---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended October 31, 2009

OR

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

For the transition period from ______________ to
______________

Commission file number 000-50346

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

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

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

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

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

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

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

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

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

---

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practicable date:
32,781,764 shares of common stock issued and outstanding as of December 14,
2009.

2

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COUNTERPATH CORPORATIONOCTOBER 31, 2009 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. | 25  
|               |                                                                                              |     
|Item
      4T. | Controls
      and Procedures.                                                               | 38  
|               |                                                                                              |     
|               | Part
      II                                                                                |     
|               |                                                                                              |     
|Item
      1.  | Legal
      Proceedings.                                                                     | 39  
|               |                                                                                              |     
|Item
      1A. | Risk
      Factors.                                                                          | 39  
|               |                                                                                              |     
|Item
      2.  | Unregistered
      Sales of Equity Securities and Use of Proceeds.                           | 43  
|               |                                                                                              |     
|Item
      3.  | Defaults
      Upon Senior Securities.                                                       | 44  
|               |                                                                                              |     
|Item
      4.  | Submission
      of Matters to a Vote of Security Holders.                                   | 44  
|               |                                                                                              |     
|Item
      5.  | Other
      Information.                                                                     | 45  
|               |                                                                                              |     
|Item
      6.  | Exhibits.                                                                                    | 45  

3

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PART I

Item 1. Financial Statements.

It is the opinion of management that the interim consolidated
financial statements for the quarter ended October 31, 2009 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 CORPORATIONINDEX TO INTERIM
CONSOLIDATED FINANCIAL STATEMENTS October 31, 2009
(Unaudited)(Stated in U.S. Dollars)

|                                                                           | Page        
|-------------------------------------------------------------------------- | ------------
|                                                                           |             
|Interim
      Consolidated Balance Sheets                                  | 5           
|                                                                           |             
|Interim
      Consolidated Statements of Operations and Comprehensive Loss | 6           
|                                                                           |             
|Interim
      Consolidated Statements of Cash Flows                        | 7           
|                                                                           |             
|Interim
      Consolidated Statements of Changes in Stockholders Equity   | 8           
|                                                                           |             
|Notes
      to the Interim Consolidated Financial Statements               | 9
      - 24

4

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

|                                                                       |   | October 31, |   |   | April 30,   |  
|---------------------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|                                                                       |   | 2009        |   |   | 2009        |  
|Assets                                                                 |   | (Unaudited) |   |   |             |  
|Current assets:                                                        |   |             |   |   |             |  
|Cash                                                                   | $ | 3,441,969   |   | $ | 2,931,932   |  
|Accounts
      receivable (net of allowance for doubtful accounts of   |   |             |   |   |             |  
|$1,028,269 and
      $755,114, respectively)                           |   | 1,841,100   |   |   | 2,524,220   |  
|Investment tax
      credits recoverable                               |   | 181,896     |   |   | 143,334     |  
|Other current assets                                                   |   | 816,684     |   |   | 310,274     |  
|Total current assets                                                   |   | 6,281,649   |   |   | 5,909,760   |  
|                                                                       |   |             |   |   |             |  
|Deposits                                                               |   | 101,912     |   |   | 114,267     |  
|Equipment                                                              |   | 217,072     |   |   | 258,442     |  
|Intangible assets (net of
      accumulated amortization of $3,797,751 |   |             |   |   |             |  
|and $3,375,195,
      respectively)  Note 2(e)                        |   | 2,790,277   |   |   | 2,201,894   |  
|Goodwill  Note 2(e)                                                   |   | 8,197,782   |   |   | 7,262,701   |  
|Other assets                                                           |   | 75,172      |   |   | 92,101      |  
|Total Assets                                                           | $ | 17,663,864  |   | $ | 15,839,165  |  
|                                                                       |   |             |   |   |             |  
|Liabilities and Stockholders Equity                                   |   |             |   |   |             |  
|Current liabilities:                                                   |   |             |   |   |             |  
|Accounts payable
      and accrued liabilities                         | $ | 3,459,562   |   | $ | 3,488,001   |  
|Unearned revenue                                                       |   | 513,956     |   |   | 708,455     |  
|Customer
      deposits                                                |   | 4,213       |   |   | 9,443       |  
|Accrued warranty                                                       |   | 108,786     |   |   | 137,378     |  
|Total current liabilities                                              |   | 4,086,517   |   |   | 4,343,277   |  
|                                                                       |   |             |   |   |             |  
|Deferred lease inducements                                             |   | 10,147      |   |   | 55,016      |  
|Unrecognized tax benefit                                               |   | 98,575      |   |   | 98,575      |  
|Total liabilities                                                      |   | 4,195,239   |   |   | 4,496,868   |  
|                                                                       |   |             |   |   |             |  
|Stockholders equity:                                                  |   |             |   |   |             |  
|Preferred stock, $0.001 par value                                      |   |             |   |   |             |  
|Authorized:
      100,000,000                                          |   |             |   |   |             |  
|Issued and outstanding: October
      31, 2009  1; April 30, 2009  1 |   |            |   |   |            |  
|Common stock, $0.001 par value
       Note 5                          |   |             |   |   |             |  
|Authorized: 83,076,900                                                 |   |             |   |   |             |  
|Issued
      and outstanding:                                          |   |             |   |   |             |  
|October 31, 2009 
      32,768,629 April 30, 2009  28,832,050        |   | 32,768      |   |   | 28,832      |  
|Additional paid-in capital                                             |   | 51,383,429  |   |   | 48,718,443  |  
|Accumulated deficit                                                    |   | (37,314,084 | ) |   | (34,318,195 | )
|Accumulated other
      comprehensive loss  currency translation      |   | (633,488    | ) |   | (3,086,783  | )
|adjustment                                                             |   |             |   |   |             |  
|Total stockholders equity                                             |   | 13,468,625  |   |   | 11,342,297  |  
|Liabilities and Stockholders Equity                                   | $ | 17,663,864  |   | $ | 15,839,165  |  
|                                                                       |   |             |   |   |             |  
|Going concern  Note 2                                                 |   |             |   |   |             |  
|Commitments and contingent liability 
      Notes 7 and 8             |   |             |   |   |             |  
|Subsequent events  Note 11                                            |   |             |   |   |             |  

See accompanying notes to the consolidated financial
statements

5

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COUNTERPATH CORPORATIONINTERIM CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS(Stated in U.S. Dollars)
(Unaudited)

|                                                       |   | Three Months Ended |   |   | Six Months Ended  |  
|------------------------------------------------------ | - | ------------------ | - | - | ----------------- | -
|                                                       |   | October
      31,  |   |   | October
      31, |  
|                                                       |   | 2009               |   |   | 2008              |  
|Revenue  Note 6:                                      |   |                    |   |   |                   |  
|Software                                               | $ | 1,451,826          |   | $ | 2,113,617         |  
|Service                                                |   | 448,781            |   |   | 903,213           |  
|Total revenue                                          |   | 1,900,607          |   |   | 3,016,830         |  
|Operating expenses:                                    |   |                    |   |   |                   |  
|Cost of sales (includes depreciation of $2,925 and     |   |                    |   |   |                   |  
|$36,862 and amortization of intangible
      assets of |   |                    |   |   |                   |  
|$422,556 and $1,055,644 for six months ended           |   |                    |   |   |                   |  
|October 31, 2009 and 2008 respectively
       Note    |   |                    |   |   |                   |  
|2(e))                                                  |   | 727,874            |   |   | 1,086,203         |  
|Sales and marketing                                    |   | 690,551            |   |   | 1,186,713         |  
|Research and development                               |   | 1,004,594          |   |   | 2,103,685         |  
|General and administrative                             |   | 1,272,904          |   |   | 1,559,672         |  
|Restructuring costs  Note 9                           |   |                   |   |   | 742,035           |  
|Total
      operating expenses                         |   | 3,695,923          |   |   | 6,678,308         |  
|Loss from operations                                   |   | (1,795,316         | ) |   | (3,661,478        | )
|Interest and other income (expense), net:              |   |                    |   |   |                   |  
|Interest income                                        |   | 33,816             |   |   | 32,198            |  
|Interest expense                                       |   | (5                 | ) |   | (3,140            | )
|Foreign exchange gain (loss)                           |   | 7,952              |   |   | 108,346           |  
|Net loss for the period                                | $ | (1,753,553         | ) | $ | (3,524,074        | )
|Other comprehensive income (loss):                     |   |                    |   |   |                   |  
|                                                       |   |                    |   |   |                   |  
|Foreign currency translation adjustments               |   | 342,399            |   |   | (3,052,311        | )
|Comprehensive loss                                     | $ | (1,411,154         | ) | $ | (6,576,385        | )
|Net loss per share:                                    |   |                    |   |   |                   |  
|Basic and diluted                                      | $ | (0.06              | ) | $ | (0.12             | )
|                                                       |   |                    |   |   |                   |  
|Weighted average common shares outstanding:            |   | 29,526,663         |   |   | 28,682,680        |  

See accompanying notes to the consolidated financial
statements

6

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COUNTERPATH CORPORATIONINTERIM CONSOLIDATED
STATEMENTS OF CASH FLOWS(Stated in U.S. Dollars) (Unaudited)

|                                                            |   | Six Months Ended  |  
|----------------------------------------------------------- | - | ----------------- | -
|                                                            |   | October
      31, |  
|                                                            |   | 2009              |  
|Cash flows from operating activities:                       |   |                   |  
|Net loss for the period                                     | $ | (2,995,889        | )
|Adjustments to reconcile
      net loss to net cash used in |   |                   |  
|operating activities:                                       |   |                   |  
|Depreciation
      and amortization                         |   | 154,209           |  
|Amortization of intangible
      assets                     |   | 422,556           |  
|Stock-based
      compensation  Note 5                     |   | 410,402           |  
|Foreign exchange loss                                       |   | 421,761           |  
|Changes in assets and liabilities:                          |   |                   |  
|Accounts receivable                                         |   | 687,217           |  
|Other
      current assets                                  |   | (492,291          | )
|Accounts payable and
      accrued liabilities              |   | 131,118           |  
|Other
      assets                                          |   | (8,071            | )
|Unearned revenue                                            |   | (185,608          | )
|Customer
      deposits                                     |   | (5,230            | )
|Accrued warranty                                            |   | (28,594           | )
|Net cash used in operating activities                       |   | (1,488,420        | )
|                                                            |   |                   |  
|Cash flows from investing activities:                       |   |                   |  
|Purchase of equipment                                       |   | (43,725           | )
|Deposits                                                    |   | 26,517            |  
|Net cash used in investing activities                       |   | (17,208           | )
|                                                            |   |                   |  
|Cash flows from financing activities:                       |   |                   |  
|Common stock issued, net of transaction
      costs         |   | 1,865,104         |  
|Net cash provided by financing activities                   |   | 1,865,104         |  
|                                                            |   |                   |  
|Foreign exchange effect on cash                             |   | 150,559           |  
|                                                            |   |                   |  
|Increase/(Decrease) in cash                                 |   | 510,037           |  
|                                                            |   |                   |  
|Cash, beginning of the period                               |   | 2,931,932         |  
|Cash, end of the period                                     | $ | 3,441,969         |  
|                                                            |   |                   |  
|Supplemental disclosure of cash flow information            |   |                   |  
|Cash paid for:                                              |   |                   |  
|Interest                                                    | $ | -                 |  

See accompanying notes to the consolidated financial
statements

7

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COUNTERPATHCORPORATIONINTERIMCONSOLIDATEDSTATEMENTSOFCHANGESINSTOCKHOLDERSEQUITYfor the SixMonthsEndedOctober31,
2009 (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, 2009                    |  | 28,832,050          |  | $ | 28,832                 |  |  | 1      |  | $ |          |  | $ | 48,718,443 |   | $ | (34,318,195 | )
|                                        |  |                     |  |   |                        |  |  |        |  |   |           |  |   |            |   |   |             |  
|Shares issued:                          |  |                     |  |   |                        |  |  |        |  |   |           |  |   |            |   |   |             |  
|Private Placements  Note 5             |  | 3,333,334           |  |   | 3,333                  |  |  |       |  |   |          |  |   | 1,849,793  |   |   |            |  
|As part of debt settlement  Note 5     |  | 527,370             |  |   | 527                    |  |  |       |  |   |          |  |   | 392,889    |   |   |            |  
|Exercise of stock options               |  | 25,875              |  |   | 26                     |  |  |       |  |   |          |  |   | 11,952     |   |   |             |  
|Exchange of subsidiary preferred shares |  | 50,000              |  |   | 50                     |  |  |       |  |   |          |  |   | (50        | ) |   |            |  
|Stock-based compensation  Note 5       |  |                    |  |   |                       |  |  |       |  |   |          |  |   | 410,402    |   |   |            |  
|Net loss for the period                 |  |                    |  |   |                       |  |  |       |  |   |          |  |   |           |   |   | (2,995,889  | )
|Foreign currency translation adjustment |  |                    |  |   |                       |  |  |       |  |   |          |  |   |           |   |   |            |  
|Balance, October 31, 2009 (Unaudited)   |  | 32,768,629          |  | $ | 32,768                 |  |  | 1      |  | $ |          |  | $ | 51,383,429 |   | $ | (37,314,084 | )

Seeaccompanyingnotes to theconsolidatedfinancialstatements

8

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COUNTERPATH CORPORATIONNOTES TO THE INTERIM
CONSOLIDATED FINANCIAL STATEMENTSOctober 31, 2009 (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 STATEMENTS**October 31, 2009 (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 October 31,
      2009, the Company has not yet achieved profitable operations and had an
      accumulated deficit of $37,314,084 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 October 31, 2010. Management is implementing
      a plan to address these uncertainties to enable the Company to continue as
      a going concern through the end of fiscal 2010 and beyond. This plan
      includes new equity financing in amounts sufficient to sustain operations,
      such as the private placement discussed in Note 5, and to increase
      revenues 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, 2009 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, 2009 annual consolidated financial
      statements.                                                                                                                                                                                 

10

---

**COUNTERPATH CORPORATION NOTES TO THE INTERIM
CONSOLIDATED FINANCIAL STATEMENTS**October 31, 2009 (Unaudited)

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

| | b) | Interim Reporting  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | Operating results for the six months ended October 31,
      2009 are not necessarily indicative of the results that can be expected
      for the year ending April 30, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | c) | New Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | In December 2007, the FASB issued Statement of Financial
      Accounting Standards No. 141 (revised 2007), Business Combinations(SFAS No. 141R). This standard replaces SFAS141 and establishes
      principles and requirements for how an acquirer recognizes and measures in
      its financial statements the identifiable assets acquired and liabilities
      assumed, any non-controlling interest in the acquiree, and the goodwill
      acquired. This standard also establishes disclosure requirements which
      will enable users to evaluate the nature and financial effects of the
      business combination. This standard is effective for financial statements
      issued for fiscal years beginning after December 15, 2008. The adoption of
      this standard did not have any material impact on these financial
      statements.                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | In December 2007, the FASB issued Statement of Financial
      Accounting Standards No. 160, Non controlling Interests in Consolidated
      Financial Statements  an amendment to ARB No.51(SFAS No. 160).
      This standard Amends ARB 51 to establish accounting and reporting
      standards for a non- controlling interest in a subsidiary and for
      deconsolidation of a subsidiary. This standard applies prospectively to
      business combinations for which the acquisition date is on or after the
      beginning of the first annual reporting period beginning on or after
      December 15, 2008. This standard may not be applied before that date. The
      adoption of this standard did not have any material impact on these
      financial statements.                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | In March 2008, the Financial Accounting Standards Board
      (FASB) issued Statement of Financial Accounting Standards No. 161,
      Disclosures about Derivative Instruments and Hedging Activities  an
      amendment of FASB Statement No. 133 (FAS 161). FAS 161 modifies
      existing requirements to include qualitative disclosures regarding the
      objectives and strategies for using derivatives, fair value amounts of
      gains and losses on derivative instruments and disclosures about
      credit-risk-related contingent features in derivative agreements. The
      pronouncement also requires the cross-referencing of derivative
      disclosures within the financial statements and notes thereto. This
      statement is effective for financial statements issued for years beginning
      after November 15, 2008 and interim periods within those years. The
      adoption of this standard did not have any material impact on these
      financial statements.                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | In May 2009, the Financial Accounting Standards Board
      (FASB) issued Statement of Financial Accounting Standards (SFAS) No.
      165, Subsequent Events (SFAS No. 165). SFAS No. 165 requires the
      disclosure of the date through which an entity has evaluated subsequent
      events for potential recognition or disclosure in the financial statements
      and whether that date represents the date the financial statements were
      issued or were available to be issued. This standard also provides
      clarification about circumstances under which an entity should recognize
      events or transactions occurring after the balance sheet date in its
      financial statements and the disclosures that an entity should make about
      events or transactions that occurred after the balance sheet date. This
      standard is effective for interim and annual periods beginning with the
      Companys fiscal year ended June 30, 2009. The adoption of this standard
      did not have a material impact on the Companys consolidated financial
      statements.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | The Company has evaluated subsequent events as at
      December 15, 2009 for potential recognition and disclosure in the
      financial statements. This date represents the date the financial
      statements are available to be issued.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

11

---

**COUNTERPATH CORPORATION NOTES TO THE INTERIM
CONSOLIDATED FINANCIAL STATEMENTS**October 31, 2009 (Unaudited)

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

| | c) | New Accounting Pronouncements  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | In June of 2009, the FASB issued Statement No. 166,
      Accounting for Transfers of Financial Assets,an amendment of
      Statement No. 140, Accounting for Transfers and Servicing of Financial
      Assets and Extinguishments of Liabilities.Statement No. 166 removes
      the concept of a qualifying special-purpose entity. Therefore, all
      entities should be evaluated for consolidation in accordance with
      applicable consolidation guidance. Statement No. 166 requires
      identification of any involvements with transferred assets and prevents
      de-recognition until all requirements for sale accounting have been met.
      Enhanced disclosures are required to provide greater transparency about
      any transferors continuing involvement with transferred assets. Statement
      No. 166 is effective as of each reporting entitys first annual reporting
      period which begins after November 15, 2009 and for all interim periods
      within that first annual period. The Company has no current involvement
      with transferred assets but will comply should the situation
  arise.                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | In June 2009, the FASB issued SFAS No. 168, The FASB
      Accounting Standards Codificationand the
      Hierarchy of Generally Accepting Accounting PrinciplesA Replacement of
      FASB Statement No. 162 (FAS 168) which established the FASB Accounting
      Standards Codification (Codification) as the single source of
      authoritative nongovernmental U.S. GAAP which was launched on July 1,
      2009. The Codification does not change current U.S. GAAP, but is intended
      to simplify user access to all authoritative U.S. GAAP by providing all
      the authoritative literature related to a particular topic in one place.
      All existing accounting standard documents will be superseded and all
      other accounting literature not included in the Codification will be
      considered non-authoritative. The Codification is effective for interim
      and annual periods ending after September 15, 2009 and will not have an
      impact on the Companys financial condition or results of operations. The
      Company is currently evaluating the impact to its financial reporting
      process of providing Codification references in its public
  filings.                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | FASB Staff Position (FSP) EITF 03-06-1,
      Participating securities and instruments granted in share- based
      payment transactions addresses whether instruments granted in
      share-based payment transactions are participating securities prior to
      vesting that should be included in the earnings allocation in computing
      earnings per share under the two-class method described FAS 128,
      Earnings per Share.This FSP is effective for years beginning after
      December 15, 2008, and interim periods within those years. The adoption of
      this standard did not have any material impact on these financial
      statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | 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.

12

---

**COUNTERPATH CORPORATION NOTES TO THE INTERIM
CONSOLIDATED FINANCIAL STATEMENTS**October 31, 2009 (Unaudited)

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

| | c) | New Accounting Pronouncements  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | 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.                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | d) | Derivative Instruments and Hedging
    Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | 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 161 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. SFAS 161 also
      requires qualitative disclosures about objectives and strategies for using
      derivatives, quantitative disclosures about fair value amounts of and
      gains and losses on derivative instruments, and disclosures about
      credit-risk-related contingent features in derivative agreements. Because
      SFAS 161 only requires additional disclosure, the adoption of SFAS 161 did
      not impact the Companys financial position, results of operations, and
      cash flows (see Note 10, 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 No. 142, Goodwill and Other
      Intangible Assets (SFAS No. 142) SFAS No. 142 requires goodwill to be
      tested for impairment annually or more frequently if an event occurs or
      circumstances change that would more likely than not reduce the fair value
      of the Company's business enterprise below its carrying value. The
      impairment test requires management to estimate the fair value of the
      Company's overall business enterprise down to the reporting unit level
      which is CounterPath Corporation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | Goodwill of $6,339,717 (CDN$6,704,947), and $2,083,960
      (CDN$2,083,752) was initially recorded in connection with the acquisition
      of NewHeights Software Corporation on August 2, 2007 and FirstHand
      Technologies Inc. on February 1, 2008. Translated to U.S. dollars using
      the period end rate, the goodwill balance at October 31, 2009 was
      $6,254,375 (CDN$6,704,947) (April 30, 2009-$5,540,968) and $1,943,407
      (CDN$2,083,752) (April 30, 2009-$1,721,733), respectively. Management will
      perform its annual impairment test in its fiscal fourth quarter. No
      impairment charges were recorded to the six months ended October 31, 2009
      (2008 - $nil).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

13

---

**COUNTERPATH CORPORATION NOTES TO THE INTERIM
CONSOLIDATED FINANCIAL STATEMENTS**October 31, 2009 (Unaudited)

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

| | e) | Goodwill and Intangible Assets 
(contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | 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 (SFAS) No. 144,
      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. The Company recognizes impairment when the
      sum of the expected undiscounted future cash flows is less than the
      carrying amount of the asset. Impairment losses, if any, are measured as
      the excess of the carrying amount of the asset over its estimated fair
      value.                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | Intangible assets include the intangibles purchased in
      connection with the acquisition of NewHeights Software Corporation on
      August 2, 2007 and FirstHand Technologies Inc. and BridgePort Networks,
      Inc. on February 1, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | The intangible assets of NewHeights are reported at
      acquisition cost and include amounts initially allocated to acquired
      technologies of $3,454,839 (CDN$3,678,100) and customer asset of
      $2,283,908 (CDN$2,431,500). The acquired technologies are amortized based
      on their estimated useful life of four years and the customer asset is
      amortized on the basis of Managements estimate of the future cash flows
      from this asset over approximately five years, which is Managements
      estimate of the useful life of the customer asset.                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | The intangible assets of FirstHand are reported at
      acquisition cost and include amounts initially allocated to acquired
      technologies of $2,804,700 (CDN$2,804,700) and customer asset of $587,000
      (CDN$587,000). The acquired technologies are amortized based on their
      estimated useful life of four years and the customer asset is amortized on
      the basis of Managements estimate of the future cash flows from this
      asset over approximately five years, which is Managements estimate of the
      useful life of the customer asset.                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | The intangible assets of BridgePort are being carried and
      reported at acquisition cost and include amounts initially allocated to
      acquired technologies of $476,703 and customer asset of $43,594. The
      acquired technologies are amortized based on their estimated useful life
      of four years and the customer asset is amortized on the basis of
      Managements estimate of the future cash flows from this asset over
      approximately five years, which is Managements estimate of the useful
      life of the customer asset.                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | A summary of the Companys intangible assets, net, at
      October 31, 2009 is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

| |                       |   |           |  |   |              |  |   | Accumulated |  |   |              | 
| | --------------------- | - | --------- |  | - | ------------ |  | - | ----------- |  | - | ------------ | 
| |                       |   |           |  |   | Accumulated  |  |   | Impairment  |  |   | Net Carrying | 
| |                       |   | Cost      |  |   | Amortization |  |   | Charge      |  |   | Amount       | 
| | Acquired technologies | $ | 6,486,265 |  | $ | 3,034,651    |  | $ | 1,636,114   |  | $ | 1,815,500    | 
| | Customer assets       |   | 2,857,096 |  |   | 763,100      |  |   | 1,119,219   |  |   | 974,777      | 
| | Intangible assets     | $ | 9,343,361 |  | $ | 3,797,751    |  | $ | 2,755,333   |  | $ | 2,790,277    | 

14

---

**COUNTERPATH CORPORATION NOTES TO THE INTERIM
CONSOLIDATED FINANCIAL STATEMENTS**October 31, 2009 (Unaudited)

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

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

|Note 3 | Related Party Transactions                                                                                                                                                            
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                       
|       | During the three and six months ended October 31, 2009
      and 2008, the Company incurred the following lease expense to a company
      with a director in common with the Company:

| |               |   | Three Months Ended |  |   | Six Months Ended  | 
| | ------------- | - | ------------------ |  | - | ----------------- | 
| |               |   | October
      31,  |  |   | October
      31, | 
| |               |   | 2009               |  |   | 2008              | 
| |               |   |                    |  |   |                   | 
| | Lease payment | $ | Nil                |  | $ | Nil               | 

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

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

On July 31, 2008 the Company entered
into a source code license agreement whereby the Company licensed to Mitel the
source code for the Your Assistant product in consideration of a payment of
$650,000. Associated with the agreement are ongoing license fees to be paid by
Mitel of $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 and six months ended October 31, 2009, pursuant to the terms of
these agreements, was $134,903 and $269,141 (2008 - $124,214 and $774,569)
respectively.

As at October 31, 2009, the Company
has an accounts receivable balance from Mitel of $117,388 (April 30, 2009 -
$155,208).

During the three and six month ended
October 31, 2009, the Company through its wholly owned subsidiary, FirstHand
Technologies Inc., paid $18,642 and $37,284 (2008 - $69,199 and $138,398)
respectively to Kanata Research Park Corporation (KRP) for leased office
space. KRP is controlled by the Companys Chairman. As at October 31, 2009, the
Company had an accounts payable balance to KRP of $17,277 (April 30, 2009 -
$13,210).

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

15

---

**COUNTERPATH CORPORATION NOTES TO THE INTERIM
CONSOLIDATED FINANCIAL STATEMENTS**October 31, 2009 (Unaudited)

|Note 4 | Exchangeable Shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | On August 2, 2007, the Company entered into a voting and
      exchange trust agreement among its subsidiary, 6789722 Canada Inc., and
      Valiant Trust Company whereby the Company issued and deposited with
      Valiant Trust a special preferred voting share of the Company in order to
      enable Valiant Trust to execute certain voting and exchange rights as
      trustee 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 October 9, 2008, November 19, 2008, and May 11, 2009
      the Company issued 50,000 shares each totaling to 150,000 shares of common
      stock pursuant to a holder of 150,000 shares of exchangeable preferred
      shares of its subsidiary 6789722 Canada Inc. exercising their exchange
      rights. There were 219,841 outstanding exchangeable shares as of October
      31, 2009 (April 30, 2009 - 269,841). As the exchangeable shares have
      already been recognized in connection with the acquisition of NewHeights,
      the value ascribed to these shares on exchange is $nil.                                                                                                                                                         
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Note 5 | Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | On March 19, 2008, the Companys Board of Directors
      approved a five for one common stock consolidation. As a result, the
      Company's authorized capital decreased from 415,384,500 shares of common
      stock to 83,076,900 shares of common stock. All per share amounts and
      outstanding shares, including all common stock equivalents (stock options
      and warrants) have been retroactively adjusted in the Consolidated
      Financial Statements and in the Notes to the Consolidated Financial
      Statements for all periods presented to reflect the stock consolidation.                                                                                                                                                        
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | On July 17, 2009, in connection with a research agreement
      and omnibus agreement under which the Company licensed certain
      technologies from Columbia University, the Company entered into a debt
      conversion agreement and an amended omnibus agreement with The Trustees of
      Columbia University (Columbia), whereby as a result of the restructuring
      of certain terms and obligations of the existing research and licensing
      agreements, the Company issued 527,370 shares of common stock to Columbia
      to settle all outstanding amounts due to Columbia under such agreements
      and rights to certain technologies have reverted back to Columbia. The
      common stock was issued at $0.75 (CDN$0.84) per share.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | On October 29, 2009, the Company issued 3,333,334 units
      at a price of $0.56 (CDN$0.60) per unit for gross proceeds of
      approximately $1,867,762 (CDN$2,000,000). The Company incurred $14, 637 of
      transaction costs. Each unit consists of one share of common stock in the
      capital of CounterPath and one-half of one non- transferable common share
      purchase warrant. Each warrant entitles the holder thereof to purchase one
      share of common stock in the capital of CounterPath for a period of two
      years commencing from October 29, 2009 at an exercise price of $0.90 per
      warrant.                                                                                                                          
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

16

---

**COUNTERPATH CORPORATION NOTES TO THE INTERIM
CONSOLIDATED FINANCIAL STATEMENTS**October 31, 2009 (Unaudited)

|Note 5 | Common Stock  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | Stock Options  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | The Company has elected to use the Black-Scholes option
      pricing model to determine the fair value of stock options granted. In
      accordance with SFAS No. 123R for employees, the compensation expense is
      amortized on a straight-line basis over the requisite service period which
      approximates the vesting period. Compensation expense for stock options
      granted to non-employees is amortized over the vesting period or, if none
      exists, over the service period. Compensation associated with unvested
      options granted to non-employees is remeasured on each balance sheet date
      using the Black-Scholes option pricing model.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | The expected volatility of options granted has been
      determined using the method described under SFAS No. 123R using the
      historical stock price. The expected term of options granted to employees
      in the current fiscal period has been determined utilizing the
      simplified method as prescribed by SAB No. 110, Share-Based Payment. For
      non-employees, the expected term of the options approximates the full term
      of the options. The risk-free interest rate is based on a treasury
      instrument whose term is consistent with the expected term of the stock
      options. The Company has not paid and does not anticipate paying dividends
      on its common stock; therefore, the expected dividend yield is assumed to
      be zero. In addition, SFAS No. 123R requires companies to utilize an
      estimated forfeiture rate when calculating the expense for the period,
      whereas prior to the adoption of SFAS No. 123R the Company recorded
      forfeitures based on actual forfeitures and recorded a compensation
      expense recovery in the period when the awards were forfeited. As a
      result, based on the Companys experience, the Company applied an
      estimated forfeiture rate of 15% for the six month period ended October 31,
      2009 and 2008 in determining the expense recorded in the accompanying
      consolidated statement of operations.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | The weighted-average fair value of options granted during
      the six months ended October 31, 2009 was $nil (2008 - $0.85). The
      weighted-average assumptions utilized to determine such values are
      presented in the following table:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

| |                             |  | Six Months Ended |  |  | Six Months Ended | 
| | --------------------------- |  | ---------------- |  |  | ---------------- | 
| |                             |  | October 31, 2009 |  |  | October 31, 2008 | 
| | Risk-free interest rate     |  | n/a              |  |  | 3.23%            | 
| | Expected volatility         |  | n/a              |  |  | 66.8%            | 
| | Expected term               |  | n/a              |  |  | 4.4 yrs          | 
| | Dividend yield              |  | n/a              |  |  | 0%               | 
| | Weighted average fair value |  | n/a              |  |  | $0.86            | 

The following is a summary of the
status of the Companys stock options as of October 31, 2009 and the stock
option activity during the six months ended October 31, 2009:

| |                                 |  |           |   | Weighted-      | 
| | ------------------------------- |  | --------- | - | -------------- | 
| |                                 |  |           |   | average        | 
| |                                 |  | Number of |   | Exercise Price | 
| |                                 |  | Options   |   | per Share      | 
| | Outstanding at April 30, 2009   |  | 4,650,768 |   | $1.13          | 
| | Forfeited / Cancelled           |  | (579,849  | ) | $1.43          | 
| | Exercised                       |  | (25,875   | ) | $0.46          | 
| | Expired                         |  | (50,200   | ) | $0.47          | 
| | Outstanding at October 31, 2009 |  | 3,994,844 |   | $1.11          | 
| |                                 |  |           |   |                | 
| | Exercisable at October 31, 2009 |  | 2,451,542 |   | $1.32          | 
| | Exercisable at April 30, 2009   |  | 2,474,207 |   | $1.41          | 

17

---

**COUNTERPATH CORPORATION NOTES TO THE INTERIM
CONSOLIDATED FINANCIAL STATEMENTS**October 31, 2009 (Unaudited)

|Note 5 | Common Stock  (contd)                                                                                              
|------ | ---------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                      
|       | Stock Options  (contd)                                                                                             
|       |                                                                                                                      
|       | The following table summarizes information regarding
      stock purchase options outstanding as of October 31, 2009:

Number of
    
    **Aggregate**
    
    
    
    Number of
    
    **Aggregate**Exercise
    Options
    
    Intrinsic
    
    
    
    Options
    
    IntrinsicPrice
    Outstanding
    
    Value
    
    Expiry Date
    
    Exercisable
    
    Value$0.44
    542,667
    
    $ 81,400
    
    December 15,
      2013
    
    114,507
    
    $ 17,176$0.47
    1,049,747
    
    125,970
    
    August 20, 2009 to September 26,
      2016
    
    937,237
    
    112,468$0.62
    850,000
    
    
    
    April 17, 2014
    
    106,250
    
    $1.75
    250,000
    
    
    
    May 14, 2013
    
    88,542
    
    $1.90
    70,210
    
    
    
    March 8, 2015 to
      January 25, 2017
    
    70,210
    
    $1.95
    582,400
    
    
    
    September 7, 2010 to January 10,
      2016
    
    559,751
    
    $2.00
    274,220
    
    
    
    January 1, 2010
      to March 18, 2015
    
    274,220
    
    $2.15
    240,000
    
    
    
    September 7, 2016
    
    185,000
    
    $3.05
    135,600
    
    
    
    May 23, 2016
    
    115,825
    
    October 31, 2009
    3,994,844
    
    $207,370
    
    
    
    2,451,542
    
    $129,644April 30, 2009
    4,650,768
    
    $494,764
    
    
    
    2,474,207
    
  $214,046


The aggregate intrinsic value in the
preceding table represents the total intrinsic value, based on the Companys
closing stock price of $0.59 per share as of October 31, 2009 (April 30, 2009 
$0.69), which would have been received by the option holders had all option
holders exercised their options as of that date. The total number of
in-the-money options vested and exercisable as of October 31, 2009 was 1,051,744
(April 30, 2009  972,936). The total intrinsic value of options exercised
during the six months ended October 31, 2009 was $3,289 (2008  $nil). The grant
date fair value of options vested during the six months ended October 31, 2009
was $208,931 (2008  $3,511,509).

The following table summarizes
information regarding the non-vested stock purchase options outstanding as of
October 31, 2009.

| |                                        |  |                   |   |  | Weighted Average | 
| | -------------------------------------- |  | ----------------- | - |  | ---------------- | 
| |                                        |  |                   |   |  | Grant-Date Fair  | 
| |                                        |  | Number of Options |   |  | Value            | 
| | Non-vested options at April 30, 2009   |  | 2,176,561         |   |  | $0.64            | 
| | Vested                                 |  | (487,293          | ) |  | $0.43            | 
| | Forfeited                              |  | (145,966          | ) |  | $0.65            | 
| | Non-vested options at October 31, 2009 |  | 1,543,302         |   |  | $0.58            | 

As of October 31, 2009 there was
$711,974 (2008  $1,517,367) of total unrecognized compensation cost related to
unvested share-based compensation awards. This unrecognized compensation cost is
expected to be recognized over a weighted average period of 1.15 years (2008 
1.015 years).

Employee and non-employee stock-based
compensation amounts classified in the Companys consolidated statements of
operations for the three and six months ended October 31, 2009 and 2008 are as
follows:

18

---

**COUNTERPATH CORPORATION NOTES TO THE INTERIM
CONSOLIDATED FINANCIAL STATEMENTS**October 31, 2009 (Unaudited)

|Note 5 | Common Stock  (contd) 
|------ | ------------------------
|       |                         
|       | Stock Options  (contd)

| |                                |   | Three Months Ended |  |   | Six Months Ended  | 
| | ------------------------------ | - | ------------------ |  | - | ----------------- | 
| |                                |   | October
      31,  |  |   | October
      31, | 
| |                                |   | 2009               |  |   | 2008              | 
| |                                |   |                    |  |   |                   | 
| | Cost of sales                  | $ | 17,411             |  |   | 18,601            | 
| | Sales and marketing            |   | 17,724             |  |   | 40,702            | 
| | Research and development       |   | 23,896             |  |   | 77,036            | 
| | General and administrative     |   | 131,756            |  |   | 175,626           | 
| | Total stock-based compensation | $ | 190,787            |  | $ | 311,965           | 

Warrants

During the six months ended October
31, 2009, the Company entered into a warrant surrender agreement with a warrant
holder whereby the holder surrendered, and the Company cancelled 750,000
warrants. In addition, the Company issued 1,666,667 warrants as part of a unit
offering which closed on October 29, 2009 (2008  1,216,720). The fair value of
the stock purchase warrants issued was $412,414 (2008  $391,831). The warrants
enable the holders thereof the right to purchase up to 1,666,667 shares of the
Companys common stock, exercisable for two years from October 29, 2009. The
assumptions utilized to determine such values are presented in the following
table:

| |                             |  | Six Months Ended |  |  | Six Months Ended | 
| | --------------------------- |  | ---------------- |  |  | ---------------- | 
| |                             |  | October 31, 2009 |  |  | October 31, 2008 | 
| |                             |  |                  |  |  |                  | 
| | Risk-free interest rate     |  | 0.90%            |  |  | 1.58%-2.52%      | 
| | Expected volatility         |  | 79.94%           |  |  | 48.54%-66.34%    | 
| | Expected term               |  | 2 yrs            |  |  | 2 yrs            | 
| | Dividend yield              |  | 0%               |  |  | 0%               | 
| | Weighted average fair value |  | $0.23            |  |  | $0.31-$0.44      | 

The following table summarizes
information regarding the warrants outstanding as of October 31, 2009:

| |                                  |  |           |   |  | Weighted       |  |  |                                              | 
| | -------------------------------- |  | --------- | - |  | -------------- |  |  | -------------------------------------------- | 
| |                                  |  | Number of |   |  | Average        |  |  |                                              | 
| |                                  |  | Warrants  |   |  | Exercise Price |  |  | Expiry Dates                                 | 
| |                                  |  |           |   |  |                |  |  |                                              | 
| | Warrants at April 30,
      2009 |  | 2,265,421 |   |  | $3.04          |  |  | November 30, 2009 to 
      October 24, 2010 | 
| | Granted                          |  | 1,666,667 |   |  | $0.90          |  |  | October 29, 2011                             | 
| | Cancelled                        |  | (750,000  | ) |  | $4.00          |  |  | November 30, 2009                            | 
| | Warrants at October 31, 2009     |  | 3,182,088 |   |  | $1.69          |  |  | November 30, 2009 to 
      October 29, 2011 | 

The warrant holder for 750,000
warrants due to expire on November 30, 2009 surrendered his warrants on
September 30, 2009.

19

---

**COUNTERPATH CORPORATION NOTES TO THE INTERIM
CONSOLIDATED FINANCIAL STATEMENTS**October 31, 2009 (Unaudited)

|Note 5 | Common Stock  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       | Employee Stock Purchase Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       | As of February 1, 2009 the Company offers an Employee
      Stock Purchase Plan (ESPP) to all regular salaried (non-probationary)
      employees. Shares of common stock issued to employees as a result of
      purchases or exercises under these plans will generally be issued from
      shares acquired in the market or shares issued from treasury.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       | Under the terms of the ESPP, all regular salaried
      (non-probationary) employees can purchase up to 6% of their base salary in
      shares of common stock of the Company at market price. The Company will
      match 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 amended on October 22, 2009. As of October 31, 2009, a
      total of 700,000 shares were available for issuance under the ESPP. During
      the six months ended October 31, 2009, no shares were issued from treasury
      to employees under the ESPP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       | Deferred Share Unit Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       | As of October 22, 2009 the Company offers a deferred
      share unit plan (DSUP) to non-employee directors and senior officers of
      the Company or any of our subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       | Under the terms of the 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. A deferred share unit
      granted to a participant who is a director of the board of the Company
      shall vest immediately on the award date. A deferred share unit granted to
      a participant other than a director will generally vest 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.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       | A total of 1,500,000 shares have been reserved for
      issuance under the DSUP. As of October 31, 2009, a total of 1,500,000
      shares were available for issuance under the DSUP. During the six months
      ended October 31, 2009, no shares were issued under the DSUP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Note 6 | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

20

---

**COUNTERPATH CORPORATION NOTES TO THE INTERIM
CONSOLIDATED FINANCIAL STATEMENTS**October 31, 2009 (Unaudited)

|Note 6 | Segmented Information  (contd)                                                                                                                                                                                           
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                            
|       | Foreign revenues are based on the country in which the
      customer is located. The following is a summary of total revenues by
      geographic area for the three and six months ended October 31, 2009 and
      2008:

| |                 |   | Three Months Ended |  |   | Six Months Ended  | 
| | --------------- | - | ------------------ |  | - | ----------------- | 
| |                 |   | October
      31,  |  |   | October
      31, | 
| |                 |   | 2009               |  |   | 2008              | 
| | North America   | $ | 1,147,134          |  | $ | 1,710,996         | 
| | Europe          |   | 509,036            |  |   | 812,944           | 
| | Asia and Africa |   | 138,561            |  |   | 285,782           | 
| | Latin America   |   | 105,876            |  |   | 207,108           | 
| |                 | $ | 1,900,607          |  | $ | 3,016,830         | 

Contained within the results of North
America for the three and six months ended October 31, 2009 are revenues from
the United States of $992,735 and $2,079,841 (2008 - $1,628,016 and $2,669,992)
respectively and from Canada of $154,399 and $316,492 (2008 - $82,980 and
$762,546) respectively.

Contained within the results of Europe
for the three and six months ended October 31, 2009 are revenues from Germany of
$72,054 and $204,916 (2008 - $199,186 and $301,302) respectively, from the
United Kingdom of $114,942 and $173,219 (2008 - $267,215 and $382,714)
respectively, from the Netherlands of $48,669 and $135,656 (2008 - $11,281 and
$14,078) respectively, and from Slovenia of $99,622 and $102,256 (2008 - $11,300
and $11,300) respectively.

Contained within the results of Asia
and Africa for the three and six months ended October 31, 2009 are revenues from
Nigeria of $6,450 and $163,800 (2008 - $49 and $97) respectively, from Israel of
$60,830 and $64,761 (2008 - $39,161 and $50,375) respectively, from the
Philippines of $11,559 and $32,244 (2008 - $nil and $nil) respectively, and from
Australia of $14,917 and $26,181 (2008 - $4,910, and $5,153) respectively.

Contained within the results of Latin
America for the three and six months ended October 31, 2009 are revenues from
Mexico of $49,689 and $121,431 (2008 - $78,840 and $202,203) respectively, from
Colombia of $11,387 and $32,013 (2008 - $1,861 and $7,918) respectively, from
Brazil of $20,250 and $27,582 (2008 - $97,500 and $113,688) respectively, and
from Uruguay of $13,754 and $13,918 (2008 - $nil and $nil) respectively.

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

| |               |   | As
      at      | 
| | ------------- | - | ---------------- | 
| |               |   | October 31, 2009 | 
| |               |   |                  | 
| | Canada        | $ | 11,262,932       | 
| | United States |   | 17,371           | 
| | Total         | $ | 11,280,303       | 

21

---

**COUNTERPATH CORPORATION NOTES TO THE INTERIM
CONSOLIDATED FINANCIAL STATEMENTS**October 31, 2009 (Unaudited)

|Note 6 | Segmented Information  (contd)                                                                                               
|------ | -------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                
|       | Revenue from significant customers for the three and six
      months ended October 31, 2009 and 2008 is summarized as follows:

| |            |  | Three Months Ended |  |  | Six Months Ended  | 
| | ---------- |  | ------------------ |  |  | ----------------- | 
| |            |  | October
      31,  |  |  | October
      31, | 
| |            |  | 2009               |  |  | 2008              | 
| |            |  |                    |  |  |                   | 
| | Customer A |  | 2%                 |  |  | 20%               | 
| | Customer B |  | 16%                |  |  | %                | 
| | Customer C |  | 7%                 |  |  | 4%                | 
| |            |  | 25%                |  |  | 24%               | 

Accounts receivable balances for
Customer A were $nil as at October 31, 2009 (April 30, 2009 - $323,285).
Accounts receivable balances for Customer B were $353,550 as at October 31, 2009
(April 30, 2009 - $nil). Accounts receivable balances for Customer C were
$117,388 as at October 31, 2009 (April 30, 2009 - $155,208).

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

| | a) | On March 14, 2008 the Company entered into a lease for
      accommodation which commenced on April 1, 2008 and expired on March 31,
      2009. On February 5, 2009, the Company entered into an extension agreement
      on this lease which commenced on April 1, 2009 and expired on September
      30, 2009. On July 28, 2009, the Company entered into another extension
      agreement on this lease which commenced on October 1, 2009 and expires on
      March 31, 2010. The monthly lease payment under the new extension
      agreement is $2,225.                                                                                                                                                                              
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | b) | On April 29, 2005, the Company entered into a lease for
      office premises, which commenced on October 1, 2005 and expires on
      September 30, 2012 for which a deposit of $9,261 was made. The monthly
      lease payment under this agreement is $9,261 plus $7,396 in operating
      costs. The Company is subleasing part of these premises for a monthly
      charge of $7,421. The sublease commenced on August 1, 2007 and expires on
      September 30, 2012. On July 17, 2009, the Company signed a new subleasing
      agreement for another part of these premises, which commenced on August 1,
      2009 and expires September 30, 2012. The monthly charge under this
      subleasing agreement is $3,000 (CDN$3,216).
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | c) | 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 $6,214.                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | d) | 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 at total of $461,736
      (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.                                                                                                                                                                                                                                                                                                          

22

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**COUNTERPATH CORPORATION NOTES TO THE INTERIM
CONSOLIDATED FINANCIAL STATEMENTS**October 31, 2009 (Unaudited)

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

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

| |      |   |                 |  |   | Office Leases |  |   |           |   |   |              |  |   |            | 
| | ---- | - | --------------- |  | - | ------------- |  | - | --------- | - | - | ------------ |  | - | ---------- | 
| |      |   | Office Leases  |  |   |  Unrelated   |  |   | Sub Lease |   |   | Total Office |  |   | Settlement | 
| |      |   | Related Party   |  |   | Party         |  |   | Income    |   |   | Leases       |  |   | Agreement  | 
| | 2010 | $ | 37,284          |  | $ | 419,818       |  | $ | (62,526   | ) | $ | 394,576      |  | $ | 61,565     | 
| | 2011 |   | 74,568          |  |   | 734,586       |  |   | (125,052  | ) |   | 684,102      |  |   | 123,130    | 
| | 2012 |   | 74,568          |  |   | 411,178       |  |   | (125,052  | ) |   | 360,694      |  |   | 123,130    | 
| | 2013 |   |                |  |   | 83,286        |  |   | (52,105   | ) |   | 31,181       |  |   | 76,956     | 
| |      | $ | 186,420         |  | $ | 1,648,868     |  | $ | (364,735  | ) | $ | 1,470,553    |  | $ | 384,781    | 

|Note 8  | Contingent Liability                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | On February 17, 2006, a competitor filed a statement of
      claim in the Supreme Court of British Columbia claiming among other
      things, general, punitive and aggravated damages of unspecified amounts
      with respect to alleged business ethics matters. Management of the Company
      believes that the claim is without foundation or merit. Any loss as a
      result of this claim will be recorded in the period that the loss is
      probable and measurable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Note 9  | Restructuring                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | As a result of the Companys post acquisition activities,
      the Company incurred restructuring costs of $44,912 and $932,996 during
      the six months ended October 31, 2009 and 2008, respectively.
      Restructuring costs of $44,912 were related to employee severance
      arrangements as a result of the consolidation of administrative, sales,
      marketing, and research and development departments after the close of
      acquisitions of NewHeights Software Corporation, FirstHand Technologies
      Inc. and BridgePort Networks, Inc. These charges are shown as a separate
      line item in the consolidated statement of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Note 10 | 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 six months ended October 31, 2009 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.

23

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**COUNTERPATH CORPORATION NOTES TO THE INTERIM
CONSOLIDATED FINANCIAL STATEMENTS**October 31, 2009 (Unaudited)

|Note 10 | Derivative Instruments and Hedging
      Activities  (contd)                                                   
|------- | -----------------------------------------------------------------------------------------------------------------
|        |                                                                                                                  
|        | Volume of Derivative Activity                                                                                    
|        |                                                                                                                  
|        | Total gross notional amounts for foreign
      currency forward contracts, presented by currency, are as follows:

| |                 |   | Six Months Ended  | 
| | --------------- | - | ----------------- | 
| | In U.S. dollars |   | October
      31, | 
| |                 |   | 2009              | 
| |                 |   |                   | 
| | Canadian dollar | $ | 500,000           | 
| | Total           | $ | 500,000           | 

|        | The fair value of forward contracts as of
      October 31, 2009 was $521,654.
|------- | ------------------------------------------------------------------------------
|        |                                                                               
|Note 11 | Subsequent Events                                                             

| | a) | On December 14, 2009, the Company granted 520,161
      deferred share units to eight non-officer directors and two officers
      pursuant to its DSUP. Each deferred share unit provides the holder thereof
      the right to exchange the unit into one share of common stock of the
      Company under the terms and conditions of the plan. 278,226 of the
      deferred share units vest immediately and 241,935 of the deferred share
      units vest as to 1/3 of the deferred share units on the first, second and
      third anniversary of the date of the grant, at which time the deferred
      share units are fully vested.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | b) | On December 14, 2009, the Company granted stock options
      to its employees to purchase an aggregate of 800,000 shares of common
      stock at an exercise price of $0.60 per share, exercisable for a period of
      five years pursuant to the Companys 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.                                                                                        

24

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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. 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. On February 1,
2008, we acquired all of the issued and outstanding shares of BridgePort
Networks, Inc. by way of merger in consideration for the assumption of all of
the assets and liabilities of BridgePort Networks.

25

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

Business of CounterPath

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

Our
strategy is to sell our software to our customers to allow such customers to
deliver session initiation protocol and 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.

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.

26

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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 October 31, 2009 we have a
restructuring accrual for severance of $nil.

Application of Critical Accounting Policies and Use of
Estimates

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

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

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

27

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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, 2009 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, 2009 annual consolidated financial
statements.

Operating
results for the six months ended October 31, 2009 are not necessarily indicative
of the results that can be expected for the year ending April 30, 2010.

Revenue Recognition

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

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

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

For
contracts with elements related to customized network solutions and certain
network build-outs, we apply FASB Emerging Issues Task Force Issue No. 00-21,
Revenue Arrangements with Multiple Deliverables and revenues are recognized
under SOP 81-1, Accounting for Performance of Construction-Type and Certain
Production-Type Contracts, generally using the percentage-of-completion method.

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

28

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

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

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

Stock-Based Compensation

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

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

The
expected volatility of options granted has been determined using the volatility
of our company's stock. The expected 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, SFAS
No. 123R requires companies to utilize an estimated forfeiture rate when
calculating the expense for the period. We applied an estimated forfeiture rate
of 15.0% in the six months ended October 31, 2009 in determining the expense
recorded in our consolidated statement of operations.

Cost
of sales and operating expenses include stock-based compensation expense. For
the six months ended October 31, 2009, we recorded an expense of $410,402 in
connection with share-based payment awards. A future expense of non-vested
options of $711,974 is expected to be recognized over a weighted-average period
of 1.15 years.

Research and Development Expense for Software
Products

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

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

29

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current ability to pay its obligation to us. We write-off
accounts receivable when they are identified as uncollectible. All outstanding
accounts receivable accounts are periodically reviewed for collectibility on an
individual basis.

Goodwill and Intangible Assets

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

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

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 FASB Statement No. 142, Goodwill and Other Intangible Assets. The
provisions of Statement 142 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 2009, did not result in an
impairment charge, nor did we record any goodwill impairment in fiscal 2008.

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 FASB Statement No. 144, 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

30

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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
most recent quarter ended October 31, 2009, 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 and six months ended October 31, 2009
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 financial information for the
periods indicated. The selected consolidated financial information set out below
for the three and six months ended October 31, 2009 and 2008, and as at October
31, 2009 and April 30, 2009 has been derived from the consolidated financial
statements and accompanying notes for the three and six months ended October 31,
2009 and 2008 and fiscal year ended April 30, 2009. Each investor should read
the following information in conjunction with those statements and the related
notes thereto.

|Selected Consolidated Statements of Operations Data |   | Three
      Months Ended October 31, |  
|--------------------------------------------------- | - | ------------------------------------ | -
|                                                    |   | 2009                                 |  
|                                                    |   |                                      |  
|                                                    |   |                                      |  
|                                                    |   | Amount                               |  
|                                                    |   |                                      |  
|Revenue                                             | $ | 1,900,607                            |  
|                                                    |   |                                      |  
|Non-GAAP operating expenses1                        |   | 3,288,552                            |  
|Stock-based compensation                            |   | 190,787                              |  
|Amortization of intangible assets                   |   | 216,584                              |  
|GAAP operating expenses                             |   | 3,695,923                            |  
|                                                    |   |                                      |  
|Loss from operations                                |   | (1,795,316                           | )
|Interest income, net                                |   | 33,811                               |  
|Foreign exchange loss                               |   | 7,952                                |  
|Net loss                                            |   | ($1,753,553                          | )
|                                                    |   |                                      |  
|Loss per share                                      |   | ($0.06                               | )
|                                                    |   |                                      |  
|Weighted average common shares outstanding          |   | 29,526,663                           |  

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

31

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|Selected Consolidated Statements of Operations Data |   | Six
      Months Ended October 31, |  
|--------------------------------------------------- | - | ---------------------------------- | -
|                                                    |   | 2009                               |  
|                                                    |   |                                    |  
|                                                    |   |                                    |  
|                                                    |   | Amount                             |  
|                                                    |   |                                    |  
|Revenue                                             | $ | 3,951,064                          |  
|                                                    |   |                                    |  
|Non-GAAP operating expenses1                        |   | 5,752,137                          |  
|Stock-based compensation                            |   | 410,402                            |  
|Amortization of intangible assets                   |   | 422,556                            |  
|GAAP operating expenses                             |   | 6,585,095                          |  
|                                                    |   |                                    |  
|Loss from operations                                |   | (2,634,031                         | )
|Interest income (expense), net                      |   | 59,903                             |  
|Foreign exchange loss                               |   | (421,761                           | )
|Net loss                                            |   | ($2,995,889                        | )
|                                                    |   |                                    |  
|Loss per share                                      |   | ($0.10                             | )
|                                                    |   |                                    |  
|Weighted average common shares outstanding          |   | 29,247,497                         |  

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

|                                         |   | October 31, |  |   | April 30,  | 
|---------------------------------------- | - | ----------- |  | - | ---------- | 
|Selected Consolidated Balance Sheet Data |   | 2009        |  |   | 2009       | 
|                                         |   |             |  |   |            | 
|Cash                                     | $ | 3,441,969   |  | $ | 2,931,932  | 
|Current assets                           |   | 6,281,649   |  |   | 5,909,760  | 
|Current liabilities                      |   | 4,086,517   |  |   | 4,343,277  | 
|Total liabilities                        |   | 4,195,239   |  |   | 4,496,868  | 
|Total assets                             | $ | 17,663,864  |  | $ | 15,839,165 | 

Revenue**Three Months Ended October 31,**2009
      
      
      2008
      
      
      Period-to-Period
        ChangePercent
      
      
      
      
      
      Percent
      
      
      
      
      
      Percentof Total
      
      
      
      
      
      of Total
      
      
      
      
      
      Increase /Amount
      
      
      Revenue
      
      
      Amount
      
      
      Revenue
      
      
      Amount
      
      
      (Decrease)Revenue by TypeSoftware
      $
      1,451,826
      
      
      76%
      
      $
      2,113,617
      
      
      70%
      
      
      ($661,791
      )
      
      (31%
      )Service
      
      448,781
      
      
      24%
      
      
      903,213
      
      
      30%
      
      
      (454,432
      )
      
      (50%
      )Total revenue
      $
      1,900,607
      
      
      100%
      
      $
      3,016,830
      
      
      100%
      
      
      ($1,116,223
      )
      
      (37%
      )Revenue by RegionInternational
      $
      753,473
      
      
      40%
      
      $
      1,305,834
      
      
      43%
      
      
      ($552,361
      )
      
      (42%
      )North America
      
      1,147,134
      
      
      60%
      
      
      1,710,996
      
      
      57%
      
      
      (563,862
      )
      
      (33%
      )Total revenue
      $
      1,900,607
      
      
      100%
      
      $
      3,016,830
      
      
      100%
      
      
      ($1,116,223
      )
      
      (37%
      )


For
the three months ended October 31, 2009, we generated $1,900,607 in revenue
compared to $3,016,830 for the three months ended October 31, 2008. This
represents a decrease of $1,116,223 or 37% from the same

32

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period last year. We generated $1,451,826 in software revenue
for the three months ended October 31, 2009 compared to $2,113,617 for the three
months ended October 31, 2008, representing a decrease of $661,791 or 31%. The
decrease in software revenue was primarily due to fewer large sales derived from
our customer base, particularly among the original equipment manufacturer
segment, during the three months ended October 31, 2009 compared to the three
months ended October 31, 2008. For the three months ended October 31, 2009,
service revenue was $448,781 compared to $903,213 for the three months ended
October 31, 2008. The decrease of $454,432 in service revenue was primarily due
to the decrease in software sales as service revenue is correlated to the amount
of software sales in the period. International revenue outside of North America
decreased by 42% during the three months ended October 31, 2009 compared to the
three months ended October 31, 2008, due to an overall decrease in sales in the
period. North American revenue decreased by 33%, compared to the three months
ended October 31, 2008, due primarily to a decrease in sales of software and
services to North American original equipment manufacturers.

|                  |   | **Six
      Months Ended October 31,** |  |  |          |  |   |                               | 
|----------------- | - | -------------------------------------- |  |  | -------- |  | - | ----------------------------- | 
|                  |   | 2009                                   |  |  | 2008     |  |   | Period-to-Period
      Change | 
|                  |   |                                        |  |  | Percent  |  |   |                               | 
|                  |   |                                        |  |  | of Total |  |   |                               | 
|                  |   | Amount                                 |  |  | Revenue  |  |   | Amount                        | 
|Revenue by Type   |   |                                        |  |  |          |  |   |                               | 
|Software          | $ | 2,593,169                              |  |  | 66%      |  | $ | 3,961,922                     | 
|Service           |   | 1,357,895                              |  |  | 34%      |  |   | 1,667,668                     | 
|Total revenue     | $ | 3,951,064                              |  |  | 100%     |  | $ | 5,629,590                     | 
|                  |   |                                        |  |  |          |  |   |                               | 
|Revenue by Region |   |                                        |  |  |          |  |   |                               | 
|International     | $ | 1,554,731                              |  |  | 39%      |  | $ | 2,197,052                     | 
|North America     |   | 2,396,333                              |  |  | 61%      |  |   | 3,432,538                     | 
|Total revenue     | $ | 3,951,064                              |  |  | 100%     |  | $ | 5,629,590                     | 

For
the six months ended October 31, 2009, we generated $3,951,064 in revenue
compared to $5,629,590 for the six months ended October 31, 2008. This
represents a decrease of $1,678,526 or 30% from the same period last year. We
generated $2,593,169 in software revenue for the six months ended October 31,
2009 compared to $3,961,922 for the six months ended October 31, 2008,
representing a decrease of $1,368,753 or 35%. The decrease in software revenue
was primarily due to fewer large sales derived from our customer base,
particularly among the original equipment manufacturer segment, during the six
months ended October 31, 2009 compared to the six months ended October 31, 2008.
For the six months ended October 31, 2009, service revenue was $1,357,895
compared to $1,667,668 for the six months ended October 31, 2008. The decrease
of $309,773 in service revenue was primarily due to the decrease in software
sales as service revenue is correlated to the amount of software sales in the
period. International revenue outside of North America decreased by 29% during
the six months ended October 31, 2009 compared to the six months ended October
31, 2008, primarily caused by lower software sales in Latin America and Europe.
North American revenue decreased by 30% compared to the six months ended October
31, 2008, caused primarily by lower sales of software and services to North
American original equipment manufacturers.

Operating Expenses

*Cost of Sales*

Cost
of sales for the three and six months ended October 31, 2009 and 2008 were as
follows:

|                   |   | October
      31, 2009 |  |  | October
      31, 2008 |  |   | Period-to-Period
      Change | 
|------------------ | - | ---------------------- |  |  | ---------------------- |  | - | ----------------------------- | 
|                   |   |                        |  |  | Percent                |  |   |                               | 
|                   |   |                        |  |  | of                     |  |   |                               | 
|                   |   | Amount                 |  |  | Revenue                |  |   | Amount                        | 
|Three months ended | $ | 727,874                |  |  | 38%                    |  | $ | 1,086,203                     | 
|Six months ended   | $ | 1,370,602              |  |  | 35%                    |  | $ | 2,464,046                     | 

33

---

Cost
of sales was $727,874 for the three months ended October 31, 2009 compared to
$1,086,203 for the three months ended October 31, 2008. The decrease of $358,329
was primarily attributable to a decrease in the amortization of intangible
assets of approximately $294,000, a decrease in personnel and associated wages
of approximately $100,000, a decrease in travel related expenses of
approximately $18,000, and decrease in warranty expenses of approximately
$31,000. The decrease was partially offset by an increase in the cost of
third-party royalties and hardware used with our products of approximately
$94,000.

Cost
of sales was $1,370,602 for the six months ended October 31, 2009 compared to
$2,464,046 for the six months ended October 31, 2008. The decrease of $1,093,444
was primarily attributable to a decrease in the amortization of intangible
assets of $633,000, a decrease in personnel and associated wages of
approximately $269,000, a decrease in travel related expenses of approximately
$29,000, and a net decrease in other expenses of approximately $162,000.

Sales and Marketing

Sales
and marketing expenses for the three and six months ended October 31, 2009 and
2008 were as follows:

|                   |   | October
      31, 2009 |  |  | October
      31, 2008 |  |   | Period-to-Period
      Change | 
|------------------ | - | ---------------------- |  |  | ---------------------- |  | - | ----------------------------- | 
|                   |   |                        |  |  | Percent                |  |   |                               | 
|                   |   |                        |  |  | of                     |  |   |                               | 
|                   |   | Amount                 |  |  | Revenue                |  |   | Amount                        | 
|Three months ended | $ | 690,551                |  |  | 36%                    |  | $ | 1,186,713                     | 
|Six months ended   | $ | 1,449,556              |  |  | 37%                    |  | $ | 2,668,664                     | 

Sales
and marketing expenses were $690,551 for the three months ended October 31, 2009
compared to $1,186,713 for the three months ended October 31, 2008. The decrease
of $496,162 was primarily attributable to an approximate decrease of $403,000 in
sales and marketing personnel and associated wages and commissions as well as
decreases in professional and consulting fees resulting from employee
restructuring throughout fiscal year 2009. Travel expenses and stock based
compensation also decreased by approximately $46,000 and $23,000,
respectively.

Sales
and marketing expenses were $1,449,556 for the six months ended October 31, 2009
compared to $2,668,664 for the six months ended October 31, 2008. The decrease
of $1,219,108 was primarily attributable to a decrease in sales and marketing
personnel and associated wages and commissions of approximately $843,000 as well
as decreases in professional and consulting fees of approximately $166,000
resulting from employee restructuring throughout fiscal year 2009. Travel
expenses and stock based compensation also decreased by approximately $142,000
and $20,000, respectively.

Research and Development

Research
and development expenses for the three and six months ended October 31, 2009 and
2008 were as follows:

|                   |   | October
      31, 2009 |  |  | October
      31, 2008 |  |   | Period-to-Period
      Change | 
|------------------ | - | ---------------------- |  |  | ---------------------- |  | - | ----------------------------- | 
|                   |   |                        |  |  | Percent                |  |   |                               | 
|                   |   |                        |  |  | of                     |  |   |                               | 
|                   |   | Amount                 |  |  | Revenue                |  |   | Amount                        | 
|Three months ended | $ | 1,004,594              |  |  | 53%                    |  | $ | 2,103,685                     | 
|Six months ended   | $ | 1,824,722              |  |  | 46%                    |  | $ | 5,121,097                     | 

Research
and development expenses were $1,004,594 for the three months ended October 31,
2009 compared to $2,103,685 for the three months ended October 31, 2008. The
decrease of $1,099,091 was primarily attributable to a decrease in research and
development personnel and associated wages and commissions as well as decreases
in professional and consulting fees resulting from employee restructuring
throughout fiscal year 2009. For the three months ended October 31, 2009,
research and development related wages decreased by approximately $862,000 and
professional services and consulting fees related to research and development
decreased by approximately $186,000, compared to the three months ended October
31, 2008.

34

---

Research
and development expenses were $1,824,722 for the six months ended October 31,
2009 compared to $5,121,097 for the six months ended October 31, 2008. The
decrease of $3,296,375 was primarily attributable to a decrease in research and
development personnel and associated wages and commissions as well as decreases
in professional and consulting fees resulting from employee restructuring
throughout fiscal year 2009. For the six months ended October 31, 2009, research
and development related wages decreased by approximately $2,750,000 and
professional services and consulting fees related to research and development
decreased by approximately $469,000, compared to the six months ended October
31, 2008.

General and Administrative

General
and administrative expenses for the three and six months ended October 31, 2009
and 2008 were as follows:

|                   |   | October
      31, 2009 |  |  | October
      31, 2008 |  |   | Period-to-Period
      Change | 
|------------------ | - | ---------------------- |  |  | ---------------------- |  | - | ----------------------------- | 
|                   |   |                        |  |  | Percent                |  |   |                               | 
|                   |   |                        |  |  | of                     |  |   |                               | 
|                   |   | Amount                 |  |  | Revenue                |  |   | Amount                        | 
|Three months ended | $ | 1,272,904              |  |  | 67%                    |  | $ | 1,559,672                     | 
|Six months ended   | $ | 1,895,303              |  |  | 48%                    |  | $ | 3,787,799                     | 

General
and administrative expenses were $1,272,904 for the three months ended October
31, 2009 compared to $1,559,672 for the three months ended October 31, 2008. The
decrease of $286,768 in general and administrative expenses was primarily
attributable to decreases in personnel related costs resulting from employee
restructuring throughout fiscal year 2009. This decrease was partially offset by
an approximate increase of $371,000 in provision for bad debts related to the
write-off of uncollectable accounts receivables. For the three months ended
October 31, 2009 compared to the three months ended October 31, 2008, wages,
stock-based compensation and professional fees related to general and
administrative functions decreased by approximately $230,000, $44,000 and
$243,000, respectively. In addition, rent and related insurance cost, travel and
amortization expense decreased by approximately $46,000, $33,000, and $41,000
respectively.

General
and administrative expenses were $1,895,303 for the six months ended October 31,
2009 compared to $3,787,799 for the six months ended October 31, 2008. The
decrease of $1,892,496 in general and administrative expenses was primarily
attributable to decreases in personnel related costs resulting from employee
restructuring throughout fiscal year 2009. This decrease was partially offset by
an approximate increase of $92,000 in provision for bad debts related to the
write-off of uncollectable accounts receivables. For the six months ended
October 31, 2009 compared to the six months ended October 31, 2008, wages,
stock-based compensation and professional fees related to general and
administrative expenses decreased by approximately $602,000, $279,000 and
$450,000, respectively. In addition, rent and related insurance cost decreased
by $115,000 due to a reduction in office space required. Amortization of capital
assets decreased by approximately $227,000 during the six months ended October
31, 2009 compared to the six months ended October 31, 2008 due to a charge taken
to intangible assets at the end of fiscal 2009. Travel and communication
expenses decreased by approximately $92,000 and $34,000, respectively, due to
cost saving policies implemented during fiscal 2010, and other office expenses,
which include supplies, utilities, office repairs, and maintenance decreased by
approximately $130,000.

Restructuring Charges

Restructuring
charges for the three and six months ended October 31, 2009 and 2008 were as
follows:

|                   |   | October
      31, 2009 |  |  | October
      31, 2008 |  |   | Period-to-Period
      Change | 
|------------------ | - | ---------------------- |  |  | ---------------------- |  | - | ----------------------------- | 
|                   |   |                        |  |  | Percent                |  |   |                               | 
|                   |   |                        |  |  | of                     |  |   |                               | 
|                   |   | Amount                 |  |  | Revenue                |  |   | Amount                        | 
|Three months ended |   | -                      |  |  | -                      |  | $ | 742,035                       | 
|Six months ended   | $ | 44,912                 |  |  | 1%                     |  | $ | 932,996                       | 

35

---

Restructuring
charges for the three months ended October 31, 2009 were $nil compared to
$742,035 for the three months ended October 31, 2008. The restructuring charges
pertain to the employee restructuring activity for the three months ended
October 31, 2008 as a result of the consolidation of administrative, sales,
marketing, and research and development departments after the close of
acquisitions of NewHeights, FirstHand and BridgePort.

Restructuring
charges for the six months ended October 31, 2009 were $44,912 compared to
$932,996 for the six months ended October 31, 2008. These costs were related to
employee severance arrangements as a result of the consolidation of
administrative, sales, marketing, and research and development departments after
the close of acquisitions of NewHeights, FirstHand and BridgePort.

Interest and Other Income

Interest
income for the three months ended October 31, 2009 was $33,816 compared to
$32,198 for the three months ended October 31, 2008. Interest expense for the
three months ended October 31, 2009 was $5 compared to $3,140 for the three
months ended October 31, 2008.

Interest
income for the six months ended October 31, 2009 was $61,574 compared to $50,266
for the six months ended October 31, 2008. Interest expense for the six months
ended October 31, 2009 was $1,671 compared to $10,435 for the six months ended
October 31, 2008.

Foreign
exchange gain for the three months ended October 31, 2009 was $7,952 compared to
$108,346 for the three months ended October 31, 2008. Foreign exchange loss for
the six months ended October 31, 2009 was $421,761 compared to a loss of $74,695
for the six months ended October 31, 2008. The foreign exchange gain/loss
represents the gain/loss on account of translation of the inter company accounts
of 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 October 31, 2009, we had $3,441,969 in cash compared to $2,931,932 at April
30, 2009, representing an increase of $510,037. Our working capital was
$2,195,132 at October 31, 2009 compared to $1,566,483 at April 30, 2009,
representing an increase of $628,649.

Presently,
our cash flow generated from operations is not sufficient to meet operating and
capital expenses. We have incurred operating losses since inception, and we
project this to continue for the next nine to twelve months. At October 31,
2009, we had cash of approximately $3.44 million and working capital of $2.20
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 beyond the
completed employee rationalization.

Operating Activities

Our
operating activities resulted in a net cash outflow of $1,488,420 for the six
months ended October 31, 2009. This compares with a net cash outflow of
$6,416,698 for the same period last year and represents a $4,928,278 decrease in
cash outflows from operations compared to the same period last year. The net
cash outflow from operating activities for the six months ended October 31, 2009
was primarily a result of a net loss of $2,995,889, a $492,291 increase in other
assets related to a forward contract settlement and a $185,608 decrease in
unearned revenue partially offset by a $131,118 increase in accounts payable and
$687,217 decrease in accounts receivable. Included in the accounts payable was a
$ 496,707 cash inflow related to a forward contract settlement. The net cash
outflow was further offset by adjustments for non-cash expenses including
$421,761 for foreign exchange loss, $410,402 for stock-based compensation,
$422,556 for amortization of intangible assets and $154,209 for depreciation and
amortization.

The
net cash outflow of $6,416,698 from operating activities for the six months
ended October 31, 2008 was primarily a result of a net loss of $9,379,876 and a
decrease in accounts payable of $255,459. The net cash

36

---

outflow was offset by a decrease in accounts receivable of
$539,443 and non-cash expenses including $1,055,644 for amortization of
intangible assets, $819,953 for stock-based compensation and $411,273 for
depreciation and amortization.

Investing Activities

Investing
activities resulted in a net cash outflow of $17,208 for the six months ended
October 31, 2009 primarily from purchases of equipment. This compares with a net
cash outflow from investing activities of $152,324 for the same period last year
from purchases of equipment and deposits. At October 31, 2009, we did not have
any material commitments for future capital expenditures.

Financing Activities

Financing
activities resulted in a net cash inflow of $1,865,104 for the six months ended
October 31, 2009 compared to a net cash inflow of $3,752,835 for the six months
ended October 31, 2008.

On
October 29, 2009 we issued 3,333,334 units at a price of $0.56 (CDN$0.60) per
unit for gross proceeds of approximately $1,867,762 (CDN$2,000,000). Each unit
consists of one share of common stock in the capital of our company and one-half
of one non-transferable common share purchase warrant. Each warrant entitles the
holder thereof to purchase one share of common stock in the capital of our
company for a period of two years commencing from October 29, 2009 at an
exercise price of US$0.90 per warrant.

We
intend to seek additional funding through public or private financings to fund
our operations through fiscal 2010 and beyond. However, if we are unable to
raise additional capital when required or on acceptable terms, or achieve cash
flow positive operations, we may have to significantly delay product development
and scale back operations both of which may affect our ability to continue as a
going concern. 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
May 2009, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 165, Subsequent Events (SFAS No.
165). SFAS No. 165 requires the disclosure of the date through which an entity
has evaluated subsequent events for potential recognition or disclosure in the
financial statements and whether that date represents the date the financial
statements were issued or were available to be issued. This standard also
provides clarification about circumstances under which an entity should
recognize events or transactions occurring after the balance sheet date in its
financial statements and the disclosures that an entity should make about events
or transactions that occurred after the balance sheet date. This standard is
effective for interim and annual periods beginning with our fiscal year ended
June 30, 2009. The adoption of this standard did not have a material impact on
the Companys consolidated financial statements.

In
June of 2009, the FASB issued Statement No. 166, Accounting for Transfers of
Financial Assets,an amendment of Statement No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities. Statement No. 166 removes the concept of a qualifying
special-purpose entity. Therefore, all entities should be evaluated for
consolidation in accordance with applicable consolidation guidance. Statement
No. 166 requires identification of any involvements with transferred assets and
prevents de-recognition until all requirements for sale accounting have been
met. Enhanced disclosures are required to provide greater transparency about any
transferors continuing involvement with transferred assets. Statement No. 166
is effective as of each reporting entitys first annual reporting period which
begins after November 15, 2009 and for all interim periods within that first
annual period. The Company has no current involvement with transferred assets
but will comply should the situation arise.

37

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In
June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards
Codificationand the Hierarchy of Generally Accepting
Accounting PrinciplesA Replacement of FASB Statement No. 162 (FAS 168)
which established the FASB Accounting Standards Codification (Codification)
as the single source of authoritative nongovernmental U.S. GAAP which was
launched on July 1, 2009. The Codification does not change current U.S. GAAP,
but is intended to simplify user access to all authoritative U.S. GAAP by
providing all the authoritative literature related to a particular topic in one
place. All existing accounting standard documents will be superseded and all
other accounting literature not included in the Codification will be considered
nonauthoritative. The Codification is effective for interim and annual periods
ending after September 15, 2009 and will not have an impact on our companys
financial condition or results of operations. We are currently evaluating the
impact to our financial reporting process of providing Codification references
in our public filings.

FASB
Staff Position (FSP) EITF 03-06-1, Participating securities and instruments
granted in share-based payment transactionsaddresses whether
instruments granted in share-based payment transactions are participating
securities prior to vesting that should be included in the earnings allocation
in computing earnings per share under the two-class method described FAS 128,
Earnings per Share.This FSP iseffective for years beginning
after December 15, 2008, and interim periods within those years. The adoption of
this standard did not have a material impact on our financial statements.

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.

Item 4T. Controls and Procedures.

Disclosure Controls and Procedures

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

In
connection with this quarterly report, as required by Rule 13a-15 under the
Securities Exchange Act of 1934, we have carried out an evaluation of the
effectiveness of the design and operation of our company's disclosure

38

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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 subject to the inherent limitations noted in
Part II, Item 9A(T) of our annual report on Form 10-K filed with the SEC on July
28, 2009, for the year ended April 30, 2009, 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 October 31, 2009 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.

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

39

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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, 2009 filed with the SEC on July 28, 2009, raise substantial
doubt on our ability to continue as a going concern. Our financial statements
included in this Form 10-Q do not include any adjustments to the recoverability
and classification of recorded asset amounts and classification of liabilities
that might be necessary should we be unable to continue as a going concern.

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

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

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

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

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

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

40

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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

41

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without merit, could be time consuming and costly to defend or
litigate, divert our attention and resources, result in the loss of goodwill
associated with our service marks or require us to make changes to our website
or other of our technologies.

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

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

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

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

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

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

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

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

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.

42

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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
September 25, 2009, we issued an aggregate of 14,250 shares of common stock to
an employee upon the exercise of stock options, of which 13,750 shares were at a
price of $0.47 per share, and 500 shares were at a price of $0.44 per share. The
shares were issued upon the exercise of stock options in accordance with the
terms of the employee's stock option agreement, our 2004 Stock Option Plan and
2005 Amended and Restated Stock Option Plan, as applicable. We issued the 14,250
shares to a non-U.S. person (as that term is defined in Regulation S of the
Securities Act of 1933), in offshore transactions in reliance upon Regulation S
and/or Section 4(2) of the Securities Act of 1933.

43

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On
October 1, 2009, we issued an aggregate of 7,875 shares of common stock to an
employee upon the exercise of stock options, of which 6,000 shares were at a
price of $0.47 per share, and 1,875 were at a price of $0.44 per share. The
shares were issued upon the exercise of stock options in accordance with the
terms of the employee's stock option agreement and our 2005 Amended and Restated
Stock Option Plan. We issued the 7,875 shares to a non-U.S. person (as that term
is defined in Regulation S of the Securities Act of 1933), in offshore
transactions in reliance upon Regulation S and/or Section 4(2) of the Securities
Act of 1933.

On
October 29, 2009, we issued 3,750 shares of common stock to an employee upon the
exercise of stock options at a price of $0.44 per share. The shares were issued
upon the exercise of stock options in accordance with the terms of the
employees stock option agreement and our 2005 Amended and Restated Stock Option
Plan. We issued the 3,750 shares to a non-U.S. person (as that term is defined
in Regulation S of the Securities Act of 1933), in an offshore transaction in
reliance upon Regulation S and/or Section 4(2) of the Securities Act of 1933.

On
December 14, 2009, we granted 520,161 deferred share units to eight non-officer
directors and two officers pursuant to our Deferred Share Unit Plan. Each
deferred share unit provides the holder thereof the right to exchange the unit
into an equivalent number of shares of our common stock under the terms and
conditions of the Deferred Share Unit Plan. 278,226 of the deferred share units
vest immediately and 241,935 of the deferred share units vest as to 1/3 of the
deferred share units on the first, second and third anniversary of the date of
the grant, at which time the deferred share units are fully vested. We issued
the deferred share units to ten non-U.S. persons (as that term is defined in
Regulation S of the Securities Act of 1933), in offshore transactions in
reliance upon Regulation S and/or Section 4(2) of the Securities Act of 1933.

On
December 14, 2009, we granted stock options to our employees to purchase an
aggregate of 800,000 shares of our common stock at an exercise price of $0.60
per share, exercisable for a period of five years pursuant to our 2005 Amended
and Restated Stock Option Plan. The options are subject to vesting provisions as
set forth in each employee's respective stock option agreement dated December
14, 2009. We issued the stock options to non-U.S. persons (as that term is
defined in Regulation S of the Securities Act of 1933), in offshore transactions
in reliance upon Regulation S and/or Section 4(2) of the Securities Act of 1933
and/or U.S. persons (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.

Item 3. Defaults Upon Senior Securities.

None.

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

We
held our annual and special meeting of shareholders on October 22, 2009 in
Vancouver, British Columbia, Canada. There were 29,409,420 common shares of our
company, and 219,481 series A exchangeable shares of our subsidiary, 6789722
Canada Inc., entitled to vote at the meeting, of which a total of 16,334,764
(55.13%) were represented at the meeting either in person or by proxy.

Five
proposals were approved by the shareholders at the annual and special meeting.
The first resolution asked shareholders to elect Mark Bruk, Peter Charbonneau,
Chris Cooper, William Jin, Donovan Jones, Owen Matthews, Terence Matthews, Greg
Pelling and Larry Timlick as directors for a one-year term expiring on the day
of the 2010 annual meeting of shareholders.

44

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DIRECTORS
    VOTES FOR
    VOTES WITHHELDMark Bruk
    16,229,860
    104,904Peter Charbonneau
    16,234,949
    99,815Chris Cooper
    16,229,417
    105,347William Jin
    16,230,821
    103,943Donovan Jones
    16,223,545
    111,219Owen Matthews
    16,229,860
    104,904Terence Matthews
    16,229,860
    104,904Greg Pelling
    16,233,988
    100,776Larry Timlick
    16,233,988
    100,776


The
second proposal asked shareholders to ratify the appointment of BDO Dunwoody
LLP, Chartered Accountants, as our independent registered public accounting firm
for the year ending April 30, 2010 and to authorize the board of directors to
fix the remuneration payable to the independent accountants.

PROPOSAL
    VOTES FOR
    VOTES AGAINST
    VOTES WITHHELDRatify appointment
    16,256,975
    na
    77,788Fix remuneration
    16,248,036
    86,727
    na


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

PROPOSAL
    VOTES FOR
    VOTES AGAINSTApprove the plan
    5,044,643
    44,435


The
fourth proposal asked shareholders to approve the increase in the number of
shares of common stock issuable under our 2005 stock option plan by 800,000
shares.

PROPOSAL
    VOTES FOR
    VOTES AGAINSTApprove increase in plan
    14,431,636
    36,833


The
fifth proposal asked shareholders to approve the decrease in the number of
shares of common stock issuable under our employee share purchase plan by
800,000 shares.

PROPOSAL
    VOTES FOR
    VOTES AGAINSTApprove decrease in plan
    14,447,245
    21,224


Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibits required by Item 601 of Regulation S-B

|(3) | Articles of Incorporation
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|--- | --------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                 
|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).                   

45

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|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  | 2004 Stock Option Plan effective May 18, 2004
      (incorporated by reference from our Registration Statement on Form S-8
      filed on June 14, 2005).                                                                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                           
|10.2  | Form of Stock Option Agreement for 2004 Stock Option Plan
      (incorporated by reference from our Registration Statement on Form S-8
      filed on June 14, 2005).                                                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                           
|10.3  | 2005 Stock Option Plan effective March 4, 2005
      (incorporated by reference from our Registration Statement on Form S-8
      filed on June 14, 2005).                                                                                                                                                                
|      |                                                                                                                                                                                                                                                                                                                           
|10.4  | Form of Stock Option Agreement for 2005 Stock Option Plan
      (incorporated by reference from our Registration Statement on Form S-8
      filed on June 14, 2005).                                                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                           
|10.5  | Form of Amended & Restated Stock Option and
      Subscription Agreement (Canadian) (incorporated by reference from our
      Current Report on Form 8-K filed On October 14, 2005).                                                                                                                                      
|      |                                                                                                                                                                                                                                                                                                                           
|10.6  | Form of Amended & Restated Stock Option and
      Subscription Agreement (US) (incorporated by reference from our Current
      Report on Form 8-K filed On October 14, 2005).                                                                                                                                            
|      |                                                                                                                                                                                                                                                                                                                           
|10.7  | 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).                                                                                                            
|      |                                                                                                                                                                                                                                                                                                                           
|10.8  | 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).      
|      |                                                                                                                                                                                                                                                                                                                           
|10.9  | 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).                          
|      |                                                                                                                                                                                                                                                                                                                           
|10.10 | 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).
|      |                                                                                                                                                                                                                                                                                                                           
|10.11 | 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).                                                                                                      

46

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|10.12 | 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).                                                  
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                           
|10.13 | 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).                        
|      |                                                                                                                                                                                                                                                                                                                           
|10.14 | 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).                                           
|      |                                                                                                                                                                                                                                                                                                                           
|10.15 | 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).                                                   
|      |                                                                                                                                                                                                                                                                                                                           
|10.16 | 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).
|      |                                                                                                                                                                                                                                                                                                                           
|10.17 | 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).                                                                                                                  
|      |                                                                                                                                                                                                                                                                                                                           
|10.18 | Form of Subscription Agreement dated October 28, 2008
      between our company and an investor (incorporated by reference from our
      Quarterly Report on Form 10-Q filed on December 15, 2008) .                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                           
|10.19 | 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).                                                                              
|      |                                                                                                                                                                                                                                                                                                                           
|10.20 | 2005 Amended and Restated Stock Option Plan effective
      January 10, 2006 (incorporated by reference from our Post-Effective
      Amendment No.1 to the Registration Statement on Form S-8 filed on January
      30, 2009).                                                                                          
|      |                                                                                                                                                                                                                                                                                                                           
|10.21 | Employee Share Purchase Plan adopted October 1, 2008, and
      amended November 6, 2008 (incorporated by reference from our Registration
      Statement on Form S-8 filed on January 30, 2009).                                                                                                                         
|      |                                                                                                                                                                                                                                                                                                                           
|10.22 | Settlement Agreement amongst Mark Bruk, CounterPath
      Corporation, and CounterPath Technologies Inc. dated March 12, 2009
      (incorporated by reference from our Quarterly Report on Form 10-Q filed on
      March 12, 2009).                                                                                     
|      |                                                                                                                                                                                                                                                                                                                           
|10.23 | 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).                                                                       
|      |                                                                                                                                                                                                                                                                                                                           
|10.24 | Deferred Share Unit Plan effective October 22, 2009
      (incorporated by reference from our Definitive Proxy Statement on Schedule
      14A filed on September 8, 2009).                                                                                                                                               
|      |                                                                                                                                                                                                                                                                                                                           
|10.25 | 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).                                                                                                                    
|      |                                                                                                                                                                                                                                                                                                                           
|(14)  | Code of Ethics                                                                                                                                                                                                                                                                                                            

47

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|14.1 | Code of Business
        Conduct and Ethics (incorporated by reference from our Annual Report on
        Form 10- KSB filed on July 29, 2004).                              
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                             
|14.2 | Code of Business
        Conduct and Ethics and Compliance Program (incorporated by reference from
        our Quarterly Report on Form 10-QSB filed on September 15, 2008).
|     |                                                                                                                                                                             
|(21) | Subsidiaries
        of CounterPath Corporation                                                                                                                             
|     |                                                                                                                                                                             
|     | CounterPath
        Technologies Inc. (incorporated in the Province of British Columbia, Canada)                                                                            
|     |                                                                                                                                                                             
|     | 6789722 Canada
        Inc. (incorporated in Canada)                                                                                                                        
|     |                                                                                                                                                                             
|     | FirstHand Technologies
        Inc. (continued into the Province of British Columbia, Canada)                                                                               
|     |                                                                                                                                                                             
|     | BridgePort Networks,
        Inc. (incorporated in the state of Delaware)                                                                                                   
|     |                                                                                                                                                                             
|     | BridgePort Networks
        (Europe) Ltd. (incorporated in the United Kingdom)                                                                                              
|     |                                                                                                                                                                             
|     | BridgePort Networks
        K.K. (incorporated in Japan)                                                                                                                    
|     |                                                                                                                                                                             
|(31) | Section 302
        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                                                                                                                                          
|     |                                                                                                                                                                             
|     | Section
        906 Certification of Donovan Jones (filed herewith).                                                                                                        
|     |                                                                                                                                                                             
|     | Section
        906 Certification of David Karp (filed herewith).                                                                                                           

48

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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: December 15, 2009                                | 
|    |                                                        | 
|    |                                                        | 
|    | /s/
      David Karp                                   | 
|    | David Karp                                             | 
|    | Chief Financial Officer, Treasurer and
      Secretary | 
|    | Date: December 15, 2009                                | 

49

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