---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended July 31, 2008

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

For the transition period from ______________to
______________

Commission file number 000-50346

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

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

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

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

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

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

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

Common Stock, par value $0.001

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

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

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

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

---

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practicable date: 28,355,236
shares of common stock issued and outstanding as of September 8, 2008.

2

---

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

|         |                                                                                             | Page
|-------- | ------------------------------------------------------------------------------------------- | ----
|         | Part I                                                                                      |     
|Item 1.  | Financial
      Statements                                                                  | 4   
|Item 2.  | Managements Discussion and
      Analysis of Financial Condition and Results of Operations | 20  
|Item 4T. | Controls and
      Procedures                                                               | 30  
|         | Part II                                                                                     |     
|Item 1.  | Legal
      Proceedings                                                                     | 30  
|Item 1A. | Risk Factors                                                                                | 30  
|Item 2.  | Unregistered
      Sales of Equity Securities and Use of Proceeds.                          | 34  
|Item 3.  | Defaults Upon Senior
      Securities.                                                      | 35  
|Item 4.  | Submission
      of Matters to a Vote of Security Holders                                   | 35  
|Item 5.  | Other Information                                                                           | 35  
|Item 6.  | Exhibits                                                                                    | 35  

3

---

PART I

Item 1. Financial Statements.

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

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

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

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

4

---

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

|                                                                           |   | July 31,    |   |   | April 30,   |  
|-------------------------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|                                                                           |   | 2008        |   |   | 2008        |  
|Assets                                                                     |   | (Unaudited) |   |   |             |  
|Current assets:                                                            |   |             |   |   |             |  
|Cash                                                                       | $ | 5,769,185   |   | $ | 6,223,613   |  
|Accounts receivable
      (net of allowance for doubtful accounts of       |   |             |   |   |             |  
|$537,050 and $407,050, respectively)                                       |   | 6,123,630   |   |   | 5,409,658   |  
|Investment tax credits
      recoverable                                   |   |            |   |   | 1,061,133   |  
|Prepaid expenses and deposits                                              |   | 535,048     |   |   | 646,679     |  
|Total current assets                                                       |   | 12,427,863  |   |   | 13,341,083  |  
|                                                                           |   |             |   |   |             |  
|Deposits                                                                   |   | 165,775     |   |   | 103,017     |  
|Equipment                                                                  |   | 504,798     |   |   | 736,854     |  
|Intangible assets (net of accumulated
      amortization of $1,909,838     |   |             |   |   |             |  
|and $1,364,365)  Note 2(d)                                                |   | 7,853,480   |   |   | 8,534,666   |  
|Goodwill  Note 2(d)                                                       |   | 8,586,228   |   |   | 8,674,990   |  
|Other assets                                                               |   | 103,839     |   |   | 177,749     |  
|Total Assets                                                               | $ | 29,641,983  |   | $ | 31,568,359  |  
|                                                                           |   |             |   |   |             |  
|Liabilities and Stockholders Equity
      (Capital Deficit)               |   |             |   |   |             |  
|Current liabilities:                                                       |   |             |   |   |             |  
|Accounts payable and
      accrued liabilities                             | $ | 4,041,904   |   | $ | 4,529,201   |  
|Unearned revenue                                                           |   | 1,228,076   |   |   | 936,343     |  
|Customer deposits                                                          |   | 70,834      |   |   | 85,283      |  
|Warranty accrual                                                           |   | 150,330     |   |   | 144,347     |  
|Total
      current liabilities                                            |   | 5,491,144   |   |   | 5,695,174   |  
|                                                                           |   |             |   |   |             |  
|Deferred Lease Inducements                                                 |   | 73,977      |   |   | 97,734      |  
|Unrecognized tax benefit                                                   |   | 98,575      |   |   | 98,575      |  
|Total
      liabilities                                                    |   | 5,663,696   |   |   | 5,891,483   |  
|                                                                           |   |             |   |   |             |  
|Stockholders equity (capital
      deficit):                              |   |             |   |   |             |  
|Preferred stock, $0.001 par value  Note 4                                 |   |             |   |   |             |  
|Authorized: 100,000,000                                                    |   |             |   |   |             |  
|Issued and outstanding: July 31, 2008 
      1; April 30, 2007  Nil      |   |            |   |   |            |  
|Common stock, $0.001 par value  Note
      5                              |   |             |   |   |             |  
|Authorized: 83,076,900                                                     |   |             |   |   |             |  
|Issued and
      outstanding:                                              |   |             |   |   |             |  
|July 31, 2008  28,355,236;
      April 30, 2007  7,588,197               |   | 28,355      |   |   | 25,921      |  
|Additional paid-in capital                                                 |   | 47,533,178  |   |   | 43,398,849  |  
|Accumulated deficit                                                        |   | (24,335,285 | ) |   | (18,479,483 | )
|Accumulated other
      comprehensive income (loss)  currency translation |   |             |   |   |             |  
|adjustment                                                                 |   | 752,039     |   |   | 731,589     |  
|Total
      stockholders equity                                           |   | 23,978,287  |   |   | 25,676,876  |  
|Liabilities and Stockholders Equity                                       | $ | 29,641,983  |   | $ | 31,568,359  |  

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

See accompanying notes to the consolidated financial
statements

5

---

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

|                                                                          |   | Three Months Ended |  
|------------------------------------------------------------------------- | - | ------------------ | -
|                                                                          |   | July 31,           |  
|                                                                          |   | 2008               |  
|Revenue  Note 6:                                                         |   |                    |  
|Software                                                                  | $ | 1,848,305          |  
|Service                                                                   |   | 764,455            |  
|Total revenue                                                             |   | 2,612,760          |  
|Operating expenses:                                                       |   |                    |  
|Cost of sales (includes depreciation of $21,484 and
      $38,541 and     |   |                    |  
|amortization of intangible
      assets of $545,473 and $nil  Note 2(d)) |   | 1,377,843          |  
|Sales and marketing                                                       |   | 1,481,951          |  
|Research and development                                                  |   | 3,017,412          |  
|General and administrative                                                |   | 2,228,127          |  
|Restructuring costs  Note 9                                              |   | 190,961            |  
|Total
      operating expenses                                            |   | 8,296,294          |  
|Loss from operations                                                      |   | (5,683,534         | )
|Interest and other income (expense), net                                  |   |                    |  
|Interest income                                                           |   | 18,068             |  
|Interest expense  Note 3                                                 |   | (7,295             | )
|Foreign exchange loss                                                     |   | (183,041           | )
|Net loss for the period                                                   |   | (5,855,802         | )
|Other comprehensive income (loss):                                        |   |                    |  
|Foreign currency translation adjustments                                  |   | 20,450             |  
|Comprehensive loss                                                        | $ | (5,835,352         | )
|Net loss per share:                                                       |   |                    |  
|Basic and diluted                                                         | $ | (0.23              | )
|                                                                          |   |                    |  
|Weighted average common shares
      outstanding:                         |   | 25,948,247         |  

See accompanying notes to the consolidated financial
statements

6

---

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

|                                                            |   | Three Months Ended |  
|----------------------------------------------------------- | - | ------------------ | -
|                                                            |   | July 31,           |  
|                                                            |   | 2008               |  
|Cash flows from operating
      activities:                 |   |                    |  
|Net loss for the period                                     | $ | (5,855,802         | )
|Adjustments to
      reconcile net loss to net cash used in |   |                    |  
|operating
      activities:                                 |   |                    |  
|Depreciation and amortization                               |   | 281,005            |  
|Amortization of
      intangible assets                     |   | 545,473            |  
|Stock-based compensation  Note 5                           |   | 507,988            |  
|Accretion of convertible
      debenture discount           |   |                   |  
|Cumulative-effect adjustment                                |   |                   |  
|Foreign exchange loss                                       |   | 183,041            |  
|Changes in assets and liabilities:                          |   |                    |  
|Accounts receivable                                         |   | 357,399            |  
|Prepaid
      expenses and deposits                         |   | 113,511            |  
|Deferred income taxes                                       |   |                   |  
|Accounts
      payable and accrued liabilities              |   | (463,700           | )
|Unearned revenue                                            |   | 291,733            |  
|Customer
      deposits                                     |   | (14,449            | )
|Unrecognized tax benefit                                    |   |                   |  
|Warranty
      payable                                      |   | 5,983              |  
|Net cash used in operating activities                       |   | (4,047,818         | )
|                                                            |   |                    |  
|Cash flows from investing activities:                       |   |                    |  
|Purchase of equipment                                       |   | (51,953            | )
|Deposits                                                    |   | 1,117              |  
|Increase in other assets                                    |   | 73,910             |  
|Net cash provided by (used in) investing activities         |   | 23,074             |  
|                                                            |   |                    |  
|Cash flows from financing activities:                       |   |                    |  
|Common stock issued, net of
      transaction costs         |   | 3,628,775          |  
|Net cash provided by financing activities                   |   | 3,628,775          |  
|                                                            |   |                    |  
|Foreign exchange effect on cash                             |   | (58,459            | )
|                                                            |   |                    |  
|Increase (decrease) in cash                                 |   | (454,428           | )
|                                                            |   |                    |  
|Cash, beginning of the period                               |   | 6,223,613          |  
|Cash, end of the period                                     | $ | 5,769,185          |  
|                                                            |   |                    |  
|Supplemental disclosure of cash flow
      information      |   |                    |  
|Cash paid for:                                              |   |                    |  
|Interest                                                    | $ | 7,282              |  
|Taxes                                                       | $ |                   |  

See accompanying notes to the consolidated financial
statements

7

---

|COUNTERPATH CORPORATION                                                 
|------------------------------------------------------------------------
|(Formerly CounterPath Solutions, Inc.)                                  
|INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN
      STOCKHOLDERS EQUITY
|for the Three Months Ended July 31, 2008                                
|(Stated in U.S. Dollars)                                                

|                                              |  | Common shares |  |   | Preferred Shares |  |  |        |  |   |                 |  |   |            |  |   |             |  
|--------------------------------------------- |  | ------------- |  | - | ---------------- |  |  | ------ |  | - | --------------- |  | - | ---------- |  | - | ----------- | -
|                                              |  |               |  |   |                  |  |  |        |  |   |                 |  |   |            |  |   |             |  
|                                              |  | Number        |  |   |                  |  |  | Number |  |   |                 |  |   | Additional |  |   |             |  
|                                              |  | of            |  |   |                  |  |  | of     |  |   |                 |  |   | Paid-in    |  |   | Accumulated |  
|                                              |  | Shares        |  |   | Par
      Value  |  |  | Shares |  |   | Par
      Value |  |   | Capital    |  |   | Deficit     |  
|Balance, April 30, 2008                       |  | 25,921,797    |  |   | 25,921           |  |  | 1      |  |   |                |  |   | 43,398,849 |  |   | (18,479,483 | )
|                                              |  |               |  |   |                  |  |  |        |  |   |                 |  |   |            |  |   |             |  
|Shares issued:                                |  |               |  |   |                  |  |  |        |  |   |                 |  |   |            |  |   |             |  
|Private placement  Note 5                    |  | 2,433,439     |  |   | 2,434            |  |  |       |  |   |                |  |   | 3,626,341  |  |   |            |  
|Stock-based compensation -
      Note 5       |  |              |  |   |                 |  |  |       |  |   |                |  |   | 507,988    |  |   |            |  
|Net loss for the period                       |  |              |  |   |                 |  |  |       |  |   |                |  |   |           |  |   | (5,855,802  | )
|Foreign currency translation
      adjustment |  |              |  |   |                 |  |  |       |  |   |                |  |   |           |  |   |            |  
|Balance, July 31 2008 (Unaudited)             |  | 28,355,236    |  | $ | 28,355           |  |  | 1      |  | $ |                |  | $ | 47,533,178 |  | $ | (24,335,285 | )

See accompanying notes to the consolidated financial
statements

8

---

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

|Note 1 | Nature of Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | CounterPath Corporation (formerly CounterPath Solutions,
      Inc.) (the Company) was incorporated in the State of Nevada on April 18,
      2003. The Company changed its name from CounterPath Solutions, Inc. to
      CounterPath Corporation on October 17, 2007. The Companys common shares
      are quoted for trading on the Over-The-Counter Bulletin Board in the
      United States of America and  the TSX Venture
    Exchange in Canada.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | On August 2, 2007, the Company acquired of all of the
      shares of NewHeights Software Corporation (NewHeights) through the
      issuance of 7,680,168 shares of the Companys common stock and 369,836
      preferred shares issued from a subsidiary of the Company that are
      exchangeable into 369,836 shares of common stock of the Company. For
      accounting purposes, the Company was deemed to be the acquirer of
      NewHeights based on certain factors including the number of common shares
      issued in the transaction as a proportion of the total common shares
      outstanding, and the composition of the board after the transaction.                                                                                                                                                                                                                                                                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | On February 1, 2008, the Company acquired FirstHand
      Technologies Inc., (FirstHand) a private Ontario, Canada corporation,
      through the issuance of 5,900,014 shares of the Companys common stock.
      For accounting purposes, the Company was deemed to be the acquirer of
      FirstHand based on certain factors including the number of common shares
      issued in the transaction as a proportion of the total common shares
      outstanding, and the composition of the board after the transaction.                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | On February 1, 2008, the Company acquired Bridgeport
      Networks, Inc. (Bridgeport), a private Delaware corporation, by way of
      merger in consideration for the assumption of all of the assets and
      liabilities of Bridgeport Networks. 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
      Software Corporation 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 application software, conferencing
      software, gateway (server) software and related professional services,
      such as pre and post sales technical support and customization services.
      The Companys products are sold into the Voice over Internet Protocol
      (VoIP) market primarily to carriers, infrastructure manufacturers and
      businesses in North America, Central and South America, Europe and Asia.                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Note 2 | Significant Accounting Policies and Going
      Concern                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | These interim consolidated financial statements have been
      prepared in accordance with generally accepted accounting principles in
      the United States of America and are stated in U.S. dollars except where
      otherwise disclosed. Because a precise determination of many assets and
      liabilities is dependent upon future events, the preparation of financial
      statements for the period necessarily involves the use of estimates, which
      have been made using careful judgment. Actual results may vary from these
      estimates.                                                                                                                                                                                                                                                                                                                                                                                          
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | These interim consolidated financial statements have been
      prepared on a going concern basis, which implies the Company will continue
      to realize its assets and discharge its liabilities and commitments in the
      normal course of business. The continuation of the Company as a going
      concern is dependent upon the continued financial support from its
      stockholders, the ability of the Company to obtain necessary equity
      financing to continue operations and to generate sustainable significant
      revenue. There is no guarantee that the Company will be able to raise any
      equity financing or generate profitable operations. As at July 31, 2008,
      the Company has not yet achieved profitable operations and had an
      accumulated deficit of $24,335,285 since incorporation. These factors
      raise substantial doubt regarding the Companys ability to continue as a
      going concern.

9

---

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

|Note 2 | Significant Accounting Policies and Going
      Concern - (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       | Management is implementing a plan to address these
      uncertainties to enable the Company to continue as a going concern through
      the end of fiscal 2009 and beyond. This plan includes new equity financing
      in amounts sufficient to sustain operations, such as the private placement
      discussed in Note 5, and to increase revenues from operations.                                                                                                                                                                                                                                                                               
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       | Realizable values may be substantially different from
      carrying values as shown in these financial statements should the Company
      be unable to continue as a going concern. These financial statements do
      not include any adjustments to the recoverability and classification of
      recorded asset amounts and classification of liabilities that might be
      necessary should the Company be unable to continue as a going concern. The
      interim consolidated financial statements have, in managements opinion,
      been properly prepared within the framework of the significant accounting
      policies as follows:

| | a) | Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | These consolidated financial statements include the
      accounts of the Company and its wholly-owned subsidiaries, CounterPath
      Technologies Inc., a company existing under the laws of the province of
      British Columbia, Canada, FirstHand Technologies Inc., continued under
      laws of the province of British Columbia, BridgePort Networks, Inc.
      incorporated under the laws of the state of Delaware and 6789722 Canada
      Inc., incorporated under the Canada Business Corporations Act. The results
      of NewHeights Software Corporation (which subsequently merged with another
      subsidiary to become CounterPath Technologies Inc.) are included from
      August 2, 2007, the date of acquisition. The results of FirstHand
      Technologies Inc. and BridgePort Networks, Inc. are included from February
      1, 2008, the date of acquisition. All inter-company transactions and
      balances have been eliminated.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | b) | Interim Reporting                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | The information presented in the accompanying interim
      consolidated financial statements is without audit pursuant to the rules
      and regulations of the Securities and Exchange Commission. Certain
      information and footnote disclosures normally included in the financial
      statements prepared in accordance with generally accepted accounting
      principles have been condensed or omitted pursuant to such rules and
      regulations, although the Company believes that the disclosures are
      adequate to make the information presented not misleading.                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | These statements reflect all adjustments, which are, in
      the opinion of management, necessary to present fairly the financial
      position, results of operations and cash flows for the interim periods
      presented in accordance with accounting principles generally accepted in
      the United States of America. Except where noted, these interim financial
      statements follow the same accounting policies and methods of their
      application as the Companys April 30, 2008 annual consolidated financial
      statements. All adjustments are of a normal recurring nature. It is
      suggested that these interim financial statements be read in conjunction
      with the Companys April 30, 2008 annual consolidated financial
      statements.                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | Operating results for the three months ended July 31,
      2008 are not necessarily indicative of the results that can be expected
      for the year ending April 30, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | c) | New Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | In September 2006, FASB issued Statement of Financial
      Accounting Standards No. 157, Fair Value Measurements(SFAS No.
      157). This standard clarifies the principle that fair value should be
      based on the assumptions that market participants would use when pricing
      an asset or liability. Additionally, it establishes a fair value hierarchy
      that prioritizes the information used to develop those assumptions. This
      standard is effective for financial statements issued for fiscal years
      beginning after November 15, 2007. The adoption of this statement did not
      have an impact on the Companys consolidated financial
  statements.                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | In February 2007, the FASB issued Statement of Financial
      Accounting Standards No. 159, The Fair Value Option for Financial
      Assets and Financial Liabilities  Including an Amendment of FASB
      Statement No. 115.(SFAS No. 159). This standard permits an entity
      to choose to measure many financial instruments and certain other items at
      fair value. This standard is effective for financial statements issued for
      fiscal years beginning after November 15, 2007. The adoption of this
      statement did not have an impact on the Companys consolidated financial
      statements.                                                                                                                                                                                                                                                                                                                                          

10

---

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

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

| | c) | New Accounting Pronouncements  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | In December 2007, the FASB issued Statement of Financial
      Accounting Standards No. 141 (revised 2007), Business Combinations(SFAS No. 141R). This standard replaces SFAS141 and establishes
      principles and requirements for an acquirer recognizes and measures in its
      financial statement the identifiable assets acquired and liabilities
      assumed, any non-controlling interest in the acquiree, and the goodwill
      acquired. This standard also establishes disclosure requirements which
      will enable users to evaluate the nature and financial effects of the
      business combination. This standard is effective for financial statements
      issued for fiscal years beginning after December 15, 2008. The Company is
      currently evaluating the impact of this statement.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | In December 2007, the FASB issued Statement of Financial
      Accounting Standards No. 160, Non controlling Interests In Consolidated
      Financial Statements  an amendment to ARB No.51(SFAS No. 160).
      This standard Amends ARB 51 to establish accounting and reporting
      standards for a non-controlling interest in a subsidiary and for
      deconsolidation of a subsidiary. This standard applies prospectively to
      business combinations for which the acquisition date is on or after the
      beginning of the first annual reporting period beginning on or after
      December 15, 2008. This standard may not be applied before that date. The
      Company is currently evaluating the impact of this statement.                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | d) | Goodwill and Intangible Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | Goodwill represents the excess purchase price over the
      estimated fair value of net assets acquired as of the acquisition date.
      Statement of Financial Accounting Standards No. 142, Goodwill and Other
      Intangible Assets (SFAS No. 142). SFAS No. 142 requires goodwill to be
      tested for impairment annually or more frequently if an event occurs or
      circumstances change that would more likely than not reduce the fair value
      of the Company's business enterprise below its carrying value. The
      impairment test requires management to estimate the fair value of the
      Company's overall business enterprise down to the reporting unit level
      which is CounterPath Corporation.                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | Goodwill of $6,339,717 (CDN$6,704,947), and $2,083,960
      (CDN$2,083,752) was initially recorded in connection with the acquisition
      of NewHeights Software Corporation on August 2, 2007 and FirstHand
      Technologies Inc. on February 1, 2008. Translated to U.S. dollars using
      the period end rate, the goodwill balance at July 31, 2008 (April 30,
      2008) was $6,462,054 (CDN$6,704,947) and $2,124,174 (CDN$2,083,752),
      respectively. Management will perform its annual impairment test in its
      fiscal fourth quarter. No impairment charges were recorded to the three
      months ended July 31, 2008 (2007 - $nil).                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | Intangible assets include the intangibles purchased in
      connection with the acquisition of NewHeights Software Corporation on
      August 2, 2007 and FirstHand Technologies Inc. and BridgePort Networks
      Inc. on February 1, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | The intangible assets of NewHeights are being carried and
      reported at acquisition cost and include amounts initially allocated to
      acquired technologies of $3,454,839 (CDN$3,678,100) and customer asset of
      $2,283,908 (CDN$2,431,500). The acquired technologies are amortized based
      on their estimated useful life of four years and the customer asset is
      amortized on the basis of Managements estimate of the future cash flows
      from this asset over approximately five years, which is Managements
      estimate of the useful life of the customer asset.                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | The intangible assets of FirstHand are being carried and
      reported at acquisition cost and include amounts initially allocated to
      acquired technologies of $2,804,700 (CDN$ 2,804,700) and customer asset of
      $587,000 (CDN$587,000). The acquired technologies is amortized based on
      their estimated useful life of four years and the customer asset is
      amortized on the basis of Managements estimate of the future cash flows
      from this asset over approximately five years, which is Managements
      estimate of the useful life of the customer asset.                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | 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.                                                                                                                                                                                                                                                            

11

---

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

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

| | d) | Goodwill and Intangible Assets 
(contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | Statement of Financial Accounting Standard No. 144, The
      Impairment or Disposal of Long-Lived Assets (SFAS No. 144), SFAS No.
      144 requires us to review the carrying value of intangibles and other
      long-lived assets for impairment at least annually or whenever events or
      changes in circumstances indicate that the carrying amount of an asset may
      not be recoverable. No impairment charges were recorded for the three
      months ended July 31, 2008 (2007 - $nil).
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | A summary of the Companys intangible assets, net, at
      July 31, 2008 is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                      

| |                                  |   |           |  |   | Accumulated  |  |   | Net Carrying | 
| | -------------------------------- | - | --------- |  | - | ------------ |  | - | ------------ | 
| |                                  |   | Cost      |  |   | Amortization |  |   | Amount       | 
| | Acquired technologies            | $ | 6,772,803 |  | $ | 1,583,926    |  | $ | 5,188,877    | 
| | Customer assets                  |   | 2,990,515 |  |   | 325,912      |  |   | 2,664,603    | 
| | Intangible assets, July 31, 2008 | $ | 9,763,318 |  | $ | 1,909,838    |  | $ | 7,853,480    | 

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

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

During the three months ended July 31,
2008 and 2007, the Company incurred the following lease expense to a company
with a director in common with the Company and interest expenses to a company
controlled by the spouse of a significant shareholder of the Company:

| |                                   |   | Three Months Ended | 
| | --------------------------------- | - | ------------------ | 
| |                                   |   | July 31,           | 
| |                                   |   | 2008               | 
| |                                   |   |                    | 
| | Interest on convertible debenture | $ | Nil                | 
| | Lease payment                     | $ | 3,446              | 

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

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

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

The Companys software license revenue
for the three months ended July 31, 2008, pursuant to the terms of these
agreements, was $650,000 (2007 - $nil).

As at July 31, 2008, the Company has
an accounts receivable balance from Mitel of $1,589,500 (April 30, 2008
-$1,177,000).

12

---

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

|Note 3 | Related Party Transactions 
      (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | During the three month ended July 31, 2008, the Company
      through its wholly owned subsidiary, FirstHand Technologies Inc., paid
      $81,691 (2007 - $nil) to Kanata Research Park Corporation (KRP) for
      leased office space. KRP is controlled by the Companys Chairman. As at
      July 31, 2008, the Company had an accounts payable balance to KRP of
      $3,021 (April 30, 2008 - $2,656).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | In connection with a non-brokered private placement of
      2,433,439 units which closed on July 31, 2008 (Note 5), three directors,
      an officer, and a company controlled by the Chairman of the Board,
      purchased 759,559 units, at a price of $1.50 (CDN$1.54) per unit, for
      aggregate proceeds of $1,142,306 (CDN$1,169,721). Each unit consists 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 $2.25 for a period of two years
      from the closing of the private placement. As the unit price of $1.50
      (CDN$1.54) per unit was below the closing market price of $1.60 (CDN$1.64)
      per share of the Companys common stock on the date of the transaction and
      included one-half of one common share purchase warrant, the Company
      recorded a compensatory charge to general and administrative expenses for
      the three months ending July 31, 2008 of $195,293.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Note 4 | Preferred Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | On August 2, 2007, the Company entered into a voting and
      exchange trust agreement among its subsidiary, 6789722 Canada Inc., and
      Valiant Trust Company whereby the Company issued and deposited with
      Valiant Trust a special preferred voting share of the Company in order to
      enable Valiant Trust to execute certain voting and exchange rights as
      trustee for and on behalf of the registered holders from time to time of
      the preferred shares of 6789722 Canada Inc. Each preferred share of
      6789722 Canada Inc. is exchangeable into one share of common stock of the
      Company at the election of the shareholder, or, in certain circumstances,
      of the Company.                                                                                                                                                                                                                                                                                                                                                         
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Note 5 | Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | On March 19, 2008, the Companys Board of Directors
      approved a five for one common stock consolidation. As a result, the
      Company's authorized capital decreased from 415,384,500 shares of common
      stock to 83,076,900 shares of common stock. All per share amounts and
      outstanding shares, including all common stock equivalents (stock options
      and warrants) have been retroactively adjusted in the Consolidated
      Financial Statements and in the Notes to the Consolidated Financial
      Statements for all periods presented to reflect the stock consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | On April 11, 2008, certain officers, directors and
      affiliates of the Company entered into an escrow agreement with the TSX- V
      whereby a total of 11,489,635 shares of common stock in the Company were
      deposited into escrow with Valiant Trust acting as escrow agent as a
      condition to listing of the Companys shares of common stock on the TSX-V.
      The shares are released as to 25% upon entering in to the agreement and
      25% on each date that is 6, 12 and 18 months from the date of the escrow
      agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | On July 30, 2008, the Company announced a private
      placement of up to approximately 3.3 million units at a price of $1.50
      (CDN$1.54) per unit for gross proceeds of up to approximately $5 million
      (CDN$5.1 million). On July 31, 2008 the Company issued 2,433,439 units at
      a price of $1.50 (CDN$1.54) per unit for gross proceeds of $3,660,379
      (CDN$3,747,497). The Company incurred $31,604 of transaction costs. Each
      unit consists of one share of common stock in the capital of CounterPath
      and one-half of one non-transferable common share purchase warrant. Each
      warrant shall entitle the holder thereof to purchase one share of common
      stock in the capital of CounterPath for a period of two years commencing
      from July 31, 2008 at an exercise price of $2.25 per warrant share.                                                                                                                                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | Certain officers and directors of the Company subscribed
      for 759,559 units at a price of $1.50 (CDN$1.54) per unit, including
      warrants entitling the holders thereof to purchase one share of common
      stock in the capital of CounterPath for a period of two years commencing
      from July 31, 2008 at an exercise price of $2.25 per warrant share for
      gross proceeds of $1,142,306 (CDN$1,169,721). As the unit price of $1.50
      (CDN$1.54) per unit was below the closing market price of $1.60 (CDN$1.64)
      per share of the Companys common stock on the date of the transaction and
      included one-half of one common share purchase warrant, the Company
      recorded a compensatory charge to general and administrative expenses for
    the three months ending July 31, 2008 of $195,293 (Note 3).                                                                                                                                                                                                                             

13

---

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

|Note 5 | Common Stock  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | Stock Options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | The Company has a stock option plan under which options
      to purchase common shares of the Company may be granted to employees,
      directors and consultants. Stock options entitle the holder to purchase
      common stock at a subscription price determined by the Board of Directors
      of the Company at the time of the grant. The options generally vest in the
      amount of 12.5% on the date which is six months from the date of grant and
      then beginning in the seventh month at 1/42 per month for 42 months, at
      which time the options are fully vested.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | The maximum number of shares of common stock authorized
      by the stockholders and reserved for issuance by the Board of Directors of
      the Company under the stock option plans are 800,000 under the 2004 Stock
      option plan and 4,260,000 under the 2005 Stock option plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | The Company has elected to use the Black-Scholes option
      pricing model to determine the fair value of stock options granted. In
      accordance with SFAS No. 123R for employees, the compensation expense is
      amortized on a straight-line basis over the requisite service period which
      approximates the vesting period. Compensation expense for stock options
      granted to non-employees is amortized over the vesting period or, if none
      exists, over the service period. Compensation associated with unvested
      options granted to non-employees is remeasured on each balance sheet date
      using the Black-Scholes option pricing model.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | The expected volatility of options granted has been
      determined using the method described under SFAS No. 123R using the
      historical stock price. The expected term of options granted to employees
      in the current fiscal period has been determined utilizing the
      simplified method as prescribed by SAB No. 107, Share-Based Payment. For
      non-employees, the expected term of the options approximates the full term
      of the options. The risk-free interest rate is based on a treasury
      instrument whose term is consistent with the expected term of the stock
      options. The Company has not paid and does not anticipate paying dividends
      on its common stock; therefore, the expected dividend yield is assumed to
      be zero. In addition, SFAS No. 123R requires companies to utilize an
      estimated forfeiture rate when calculating the expense for the period,
      whereas prior to the adoption of SFAS No. 123R the Company recorded
      forfeitures based on actual forfeitures and recorded a compensation
      expense recovery in the period when the awards were forfeited. As a
      result, based on the Companys experience, the Company applied an
      estimated forfeiture rate of 15% in fiscal 2009 and 2008 in determining
      the expense recorded in the accompanying consolidated statement of
      operations.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | The weighted-average fair value of options granted during
      the three months ended July 31, 2008 was $0.85. The weighted- average
      assumptions utilized to determine such values are presented in the
      following table:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

| |                             |   | Three Months 
    Ended |  |   | Three Months 
    Ended | 
| | --------------------------- | - | ----------------------- |  | - | ----------------------- | 
| |                             |   | July 31, 2008           |  |   | July 31, 2007           | 
| | Risk-free interest rate     |   | 3.25%                   |  |   | 4.78%                   | 
| | Expected volatility         |   | 67.0%                   |  |   | 70.0%                   | 
| | Expected term               |   | 3.7 yrs                 |  |   | 3.7 yrs                 | 
| | Dividend yield              |   | 0%                      |  |   | 0%                      | 
| | Weighted average fair value | $ | 0.85                    |  | $ | 0.18                    | 

14

---

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

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

| |                               |           |   | Weighted-average | 
| | ----------------------------- | --------- | - | ---------------- | 
| |                               | Number of |   | Exercise Price   | 
| |                               | Options   |   | per Share        | 
| | Outstanding at April 30, 2008 | 3,794,263 |   | $2.20            | 
| | Granted                       | 524,000   |   | $1.70            | 
| | Exercised                     | -         |   | -                | 
| | Forfeited / Cancelled         | (13,694   | ) | $2.06            | 
| | Expired                       | (1,000    | ) | $2.00            | 
| | Outstanding at July 31, 2008  | 4,303,569 |   | $2.16            | 
| |                               |           |   |                  | 
| | Exercisable at July 31, 2008  | 2,537,803 |   | $2.28            | 
| | Exercisable at April 30, 2008 | 2,360,979 |   | $2.30            | 

The following table summarizes
information regarding stock purchase options outstanding as of July 31, 2008.

Number of
    
    Aggregate
    
    
    
    Number of
    
    AggregateExercise
    Options
    
    Intrinsic
    
    
    
    Options
    
    IntrinsicPrice
    Outstanding
    
    Value
    
    Expiry Date
    
    Exercisable
    
    Value$1.50
    40,000
    
    $4,000
    
    August 1, 2016
    
    19,167
    
    $1,917$1.55
    100,000
    
    5,000
    
    July 30, 2013
    
    
    
    $1.64
    40,000
    
    -
    
    June 3, 2013
    
    -
    
    $1.70
    53,333
    
    -
    
    May 1, 2012
    
    28,542
    
    $1.75
    384,000
    
    -
    
    May 14, 2013
    
    -
    
    $1.85
    192,312
    
    
    
    February 2, 2013
    
    124,766
    
    October 1, 2011
      to$1.90
    302,611
    
    
    
    June 26, 2017
    
    214,406
    
    $1.95
    1,637,375
    
    
    
    September 7,
      2010 to
    
    1,124,231
    
    January 10, 2016$2.00
    780,089
    
    
    
    September 5,2008 to
    
    577,981March 18, 2015$2.15
    240,000
    
    
    
    September 7,
      2016
    
    110,000
    
    $2.25
    32,021
    
    
    
    December 13, 2012
    
    5,542
    
    $2.80
    50,000
    
    
    
    February 20,
      2016
    
    30,208
    
    $2.95
    60,000
    
    
    
    July 26, 2016
    
    30,000
    
    $3.05
    196,620
    
    
    
    May 23, 2016
    
    106,502
    
    $3.35
    55,000
    
    
    
    June 13, 2010 to
    
    35,000
    
    July 11, 2016$3.40
    20,000
    
    
    
    April 10, 2016
    
    11,250
    
    $3.75
    5,208
    
    
    
    March 3, 2016
    
    5,208
    
    $5.35
    30,000
    
    
    
    March 29, 2010
    
    30,000
    
    $5.85
    35,000
    
    
    
    February 22,
      2010
    
    35,000
    
    $7.90
    30,000
    
    
    
    October 24, 2009
    
    30,000
    
    $9.35
    20,000
    
    
    
    July 21, 2009
    
    20,000
    
    July 31, 2008
    4,303,569
    
    $9,000
    
    
    
    2,537,803
    
    $1,917April 30, 2008
    3,794,263
    
    $17,333
    
    
    
    2,360,979
    
    $7,635


15

---

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

|Note 5 | Common Stock  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | Stock Options  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | The aggregate intrinsic value in the preceding table
      represents the total intrinsic value, based on the Companys closing stock
      price of $1.60 per share as of July 31, 2008 (April 30, 2008  $1.80),
      which would have been received by the option holders had all option
      holders exercised their options as of that date. The total number of
      in-the-money options vested and exercisable as of July 31, 2008 was 19,167
      (April 30, 2008  43,021). The total intrinsic value of options exercised
      during the three months ended July 31, 2008 was $nil (2007  $341). The
      grant date fair value of options vested during the three months ended July
      31, 2008 was $264,956 (April 30, 2008  $1,817,972).
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | The following table summarizes information regarding the
      non-vested stock purchase options outstanding as of July 31, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

| |                                      |  |                   |   | Weighted Average      | 
| | ------------------------------------ |  | ----------------- | - | --------------------- | 
| |                                      |  | Number of Options |   | Grant-Date Fair Value | 
| | Non-vested options at April 30, 2008 |  | 1,433,284         |   | $1.48                 | 
| | Granted                              |  | 524,000           |   | $0.85                 | 
| | Vested                               |  | (177,823          | ) | $1.49                 | 
| | Forfeited                            |  | (13,694           | ) | $1.15                 | 
| | Non-vested options at July 31, 2008  |  | 1,765,767         |   | $1.29                 | 

As of July 31, 2008 there was
$2,002,259 of total unrecognized compensation cost related to unvested
share-based compensation awards. This unrecognized compensation cost is expected
to be recognized over a weighted average period of 1.05 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, 2008 and 2007 are as follows:

| |                                |   | Three Months Ended | 
| | ------------------------------ | - | ------------------ | 
| |                                |   | July 31,           | 
| |                                |   | 2008               | 
| |                                |   |                    | 
| | Cost of sales                  | $ | 19,916             | 
| | Sales and marketing            |   | 28,249             | 
| | Research and development       |   | 87,793             | 
| | General and administrative     |   | 372,030            | 
| | Total stock-based compensation | $ | 507,988            | 

Warrants

During the three months ended July 31,
2008, the Company issued 1,216,720 warrants as part of unit offering which
closed on July 31, 2008 (2007  nil). The fair value of the stock purchase
warrants granted was $391,831. The warrants enable the holders the right to
purchase up to 1,216,720 shares of the Companys common stock, exercisable for
two years from July 31, 2008. The assumptions utilized to determine such values
are presented in the following table:

| |                             |  | Three Months  | 
| | --------------------------- |  | ------------- | 
| |                             |  | Ended         | 
| |                             |  | July 31, 2008 | 
| |                             |  |               | 
| | Risk-free interest rate     |  | 2.52%         | 
| | Expected volatility         |  | 66.34%        | 
| | Expected term               |  | 2 yrs         | 
| | Dividend yield              |  | 0%            | 
| | Weighted average fair value |  | 0.44          | 

16

---

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

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

| |                            |  |                   |  | Weighted Average | 
| | -------------------------- |  | ----------------- |  | ---------------- | 
| |                            |  | Number of Options |  | Exercise Price   | 
| | Warrants at April 30, 2008 |  | 1,000,000         |  | $4.00            | 
| | Granted                    |  | 1,216,720         |  | $2.25            | 
| | Exercised                  |  | -                 |  | -                | 
| | Expired                    |  | -                 |  | -                | 
| | Warrants at July 31, 2008  |  | 2,216,720         |  | $3.04            | 

|Note 6 | Segmented Information                                                                                                                                                                                                                                                                                                                                                
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                      
|       | Our chief operating decision maker reviews financial
      information presented on a consolidated basis, accompanied by desegregated
      information about revenues by geographic region for purposes of making
      operating decisions and assessing financial performance. Accordingly, we
      have concluded that we have one reportable operating segment.
|       |                                                                                                                                                                                                                                                                                                                                                                      
|       | Foreign revenues are based on the country in which the
      customer is located. The following is a summary of total revenues by
      geographic area for the three months ended January 31, 2008 and 2007:                                                                                                                                                        

| |                           |   | Three Months Ended | 
| | ------------------------- | - | ------------------ | 
| |                           |   | July 31,           | 
| |                           |   | 2008               | 
| | North America             | $ | 1,721,543          | 
| | Europe                    |   | 576,569            | 
| | Asia                      |   | 74,021             | 
| | Central and South America |   | 240,627            | 
| | Other                     |   |                   | 
| |                           | $ | 2,612,760          | 

Contained within the results of North
America for the three months ended July 31, 2008 are revenues from the United
States of $1,041,977 (2007 - $349,952) and from Canada of $679,566 (2007 -
$96,602).

Contained within the results of Europe
for the three months ended July 31, 2008 are revenues from the United Kingdom of
$172,871 (2007 - $352,379), from Denmark of $170,043 (2007 - $115), from Germany
of $102,115 (2007 - $81,968), and from Portugal of $58,410 (2007 - $466).

Contained within the results of South
America for the three months ended July 31, 2008 are revenues from the Dominican
Republic of $57,090 (2007 - $54,160), from Mexico of $122,231 (2007 - $106,193),
from Chile of $17,587 (2007 - $8), and from Brazil of $16,188 (2007 -
$14,407).

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

| |               |   | As at         | 
| | ------------- | - | ------------- | 
| |               |   | July 31, 2008 | 
| |               |   |               | 
| | Canada        | $ | 8,280,569     | 
| | United States |   | 181,548       | 
| | Total         | $ | 8,462,117     | 

17

---

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

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

| |            |  | Three Months Ended | 
| | ---------- |  | ------------------ | 
| |            |  | July 31,           | 
| |            |  | 2008               | 
| |            |  |                    | 
| | Customer A |  | 25%                | 
| | Customer B |  | 12%                | 
| | Customer C |  | 4%                 | 
| |            |  | 41%                | 

Accounts receivable balances for
Customer A were $1,589,500 as at July 31, 2008 (April 30, 2008 - $1,177,000).
Accounts receivable balances for Customer B were $592,512 as at July 31, 2008
(April 30, 2008 - $432,019) . Accounts receivable balances for Customer C
were $380,000 as at July 31, 2008 (April 30, 2008 - $400,000).

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

| | a) | On July 10, 2006, the Company entered into a lease for
      office premises, which commenced on December 1, 2006 and expires on
      September 29, 2011 for which a deposit of $80,921 was made. The monthly
      lease payment under this agreement is $20,268 plus $21,459 in operating
      costs. These amounts increase as of October 1, 2009 to $22,802 and
      $21,459, respectively.                                                                                           
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | 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 $9,700 was made. The monthly
      lease payment under this agreement is $9,700 plus $7,746 in operating
      costs. Currently, the Company is subleasing a part of these premises for a
      monthly charge of $7,773. The sub lease commenced on August 1, 2007 and
      expires on September 30, 2012.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | c) | On February 15, 2005, the Company entered into a lease
      extension for office premises, which commenced on April 1, 2005 and
      expires on March 31, 2010. The monthly lease payment under this agreement
      is $9,984 plus $17,247 in operating costs. This monthly lease increases to
      $11,232 on April 1, 2009.                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | d) | On June 1, 2008, the Company entered into a lease for
      office premises, which commences on August 1, 2008 and expires on July 31,
      2010 for which a deposit of $27,000 was made. The monthly lease payment
      under this agreement is $9,000. This amount increases to $9,200 on August
      1, 2009.                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | e) | On March 14, 2008, the Company entered into a lease for
      office premises, which commences on April 1, 2008 and expires on March 31,
      2009. The monthly lease payment under this agreement is $3,857.                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | f) | On April 23, 2008, the Company entered into a software
      development consulting agreement, which commenced on May 5, 2008 and
      expires on December 5, 2008 for which a prepayment of $42,400 was made.
      The payment schedule is tied to specific milestones as they are completed
      and requires total payments of $169,600 in fiscal year
  2009.                                                                                                                         

18

---

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

|Note 7 | Commitments (contd)
|------ | ---------------------

| | g) | On June 28, 2005, the Company entered into a software
      development consulting agreement extension, which commenced on June 30,
      2006 and expires June 30, 2009. The payment schedule is tied to specific
      milestones as they are completed and requires total payments of $109,000
      in fiscal year 2009 and $109,000 in fiscal year 2010.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                              
| |    | Total payable over the term of the agreements for the
      years ended April 30 are as follows:                                                                                                                                                                                                                                                             

Office Leases Related
    
    
    Office Leases 
    
    
    
    
    
    
    
    
    SoftwareParty
    
    
    Unrelated Party
    
    
    Sub Lease
    
    
    Total Office
    
    
    DevelopmentIncome
    
    
    Leases
    
    
    Contracts2009
    $
    246,321
    
    $
    644,419
    
    $
    (69,956
    )
    $
    820,784
    
    $
    169,6002010
    
    313,262
    
    
    837,618
    
    
    (93,275
    )
    
    1,057,605
    
    
    109,0002011
    
    
    
    
    768,086
    
    
    (93,275
    )
    
    674,811
    
    
    2012
    
    
    
    
    430,662
    
    
    (93,275
    )
    
    337,387
    
    
    2013
    
    
    
    
    87,232
    
    
    (38,864
    )
    
    48,368
    
    
    $
    559,583
    
    $
    2,768,017
    
    $
    (388,645
    )
    $
    2,938,955
    
    $
    278,600


|Note 8 | Contingent Liability                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       | On February 17, 2006, a competitor filed a statement of
      claim in the Supreme Court of British Columbia claiming among other
      things, general, punitive and aggravated damages of unspecified amounts
      with respect to alleged business ethics matters. Management of the Company
      believes that the claim is without foundation or merit. Any loss as a
      result of this claim will be recorded in the period that the loss is
      probable and measurable.                                                                                                                                                                               
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Note 9 | Restructuring                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       | As a result of the Companys post acquisition activities,
      the Company incurred restructuring costs of $190,961 and $nil during the
      three months ended July 31, 2008 and 2007, respectively. Restructuring
      costs of $190,961 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.

19

---

PART II

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

Forward-Looking Statements

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

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

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

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

Overview

Background

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

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

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

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

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

20

---

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

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

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

Business of CounterPath

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

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

Revenue

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

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

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

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

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

21

---

Operating Expenses

Operating expenses consist of
cost of sales, sales and marketing, research and development, and general and
administrative expenses, and restructuring costs. Personnel-related costs are
the most significant component of each of these expense categories. We expect to
continue to hire a number of new employees to support our growth.

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

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

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

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

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

Critical Accounting Policies

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

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

22

---

Basis of Presentation

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

Interim Reporting

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

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

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

Revenue Recognition

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

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

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

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

23

---

revenues are recognized under SOP 81-1, "Accounting for
Performance of Construction-Type and Certain Production-Type Contracts",
generally using the percentage-of-completion method.

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

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

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

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

Stock-Based Compensation

Stock options granted are
accounted for under SFAS No. 123R "Share-Based Payment" and are recognized at
the fair value of the options as determined by an option pricing model as the
related services are provided and the options earned. SFAS No.123R replaces
existing requirements under FAS 123 and APB 25, and requires public companies to
recognize the cost of employee services received in exchange for equity
instruments, based on the fair value of those instruments on the measurement
date which generally is the grant date, with limited exceptions.

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

The expected volatility of
options granted has been determined using the volatility of our company's stock.
The expected volatility for options granted during the three months ended July
31, 2008 was 67.0% . The expected life of options granted after April 30, 2006
has been determined utilizing the "simplified" method as prescribed by the SEC's
Staff Accounting Bulletin No. 107, Share-Based Payment. The expected term
of options granted during the three months ended July 31, 2008 was 3.6 years.
For the three months ended July 31, 2008, the weighted-average risk free
interest rate used was 3.22% . The risk-free interest rate is based on a
treasury instrument whose term is consistent with the expected term of the stock
options. We have not paid and do not anticipate paying cash dividends on our
shares of common stock; therefore, the expected dividend yield is assumed to be
zero. In addition, SFAS No. 123R requires companies to utilize an estimated
forfeiture rate when calculating the expense for the period. We applied an
estimated forfeiture rate of 15.0% in the three months ended July 31, 2008 in
determining the expense recorded in our consolidated statement of operations.

Cost of sales and operating
expenses include stock-based compensation expense. For the three months ended
July 31, 2008, we recorded an expense of $507,988 in connection with share-based
payment awards. A future expense of non-vested options of $2,002,259 is expected
to be recognized over a weighted-average period of 1.05 years.

Research and Development Expense for Software
Products

Research and development expense
includes costs incurred to develop intellectual property. The costs for the
development of new software and substantial enhancements to existing software
are expensed as incurred until technological feasibility has been established,
at which time any additional costs would be capitalized. We have

24

---

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

Accounts Receivable and Allowance for Doubtful Accounts

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

Goodwill and Intangible Assets

We have a significant amount of
goodwill and intangible assets on our balance sheet related to the acquisitions
of NewHeights Software Corporation, FirstHand Technologies Inc. and BridgePort
Networks, Inc. Intangible assets are carried and reported at acquisition cost,
net of accumulated amortization subsequent to acquisition. The intangible assets
acquired are comprised of acquired technologies and customer assets relating to
customer relationships. The acquired technologies are amortized based on their
estimated useful life of four years and the customer asset is amortized on the
basis of Management's estimate of the future cash flows from this asset over
approximately five years, which is Management's estimate of the useful life of
the customer assets. The intangible assets are reviewed for impairment whenever
events or circumstances indicate impairment might exist in accordance with SFAS
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."Projected undiscounted net cash flows expected to be derived from the use of
those assets are compared to the respective net carrying amounts to determine
whether any impairment exists. Impairment, if any, is based on the excess of the
carrying amount over the fair value of those assets.

The determination of the net
carrying value of goodwill and intangible assets and the extent to which, if
any, there is impairment, are dependent on material estimates and judgments on
our part, including the useful life over which the intangible assets are to be
amortized and the estimates of the value of future net cash flows, which are
based upon further estimates of future revenues, expenses and operating margins.
In applying SFAS No. 142, "Goodwill and Other Intangible Assets,"we
review our goodwill annually for impairment or more frequently when indicators
of impairment are present.

Use of Estimates

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

Results of Operations

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

25

---

Revenue

|                  |   | **Three Months Ended July 31,** |  |  |          |  |   |                         | 
|----------------- | - | ------------------------------- |  |  | -------- |  | - | ----------------------- | 
|                  |   | 2008                            |  |  | 2007     |  |   | Period-to-Period Change | 
|                  |   |                                 |  |  | Percent  |  |   |                         | 
|                  |   |                                 |  |  | of Total |  |   |                         | 
|                  |   | Amount                          |  |  | Revenue  |  |   | Amount                  | 
|Revenue by Type   |   |                                 |  |  |          |  |   |                         | 
|Software          | $ | 1,848,305                       |  |  | 71%      |  | $ | 769,008                 | 
|Service           |   | 764,455                         |  |  | 29%      |  |   | 457,783                 | 
|Total revenue     | $ | 2,612,760                       |  |  | 100%     |  | $ | 1,226,791               | 
|                  |   |                                 |  |  |          |  |   |                         | 
|Revenue by Region |   |                                 |  |  |          |  |   |                         | 
|International     | $ | 889,084                         |  |  | 34%      |  | $ | 780,237                 | 
|North America     |   | 1,723,676                       |  |  | 66%      |  |   | 446,554                 | 
|Total revenue     | $ | 2,612,760                       |  |  | 100%     |  | $ | 1,226,791               | 

For the three months ended April
30, 2008, we generated $2,612,760 in revenue compared to $1,226,791 for the
three months ended July 31, 2007. This represents an increase of $1,385,969 or
113% from the same period last year. We generated $1,848,305 in software revenue
for the three months ended July 31, 2008 compared to $769,008 for the three
months ended July 31, 2007, representing an increase of $1,079,297or 140%. The
increase in software revenue was driven by continued growth in sales of our
consumer oriented softphone software as well as sales of our enterprise oriented
softphone software. For the three months ended July 31, 2008, service revenue
was $764,455 compared to $457,783 for the three months ended July 31, 2007. The increase of $306,672 in service revenue was primarily due to increase in professional services and support related to increased software sales in the period.  International revenue outside of North America grew by14% during the three months ended July 31, 2008 compared to the three months ended July 31, 2007, driven by Latin American and European software sales.  North American revenue increased 286%, compared to the three months ended July 31, 2007, driven primarily by  sales of software and services to North American original equipment manufacturers.

Operating Expenses

Cost of Sales

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

|                   |   | July 31, 2008 |  |  | July 31, 2007 |  |   | Period-to-Period Change | 
|------------------ | - | ------------- |  |  | ------------- |  | - | ----------------------- | 
|                   |   |               |  |  | Percent       |  |   |                         | 
|                   |   |               |  |  | of            |  |   |                         | 
|                   |   | Amount        |  |  | Revenue       |  |   | Amount                  | 
|Three months ended | $ | 1,377,843     |  |  | 53%           |  | $ | 361,158                 | 

Cost of sales was $1,377,843 for the three months ended July 31, 2008 compared to $361,158 recorded for the three months ended July 31, 2007.  The increase of $1,016,685 was primarily attributable to the amortization of intangibles amounting to $545,473 (July 31, 2007 - nil). The increase in cost of sales was also attributable to  increases in personnel and associated wages, third-party royalties used with our products, and third-party hardware used with our products.

Sales and Marketing

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

|                   |   | July 31, 2008 |  |  | July 31, 2007 |  |   | Period-to-Period Change | 
|------------------ | - | ------------- |  |  | ------------- |  | - | ----------------------- | 
|                   |   |               |  |  | Percent       |  |   |                         | 
|                   |   |               |  |  | of            |  |   |                         | 
|                   |   | Amount        |  |  | Revenue       |  |   | Amount                  | 
|Three months ended | $ | 1,481,951     |  |  | 66%           |  | $ | 454,883                 | 

26

---

Sales and marketing expenses were
$1,481,951 for the three months ended July 31, 2008 compared to $454,883
recorded for the three months ended July 31, 2007. The increase of $1,027,068
was primarily attributable to increases in sales and marketing personnel and
associated wages and commissions, consulting fees relating to hiring and
retention primarily due to the acquisitions of NewHeights, FirstHand and
BridgePort.

Research and Development

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

|                   |   | July 31, 2008 |  |  | July 31, 2007 |  |   | Period-to-Period Change | 
|------------------ | - | ------------- |  |  | ------------- |  | - | ----------------------- | 
|                   |   |               |  |  | Percent       |  |   |                         | 
|                   |   |               |  |  | of            |  |   |                         | 
|                   |   | Amount        |  |  | Revenue       |  |   | Amount                  | 
|Three months ended | $ | 3,017,412     |  |  | 134%          |  | $ | 766,468                 | 

Research and development expenses
were $3,017,412 for the three months ended July 31, 2008 compared to $766,468
for the three months ended July 31, 2007. The increase of $2,250,944 was
primarily attributable to increases in research and development personnel and
associated wages and non-cash stock based compensation. Research and development
personal were both hired and acquired through the acquisitions of NewHeights,
FirstHand and BridgePort.

General and Administrative

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

|                    |   | July 31, 2008 |  |  | July 31, 2007 |  |   | Period-to-Period Change | 
|------------------- | - | ------------- |  |  | ------------- |  | - | ----------------------- | 
|                    |   |               |  |  | Percent       |  |   |                         | 
|                    |   |               |  |  | of            |  |   |                         | 
|                    |   | Amount        |  |  | Revenue       |  |   | Amount                  | 
|Three months  ended | $ | 2,228,127     |  |  | 85%           |  | $ | 724,527                 | 

General and administrative
expenses for the three months ended July 31, 2008 were $2,228,127 compared to
$724,527 for the three months ended July 31, 2007. The increase of $1,503,600 in
general and administrative expenses year over year was primarily attributable to
increases in personnel related costs, stock based compensation and professional
fees incurred as a result of the acquisitions of NewHeights, FirstHand and
BridgePort. In connection with a non-brokered private placement of 2,433,439
units which closed on July 31, 2008, three directors, an officer, and a company
controlled by the chairman of our board, purchased a total of 759,559 units, at
a price of $1.50 (CDN$1.54) per unit, for aggregate proceeds of $1,142,306
(CDN$1,169,721). As the unit price of $1.50 (CDN$1.54) per unit was below the
closing market price of $1.60 (CDN$1.64) per share of our common stock on the
date of the transaction and included one-half of one common share purchase
warrant, we recorded a compensatory charge to general and administrative
expenses for the three months ending July 31, 2008 of $195,293.

Restructuring Charges

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

|                   |   | July 31, 2008 |  |  | July 31, 2007 |  |   | Period-to-Period Change | 
|------------------ | - | ------------- |  |  | ------------- |  | - | ----------------------- | 
|                   |   |               |  |  | Percent       |  |   |                         | 
|                   |   |               |  |  | of            |  |   |                         | 
|                   |   | Amount        |  |  | Revenue       |  |   | Amount                  | 
|Three months ended | $ | 190,961       |  |  | 6%            |  | $ | 0                       | 

Restructuring charges for the
three months ended July 31, 2008 were $190,961. These costs were related to
employee severance arrangements as a result of the consolidation of
administrative, sales, marketing, and research

27

---

and development departments after the close of acquisitions of
NewHeights, FirstHand and BridgePort. There were no restructuring charges for
the three months ended July 31, 2007.

Interest and Other Income

Interest income for the three
months ended July 31, 2008 was $18,068 compared to $15,524 for the same
respective period in 2007. Interest expense for the three months ended July 31,
2008 was $7,295 compared to $140,576 for the three months ended July 31, 2007.
Interest expense for the three months ended July 31, 2007 included both a cash
interest component of $50,006 and a non-cash component of $90,570 relating to
the accretion of the discount on our convertible debenture. On August 2, 2007,
in conjunction with the acquisition of NewHeights, our convertible debenture
holders converted their existing debentures in the amount of $4,000,000 into
2,000,000 shares of common stock at a conversion price of $2.00 per share.

Liquidity and Capital Resources

As of April 30, 2008, we had
$5,769,185 in cash compared to $6,223,613 at April 30, 2008, representing a
decrease of $454,428. Our working capital was $6,936,719 at July 31, 2008
compared to $7,645,909 at April 30, 2008, representing a decrease of
$709,190.

Presently, our cash flow
generated from operations is not sufficient to meet operating and capital
expenses. We have incurred operating losses since inception, and we project this
to continue for the next nine to twelve months. At July 31, 2008, we had cash of
approximately $5.8 million and working capital of $6.9 million; however, as our
management projects that under our current operating plan, we will require
approximately $22-24 million to fund our ongoing operating expenses and working
capital requirements for the next twelve months. We anticipate that this will be
funded through cash flow generated from operations, working capital, potential
rationalization and external financing. On July 31, 2008 we issued 2,433,439
units at a price of $1.50 (CDN$1.54) per unit for gross proceeds of $3,660,379
(CDN$3,747,497).

Operating Activities

Our operating activities resulted
in a net cash outflow of $4,047,818 for the three months ended July 31, 2008.
This compares with a net cash outflow of $191,394 for the same period last year
and represents a $3,856,424 increase in cash outflows from operations compared
to the same period last year. The net cash outflow from operating activities for
the three months ended July 31, 2008 was primarily a result of a net loss of
$5,855,802 compared to a net loss of $1,205,297 in the same period last year, an increase in accounts receivable of $713,972 and a decrease in accounts payable
of $463,700. The net cash outflow was offset by the receipt of investment tax
credits of $1,061,133. The net cash outflow was also offset by an adjustment for
non-cash expenses including $507,988 for stock-based compensation, $291,733 for
unearned revenue, $545,573 for amortization of intangible assets and $281,005
for depreciation and amortization.

The net cash outflow from
operating activities for the three months ended July 31, 2007 was primarily a
result of a net loss of $1,205,297 offset by a decrease in accounts receivable
of $307,255. The decrease in accounts receivable was attributable to a decline
in sales and a corresponding increase in collections from customers. The net
cash outflow was also offset by an increase in accounts payable and accrued
liabilities of $50,004, as well as an increase of $199,333 for unearned revenue
and adjustments for non-cash expenses including $230,724 for stock-based
compensation, $90,570 for accretion of convertible debenture discount and
$64,224 for depreciation and amortization.

Investing Activities

Investing activities resulted in
a net cash inflow of $23,074 for the three months ended July 31, 2008 primarily
from a decrease in other assets. This compares with a net cash outflow from
investing activities of $94,591 for the same period last year which was
primarily for purchases of equipment. At July 31, 2008, we did not have any
material commitments for future capital expenditures.

28

---

Financing Activities

Financing activities resulted in
a net cash inflow of $3,628,775 for the three months ended July 31, 2008
compared to a net cash inflow of $nil for the same period last year. On July 31,
2008, we issued 2,433,439 units at a price of $1.50 (CDN$1.54) per unit for
gross proceeds of $3,660,379 (CDN$3,747,497) through a non-brokered private
placement announced on July 30, 2008. Each unit consists of one share of common
stock in the capital of our company and one-half of one non-transferable common
share purchase warrant. Each warrant shall entitle the holder thereof to
purchase one share of common stock in the capital of our company for a period of
two years commencing from July 31, 2008 at an exercise price of US$2.25 per
warrant share.

We intend to seek additional
funding through public or private financings to fund our operations through
fiscal 2009 and beyond.  However, if we are unable to
raise additional capital when required or on acceptable terms, or achieve cash
flow positive operations, we may have to significantly delay product development
and scale back operations both of which may affect our ability to continue as a
going concern.

Off-Balance Sheet Arrangements

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

New Accounting Pronouncements

In September 2006, FASB issued
Statement of Financial Accounting Standards No. 157, Fair Value
Measurements (SFAS No. 157). This standard clarifies the principle that
fair value should be based on the assumptions that market participants would use
when pricing an asset or liability. Additionally, it establishes a fair value
hierarchy that prioritizes the information used to develop those assumptions.
This standard is effective for financial statements issued for fiscal years
beginning after November 15, 2007. The adoption of this statement did not have
an impact on the Companys consolidated financial statements.

In February 2007, the FASB issued
Statement of Financial Accounting Standards No. 159, The Fair Value Option
for Financial Assets and Financial Liabilities  Including an Amendment of FASB
Statement No. 115.

(SFAS No. 159). This standard permits an entity to choose to
measure many financial instruments and certain other items at fair value. This
standard is effective for financial statements issued for fiscal years beginning
after November 15, 2007. The adoption of this statement did not have an impact
on the Companys consolidated financial statements.

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

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

29

---

Item 4T. Controls and Procedures.

Disclosure Controls and Procedures

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

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

***Changes in Internal  Control Over Financial Reporting***

PART II  OTHER INFORMATION

Item 1. Legal Proceedings.

Except as set out below, we know
of no material, active, or pending legal proceeding against our company, nor are
we involved as a plaintiff in any material proceeding or pending litigation
where such claims or action involves damages for a value of more than 10% of our
assets as of July 31, 2008, or any proceeding in which any of our company's
directors, officers, or affiliates, or any registered or beneficial
shareholders, is an adverse party or has a material interest advance to our
company's interest.

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

Item 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

30

---

materially affect actual results and cause actual results to
differ materially from the results expressed in any such estimates, projections
or other "forward looking statements".

Risks Associated with our Business and Industry

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

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

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

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

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

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

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

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

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

The majority of our directors and
officers are nationals and/or residents of countries other than the United
States, and all or a substantial portion of such persons' assets are located
outside the United States. As a result, it may be difficult for investors to
enforce within the United States any judgments obtained against us or our
officers

31

---

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;
- lead to the bankruptcy or liquidation of the 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.

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.

32

---

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

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

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

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

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

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

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

During the three months ended
July 31, 2008, we completed the acquisition of NewHeights Software Corporation,
a private Canada corporation, FirstHand Technologies Inc., a private Ontario
corporation, and BridgePort Networks, Inc., a private Delaware corporation. The
integration of the business of each respective company with our business has
been, and will continue to be, a time consuming and expensive process. Any
prolonged activity in respect of the integration of the acquired businesses with
our business could divert financial and other resources from our planned
operations, which could negatively affect our results of operations, lower
employee morale, and result in customers cancelling existing orders or choosing
not to place new ones. In addition, the combined operations of our company and
the acquired businesses may not achieve anticipated synergies or other benefits.
If the anticipated benefits of the combined operations are not realized or do
not meet the expectations of financial or industry analysts, the market price of
our common stock may decline.

Risks Associated with our Common Stock

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

We are authorized to issue
83,076,900 shares of common stock. Our board of directors has the authority to
issue additional shares of common stock up to the authorized capital stated in
the certificate of incorporation. Our board of directors may choose to issue
some or all of such shares to acquire one or more businesses or to provide
additional financing in the future. The issuance of any such shares may result
in a reduction of the book value or

33

---

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.

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

On May 14, 2008, we granted stock
options to four employees and a consultant to purchase an aggregate of 134,000
shares of our common stock at an exercise price of $1.75 per share, exercisable
for a period of five years pursuant to our 2005 Amended and Restated Stock
Option Plan. The options are subject to vesting provisions as set forth in the
stock option agreements dated May 14, 2008. We issued the stock options to five
non-U.S. persons (as that term is defined in Regulation S of the Securities Act
of 1933), in an offshore transaction relying on Regulation S and/or Section 4(2)
of the Securities Act of 1933.

On May 15, 2008, we granted stock
options to an employee to purchase an aggregate of 250,000 shares of our common
stock at an exercise price of $1.75 per share, exercisable for a period of five
years pursuant to our 2005 Amended and Restated Stock Option Plan. The options
are subject to vesting provisions as set forth in the stock option agreements
dated May 15, 2008. We issued the stock options to a non-U.S. person (as that
term is defined in

34

---

Regulation S of the Securities Act of 1933), in an offshore
transaction relying on Regulation S and/or Section 4(2) of the Securities Act of
1933.

On June 3, 2008, we granted stock
options to an employee to purchase an aggregate of 40,000 shares of our common
stock at an exercise price of $1.64 per share, exercisable for a period of five
years pursuant to our 2005 Amended and Restated Stock Option Plan. The options
are subject to vesting provisions as set forth in the stock option agreements
dated June 3, 2008. We issued the stock options 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.

On July 30, 2008, we granted
stock options to two employees to purchase an aggregate of 40,000 shares of our
common stock at an exercise price of $1.55 per share, exercisable for a period
of five years pursuant to our 2005 Amended and Restated Stock Option Plan. The
options are subject to vesting provisions as set forth in the stock option
agreements dated July 30, 2008. We issued the stock options to two non-U.S.
persons (as that term is defined in Regulation S of the Securities Act of 1933),
in an offshore transaction relying on Regulation S and/or Section 4(2) of the
Securities Act of 1933.

On July 31, 2008 we issued
2,433,439 units at a price of $1.50 (CDN$1.54) per unit for gross proceeds of
$3,660,379 (CDN$3,747,497). Each unit consists of one share of common stock in
the capital of our company and one-half of one non-transferable common share
purchase warrant. Each warrant shall entitle the holder thereof to purchase one
share of common stock in the capital of our company for a period of two years
commencing from July 31, 2008 at an exercise price of US$2.25 per Warrant share.
The 2,433,439 units were issued to eight non-U.S. persons (as that term is
defined in Regulation S of the Securities Act of 1933), in an offshore
transaction relying on Regulation S and/or Section 4(2) of the Securities Act of
1933.

Item 3. Defaults Upon Senior Securities.

None.

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

None.

Item 5. Other Information.

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).           

35

---

|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).                                                                                                                                                                       
|     |                                                                                                                                                                                                                                                                                     
|(4)  | Instruments defining the rights of security holders,
      including indentures                                                                                                                                                                                                     
|     |                                                                                                                                                                                                                                                                                     
|4.1  | 2004 Stock Option Plan effective May 18, 2004
      (incorporated by reference from our Registration Statement on Form S-8
      filed on June 14, 2005).                                                                                                                           
|     |                                                                                                                                                                                                                                                                                     
|4.2  | Form of Stock Option Agreement for 2004 Stock Option Plan
      (incorporated by reference from our Registration Statement on Form S-8
      filed on June 14, 2005).                                                                                                               
|     |                                                                                                                                                                                                                                                                                     
|4.3  | 2005 Stock Option Plan effective March 4, 2005
      (incorporated by reference from our Registration Statement on Form S-8
      filed on June 14, 2005).                                                                                                                          
|     |                                                                                                                                                                                                                                                                                     
|4.4  | Form of Stock Option Agreement for 2005 Stock Option Plan
      (incorporated by reference from our Registration Statement on Form S-8
      filed on June 14, 2005).                                                                                                               
|     |                                                                                                                                                                                                                                                                                     
|4.5  | Form of Amended & Restated Stock Option and
      Subscription Agreement (Canadian) (incorporated by reference from our
      Current Report on Form 8-K filed On October 14, 2005).                                                                                                
|     |                                                                                                                                                                                                                                                                                     
|4.6  | Form of Amended & Restated Stock Option and
      Subscription Agreement (US) (incorporated by reference from our Current
      Report on Form 8-K filed On October 14, 2005).                                                                                                      
|     |                                                                                                                                                                                                                                                                                     
|(10) | Material Contracts                                                                                                                                                                                                                                                                  
|     |                                                                                                                                                                                                                                                                                     
|10.1 | Employment Agreement between CounterPath Solutions, Inc.
      and Jason Fischl dated August 29, 2005 (incorporated by reference from our
      Annual Report on Form 10-KSB filed on July 31, 2006).                                                                               
|     |                                                                                                                                                                                                                                                                                     
|10.2 | Employment Agreement between CounterPath Solutions, Inc.
      and Donovan Jones dated June 1, 2005 (incorporated by reference from our
      Annual Report on Form 10-KSB filed on July 31, 2006).                                                                                 
|     |                                                                                                                                                                                                                                                                                     
|10.3 | Employment Agreement between CounterPath Solutions, Inc.
      and David Karp dated September 11, 2006 (incorporated by reference from
      our Quarterly Report on Form 10-QSB filed on September 14, 2006).                                                                      
|     |                                                                                                                                                                                                                                                                                     
|10.4 | Form of Subscription Agreement dated November 30, 2006,
      between our company and various investors (incorporated by reference from
      our Current Report on Form 8-K filed on December 7, 2006).                                                                            
|     |                                                                                                                                                                                                                                                                                     
|10.5 | Form of Subscription Agreement dated November 30, 2006,
      between our company and KMB Trac Two Holdings Ltd (incorporated by
      reference from our Current Report on Form 8-K filed on December 7, 2006).                                                                    
|     |                                                                                                                                                                                                                                                                                     
|10.6 | Form of Convertible Note dated November 30, 2006
      (incorporated by reference from our Current Report on Form 8-K filed on
      December 7, 2006).                                                                                                                             
|     |                                                                                                                                                                                                                                                                                     
|10.7 | Form of Warrant Certificate dated November 30, 2006
      (incorporated by reference from our Current Report on Form 8-K filed on
      December 7, 2006).                                                                                                                          
|     |                                                                                                                                                                                                                                                                                     
|10.8 | Amended Employment Agreement between Donovan Jones and
      CounterPath Solutions R&D Inc., a wholly owned subsidiary of
      CounterPath Solutions, Inc. dated February 1, 2007 (incorporated by
      reference from our Quarterly Report on Form 10QSB filed on March 9, 2007).

36

---

|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).
|      |                                                                                                                                                                                                                                                                                                                           
|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).                        

37

---

|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 (filed herewith).                                                                                                                                                                                                
|      |                                                                                                                                                                                                                                                                                                                           
|(14)  | Code of Ethics                                                                                                                                                                                                                                                                                                            
|      |                                                                                                                                                                                                                                                                                                                           
|14.1  | Code of Business Conduct and Ethics
      (incorporated by reference from our Annual Report on Form 10-KSB filed on
      July 29, 2004).                                                                                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                           
|14.2  | Code
      of Business Conduct and Ethics and Compliance Program (filed herewith).                                                                                                                                                                                                                                        
|      |                                                                                                                                                                                                                                                                                                                           
|(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. (incorporated
      in the Province of Ontario, Canada)                                                                                                                                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                                           
|      | BridgePort Networks, Inc. (incorporated
      in the state of Delaware)                                                                                                                                                                                                                                                   
|      |                                                                                                                                                                                                                                                                                                                           
|      | BridgePort Networks (Europe) Ltd.
      (incorporated in the United Kingdom)                                                                                                                                                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                           
|      | BridgePort Networks K.K. (incorporated
      in Japan)                                                                                                                                                                                                                                                                    
|      |                                                                                                                                                                                                                                                                                                                           
|(31)  | Section 302 Certification                                                                                                                                                                                                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                           
|31.1  | Section
      302 Certification of Donovan Jones (filed herewith).                                                                                                                                                                                                                                                        
|      |                                                                                                                                                                                                                                                                                                                           
|31.2  | Section
      302 Certification of David Karp (filed herewith).                                                                                                                                                                                                                                                           
|      |                                                                                                                                                                                                                                                                                                                           
|(32)  | Section 906 Certification                                                                                                                                                                                                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                           
|32.1  | Section
      906 Certification of Donovan Jones (filed herewith).                                                                                                                                                                                                                                                        

38

---

SIGNATURES

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

COUNTERPATH CORPORATION

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

39

---