---

UNITED STATESSECURITIES AND EXCHANGE
COMMISSIONWashington, D.C. 20549

FORM 10-Q(Mark One)

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

For the quarterly period ended July 31,
2010

OR

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

For the transition period from ______________to
______________

Commission file number 000-50346

COUNTERPATH CORPORATION

(Exact name of registrant as specified in its charter)

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

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

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

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

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

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

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

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



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APPLICABLE ONLY TO CORPORATE ISSUERS:

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







2

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

|         |                                                                                              | Page
|-------- | -------------------------------------------------------------------------------------------- | ----
|         | Part I                                                                                       |     
|         |                                                                                              |     
|Item 1.  | Financial Statements.                                                                        | 4   
|         |                                                                                              |     
|Item 2.  | Managements Discussion and
      Analysis of Financial Condition and Results of Operations. | 24  
|         |                                                                                              |     
|Item 4T. | Controls and Procedures.                                                                     | 35  
|         |                                                                                              |     
|         | Part II                                                                                      |     
|         |                                                                                              |     
|Item 1.  | Legal Proceedings.                                                                           | 36  
|         |                                                                                              |     
|Item 1A. | Risk Factors.                                                                                | 36  
|         |                                                                                              |     
|Item 2.  | Unregistered Sales of Equity
      Securities and Use of Proceeds.                           | 40  
|         |                                                                                              |     
|Item 3.  | Defaults Upon Senior
      Securities.                                                       | 41  
|         |                                                                                              |     
|Item 4.  | Removed and Reserved.                                                                        | 41  
|         |                                                                                              |     
|Item 5.  | Other Information.                                                                           | 41  
|         |                                                                                              |     
|Item 6.  | Exhibits.                                                                                    | 41  



3



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PART I

Item 1. Financial Statements.

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

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



|COUNTERPATH CORPORATION
      INDEX TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS July
      31, 2010 (Unaudited) (Stated in U.S. Dollars)
|-----------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Interim Consolidated Balance Sheets                                                                                                      
|Interim Consolidated Statements of Operations and
      Comprehensive Loss                                                               
|Interim Consolidated Statements of Cash
      Flows                                                                                      
|Interim Consolidated Statements of Changes in Stockholders
      Equity                                                                 
|Notes to the Interim Consolidated Financial
      Statements                                                                             

4

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|COUNTERPATH CORPORATION INTERIM
      CONSOLIDATED BALANCE SHEETS (Stated in U.S. Dollars)                                      
|--------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                
|                                                                                                                                
|                                                                                                                                
|Assets                                                                                                                          
|Current assets:                                                                                                                 
|Cash                                                                                                                            
|Accounts receivable (net of allowance for
      doubtful accounts 
             of $1,111,698 and $1,116,119, respectively)     
|Investment tax
      credits recoverable                                                                                        
|Other current assets                                                                                                            
|Total current assets                                                                                                            
|                                                                                                                                
|Deposits                                                                                                                        
|Equipment                                                                                                                       
|Intangible assets (net of
      accumulated amortization of $4,449,281 
         and $4,243,641, respectively) 
      Note 2(e)
|Goodwill  Note 2(e)                                                                                                            
|Other assets                                                                                                                    
|Total Assets                                                                                                                    
|                                                                                                                                
|Liabilities and Stockholders Equity                                                                                            
|Current liabilities:                                                                                                            
|Accounts payable and accrued
      liabilities                                                                                  
|Unearned revenue                                                                                                                
|Customer deposits                                                                                                               
|Accrued warranty                                                                                                                
|Total current
      liabilities                                                                                                 
|                                                                                                                                
|Deferred lease inducements                                                                                                      
|Convertible debentures  Note
      4                                                                                           
|Unrecognized tax benefit                                                                                                        
|Total
      liabilities                                                                                                         
|                                                                                                                                
|Stockholders equity:                                                                                                           
|Preferred stock, $0.001 par value                                                                                               
|Authorized:
      100,000,000                                                                                                   
|Issued and outstanding: July 31,
      2010  1; April 30, 2010  1                                                             
|Common stock, $0.001 par value
       Note 6                                                                                   
|Authorized: 83,076,900                                                                                                          
|Issued
      and outstanding:                                                                                                   
|July 31,
      2010 33,088,375; April 30, 2010  33,015,627                                                                    
|Additional paid-in capital                                                                                                      
|Accumulated deficit                                                                                                             
|Accumulated other comprehensive income 
      currency translation adjustment                                                  
|Total stockholders equity                                                                                                      
|Liabilities and Stockholders Equity                                                                                            

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

See accompanying notes to the consolidated financial
statements

5

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|                                                                                                                                             
|---------------------------------------------------------------------------------------------------------------------------------------------
|COUNTERPATH CORPORATION
      INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND
      COMPREHENSIVE LOSS (Stated in U.S. Dollars) (Unaudited)
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|Revenue  Note 7:                                                                                                                            
|Software                                                                                                                                     
|Service                                                                                                                                      
|Total
      revenue                                                                                                                          
|Operating expenses:                                                                                                                          
|Cost of sales (includes depreciation of $3,994
      and $2,121 and                                                                          
|amortization of intangible
      assets of $205,640 and $205,972                                                                             
|for three months ended July 31, 2010 and 2009
      respectively                                                                            
|Note 2(e))                                                                                                                                   
|Sales and marketing                                                                                                                          
|Research and development                                                                                                                     
|General and administrative                                                                                                                   
|Restructuring costs  Note 10                                                                                                                
|Total
      operating expenses                                                                                                               
|Loss
      from operations                                                                                                                   
|Interest and other income (expense), net:                                                                                                    
|Interest income                                                                                                                              
|Interest expense                                                                                                                             
|Foreign exchange loss                                                                                                                        
|Net loss for the period                                                                                                                      
|Other comprehensive income (loss):                                                                                                           
|Foreign currency translation adjustments                                                                                                     
|Comprehensive income (loss)                                                                                                                  
|Net loss per share:                                                                                                                          
|Basic and diluted                                                                                                                            
|                                                                                                                                             
|Weighted average common shares
      outstanding:                                                                                            
|                                                                                                                                             
|                                                                                                                                             
|See accompanying notes to
      the consolidated financial statements                                                                        

6

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|COUNTERPATH CORPORATION
      INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (Stated in
      U.S. Dollars) (Unaudited)
|----------------------------------------------------------------------------------------------------------------------
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Cash flows from operating
      activities:                                                                           
|Net loss for the period                                                                                               
|Adjustments to reconcile
      net loss to net cash used in operating activities:                                     
|Depreciation and
      amortization                                                                                   
|Amortization of intangible assets                                                                                     
|Stock-based
      compensation  Note 6                                                                               
|Share purchase warrants  Note 6                                                                                      
|Shares issued as
      part of share purchase plan                                                                    
|Foreign exchange loss                                                                                                 
|Changes in assets and liabilities:                                                                                    
|Accounts receivable                                                                                                   
|Other current
      assets                                                                                            
|Decrease in other assets                                                                                              
|Accounts payable
      and accrued liabilities                                                                        
|Unearned revenue                                                                                                      
|Customer deposits                                                                                                     
|Accrued warranty                                                                                                      
|Net cash used in operating activities                                                                                 
|                                                                                                                      
|Cash flows from investing activities:                                                                                 
|Purchase of equipment                                                                                                 
|Deposits                                                                                                              
|Net cash used in investing activities                                                                                 
|                                                                                                                      
|Cash flows from financing
      activities:                                                                           
|Common stock issued, net of transaction costs                                                                         
|Convertible debentures issued                                                                                         
|Net cash provided by financing activities                                                                             
|                                                                                                                      
|Foreign exchange effect on cash                                                                                       
|                                                                                                                      
|Decrease in cash                                                                                                      
|                                                                                                                      
|Cash, beginning of the period                                                                                         
|Cash, end of the period                                                                                               
|                                                                                                                      
|Supplemental disclosure of cash flow
      information                                                                
|Cash paid for:                                                                                                        
|Interest                                                                                                              
|Taxes                                                                                                                 
|Non cash transactions  Note 5                                                                                        
|                                                                                                                      
|See accompanying notes to
      the consolidated financial statements                                                 

7

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COUNTERPATHCORPORATIONINTERIMCONSOLIDATEDSTATEMENTSOFCHANGESINSTOCKHOLDERSEQUITYfor
the ThreeMonthsEnded July 31, 2010 (Stated in U.S.
Dollars) (Unaudited)

|                                                       | Common shares |  | Preferred Shares |                 |  |        |  |   |                 |  |   |            |   |   |             |  
|------------------------------------------------------ | ------------- |  | ---------------- | --------------- |  | ------ |  | - | --------------- |  | - | ---------- | - | - | ----------- | -
|                                                       |               |  |                  |                 |  |        |  |   |                 |  |   |            |   |   |             |  
|                                                       | Number        |  |                  |                 |  | Number |  |   |                 |  |   | Additional |   |   |             |  
|                                                       | of            |  |                  |                 |  | of     |  |   |                 |  |   | Paid-in    |   |   | Accumulated |  
|                                                       | Shares        |  |                  | Par
      Value |  | Shares |  |   | Par
      Value |  |   | Capital    |   |   | Deficit     |  
|Balance, May 1, 2010                                   | 33,015,627    |  | $                | 33,016          |  | 1      |  | $ |                |  | $ | 51,902,471 |   | $ | (39,779,781 | )
|                                                       |               |  |                  |                 |  |        |  |   |                 |  |   |            |   |   |             |  
|Shares issued:                                         |               |  |                  |                 |  |        |  |   |                 |  |   |            |   |   |             |  
|Employee share purchase plan                           | 22,748        |  |                  | 22              |  |       |  |   |                |  |   | 23,720     |   |   |            |  
|Exchange of subsidiary preferred shares 
      Note 6 | 50,000        |  |                  | 50              |  |       |  |   |                |  |   | (50        | ) |   |            |  
|Stock-based compensation  Note 6                      |              |  |                  |                |  |       |  |   |                |  |   | 300,485    |   |   |            |  
|Share purchase warrants  Note 6                       |              |  |                  |                |  |       |  |   |                |  |   | 136,934    |   |   |            |  
|Net loss for the period                                |              |  |                  |                |  |       |  |   |                |  |   |           |   |   | (1,427,425  | )
|Foreign currency translation adjustment                |              |  |                  |                |  |       |  |   |                |  |   |           |   |   |            |  
|Balance, July 31, 2010 (Unaudited)                     | 33,088,375    |  | $                | 33,088          |  | 1      |  | $ |                |  | $ | 52,363,560 |   | $ | (41,207,206 | )
|                                                       |               |  |                  |                 |  |        |  |   |                 |  |   |            |   |   |             |  

See accompanying notes to
the consolidated financial statements

8

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COUNTERPATH CORPORATIONNOTES TO THE INTERIM
    CONSOLIDATED FINANCIAL STATEMENTSJuly 31, 2010 
  (Unaudited)

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

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

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

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

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

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

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

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

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

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

9

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COUNTERPATH CORPORATION 
  NOTES TO THE INTERIM
  CONSOLIDATED FINANCIAL STATEMENTSJuly 31, 2010 
  (Unaudited)

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

These interim consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities and commitments in the normal course of business. The
  continuation of the Company as a going concern is dependent upon the continued financial support from its stockholders, the ability of the Company to obtain necessary equity financing to continue operations and to generate sustainable significant
  revenue. There is no guarantee that the Company will be able to raise any equity financing or generate profitable operations. As at July 31, 2010, the Company has not yet achieved profitable operations and had an accumulated deficit of
  $41,207,206 since incorporation. These factors raise substantial doubt regarding the Companys ability to continue as a going concern.

Under its current operating plan the Company will require approximately $11-$13 million to fund ongoing operations and working capital requirements through July 31, 2011. Management is implementing a plan to address these uncertainties to
  enable the Company to continue as a going concern through the end of fiscal 2011 and beyond. This plan includes new equity financing in amounts sufficient to sustain operations, such as the private placement discussed in Note 4, and to increase
  revenues and decrease costs from operations.

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

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

10

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COUNTERPATH CORPORATION 
  NOTES TO THE INTERIM
  CONSOLIDATED FINANCIAL STATEMENTSJuly 31, 2010 
  (Unaudited)

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

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

11

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COUNTERPATH CORPORATION 
  NOTES TO THE INTERIM
  CONSOLIDATED FINANCIAL STATEMENTSJuly 31, 2010 
  (Unaudited)

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

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | d) | Derivative Instruments and Hedging Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | ASC 815: The Company adopted the provisions of Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities  an amendment of FASB Statement No. 133
      (SFAS 161), effective at the beginning of the first quarter of fiscal year 2010. SFAS No. 161 was incorporated into ASC 815, Derivatives and Hedging(ASC 815). ASC 815 expands financial reporting about derivative
      instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entitys financial position, results of operations and cash flows. ASC 815 also requires qualitative disclosures
      about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. Because
      ASC 815 only requires additional disclosure, the adoption of ASC 815 did not impact the Companys financial position, results of operations, and cash flows (see Note 11, Derivative Instruments and Hedging Activities, of the Notes to
      Interim Consolidated Financial Statements).
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | e) | Goodwill and Intangible Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | Goodwill represents the excess purchase price over the estimated fair value of net assets acquired as of the acquisition date. Statement of Financial Accounting Standards ASC 350, Goodwill and Other Intangible Assets
      (SFAS ASC 350) ASC 350 requires goodwill to be tested for impairment annually or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of the Company's business enterprise below
      its carrying value. The impairment test requires management to estimate the fair value of the Company's overall business enterprise down to the reporting unit level which is CounterPath Corporation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | Goodwill of $6,339,717 (CDN$6,704,947), and $2,083,960 (CDN$2,083,752) was initially recorded in connection with the acquisition of NewHeights Software Corporation on August 2, 2007 and FirstHand Technologies Inc.
      on February 1, 2008. Translated to U.S. dollars using the period end rate, the goodwill balance at July 31, 2010 was $6,497,094 (CDN$6,704,947) (April 30, 2010-$6,668,070) and $2,018,828 (CDN$2,083,752) (April 30,
      2010-$2,071,956), respectively. Management will perform its annual impairment test in its fiscal fourth quarter. No impairment charges were recorded for the three months ended July 31, 2010 and 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | The Company also evaluates goodwill for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. These events or circumstances could include a significant change in the
      business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | Recoverability of goodwill is measured at the reporting unit level by comparing the reporting units carrying amount, including goodwill, to the fair value of the reporting unit, which is measured based upon, among other
      factors, market multiples for comparable companies as well as a discounted cash flow analysis. Reporting units represent components of the Company for which discrete financial information is available that is regularly reviewed by management.
      Management has determined that the Company currently has one reporting unit. If the recorded value of the assets, including goodwill, and liabilities (net book value) of the reporting unit exceeds its fair value, an impairment loss may
      be required.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | In accordance with Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards ASC 360, Accounting for the Impairment or Disposal of Long-Lived Assets, the carrying value of
      intangible assets and other long-lived assets are reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

12

---

COUNTERPATH CORPORATION 
  NOTES TO THE INTERIM
  CONSOLIDATED FINANCIAL STATEMENTSJuly 31, 2010 
  (Unaudited)

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

AccumulatedAccumulated
      
      
      Impairment
      
      
      Net CarryingCost
      
      
      Amortization
      
      
      Charge
      
      
      AmountAcquired technologies
      $
      6,720,941
      
      $
      3,514,719
      
      $
      1,636,114
      
      $
      1,570,108Customer assets
      
      2,966,366
      
      
      934,562
      
      
      1,119,219
      
      
      912,585Intangible assets
      $
      9,687,307
      
      $
      4,449,281
      
      $
      2,755,333
      
      $
      2,482,693


13

---

COUNTERPATH CORPORATION 
  NOTES TO THE INTERIM
  CONSOLIDATED FINANCIAL STATEMENTSJuly 31, 2010 
  (Unaudited)

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

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

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

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

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

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

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

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

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

On April 27, 2010, the Company issued 4,424 shares of common stock pursuant to a holder of 4,424 shares of exchangeable preferred shares of its subsidiary 6789722 Canada Inc. exercising their exchange rights. On May 14, 2010, the Company issued
  50,000 shares of common stock pursuant to a holder of 50,000 shares of exchangeable preferred shares of its subsidiary 6789722 Canada Inc. exercising their exchange rights.

14

---



COUNTERPATH CORPORATION 
  NOTES TO THE INTERIM
  CONSOLIDATED FINANCIAL STATEMENTSJuly 31, 2010 
  (Unaudited)

|Note 5 | Exchangeable Shares  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       | There were 10,871 outstanding exchangeable shares as of
      July 31, 2010 (April 30, 2009  60,871). As the exchangeable shares have
      already been recognized in connection with the acquisition of NewHeights,
      the value ascribed to these shares on exchange is $nil.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Note 6 | Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       | On March 19, 2008, the Companys Board of Directors
      approved a five for one common stock consolidation. As a result, the
      Company's authorized capital decreased from 415,384,500 shares of common
      stock to 83,076,900 shares of common stock. All per share amounts and
      outstanding shares, including all common stock equivalents (stock options
      and warrants) have been retroactively adjusted in the Consolidated
      Financial Statements and in the Notes to the Consolidated Financial
      Statements for all periods presented to reflect the stock consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       | Stock Options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       | The Company has a stock option plan under which options
      to purchase common shares of the Company may be granted to employees,
      directors and consultants. Stock options entitle the holder to purchase
      common stock at a subscription price determined by the Board of Directors
      of the Company at the time of the grant. The options generally vest in the
      amount of 12.5% on the date which is six months from the date of grant and
      then beginning in the seventh month at 1/42 per month for 42 months, at
      which time the options are fully vested.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       | The maximum number of shares of common stock authorized
      by the stockholders and reserved for issuance by the Board of Directors of
      the Company under the stock option plans are 800,000 under the 2004 Stock
      option plan and 5,060,000 under the 2005 Stock option plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       | The Company has elected to use the Black-Scholes option
      pricing model to determine the fair value of stock options granted. In
      accordance with ASC 718 for employees, the compensation expense is
      amortized on a straight-line basis over the requisite service period which
      approximates the vesting period. Compensation expense for stock options
      granted to non-employees is amortized over the vesting period or, if none
      exists, over the service period. Compensation associated with unvested
      options granted to non-employees is remeasured on each balance sheet date
      using the Black-Scholes option pricing model.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       | The expected volatility of options granted has been
      determined using the method described under ASC 718 using the historical
      stock price. The expected term of options granted to employees in the
      current fiscal period has been determined utilizing the simplified
      method as prescribed by ASC 718 Share-Based Payment. For non-employees,
      the expected term of the options approximates the full term of the
      options. The risk-free interest rate is based on a treasury instrument
      whose term is consistent with the expected term of the stock options. The
      Company has not paid and does not anticipate paying dividends on its
      common stock; therefore, the expected dividend yield is assumed to be
      zero. In addition, ASC 718 requires companies to utilize an estimated
      forfeiture rate when calculating the expense for the period, whereas prior
      to the adoption of ASC 718 the Company recorded forfeitures based on
      actual forfeitures and recorded a compensation expense recovery in the
      period when the awards were forfeited. As a result, based on the Companys
      experience, the Company applied an estimated forfeiture rate of 15% for
      the three month period ended July 31, 2010 and 2009 in determining the
      expense recorded in the accompanying consolidated statement of operations.

15

---

COUNTERPATH CORPORATIONNOTES TO THE INTERIM
    CONSOLIDATED FINANCIAL STATEMENTSJuly 31, 2010 
  (Unaudited)

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

Stock Options (contd)

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

Three Months
      
      
      Three MonthsEnded
      
      
      EndedJuly 31, 2010
      
      
      July 31, 2009Risk-free interest rate
      1.60%
      
      
      n/aExpected volatility
      84.7%
      
      
      n/aExpected term
      3.7 yrs
      
      
      n/aDividend yield
      0%
      
      
      n/aWeighted average fair value
      $0.66
      
      
      n/a


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

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


16

---

COUNTERPATH CORPORATION 
  NOTES TO THE INTERIM
  CONSOLIDATED FINANCIAL STATEMENTSJuly 31, 2010 
  (Unaudited)

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

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


The aggregate intrinsic value in the
  preceding table represents the total intrinsic value, based on the Companys
  closing stock price of $1.00 per share as of July 31, 2010 (April 30, 2010 
  $0.82), which would have been received by the option holders had all option
  holders exercised their options as of that date. The total number of
  in-the-money options vested and exercisable as of July 31, 2010 was 1,367,632
  (April 30, 2010  1,239,933). The total intrinsic value of options exercised
  during the three months ended July 31, 2010 was $nil (2009  $nil). The grant
  date fair value of options vested during the three months ended July 31, 2010
  was $119,866 (2009  $938,301).

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

Weighted AverageGrant-Date FairNumber of Options
      
      ValueNon-vested options at April 30, 2010
      
      2,015,088
      
      $0.39Granted
      
      20,000
      
      $0.66Vested
      
      (216,149
      )
      $0.55Non-vested options at July 31, 2010
      
      1,818,939
      
      $0.38


17

---

COUNTERPATH CORPORATION 
  NOTES TO THE INTERIM
  CONSOLIDATED FINANCIAL STATEMENTSJuly 31, 2010 
  (Unaudited)

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

Stock Options  (contd)

As of July 31, 2010 there was $598,601
  (2009  $1,278,035) of total unrecognized compensation cost related to unvested
  share-based compensation awards. This unrecognized compensation cost is expected
  to be recognized over a weighted average period of 2.66 years (2009  0.96
  years).

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

Three Months EndedJuly 31,2010
      
      
      2009Cost of sales
      $
      6,751
      
      $
      20,180Sales and marketing
      
      23,029
      
      
      31,373Research and development
      
      8,460
      
      
      31,589General and administrative
      
      262,245
      
      
      136,473Total stock-based compensation
      $
      300,485
      
      $
      219,615


Warrants

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

Three Months EndedJuly 31,2010
      
      
      2009Risk-free interest rate
      0.55%
      
      
      Expected volatility
      100.51%
      
      
      Expected term
      2 yrs
      
      
      Dividend yield
      0%
      
      
      Weighted average fair value
      $0.43
      
      
      


18

---

COUNTERPATH CORPORATION 
  NOTES TO THE INTERIM
  CONSOLIDATED FINANCIAL STATEMENTSJuly 31, 2010 
  (Unaudited)

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

Warrants (contd)

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

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


Employee Stock Purchase Plan

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

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

Deferred Share Unit Plan

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

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

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

19

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COUNTERPATH CORPORATION 
  NOTES TO THE INTERIM
  CONSOLIDATED FINANCIAL STATEMENTSJuly 31, 2010 
  (Unaudited)

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

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


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

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

Three Months EndedJuly 31,2010
      
      
      2009General and administrative
      $
      195,708
      
      $
      Total deferred share unit-based compensation
      $
      195,708
      
      $
      


|Note 7 | Segmented Information
|------ | ---------------------

The Companys chief operating decision
  maker reviews financial information presented on a consolidated basis,
  accompanied by desegregated information about revenues by geographic region for
  purposes of making operating decisions and assessing financial performance.
  Accordingly, the Company has concluded that it has one reportable operating
  segment.

Foreign revenues are based on the
  country in which the customer is located. The following is a summary of total
  revenues by geographic area for the three months ended July 31, 2010 and
  2009:

Three Months EndedJuly 31,2010
      
      
      2009North America
      $
      1,377,595
      
      $
      1,249,199Europe
      
      619,630
      
      
      441,968Asia and Africa
      
      118,405
      
      
      239,260Latin America
      
      103,955
      
      
      120,030$
      2,219,585
      
      $
      2,050,457


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

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

20

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COUNTERPATH CORPORATION 
  NOTES TO THE INTERIM
  CONSOLIDATED FINANCIAL STATEMENTSJuly 31, 2010 
  (Unaudited)



|Note 7 | Segmented Information 
      (contd)
|------ | --------------------------------------

Contained within the results of Asia
  and Africa for the three months ended July 31, 2010 are revenues from China of
  $39,543 (2009 - $8,775), from Australia of $22,681 (2009 - $11,264), and from
  Sri Lanka of $12,080 (2009 - $7,575).

Contained within the results of Latin
  America for the three months ended July 31, 2010 are revenues from Mexico of
  $38,071 (2009 - $71,741), from South Africa of $21,318 (2009 - $nil), from
  Brazil of $14,940 (2009 - $7,332), and from Colombia of $11,511 (2009 -
  $20,626).

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

As atJuly 31, 2010
      
      
      April 30, 2010Canada
      $
      11,131,185
      
      $
      11,825,188United States
      
      36,843
      
      
      15,420Total
      $
      11,168,028
      
      $
      11,840,608


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

Three Months EndedJuly 31,2010
      
      
      2009Customer A
      
      21%
      
      
      16%Customer B
      
      15%
      
      
      -Customer C
      
      -
      
      
      10%36%
      
      
      26%


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

|**Note 8** | **Commitments**
|---------- | ---------------
|           |                
|           | a)             
|           |                
|           | b)             

21

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COUNTERPATH CORPORATION 
  NOTES TO THE INTERIM
  CONSOLIDATED FINANCIAL STATEMENTSJuly 31, 2010 
  (Unaudited)

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

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

Total payable over the term of the
  agreements for the years ended April 30 are as follows:

Office Leases
      
      
      Office Leases Related
      
      
       Unrelated
      
      
      Sub Lease
      
      
      Total Office
      
      
      SettlementParty
      
      
      Party
      
      
      Income
      
      
      Leases
      
      
      Agreement2011
      $
      58,096
      
      $
      641,725
      
      $
      (121,159
      )
      $
      578,662
      
      $
      95,9312012
      
      77,462
      
      
      457,920
      
      
      (161,545
      )
      
      373,837
      
      
      127,9082013
      
      
      
      
      90,252
      
      
      (67,310
      )
      
      22,942
      
      
      79,943$
      135,558
      
      $
      1,189,897
      
      $
      (350,014
      )
      $
      975,441
      
      $
      303,782


|Note 9 | Contingent Liability
|------ | --------------------

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

|Note 10 | Restructuring
|------- | -------------

The Company incurred no restructuring
  costs for the three months ended July 31, 2010. The Company incurred
  restructuring costs of $44,912 during the three months ended July 31, 2009, as a
  result of the Companys post acquisition activities. Restructuring costs were
  related to employee severance arrangements as a result of the consolidation of
  administrative, sales, marketing, and research and development departments after
  the close of acquisitions of NewHeights Software Corporation, FirstHand
  Technologies Inc. and BridgePort Networks, Inc. These charges are shown as a
  separate line item in the consolidated statement of operations.

22

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COUNTERPATH CORPORATION 
  NOTES TO THE INTERIM
  CONSOLIDATED FINANCIAL STATEMENTSJuly 31, 2010 
  (Unaudited)

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

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

Foreign Currency Exchange Rate
  Risk

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

Volume of Derivative
  Activity

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

Three Months EndedIn U.S. dollars
      
      July 31,2010
      
      
      2009Canadian dollar
      $
      -
      
      $
      1,000,000Total
      $
      -
      
      $
      1,000,000


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

23

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

Forward-Looking Statements

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

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

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

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

Background

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

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

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

On October 17, 2007, we changed our name from CounterPath Solutions, Inc. to CounterPath Corporation.

On February 1, 2008, we acquired all of the shares of FirstHand Technologies Inc. through the issuance of 5,900,014 shares of our common stock. For accounting purposes, our company was deemed to be the acquirer of
FirstHand based on certain factors including the number of common shares issued in the transaction as a proportion of the total common shares outstanding, and the composition of the board after the transaction.

24

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

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

On March 19, 2008, our board of directors approved a five for one common stock consolidation. As a result, our authorized capital decreased from 415,384,500 shares of common stock to 83,076,900 shares of common stock.
The par value of the common stock was unaffected by the stock consolidation and remains at $0.001 per share. All per share amounts and outstanding shares, including all common stock equivalents (stock options and warrants) have been
retroactively adjusted in the consolidated financial statements and in the notes to the consolidated financial statements for all periods presented to reflect the stock consolidation.

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

Business of CounterPath

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

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

Revenue

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

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

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

25

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

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

Operating Expenses

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

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

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

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

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

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

Application of Critical Accounting Policies and Use of Estimates

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

26

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

Basis of Presentation

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

Interim Reporting

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

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

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

Revenue Recognition

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

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

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

27

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

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

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

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

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

Stock-Based Compensation

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

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

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

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

28

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Research and Development Expense for Software Products

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

Accounts Receivable and Allowance for Doubtful Accounts

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

Goodwill and Intangible Assets

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

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

Goodwill and Intangible AssetsImpairment Assessments

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

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

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

Assumptions and estimates about future values and remaining useful lives of our intangible and other long-lived assets are complex and subjective. They can be affected by a variety of factors, including external factors
such as industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts. These estimates and assumptions include revenue growth rates and operating margins used to calculate projected future
cash flows and risk adjusted discounted rates and future economic and market conditions. During the fourth quarter of fiscal 2009, we recorded an impairment charge of $2.75 million consisting of $1.75 million for the intangible assets of NewHeights and $1.0 million for the intangible assets of FirstHand. During the fiscal year ended April 30, 2010 and the most recent quarter ended July 31, 2010, management concluded that there was no further impairment charge related to our
intangible assets.

Use of Estimates

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

Results of Operations

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

Selected Consolidated Financial Information

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

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|Selected Consolidated Statements of Operations Data |   |             |   |  | Three Months Ended July 31, |   |   |             |  
|--------------------------------------------------- | - | ----------- | - |  | --------------------------- | - | - | ----------- | -
|                                                    |   | 2010        |   |  | 2009                        |  
|                                                    |   |             |   |  | Percent of                  |   |   |             |  
|                                                    |   |             |   |  | Total                       |   |   |             |  
|                                                    |   | Amount      |   |  | Revenue                     |   |   | Amount      |  
|Revenue                                             | $ | 2,219,585   |   |  | 100%                        |   | $ | 2,050,457   |  
|                                                    |   |             |   |  |                             |   |   |             |  
|Non-GAAP operating expenses1                        |   | 3,164,697   |   |  | 143%                        |   |   | 2,463,585   |  
|Stock-based compensation                            |   | 300,485     |   |  | 14%                         |   |   | 219,615     |  
|Amortization of intangible assets                   |   | 205,640     |   |  | 9%                          |   |   | 205,972     |  
|GAAP operating expenses                             |   | 3,670,822   |   |  | 165%                        |   |   | 2,889,172   |  
|                                                    |   |             |   |  |                             |   |   |             |  
|Loss from operations                                |   | (1,451,237  | ) |  | (65%                        | ) |   | (838,715    | )
|Interest income, net                                |   | 51,858      |   |  | 2%                          |   |   | 26,092      |  
|Foreign exchange loss                               |   | (28,046     | ) |  | (1%                         | ) |   | (429,713    | )
|Net loss                                            |   | ($1,427,425 | ) |  | (64%                        | ) |   | ($1,242,336 | )
|                                                    |   |             |   |  |                             |   |   |             |  
|Loss per share                                      |   | ($0.04      | ) |  |                             |   |   | ($0.04      | )
|                                                    |   |             |   |  |                             |   |   |             |  
|Weighted average common shares outstanding          |   | 33,066,204  |   |  |                             |   |   | 28,968,332  |  

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

|Selected Consolidated Balance Sheet Data |   | July 31, 2010 |  |   | April 30, 2010 | 
|---------------------------------------- | - | ------------- |  | - | -------------- | 
|Cash                                     | $ | 1,209,989     |  | $ | 1,556,813      | 
|Current assets                           |   | 3,934,995     |  |   | 4,252,772      | 
|Current liabilities                      |   | 3,360,157     |  |   | 3,449,448      | 
|Total liabilities                        |   | 3,946,019     |  |   | 3,552,700      | 
|Total assets                             | $ | 15,202,995    |  | $ | 16,195,374     | 

Revenue

|                  | Three Months Ended July 31, |           |      |  |         
|----------------- | --------------------------- | --------- | ---- |  | --------
|                  | 2010                        |           | 2009 |  |         
|                  |                             |           |      |  | Percent 
|                  |                             |           |      |  | of Total
|                  |                             | Amount    |      |  | Revenue 
|Revenue by Type   |                             |           |      |  |         
|Software          | $                           | 1,819,152 |      |  | 82%     
|Service           |                             | 400,433   |      |  | 18%     
|Total revenue     | $                           | 2,219,585 |      |  | 100%    
|                  |                             |           |      |  |         
|Revenue by Region |                             |           |      |  |         
|International     | $                           | 841,990   |      |  | 38%     
|North America     |                             | 1,377,595 |      |  | 62%     
|Total revenue     | $                           | 2,219,585 |      |  | 100%    

For the three months ended July 31,
2010, we generated $2,219,585 in revenue compared to $2,050,457 for the three
months ended July 31, 2009. This represents an increase of $169,128 or 8% from
the same period last year. Revenues of $2,219,585 are net of a $136,934 non-cash
charge representing the fair value of 320,000 warrants that were charged against
revenue during the quarter. In total, 1,000,000 warrants with a term of two
years were issued to a customer as part of a contract entered into on July
30, 2010, enabling the customer to acquire shares of common stock for a period
of up to two years at an exercise price of $1.50 per share of common stock. The
warrants were valued using the Black Scholes methodology as outlined in note 5
to the consolidated unaudited financial statements. We generated $1,819,152 in
software revenue for the three months ended July 31, 2010 compared to $1,141,343
for the three months ended July 31, 2009, representing an increase of $677,809
or 59%. The increase in software revenue was primarily due to increases in sales
of our products to original equipment manufacturers. For the three months ended
July 31, 2010, service revenue was $400,433 compared to $909,114 for the three
months ended July 31, 2009. The decrease of $508,681 in service revenue was
primarily due to the decrease in sales of professional engineering and
customization work. International revenue outside of North America increased by
5% during the three months ended July 31, 2010 compared to the three months
ended July 31, 2009, due to an overall increase in sales in the period. North
American revenue increased by 10%, compared to the three months ended July 31,
2009, due primarily to an increase in sales of software and services to North
American original equipment manufacturers.

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Operating Expenses

Cost of Sales

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

|                   |   | July 31, 2010 |  |  | July 31, 2009 |  |   | Period-to-Period Change | 
|------------------ | - | ------------- |  |  | ------------- |  | - | ----------------------- | 
|                   |   |               |  |  | Percent       |  |   |                         | 
|                   |   |               |  |  | of            |  |   |                         | 
|                   |   | Amount        |  |  | Revenue       |  |   | Amount                  | 
|Three months ended | $ | 746,030       |  |  | 34%           |  | $ | 642,728                 | 

Cost of sales was $746,030 for the three months ended July 31,
2010 compared to $642,728 for the three months ended July 31, 2009. The increase
of $103,302 was primarily attributable to an increase in wages and benefits of
approximately $61,000, and increase in costs of approximately $34,000 due to
increased sales of third party software (codecs) and USB sticks. Additionally,
there was an increase in warranty expense of approximately $20,000 as a result
of the overall increase in revenue. Cost of sales for the three months ended
July 31, 2010 includes $205,640 ($205,972  2009) representing the non-cash
amortization of the intangible assets as a result of the acquisitions of
NewHeights Software in August 2007 and FirstHand Technologies in February 2008.

Sales and Marketing

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

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

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

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Research and Development

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

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

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

General and Administrative

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

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

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

Restructuring Charges

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

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

Restructuring charges for the three months ended July 31, 2010
were $nil compared to $44,912 for the three months ended July 31, 2009. The
restructuring charges for the three months ended July 31, 2009 pertain to the
employee restructuring activity as a result of the consolidation of
administrative, sales, marketing, research and development departments after the
close of acquisitions of NewHeights, FirstHand and BridgePort.

Interest and Other Income

Interest income for the three months ended July 31, 2010 was
$52,079 compared to $27,758 for the three months ended July 31, 2009. Interest
expense for the three months ended July 31, 2010 was $221 compared to $1,666 for
the three months ended July 31, 2009.

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

Liquidity and Capital Resources

As of July 31, 2010, we had $1,209,989 in cash compared to $1,556,813 at April 30, 2010, representing a decrease of $346,824. Our working capital was $574,838 at July 31, 2010 compared to $803,324 at April 30, 2010, representing
a decrease of $228,486.

Presently, our cash flow generated from operations is not sufficient to meet our operating and capital expenses. We have incurred operating losses since inception, and we project this to continue for the next nine to
twelve months. At July 31, 2010, we had cash of approximately $1.21 million and working capital of approximately $0.57 million; however, our management projects that under our current operating plan, we will require approximately $11-13
million to fund our ongoing operating expenses and working capital requirements for the next twelve months. We anticipate that this will be funded through cash flow generated from operations, working capital, external financing and potential
rationalization.

Operating Activities

Our operating activities resulted in a net cash outflow of $818,499 for the three months ended July 31, 2010. This compares to a net cash outflow of $908,943 for the same period last year and represents a decrease of $90,444 in cash
outflow from operations compared to the same period last year. The net cash outflow from operating activities for the three months ended July 31, 2010 was primarily a result of a net loss of $1,427,425, a $132,962 decrease in accounts
payable, and a $116,599 increase in accounts receivable, offset by a $70,987 increase in unearned revenue. The net cash outflow was further offset by adjustments for non-cash expenses including $136,934 for a warrant charge, $28,046
for foreign exchange loss, $300,485 for stock-based compensation, $205,640 for amortization of intangible assets, and $34,509 for depreciation and amortization.

The net cash outflow of $908,943 from operating activities for the three months ended July 31, 2009 was primarily a result of a net loss of $1,242,336, a $948,309 increase in other current assets and a
$97,029 decrease in unearned revenue partially offset by a $510,778 increase in accounts payable. The net cash outflow was further offset by adjustments for non-cash expenses including $429,713 for foreign exchange loss, $219,615 for
stock-based compensation, $205,972 for amortization of intangible assets and $67,628 for depreciation and amortization.

Investing Activities

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

Financing Activities

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

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

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

Off-Balance Sheet Arrangements

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

New Accounting Pronouncements

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

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

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

Item 4T. Controls and Procedures.

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.

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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 as of July 31, 2010, our disclosure controls and procedures are effective as at the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

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

PART II

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

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

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

Risks Associated with our Business and Industry

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

38

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

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

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

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

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

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

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

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

39

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Risks Associated with our Common Stock

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

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

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

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

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

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

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

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

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

40

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On July 30, 2010, we issued warrants to a customer to purchase 1,000,000 shares of our common stock at an exercise price of $1.50 per share, exercisable for a period of two years. The warrants were issued from the
available option pool under the 2005 Amended and Restated Stock Option Plan. These warrants will vest on a proportional basis to invoices delivered by the Company and the warrants will be held in trust and delivered once payment has been received by
the Company. We issued the warrants to a non-U.S. person (as that term is defined in Regulation S of the Securities Act of 1933) in an offshore transaction relying on Regulation S and/or Section 4(2) of the Securities Act of 1933.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. [Removed and Reserved]Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibits required by Item 601 of Regulation S-B

|(3)  | Articles of Incorporation and By-laws                                                                                                                                                    
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                          
|3.1  | Articles of Incorporation (incorporated by reference from our Registration Statement on Form SB-2 filed on July 16, 2003).                                                               
|     |                                                                                                                                                                                          
|3.2  | Bylaws (incorporated by reference from our Registration Statement on Form SB-2 filed on July 16, 2003).                                                                                  
|     |                                                                                                                                                                                          
|3.3  | Amended Bylaws (incorporated by reference from our Registration Statement on Form SB-2/A filed on September 3, 2003).                                                                    
|     |                                                                                                                                                                                          
|3.4  | Articles of Merger (incorporated by reference from our Current Report on Form 8-K filed on September 15, 2005).                                                                          
|     |                                                                                                                                                                                          
|3.5  | Amended Bylaws (incorporated by reference from our Current Report on Form 8-K filed on April 28, 2006).                                                                                  
|     |                                                                                                                                                                                          
|3.6  | Amended Bylaws (incorporated by reference from our Current Report on Form 8-K filed on April 22, 2008).                                                                                  
|     |                                                                                                                                                                                          
|(10) | Material Contracts                                                                                                                                                                       
|     |                                                                                                                                                                                          
|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).  

41

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|10.3  | Employment Agreement between CounterPath Solutions, Inc. and David Karp dated September 11, 2006 (incorporated by reference from our Quarterly Report on Form 10-QSB filed on September 14, 2006).                                                                                                
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                   
|10.4  | Form of Subscription Agreement dated November 30, 2006, between our company and various investors (incorporated by reference from our Current Report on Form 8-K filed on December 7, 2006).                                                                                                      
|      |                                                                                                                                                                                                                                                                                                   
|10.5  | Form of Subscription Agreement dated November 30, 2006, between our company and KMB Trac Two Holdings Ltd (incorporated by reference from our Current Report on Form 8-K filed on December 7, 2006).                                                                                              
|      |                                                                                                                                                                                                                                                                                                   
|10.6  | Form of Convertible Note dated November 30, 2006 (incorporated by reference from our Current Report on Form 8-K filed on December 7, 2006).                                                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                   
|10.7  | Form of Warrant Certificate dated November 30, 2006 (incorporated by reference from our Current Report on Form 8-K filed on December 7, 2006).                                                                                                                                                    
|      |                                                                                                                                                                                                                                                                                                   
|10.8  | Amended Employment Agreement between Donovan Jones and CounterPath Solutions R&D Inc., a wholly owned subsidiary of CounterPath Solutions, Inc. dated February 1, 2007 (incorporated by reference from our Quarterly Report on
Form 10QSB filed on March 9, 2007).                                
|      |                                                                                                                                                                                                                                                                                                   
|10.9  | Employment Agreement between Mark Bruk and CounterPath Solutions R&D Inc., a wholly owned subsidiary of CounterPath Solutions, Inc. dated March 8, 2007 (incorporated by reference from our Quarterly Report on Form 10QSB filed
on March 9, 2007).                                               
|      |                                                                                                                                                                                                                                                                                                   
|10.10 | Arrangement Agreement among CounterPath Solutions, Inc., 6789722 Canada Inc., a wholly owned subsidiary of CounterPath Solutions, Inc. and NewHeights Software Corporation dated as of June 15, 2007 (incorporated by reference from
our Current Report on Form 8-K filed on June 18, 2007).      
|      |                                                                                                                                                                                                                                                                                                   
|10.11 | Support and Lock-Up Agreements between CounterPath Solutions, Inc and each of Owen Matthews and Wesley Clover dated as of June 15, 2007 (incorporated by reference from our Current Report on Form 8-K filed on June 18, 2007).                                                                   
|      |                                                                                                                                                                                                                                                                                                   
|10.12 | Subscription Agreement between CounterPath Solutions, Inc and Wesley Clover dated as of June 15, 2007 (incorporated by reference from our Current Report on Form 8-K filed on June 18, 2007).                                                                                                     
|      |                                                                                                                                                                                                                                                                                                   
|10.13 | Amended Employment Agreement between Mark Bruk and CounterPath Solutions R&D Inc., a wholly owned subsidiary of CounterPath Solutions, Inc. dated July 24, 2007 (incorporated by reference from our Annual Report on Form 10-KSB/A
filed on July 30, 2007).                                       
|      |                                                                                                                                                                                                                                                                                                   
|10.14 | Exchangeable Share Support Agreement between CounterPath Solutions, Inc. and 6789722 Canada Inc., a wholly owned subsidiary of CounterPath Solutions, Inc. dated as of August 2, 2007 (incorporated by reference from our Current
Report on Form 8-K filed on August 8, 2007).                    
|      |                                                                                                                                                                                                                                                                                                   
|10.15 | Voting and Exchange Trust Agreement among CounterPath Solutions, Inc., 6789722 Canada Inc., a wholly owned subsidiary of CounterPath Solutions, Inc. and Valiant Trust Company dated as of August 2, 2007 (incorporated by reference
from our Current Report on Form 8-K filed on August 8, 2007).
|      |                                                                                                                                                                                                                                                                                                   
|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)                                                                                           

42

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|10.17 | Form of Subscription Agreement dated August 2, 2007, between our company and various investors (incorporated by reference from our Current Report on Form 8-K filed on August 8, 2007).                                                                                                           
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                   
|10.18 | Installment Subscription Agreement dated August 2, 2007, between our company and various investors (incorporated by reference from our Current Report on Form 8-K filed on August 8, 2007).                                                                                                       
|      |                                                                                                                                                                                                                                                                                                   
|10.19 | Loan Conversion Agreement dated August 2, 2007, between our company and various investors (incorporated by reference from our Current Report on Form 8-K filed on August 8, 2007).                                                                                                                
|      |                                                                                                                                                                                                                                                                                                   
|10.20 | Form of Stock Option and Subscription Agreement dated August 2, 2007, between our company and each of the former optionees of NewHeights Software Corporation (incorporated by reference from our Current Report on Form 8-K filed on
August 8, 2007).                                            
|      |                                                                                                                                                                                                                                                                                                   
|10.21 | Escrow Agreement among our company, Owen Matthews, Wesley Clover and Clark Wilson LLP dated as of August 2, 2007 (incorporated by reference from our Current Report on Form 8-K filed on August 8, 2007).                                                                                         
|      |                                                                                                                                                                                                                                                                                                   
|10.22 | Employment Agreement between Greg Pelling and CounterPath Solutions R&D Inc., a wholly owned subsidiary of CounterPath Solutions, Inc. dated September 13, 2007 (incorporated by reference from our Quarterly Report on Form
10-QSB filed on September 14, 2007).                                 
|      |                                                                                                                                                                                                                                                                                                   
|10.23 | Amended Employment Agreement between Donovan Jones and CounterPath Solutions R&D Inc., a wholly owned subsidiary of CounterPath Solutions, Inc. dated September 13, 2007 (incorporated by reference from our Quarterly Report on
Form 10-QSB filed on September 14, 2007).                        
|      |                                                                                                                                                                                                                                                                                                   
|10.24 | Employment Agreement between Mark Bruk and CounterPath Corporation dated December 13, 2007 (incorporated by reference from our Quarterly Report on Form 10-QSB filed on December 17, 2007).                                                                                                       
|      |                                                                                                                                                                                                                                                                                                   
|10.25 | Share Exchange Agreement dated January 28, 2008 among CounterPath Corporation, FirstHand Technologies Inc. and certain shareholders of FirstHand Technologies Inc. (incorporated by reference from our Current Report on Form 8-K
filed on January 29, 2008).                                     
|      |                                                                                                                                                                                                                                                                                                   
|10.26 | Escrow Agreement dated February 1, 2008 among CounterPath Corporation, FirstHand Technologies Inc. and certain shareholders of FirstHand Technologies Inc. (incorporated by reference from our Current Report on Form 8-K filed on
February 5, 2008).                                             
|      |                                                                                                                                                                                                                                                                                                   
|10.27 | Agreement of Merger and Plan of Reorganization dated February 1, 2008 among our company, CounterPath Acquisition Corp., BridgePort Networks, Inc. and certain shareholders of BridgePort Networks, Inc. (incorporated by reference
from our Current Report on Form 8-K filed on February 5, 2008).
|      |                                                                                                                                                                                                                                                                                                   
|10.28 | Form of Subscription Agreement dated July 31, 2008 between our company and various investors (incorporated by reference from our Quarterly Report on Form 10-Q filed on September 15, 2008).                                                                                                      
|      |                                                                                                                                                                                                                                                                                                   
|10.29 | Form of Subscription Agreement dated October 28, 2008 between our company and an investor (filed herewith).                                                                                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                   
|10.30 | Settlement Agreement amongst Greg Pelling, CounterPath Corporation and CounterPath Technologies Inc. dated October 31, 2008 (incorporated by reference from our Quarterly Report on Form 10-Q filed on December 15, 2008).                                                                        
|      |                                                                                                                                                                                                                                                                                                   
|10.31 | Settlement Agreement amongst Mark Bruk, CounterPath Corporation, and CounterPath Technologies Inc. dated March 12, 2009 (incorporated by reference from our Quarterly Report on Form 10-Q filed on March 12, 2009).                                                                               

43

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|10.32 | Form of Debt Conversion Agreement dated July
      17, 2009 between our company and The Trustees of Columbia University in the City of New York
      (incorporated by reference from our Annual Report on Form 10-K filed on July 28, 2009).
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                              
|10.33 | Form of Subscription Agreement dated October
      29, 2009 between our company and various investors (incorporated by reference from our Current
      Report on Form 8-K filed on November 4, 2009).                                       
|      |                                                                                                                                                                                                                                              
|10.34 | Form of Subscription Agreement dated July 30,
      2010 between our company and various investors  (incorporated by reference from our
      Current Report on Form 8-K filed on August 4, 2010).                                           
|     
|(14)  | Code of Ethics                                                                                                                                                                                                                               
|      |                                                                                                                                                                                                                                              
|14.1  | Code of Business Conduct and Ethics
      (incorporated by reference from our Annual Report on Form 10- KSB filed on July 29, 2004).                                                                                                         
|      |                                                                                                                                                                                                                                              
|14.2  | Code of Business Conduct and Ethics and
      Compliance Program (incorporated by reference from our Quarterly Report on Form 10-QSB filed on
      September 15, 2008).                                                                     
|      |                                                                                                                                                                                                                                              
|(21)  | Subsidiaries of CounterPath Corporation                                                                                                                                                                                                      
|      | CounterPath Technologies Inc.
      (incorporated in the Province of British Columbia, Canada)                                                                                                                                               
|      | 6789722 Canada Inc. (incorporated in Canada)                                                                                                                                                                                                 
|      | FirstHand Technologies Inc. (continued
      into the Province of British Columbia, Canada)                                                                                                                                                  
|      | BridgePort Networks, Inc. (incorporated in the
      state of Delaware)                                                                                                                                                                      
|      | BridgePort Networks (Europe) Ltd. (incorporated
      in the United Kingdom)                                                                                                                                                                 
|      |                                                                                                                                                                                                                                              
|(31)  | Section 302 Certifications                                                                                                                                                                                                                   
|      |                                                                                                                                                                                                                                              
|31.1  | Section 302 Certification of Donovan Jones
      (filed herewith).                                                                                                                                                                           
|      |                                                                                                                                                                                                                                              
|31.2  | Section 302 Certification of David Karp (filed
      herewith).                                                                                                                                                                              
|      |                                                                                                                                                                                                                                              
|(32)  | Section 906 Certifications                                                                                                                                                                                                                   
|      |                                                                                                                                                                                                                                              
|32    | Section 906 Certification of Donovan Jones and David Karp
      (filed herewith).                                                                                                                                                            

44

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SIGNATURES

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

COUNTERPATH CORPORATION

|By: | /s/ Donovan Jones                               
|--- | ------------------------------------------------
|    | Donovan Jones                                   
|    | President, Chief Executive Officer and Director 
|    | Date: September 14, 2010                        
|    |                                                 
|    |                                                 
|    | /s/ David Karp                                  
|    | David Karp                                      
|    | Chief Financial Officer, Treasurer and Secretary
|    | Date: September 14, 2010                        

45

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