | $ 0.65         |  |  | 30,000      |  |   | 10,500    |  |  | April 27, 2015                               |  |  |            |  |   |          | 
| | $ 1.10         |  |  | 20,000      |  |   |          |  |  | July 23, 2015                                |  |  |            |  |   |          | 
| | $ 1.75         |  |  | 250,000     |  |   |          |  |  | May 14, 2013                                 |  |  | 135,417     |  |   |          | 
| | $ 1.90         |  |  | 66,719      |  |   |          |  |  | March 8, 2015                                |  |  | 66,719      |  |   |          | 
| | $ 1.95         |  |  | 622,400     |  |   |          |  |  | September 7, 2010 to January
      10, 2016  |  |  | 622,400     |  |   |          | 
| | $ 2.00         |  |  | 246,000     |  |   |          |  |  | January 1, 2011 to February 28, 2015         |  |  | 246,000     |  |   |          | 
| | $ 2.15         |  |  | 240,000     |  |   |          |  |  | September 7, 2016                            |  |  | 230,000     |  |   |          | 
| | $ 3.05         |  |  | 135,600     |  |   |          |  |  | May 23, 2016                                 |  |  | 135,600     |  |   |          | 
| |                |  |  |             |  |   |           |  |  |                                              |  |  |             |  |   |           | 
| | July 31, 2010  |  |  | 4,622,707   |  | $ | 1,426,427 |  |  |                                              |  |  | 2,803,768   |  | $ | 678,122   | 
| |                |  |  |             |  |   |           |  |  |                                              |  |  |             |  |   |           | 
| | April 30, 2010 |  |  | 4,617,707   |  | $ | 895,060   |  |  |                                              |  |  | 2,602,619   |  | $ | 404,859   | 

The aggregate intrinsic value in the
preceding table represents the total intrinsic value, based on the Companys
closing stock price of $1.00 per share as of July 31, 2010 (April 30, 2010 
$0.82), 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 July 31, 2010 was 1,367,632
(April 30, 2010  1,239,933). The total intrinsic value of options exercised
during the three months ended July 31, 2010 was $nil (2009 $nil). The grant
date fair value of options vested during the three months ended July 31, 2010
was $119,866 (2009  $938,301).

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

| |                                            |  |                   |   |   | Weighted Average | 
| | ------------------------------------------ |  | ----------------- | - | - | ---------------- | 
| |                                            |  |                   |   |   | Grant-Date Fair  | 
| |                                            |  | Number of Options |   |   | Value            | 
| | Non-vested options at April
      30, 2010 |  | 2,015,088         |   | $ | 0.39             | 
| | Granted                                    |  | 20,000            |   | $ | 0.66             | 
| | Vested                                     |  | (216,149          | ) | $ | 0.55             | 
| | Non-vested options at July 31, 2010        |  | 1,818,939         |   | $ | 0.38             | 

18

---

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

|Note 6 | Common Stock  (contd)                                                                                                                                                                                                                                                                                           
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                   
|       | Stock Options  (contd)                                                                                                                                                                                                                                                                                          
|       |                                                                                                                                                                                                                                                                                                                   
|       | As of July 31, 2010 there was $598,601 (2009 
      $1,278,035) of total unrecognized compensation cost related to unvested
      share-based compensation awards. This unrecognized compensation cost is
      expected to be recognized over a weighted average period of 2.66 years
      (2009  0.96 years).
|       |                                                                                                                                                                                                                                                                                                                   
|       | Employee and non-employee stock-based compensation
      amounts classified in the Companys consolidated statements of operations
      for the three months ended July 31, 2010 and 2009 are as follows:                                                                                                        

| |                                |   | Three Months Ended | 
| | ------------------------------ | - | ------------------ | 
| |                                |   | July 31,           | 
| |                                |   | 2010               | 
| |                                |   |                    | 
| | Cost of sales                  | $ | 6,751              | 
| | Sales and marketing            |   | 23,029             | 
| | Research and development       |   | 8,460              | 
| | General and administrative     |   | 262,245            | 
| | Total stock-based compensation | $ | 300,485            | 

Warrants

During the three months ended July 31,
2010, the Company entered into a warrant agreement with a customer whereby the
Company issued 1,000,000 stock purchase warrants as part of a contract that the
Company entered into with the customer. These warrants will vest on a
proportional basis to invoices delivered by the Company and the warrants will be
held in trust and delivered once payment has been received by the Company. The
fair value of 320,000 stock purchase warrants that was charged to revenue during
the three months ended July 31, 2010 was $136,934 (2009  $nil). The remaining
680,000 warrants will be valued and charged against revenue pro rata as the
remaining revenue under the contract is recognized. The warrants enable the
holder thereof the right to purchase up to 1,000,000 shares of the Companys
common stock, exercisable for two years at a price of $1.50 per share until July
30, 2012. The assumptions utilized to determine such values are presented in the
following table:

| |                             |   | Three Months Ended | 
| | --------------------------- | - | ------------------ | 
| |                             |   | July 31,           | 
| |                             |   | 2010               | 
| | Risk-free interest rate     |   | 0.55%              | 
| | Expected volatility         |   | 100.51%            | 
| | Expected term               |   | 2 yrs              | 
| | Dividend yield              |   | 0%                 | 
| | Weighted average fair value | $ | 0.43               | 

19

---

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

|Note 6 | Common Stock  (contd)                                                                                 
|------ | --------------------------------------------------------------------------------------------------------
|       |                                                                                                         
|       | Warrants (contd)                                                                                       
|       |                                                                                                         
|       | The following table summarizes information
      regarding the warrants outstanding as of July 31, 2010:

| |                            |  |            |   | Weighted       |  |                                         | 
| | -------------------------- |  | ---------- | - | -------------- |  | --------------------------------------- | 
| |                            |  | Number of  |   | Average        |  |                                         | 
| |                            |  | Warrants   |   | Exercise Price |  | Expiry Dates                            | 
| | Warrants at April 30, 2010 |  | 2,932,088  |   | $ 1.50         |  | July 31, 2010 to October 29,
      2011 | 
| | Granted                    |  | 1,000,000  |   | $ 1.50         |  | July 30, 2012                           | 
| | Expired                    |  | (1,216,720 | ) | $ 2.25         |  | July 31, 2010                           | 
| | Warrants at July 31, 2010  |  | 2,715,368  |   | $
      1.15   |  | October 24, 2010 to July 30, 2012       | 

Employee Stock Purchase
Plan

Under the terms of the Employee Stock
Purchase Plan (ESPP), all regular salaried (non-probationary) employees may
purchase up to 6% of their base salary in shares of common stock of the Company
at market price. The Company matches 50% of the shares purchased by issuing up
to 3% of the respective employees base salary in shares.

A total of 700,000 shares have been
reserved for issuance under the ESPP. As of July 31, 2010, a total of 589,244
shares were available for issuance under the ESPP. During the three months ended
July 31, 2010, 22,748 shares were sold or issued to employees under the
ESPP.

Deferred Share Unit Plan

Under the terms of the Deferred Share
Unit Plan (DSUP), each deferred share unit is equivalent to one share of common
stock. The maximum number of shares of common stock that may be reserved for
issuance to any one participant pursuant to deferred share units granted under
the DSUP and any share compensation arrangement is 5% of the number of shares of
common stock of the Company outstanding at the time of reservation and, as
applicable, any grants of deferred share units to any one participant may not
exceed a value of $100,000 per annum on the date of grant without prior approval
of the TSX Venture Exchange. A deferred share unit (DSU) granted to a
participant who is a director of the board of the Company vests immediately on
the award date. A deferred share unit granted to a participant other than a
director generally vests as to one-third (1/3) of the number of deferred share
units granted on the first, second and third anniversaries of the award date.
Fair value of the DSUs, which is based on the closing price of the Companys
common stock on the date of grant, is recorded as compensation expense in the
period of grant.

A total of 1,500,000 shares have been
reserved for issuance under the DSUP. During the three months ended July 31,
2010, 322,500 deferred share units were issued under the DSUP, of which 150,000
were granted to officers and 172,500 were granted to non-employee directors. As
of July 31, 2010, a total of 657,339 shares were available for issuance under
the DSUP.

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

20

---

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

|Note 6 | Common Stock  (contd)            
|------ | -----------------------------------
|       |                                    
|       | Deferred Share Unit Plan  (contd)

| |                                     |  |                 |  |   | Weighted Average Grant Date | 
| | ----------------------------------- |  | --------------- |  | - | --------------------------- | 
| |                                     |  | Number of DSUs |  |   | Fair Value Per Unit         | 
| | DSUs outstanding at April 30, 2010 |  | 520,161         |  | $ | 0.60                        | 
| | Granted                             |  | 322,500         |  | $ | 1.00                        | 
| | DSUs outstanding at July 31, 2010  |  | 842,661         |  | $ | 0.75                        | 

As of July 31, 2010 there was $248,192
(2009  $nil) of total unrecognized compensation cost related to unvested
deferred share units awards. This unrecognized compensation cost is expected to
be recognized over a weighted average period of 2.66 years (2009  nil).

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

| |                                              |   | Three Months Ended | 
| | -------------------------------------------- | - | ------------------ | 
| |                                              |   | July 31,           | 
| |                                              |   | 2010               | 
| | General and administrative                   | $ | 195,708            | 
| | Total deferred share unit-based compensation | $ | 195,708            | 

|Note 7 | Segmented Information                                                                                                                                                                                                                                                                                                                                                                       
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                             
|       | The Companys chief operating decision maker reviews
      financial information presented on a consolidated basis, accompanied by
      desegregated information about revenues by geographic region for purposes
      of making operating decisions and assessing financial performance.
      Accordingly, the Company has concluded that it has one reportable
      operating segment.
|       |                                                                                                                                                                                                                                                                                                                                                                                             
|       | Foreign revenues are based on the country in which the
      customer is located. The following is a summary of total revenues by
      geographic area for the three months ended July 31, 2010 and 2009:                                                                                                                                                                                  

| |                 |   | Three Months Ended | 
| | --------------- | - | ------------------ | 
| |                 |   | July 31,           | 
| |                 |   | 2010               | 
| | North America   | $ | 1,377,595          | 
| | Europe          |   | 619,630            | 
| | Asia and Africa |   | 118,405            | 
| | Latin America   |   | 103,955            | 
| |                 | $ | 2,219,585          | 

Contained within the results of North
America for the three months ended July 31, 2010 are revenues from the United
States of $1,172,545 (2009 - $1,087,106) and from Canada of $205,050 (2009 -
$162,093).

Contained within the results of Europe
for the three months ended July 31, 2010 are revenues from the United Kingdom of
$408,413 (2009 - $58,277), from Germany of $50,686 (2009 - $132,862), from
Iceland of $20,704 (2009 - $12,847), from Switzerland of $17,619 (2009 -
$9,918), and from Norway of $15,444 (2009 - $1,377).

21

---

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

|Note 7 | Segmented Information  (contd)                                                                                                                                                                                                                                                                 
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                  
|       | Contained within the results of Asia and Africa for the
      three months ended July 31, 2010 are revenues from China of $39,543 (2009
      - $8,775), from Australia of $22,681 (2009 - $11,264), and from Sri Lanka
      of $12,080 (2009 - $7,575).                                        
|       |                                                                                                                                                                                                                                                                                                  
|       | Contained within the results of Latin America for the
      three months ended July 31, 2010 are revenues from Mexico of $38,071 (2009
      - $71,741), from South Africa of $21,318 (2009 - $nil), from Brazil of
      $14,940 (2009 - $7,332), and from Colombia of $11,511 (2009 - $20,626).
|       |                                                                                                                                                                                                                                                                                                  
|       | All of the Companys long-lived assets, which include
      equipment, intangible assets, goodwill and other assets, are located in
      Canada and the United States as follows:                                                                                                               

| |               | As at |                   
| | ------------- | ----- | ------------------
| |               |       | July 31, 2010     
| |               |       | Restated  Note 12
| | Canada        | $     | 10,074,521        
| | United States |       | 36,843            
| | Total         | $     | 10,111,364        

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

| |            |  | Three Months
      Ended | 
| | ---------- |  | ------------------------ | 
| |            |  | July 31,                 | 
| |            |  | 2010                     | 
| | Customer A |  | 21%                      | 
| | Customer B |  | 15%                      | 
| | Customer C |  | −                        | 
| |            |  | 36%                      | 

Accounts receivable balances for
Customer A were $532,812 as at July 31, 2010 (April 30, 2010 - $1,000,975).
Accounts receivable balances for Customer B were $500,000 as at July 31, 2010
(April 30, 2010 - $nil). Accounts receivable balances for Customer C were
$45,250 as at July 31, 2010 (April 30, 2010 - $88,250).

|Note 8 | Commitments
|------ | -----------

| | a) | On March 14, 2008 the Company entered into a lease for
      accommodation which commenced on April 1, 2008 and expired on March 31,
      2009. On January 14, 2010, the Company entered into extension agreement on
      this lease for the third time which commenced on April 1, 2010 and expires
      March 31, 2011. The monthly lease payment under the extension agreement is
      $2,339.                                                                                                                                                                                                                                                                                                                                                                                             
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | b) | On April 29, 2005, the Company entered into a lease for
      office premises, which commenced on October 1, 2005 and expires on
      September 30, 2012 for which a deposit of $9,621 was made. The monthly
      lease payment under this agreement is $9,621 plus $8,430 in operating
      costs. The Company is subleasing part of these premises for a monthly
      charge of $7,273. The sublease commenced on August 1, 2007 and expires on
      September 30, 2012. On July 17, 2009, the Company signed a new subleasing
      agreement for another part of these premises, which commenced on August 1,
      2009 and expires September 30, 2012. The monthly charge under this
      subleasing agreement is $3,116 (CDN$3,216) plus $3,073 (CDN$3,171) in
      operating costs.

22

---

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

|Note 8 | Commitments  (contd)
|------ | ----------------------

| | c) | On July 10, 2006, the Company entered into a lease for
      our head office premises of 15,559 square feet, which commenced on
      December 1, 2006 and expires on September 29, 2011 for which a deposit of
      $80,258 was made. The monthly lease payment under this agreement is
      $22,615 plus $21,283 in operating costs. Management believes that this
      office space is adequate for the operations of the Company for the
      foreseeable future.          
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | d) | On May 1, 2009 the Company modified its existing lease
      agreement for office premises, as a result of which it surrendered a
      substantial part of the previously leased area. The new agreement
      commenced on May 1, 2009 and expires on April 20, 2012. The monthly lease
      payment under this agreement is $6,455. This lease expense is a related
      party transaction as it was incurred with a company with a director in
      common with the Company.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | e) | On July 29, 2010, the Company entered into extension of
      an existing leases agreement which commenced on August 1, 2010 and expires
      on July 31, 2011. The monthly lease payment under the new extension
      agreement is $7,275.                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | f) | On March 12, 2009, the Company and its wholly-owned
      subsidiary, CounterPath Technologies Inc., entered into a settlement
      agreement with a founder and former officer of the Company. Under the
      settlement agreement, the Company will pay a total of $479,655
      (CDN$495,000) over 45 months at a rate of CDN$11,000 per month and pay for
      health benefits for 21 months from the date of the agreement.                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | Total payable over the term of the agreements for the
      years ended April 30 are as follows:                                                                                                                                                                                                                                                                                                                                                                                   

| |      |  |   |                 |  |   | Office Leases |  |   |           |   |   |              |  |   |            | 
| | ---- |  | - | --------------- |  | - | ------------- |  | - | --------- | - | - | ------------ |  | - | ---------- | 
| |      |  |   | Office Leases  |  |   |  Unrelated   |  |   | Sub Lease |   |   | Total Office |  |   | Settlement | 
| |      |  |   | Related Party   |  |   | Party         |  |   | Income    |   |   | Leases       |  |   | Agreement  | 
| | 2011 |  | $ | 58,096          |  | $ | 641,725       |  | $ | (121,159  | ) | $ | 578,662      |  | $ | 95,931     | 
| | 2012 |  |   | 77,462          |  |   | 457,920       |  |   | (161,545  | ) |   | 373,837      |  |   | 127,908    | 
| | 2013 |  |   |                |  |   | 90,252        |  |   | (67,310   | ) |   | 22,942       |  |   | 79,943     | 
| |      |  | $ | 135,558         |  | $ | 1,189,897     |  | $ | (350,014  | ) | $ | 975,441      |  | $ | 303,782    | 

|Note 9  | 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 10 | Restructuring                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | The Company incurred no restructuring costs for the three
      months ended July 31, 2010. The Company incurred restructuring costs of
      $44,912 during the three months ended July 31, 2009, as a result of the
      Companys post acquisition activities. 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.

23

---

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

|Note 11 | Derivative Instruments and Hedging
      Activities
|------- | ---------------------------------------------------

In the normal course of business, the
Company is exposed to fluctuations in interest rates and the exchange rates
associated with foreign currencies. The Companys primary objective for holding
derivative financial instruments is to manage foreign currency exchange rate
risk.

Foreign Currency Exchange Rate
Risk

A majority of the Companys revenue
activities are transacted in U.S. dollars. However, the Company is exposed to
foreign currency exchange rate risk inherent in conducting business globally in
numerous currencies, of which the most significant to its operations for the
three months ended July 31, 2010 is the Canadian dollar. The Company is
primarily exposed to a strengthening Canadian dollar as its operating expenses
are primarily denominated in Canadian dollars while its revenues are primarily
denominated in U.S. dollars. The Companys foreign currency risk management
program includes foreign currency derivatives with cash flow hedge accounting
designation that utilizes foreign currency forward contracts to hedge exposures
to the variability in the U.S. dollar equivalent of anticipated non-U.S.
dollar-denominated cash flows. These instruments generally have a maturity of
less than one year. For these derivatives, the Company reports the after-tax
gain or loss from the effective portion of the hedge as a component of
accumulated other comprehensive income (loss) in stockholders equity and
reclassifies it into earnings in the same period in which the hedged transaction
affects earnings, and within the same line item on the consolidated statements
of operations as the impact of the hedged transaction.

Volume of Derivative
Activity

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

| |                 |   | Three Months Ended | 
| | --------------- | - | ------------------ | 
| | In U.S. dollars |   | July 31,           | 
| |                 |   | 2010               | 
| | Canadian dollar | $ | −                  | 
| | Total           | $ | −                  | 

The fair value of forward contracts as
of July 31, 2010 was $nil, as all forward contracts have since been settled.

|Note 12 | Restatement
|------- | -----------

On December 3, 2010, the Company
announced that it would restate its Quarterly Report on Form 10-Q/A as at July
31, 2010 and for the quarters ended July 31, 2010 and 2009 for the effects of a
computational error for the foreign currency translation adjustments to our
Canadian dollar denominated intangible assets, and an overstatement of accrued
liabilities for certain third party software.

| | a) | Foreign Currency Translation of Intangible
      Assets
| | -- | -------------------------------------------------------

Subsequent to the issue of the July
31, 2010 consolidated financial statements, the Company has corrected a
computational error in translating Canadian dollar denominated intangible assets
to United States dollar denominated assets. These adjustments resulted in an
increase in net loss of $2,832 for the quarter ended July 31, 2010 (2009 -
$1,475). These adjustments also result in a decrease in comprehensive loss of
$199,593 for the quarter ended July 31, 2010 (2009  increase of $682,699). The
adjustments also result in a decrease in the carrying amount of intangible
assets by $1,056,664 as at July 31, 2010. In addition, the adjustments resulted
in a decrease of $358,439 in accumulated deficit as of July 31, 2010 to reflect
the cumulative effect of the error.

24

---

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

|Note 12 | Restatement (contd)
|------- | ---------------------

| | b) | Overstatement of Accrued
  Liabilities
| | -- | --------------------------------------

Subsequent to the issue of the July
31, 2010 consolidated financial statements, the Company determined through its
investigation that it overstated the accrual of its estimated royalty costs for
certain third party software. Therefore, the Company has corrected the error in
recording its estimated royalty costs and the related accrued liabilities. These
adjustments result in a decrease in net loss of $nil for the quarter ended July
31, 2010 (2009 $18,482). In addition, these adjustments resulted in a decrease
of $354,309 in accumulated deficit as of July 31, 2010 to reflect the cumulative
effect of the error.

The following represents the combined
effect of the restatements to the interim consolidated financial statement as at
July 31, 2010 and for the quarters ended July 31, 2010 and 2009:

| |                                           |   | As Previously |   |   | Adjustment |   |   |         |  
| | ----------------------------------------- | - | ------------- | - | - | ---------- | - | - | ------- | -
| | For the
      Quarter Ended July 31, 2009 |   | Recorded      |   |   | (a)        |   |   | (b)     |  
| | Cost of sales                             | $ | 642,728       |   | $ | 1,475      |   | $ | (18,482 | )
| | Loss from operations                      |   | (838,715      | ) |   | (1,475     | ) |   | 18,482  |  
| | Net loss for the period                   |   | (1,242,336    | ) |   | (1,475     | ) |   | 18,482  |  
| | Foreign currency translation adjustments  |   | 2,110,896     |   |   | (681,224   | ) |   |        |  
| | Net loss per share                        |   | (0.04         | ) |   |           |   |   |        |  
| | Comprehensive income                      |   | 868,560       |   |   | (682,699   | ) |   | 18,482  |  

| |                                                                                                  |   | As Previously |   |   | Adjustment |   |   |          |  
| | ------------------------------------------------------------------------------------------------ | - | ------------- | - | - | ---------- | - | - | -------- | -
| | As at July 31,
      2010                                                                        |   | Recorded      |   |   | (a)        |   |   | (b)      |  
| | Intangible assets                                                                                | $ | 2,482,693     |   | $ | (1,056,664 | ) | $ |         |  
| | Accounts payable and accrued liabilities                                                         |   | 2,504,980     |   |   |           |   |   | (354,309 | )
| | Accumulated deficit                                                                              |   | (41,207,206   | ) |   | (358,439   | ) |   | 354,309  |  
| | Accumulated other comprehensive 
        income (loss) 
      currency translation   adjustment |   | 67,534        |   |   | (698,225   | ) |   |         |  
| | Total Stockholders Equity                                                                       |   | 11,256,976    |   |   | (1,056,664 | ) |   | 354,309  |  

| | For the Quarter Ended July 31, 2010      |   |            |   |   |         |   |   |   |  |   |            |  
| | ---------------------------------------- | - | ---------- | - | - | ------- | - | - | - |  | - | ---------- | -
| | Cost of sales                            | $ | 746,030    |   | $ | 2,832   |   | $ |  |  | $ | 748,862    |  
| | Loss from operations                     |   | (1,451,237 | ) |   | (2,832  | ) |   |  |  |   | (1,454,069 | )
| | Net loss for the period                  |   | (1,427,425 | ) |   | (2,832  | ) |   |  |  |   | (1,430,257 | )
| | Foreign currency translation adjustments |   | (419,434   | ) |   | 202,425 |   |   |  |  |   | (217,009   | )
| | Net loss per share                       |   | (0.04      | ) |   |        |   |   |  |  |   | (0.04      | )
| | Comprehensive loss                       |   | (1,846,859 | ) |   | 199,593 |   |   |  |  |   | (1,647,266 | )

25

---

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

Forward-Looking Statements

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

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

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

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

Background

We were incorporated under the
laws of the State of Nevada on April 18, 2003. Following incorporation, we
commenced the business of operating an entertainment advertising website. On
April 30, 2004, we changed our business following the merger of our company with
Xten Networks, Inc., a private Nevada company. Xten Networks was incorporated
under the laws of the State of Nevada on October 28, 2002. As a result of the
merger, we acquired all of the issued and outstanding shares in Xten Networks in
exchange for agreeing to issue 3,600,000 shares of our common stock to the
stockholders of Xten Networks. The stockholders of Xten Networks were entitled
to receive two shares of our common stock for each one share of Xten
Networks.

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

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

On February 1, 2008, we acquired
all of the shares of FirstHand Technologies Inc. through the issuance of
5,900,014 shares of our common stock. For accounting purposes, our 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.

26

---

On February 1, 2008, we acquired
BridgePort Networks, Inc. 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, our 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, our
company's wholly-owned subsidiaries, NewHeights and CounterPath Solutions
R&D Inc. were merged as a wholly-owned subsidiary of our company 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. 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.

Our common shares are quoted for
trading on the Over-The-Counter Bulletin Board in the United States of America
and on the TSX Venture Exchange in Canada.

Business of CounterPath

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

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

Revenue

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

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

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

27

---

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

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

Operating Expenses

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

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

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

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

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

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

Application of Critical Accounting Policies and Use of
Estimates

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

28

---

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

Basis of Presentation

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

Interim Reporting

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

These statements reflect all
adjustments, which are, in the opinion of management, necessary to present
fairly the financial position, results of operations and cash flows for the
interim periods presented in accordance with accounting principles generally
accepted in the United States of America. Except where noted, the interim
consolidated financial statements follow the same accounting policies and
methods of their application as our April 30, 2010 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, 2010 annual consolidated financial statements.

Operating results for the three
months ended July 31, 2010 are not necessarily indicative of the results that
can be expected for the year ending April 30, 2011.

Revenue Recognition

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

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

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

29

---

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

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

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

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

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

Stock-Based Compensation

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

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

The expected volatility of
options granted has been determined using the volatility of our company's stock.
The expected life of options granted after April 30, 2006 has been determined
utilizing the simplified method as prescribed by the SEC's Staff Accounting
Bulletin No. 107, Share-Based Payment. We have not paid and do not anticipate
paying cash dividends on our shares of common stock; therefore, the expected
dividend yield is assumed to be zero. In addition, ASC 718 requires companies to
utilize an estimated forfeiture rate when calculating the expense for the
period. We applied an estimated forfeiture rate of 15.0% in the six months ended
October 31, 2009 in determining the expense recorded in our consolidated
statement of operations.

Cost of sales and operating
expenses include stock-based compensation expense, and deferred share unit plan
expense. For the three months ended July 31, 2010, we recorded an expense of
$300,485 in connection with share-based payment awards. A future expense of
non-vested options of $598,601 is expected to be recognized over a
weighted-average period of 2.66 years. A future expense of non-vested deferred
share units of $248,192 is expected to be recognized over a weighted-average
period of 2.66 years.

30

---

Research and Development Expense for Software
Products

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

Accounts Receivable and Allowance for Doubtful Accounts

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

Goodwill and Intangible Assets

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

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

Goodwill and Intangible AssetsImpairment
Assessments

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

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

31

---

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

Assumptions and estimates about
future values and remaining useful lives of our intangible and other long-lived
assets are complex and subjective. They can be affected by a variety of factors,
including external factors such as industry and economic trends, and internal
factors such as changes in our business strategy and our internal forecasts.
These estimates and assumptions include revenue growth rates and operating
margins used to calculate projected future cash flows and risk adjusted
discounted rates and future economic and market conditions. During the fourth
quarter of fiscal 2009, we recorded an impairment charge of $3.10 million
consisting of $2.01 million for the intangible assets of NewHeights and $1.09
million for the intangible assets of FirstHand. During the fiscal year ended
April 30, 2010 and the most recent quarter ended July 31, 2010, management
concluded that there was no further impairment charge related to our intangible
assets.

Use of Estimates

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

Results of Operations

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

Selected Consolidated Financial Information

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

32

---

|Selected Consolidated Statements of Operations Data |   |             |   |  | Three Months Ended July 31, |   |   |             |  
|--------------------------------------------------- | - | ----------- | - |  | --------------------------- | - | - | ----------- | -
|                                                    |   | 2010        |   |  | 2009                        |  
|                                                    |   |             |   |  | Percent of                  |   |   |             |  
|                                                    |   |             |   |  | Total                       |   |   |             |  
|                                                    |   | Amount      |   |  | Revenue                     |   |   | Amount      |  
|Revenue                                             | $ | 2,219,585   |   |  | 100%                        |   | $ | 2,050,457   |  
|                                                    |   |             |   |  |                             |   |   |             |  
|Non-GAAP operating expenses1                        |   | 3,164,697   |   |  | 143%                        |   |   | 2,445,103   |  
|Stock-based compensation                            |   | 300,485     |   |  | 14%                         |   |   | 219,615     |  
|Amortization of intangible assets                   |   | 208,472     |   |  | 9%                          |   |   | 207,447     |  
|GAAP operating expenses                             |   | 3,673,654   |   |  | 166%                        |   |   | 2,872,165   |  
|                                                    |   |             |   |  |                             |   |   |             |  
|Loss from operations                                |   | (1,454,069  | ) |  | (66%                        | ) |   | (821,708    | )
|Interest income, net                                |   | 51,858      |   |  | 3%                          |   |   | 26,092      |  
|Foreign exchange loss                               |   | (28,046     | ) |  | (1%                         | ) |   | (429,713    | )
|Net loss                                            |   | ($1,430,257 | ) |  | (64%                        | ) |   | ($1,225,329 | )
|                                                    |   |             |   |  |                             |   |   |             |  
|Loss per share                                      |   | ($0.04      | ) |  |                             |   |   | ($0.04      | )
|                                                    |   |             |   |  |                             |   |   |             |  
|Weighted average common shares outstanding          |   | 33,066,204  |   |  |                             |   |   | 28,968,332  |  

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

|                                         |   | July 31,   |  |   | April 30,  | 
|---------------------------------------- | - | ---------- |  | - | ---------- | 
|Selected Consolidated Balance Sheet Data |   | 2010       |  |   | 2010       | 
|Cash                                     | $ | 1,209,989  |  | $ | 1,556,813  | 
|Current assets                           |   | 3,934,995  |  |   | 4,252,772  | 
|Current liabilities                      |   | 3,005,848  |  |   | 3,095,139  | 
|Total liabilities                        |   | 3,591,710  |  |   | 3,198,391  | 
|Total assets                             | $ | 14,146,331 |  | $ | 14,939,117 | 

Revenue

|                  |   | **Three Months Ended July 31,** |  |  |          |  |   |                         | 
|----------------- | - | ------------------------------- |  |  | -------- |  | - | ----------------------- | 
|                  |   | 2010                            |  |  | 2009     |  |   | Period-to-Period Change | 
|                  |   |                                 |  |  | Percent  |  |   |                         | 
|                  |   |                                 |  |  | of Total |  |   |                         | 
|                  |   | Amount                          |  |  | Revenue  |  |   | Amount                  | 
|Revenue by Type   |   |                                 |  |  |          |  |   |                         | 
|Software          | $ | 1,819,152                       |  |  | 82%      |  | $ | 1,141,343               | 
|Service           |   | 400,433                         |  |  | 18%      |  |   | 909,114                 | 
|Total revenue     | $ | 2,219,585                       |  |  | 100%     |  | $ | 2,050,457               | 
|                  |   |                                 |  |  |          |  |   |                         | 
|Revenue by Region |   |                                 |  |  |          |  |   |                         | 
|International     | $ | 841,990                         |  |  | 38%      |  | $ | 801,258                 | 
|North America     |   | 1,377,595                       |  |  | 62%      |  |   | 1,249,199               | 
|Total revenue     | $ | 2,219,585                       |  |  | 100%     |  | $ | 2,050,457               | 

For the three months ended July
31, 2010, we generated $2,219,585 in revenue compared to $2,050,457 for the
three months ended July 31, 2009. This represents an increase of $169,128 or 8%
from the same period last year. Revenues of $2,219,585 are net of a $136,934
non-cash charge representing the fair value of 320,000 warrants that were
charged against revenue during the quarter. In total, 1,000,000 warrants with a
term of two years were

33

---

issued to a customer as part of a contract entered into on July
30, 2010, enabling the customer to acquire shares of common stock for a period
of up to two years at an exercise price of $1.50 per share of common stock. The
warrants were valued using the Black Scholes methodology as outlined in note 5
to the consolidated unaudited financial statements. We generated $1,819,152 in
software revenue for the three months ended July 31, 2010 compared to $1,141,343
for the three months ended July 31, 2009, representing an increase of $677,809
or 59%. The increase in software revenue was primarily due to increases in sales
of our products to original equipment manufacturers. For the three months ended
July 31, 2010, service revenue was $400,433 compared to $909,114 for the three
months ended July 31, 2009. The decrease of $508,681 in service revenue was
primarily due to the decrease in sales of professional engineering and
customization work. International revenue outside of North America increased by
5% during the three months ended July 31, 2010 compared to the three months
ended July 31, 2009, due to an overall increase in sales in the period. North
American revenue increased by 10%, compared to the three months ended July 31,
2009, due primarily to an increase in sales of software and services to North
American original equipment manufacturers.

Operating Expenses

Cost of Sales

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

|                   |   | July 31, 2010      |  |  | July 31, 2009      |  |   | Period-to-Period Change | 
|------------------ | - | ------------------ |  |  | ------------------ |  | - | ----------------------- | 
|                   |   | Restated - Note 12 |  |  | Restated - Note 12 |  |   | Restated - Note 12      | 
|                   |   |                    |  |  | Percent            |  |   |                         | 
|                   |   |                    |  |  | of                 |  |   |                         | 
|                   |   | Amount             |  |  | Revenue            |  |   | Amount                  | 
|Three months ended | $ | 748,862            |  |  | 34%                |  | $ | 625,721                 | 

Cost of sales was $748,862 for
the three months ended July 31, 2010 compared to $625,721 for the three months
ended July 31, 2009. The increase of $123,141 was primarily attributable to an
increase in wages and benefits of approximately $61,000, and increase in costs
of approximately $34,000 due to increased sales of third party software (codecs)
and USB sticks. Additionally, there was an increase in warranty expense of
approximately $20,000 as a result of the overall increase in revenue. Cost of
sales for the three months ended July 31, 2010 includes $208,473 ($207,447 
2009) representing the non-cash amortization of the intangible assets as a
result of the acquisitions of NewHeights Software in August 2007 and FirstHand
Technologies in February 2008.

Sales and Marketing

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

|                   |   | July 31, 2010 |  |  | July 31, 2009 |  |   | Period-to-Period Change | 
|------------------ | - | ------------- |  |  | ------------- |  | - | ----------------------- | 
|                   |   |               |  |  | Percent       |  |   |                         | 
|                   |   |               |  |  | of            |  |   |                         | 
|                   |   | Amount        |  |  | Revenue       |  |   | Amount                  | 
|Three months ended | $ | 865,683       |  |  | 39%           |  | $ | 759,005                 | 

Sales and marketing expenses were
$865,683 for the three months ended July 31, 2010 compared to $759,005 for the
three months ended July 31, 2009. The increase of $106,678 was primarily
attributable to an increase of approximately $100,000 in sales and marketing
related wages and commissions as well as increases in professional and
consulting fees of approximately $23,000 resulting from a combination of new
hires and salary increases to the existing staff. Other sales and marketing
expenses decreased by a net amount of approximately $15,000.

34

---

Research and Development

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

|                   |   | July 31, 2010 |  |  | July 31, 2009 |  |   | Period-to-Period Change | 
|------------------ | - | ------------- |  |  | ------------- |  | - | ----------------------- | 
|                   |   |               |  |  | Percent       |  |   |                         | 
|                   |   |               |  |  | of            |  |   |                         | 
|                   |   | Amount        |  |  | Revenue       |  |   | Amount                  | 
|Three months ended | $ | 1,063,647     |  |  | 48%           |  | $ | 820,128                 | 

Research and development expenses
were $1,063,647 for the three months ended July 31, 2010 compared to $820,128
for the three months ended July 31, 2009. The increase of $243,519 was primarily
attributable to an increase in dues and subscriptions of approximately $145,000.
Wages and benefits increased by approximately $93,000 as a result of new hires
and increases in salaries to the existing employees.

General and Administrative

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

|                   |   | July 31, 2010 |  |  | July 31, 2009 |  |   | Period-to-Period Change | 
|------------------ | - | ------------- |  |  | ------------- |  | - | ----------------------- | 
|                   |   |               |  |  | Percent       |  |   |                         | 
|                   |   |               |  |  | of            |  |   |                         | 
|                   |   | Amount        |  |  | Revenue       |  |   | Amount                  | 
|Three months ended | $ | 995,462       |  |  | 45%           |  | $ | 622,399                 | 

General and administrative
expenses were $995,462 for the three months ended July 31, 2010 compared to
$622,399 for the three months ended July 31, 2009. The increase of $373,063 in
general and administrative expenses was primarily attributable to an increase in
personnel related costs of approximately $35,000, a relative increase in
provision for bad debts of approximately $150,000 as a result of a recovery of
bad debt in the prior year, an increase in patent related costs of approximately
$88,000, and an increase of approximately $126,000 in stock based compensation
expense partially offset by a decrease of approximately of approximately $32,000
in amortization expense.

Restructuring Charges

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

|                   |   | July 31, 2010 |  |  | July 31, 2009 |  |   | Period-to-Period Change | 
|------------------ | - | ------------- |  |  | ------------- |  | - | ----------------------- | 
|                   |   |               |  |  | Percent       |  |   |                         | 
|                   |   |               |  |  | of            |  |   |                         | 
|                   |   | Amount        |  |  | Revenue       |  |   | Amount                  | 
|Three months ended | $ | nil           |  |  | n/a           |  | $ | 44,912                  | 

Restructuring charges for the
three months ended July 31, 2010 were $nil compared to $44,912 for the three
months ended July 31, 2009. The restructuring charges for the three months ended
July 31, 2009 pertain to the employee restructuring activity as a result of the
consolidation of administrative, sales, marketing, 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 July 31, 2010 was $52,079 compared to $27,758 for the three months
ended July 31, 2009. Interest expense for the three months ended July 31, 2010
was $221 compared to $1,666 for the three months ended July 31, 2009.

35

---

Foreign exchange loss for the
three months ended July 31, 2010 was $28,046 compared to $429,713 for the three
months ended July 31, 2009. The foreign exchange loss represents the loss on
account of translation of the inter company accounts of our subsidiaries who
maintain their records in currencies other than U.S. dollars as well as
transactional losses and gains.

Liquidity and Capital Resources

As of July 31, 2010, we had
$1,209,989 in cash compared to $1,556,813 at April 30, 2010, representing a
decrease of $346,824. Our working capital was $ 929,147  at July 31, 2010 compared
to $ 1,157,633  at April 30, 2010, representing a decrease of $228,486.

Presently, our cash flow
generated from operations is not sufficient to meet our 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 July 31, 2010, we had cash of
approximately $1.21 million and working capital of approximately $ 0.93  million;
however, our management projects that under our current operating plan, we will
require approximately $11-13 million to fund our ongoing operating expenses and
working capital requirements for the next twelve months. We anticipate that this
will be funded through cash flow generated from operations, working capital,
external financing and potential rationalization.

Operating Activities

Our operating activities resulted
in a net cash outflow of $818,499 for the three months ended July 31, 2010. This
compares to a net cash outflow of $908,943 for the same period last year and
represents a decrease of $90,444 in cash outflow from operations compared to the
same period last year. The net cash outflow from operating activities for the
three months ended July 31, 2010 was primarily a result of a net loss of
$1,430,257, a $132,963 decrease in accounts payable and accrued liabilities, and
a $116,599 increase in accounts receivable, offset by a $70,987 increase in
unearned revenue. The net cash outflow was further offset by adjustments for
non-cash expenses including $136,934 for a warrant charge, $28,046 for foreign
exchange loss, $300,485 for stock-based compensation, $208,473 for amortization
of intangible assets, and $34,509 for depreciation and amortization.

The net cash outflow of $908,943
from operating activities for the three months ended July 31, 2009 was primarily
a result of a net loss of $1,225,329, a $948,309 increase in other current
assets and a $97,029 decrease in unearned revenue partially offset by a $492,296
increase in accounts payable and accrued liabilities. The net cash outflow was
further offset by adjustments for non-cash expenses including $429,713 for
foreign exchange loss, $219,615 for stock-based compensation, $207,447 for
amortization of intangible assets and $67,628 for depreciation and
amortization.

Investing Activities

Investing activities resulted in
a net cash outflow of $27,796 for the three months ended July 31, 2010 primarily
from purchases of equipment. This compares with a net cash outflow from
investing activities of $8,358 for the same period last year from purchases of
equipment. At July 31, 2010, we did not have any material commitments for future
capital expenditures.

Financing Activities

Financing activities resulted in
a net cash inflow of $499,102 for the three months ended July 31, 2010 compared
to a net cash inflow of $nil for the three months ended July 31, 2009.

On July 30, 2010 we issued a
convertible debenture in the principal amount of $483,300 to a company
controlled by the spouse of a significant shareholder of our company. The
convertible debenture is unsecured, bearing interest at the prime bank rate as
quoted by the Bank of Montreal with interest payable monthly and maturing on
July 30, 2012. The debenture is convertible by the holder, at any time prior to
maturity, in whole or in part into common shares of our company at a conversion
price of $1.00 per share. The convertible debenture may all be prepaid in whole
or in part by the Company by paying 105% of the principal to be prepaid together
with accrued and unpaid interest on or before July 30, 2011, or by paying
102.5% of the principal to be prepaid together with accrued and unpaid interest
between July 31, 2011 and April 30, 2012.

36

---

We intend to seek additional
funding through public or private financings to fund our operations through
fiscal 2011 and beyond. However, if we are unable to raise additional capital
when required or on acceptable terms, or achieve cash flow positive operations,
we may have to significantly delay product development and scale back operations
both of which may affect our ability to continue as a going concern. There is no
assurance that we will be able to obtain financing on terms deemed acceptable to
our company.

Off-Balance Sheet Arrangements

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

New Accounting Pronouncements

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

In October 2009, the FASB issued
ASU No. 2009-14, Certain Revenue Arrangements That Include Software Elements,
(ASU 2009-14). ASU 2009-14 changes the accounting model for revenue
arrangements that include both tangible products and software elements. Tangible
products containing both software and non-software components that function
together to deliver the products essential functionality will no longer be
within the scope of ASC 985-605 Software Revenue Recognition (ASC 985-605).
The entire product (including the software and non-software deliverables) will
therefore be accounted for under accounting literature found in ASC 605. ASU
2009-14 is effective for fiscal years beginning on or after June 15, 2010.
Companies can elect to apply this guidance (1) prospectively to new or
materially modified arrangements after the effective date or (2) retrospectively
for all periods presented. The Company is currently assessing the impact of
adoption of ASU 2009-14 and does not currently plan to early adopt.

In January 2010, the FASB issued
ASU 2010-06, Improving Disclosures about Fair Value Measurements,which
is included in the ASC in Topic 820 (Fair Value Measurements and Disclosures).
ASU 2010-06 requires new disclosures on the amount and reason for transfers in
and out of Level 1 and 2 fair value measurements. ASU 2010-06 also requires
disclosure of activities, including purchases, sales, issuances, and settlements
within the Level 3 fair value measurements and clarifies existing disclosure
requirements on levels of disaggregation and disclosures about inputs and
valuation techniques. ASU 2010-06 is effective for interim and annual reporting
periods beginning after December 15, 2009. The Company is currently assessing
the impact of adoption of ASU 2009-14 and does not currently plan to early
adopt.

Item 4T. Controls and Procedures.

Restatements

Our company has effected a
restatement of its financial results for the periods ended July 31, 2010 and
2009.

37

---

The restatement was effected to
correct the effects of a computational error in accounting for the foreign
currency translation adjustments to our Canadian dollar denominated intangible
assets, and an overstatement of accrued liabilities for the quarters ended July
31, 2010 and July 31, 2009. As a result of these corrections, the net loss
increased by $2,832 for the quarter ended July 31, 2010 and decreased by $17,007
for the quarter ended July 31, 2009. The effect on our companys consolidated
balance sheet as of July 31, 2010 is a decrease in intangible assets of
$1,056,664, a decrease in accounts payable and accrued liabilities of $354,309,
an increase in accumulated deficit of $4,130 and an increase in accumulated
other comprehensive loss  currency translation adjustment of $698,225.

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.

Evaluation of disclosure controls and procedures and
remediation

A material weakness is a
deficiency, or a combination of deficiencies, in our disclosure controls and
procedures such that there is a reasonable possibility that a material
misstatement of our companys annual or interim financial statements will not be
prevented or detected on a timely basis.

In connection with the
restatement, we identified a material weakness in our disclosure controls and
procedures, and a resultant deficiency in our internal control over financial
reporting, relating to computational methods used to translate our Canadian
dollar denominated intangible assets to United States dollar denominated assets,
and in estimating royalty costs for certain third party software. The weakness
resulted from the inappropriate preparation and review of calculations relating
to foreign currency translation of Canadian dollar denominated intangible assets
and insufficient review of accrual for estimated royalty costs for certain third
party software.

In connection with this quarterly
report, as required by Rule 13a-15 under the Securities Exchange Act of 1934, we
have carried out a re-evaluation of the effectiveness of the design and
operation of our company's disclosure controls and procedures. This
re-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 as of July 31,
2010, our disclosure controls and procedures were not effective as at the end of
the period covered by this report.

On December 3, 2010, our company
announced that following an internal review by our company and our auditors, our
company would restate its historical financial statements in our quarterly
report for the period ended July 31, 2010 and 2009. Our conclusion to restate
the above periods resulted in the company recognizing that its disclosure
controls and procedures, and, as a result, our internal control over financial
reporting, were not effective as of the period ended July 31, 2009 and 2010 and
constituted a material weakness.

To address this material
weakness, we performed additional analyses and other procedures to ensure that
the financial statements included herein fairly present, in all material
respects, our financial position, results of operations and cash flows for the
periods presented.

To remediate the material
weakness in our disclosure controls and procedures, and the resultant deficiency
in our internal control over financial reporting, identified above, in addition
to working with our independent auditors, we have continued to refine our
internal procedures to alleviate this weakness and have added human resources
with experience in generally accepted accounting principles (GAAP) and are
committed to ongoing education in this area as a well as a defined process to
prepare such calculations.

38

---

Limitations on the effectiveness of disclosure controls
and procedures

A control system, no matter how
well conceived or operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. Further, the design of a
control system must reflect the fact that there are resource constraints, and
the benefits of controls must be considered relative to their costs. Because of
the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within our company have been detected. These inherent limitations include
the realities that judgments, in decision making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two
or more people, or by management override of the controls. The design of any
system of internal control is based in part upon certain assumptions above the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions.
Over time, controls may become inadequate because of changes in conditions, or
the degree of compliance with the policies or procedures may deteriorate.
Because of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected.

Changes in Internal Control over Financial
Reporting

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

PART II

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

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

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

Risks Associated with our Business and Industry

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

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

- we incur delays and additional expenses as a result of technology failure;

39

---

- we are unable to create a substantial market for our products; or
- we incur any significant unanticipated expenses.

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

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

If we are unable to obtain
financing in the amounts and on terms deemed acceptable to us, our business and
future success may be adversely affected and, as indicated in the audit report
included in our annual report on Form 10-K for the year ended April 30, 2010
filed with the SEC on July 27, 2010, raise substantial doubt on our ability to
continue as a going concern. Our financial statements included in this Form 10-Q
do not include any adjustments to the recoverability and classification of
recorded asset amounts and classification of liabilities that might be necessary
should we be unable to continue as a going concern.

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

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

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

We are subject to the credit risk
of our customers. Businesses that are good credit risks at the time of sale may
become bad credit risks over time. In times of economic recession, the number of
our customers who default on payments owed to us tends to increase. If we fail
to adequately assess and monitor our credit risks, we could experience longer
payment cycles, increased collection costs and higher bad debt expense.
Additionally, to the degree that the ongoing turmoil in the credit markets makes
it more difficult for some customers to obtain financing, those customers
ability to pay could be adversely impacted, which in turn could have a material
adverse impact on our business, operating results, and financial condition.

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

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

40

---

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.

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.

41

---

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

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

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

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

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

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

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

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

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

42

---

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
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.

43

---

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

On July 23, 2010, we granted
stock options to an employee to purchase an aggregate of 20,000 shares of our
common stock at an exercise price of $1.10 per share, exercisable for a period
of five years pursuant to our 2005 Amended and Restated Stock Option Plan. The
options vest in the amount of 12.5% on the date which is six months from the
date of grant and then beginning in the seventh month at 1/42 per month for 42
months, at which time the options are fully vested. We issued the stock options
to a U.S. person (as that term is defined in Regulation S of the Securities Act
of 1933) in reliance upon Rule 506 of Regulation D and/or Section 4(2) of the
Securities Act of 1933, as applicable.

On July 30, 2010, we issued
warrants to a customer to purchase 1,000,000 shares of our common stock at an
exercise price of $1.50 per share, exercisable for a period of two years. The
warrants were issued from the available option pool under the 2005 Amended and
Restated Stock Option Plan. These warrants will vest on a proportional basis to
invoices delivered by the Company and the warrants will be held in trust and
delivered once payment has been received by the Company. We issued the warrants
to a 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. [Removed and Reserved]

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).                         
|     |                                                                                                                                       
|(10) | Material Contracts                                                                                                                    

44

---

|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).      
|      |                                                                                                                                                                                                                                                                                                                           
|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).

45

---

|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).                                           
|      |                                                                                                                                                                                                                                                                                                                       
|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-Q 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
      (incorporated by reference from our Quarterly Report on Form 10-Q filed on
December 15, 2008).                                                                                

46

---

|10.31 | Settlement Agreement amongst
      Mark Bruk, CounterPath Corporation, and CounterPath Technologies Inc.
      dated March 12, 2009 (incorporated by reference from our Quarterly Report
      on Form 10-Q filed on March 12, 2009).                                                                                                                                                                                                         
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.32 | Form of Debt Conversion
      Agreement dated July 17, 2009 between our company and The Trustees of
      Columbia University in the City of New York (incorporated by reference
      from our Annual Report on Form 10-K filed on July 28, 2009).                                                                                                                                                                                           
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.33 | Form of Subscription Agreement
      dated October 29, 2009 between our company and various investors
      (incorporated by reference from our Current Report on Form 8-K filed on
      November 4, 2009).                                                                                                                                                                                                                                  
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.34 | Form of Subscription Agreement
      dated July 30, 2010 between our company and various
      investors  (incorporated by reference from our Current Report on
      Form 8-K filed on August 4, 2010).                                                                                                                                                                                                                                      
|     
|(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)
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(31)  | Section 302
      Certifications                                                                                                                                                                                                                                                                                                                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|31.1  | Section 302 Certification of
      Donovan Jones (filed herewith).                                                                                                                                                                                                                                                                                                                                                                            
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|31.2  | Section 302 Certification of
      David Karp (filed herewith).                                                                                                                                                                                                                                                                                                                                                                               
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(32)  | Section 906
      Certifications                                                                                                                                                                                                                                                                                                                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|32    | Section 906 Certification of Donovan Jones
    (filed herewith).                                                                                                                                                                                                                                                                                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|32    | Section 906 Certification of David Karp (filed
    herewith).                                                                                                                                                                                                                                                                                                                                                                                 

47

---

SIGNATURES

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

COUNTERPATH CORPORATION

|By: | /s/ Donovan Jones                                      | 
|--- | ------------------------------------------------------ | 
|    | Donovan Jones                                          | 
|    | President, Chief Executive Officer and Director        | 
|    | Date: December 9,  2010                                | 
|    |                                                        | 
|    |                                                        | 
|    | /s/
      David Karp                                   | 
|    | David Karp                                             | 
|    | Chief Financial Officer, Treasurer and
      Secretary | 
|    | Date: December 9,  2010                                | 

48

---