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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-K

(Mark One)

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

For the fiscal year ended April 30, 2011

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

For the transition period from ______________to
______________

Commission file number 000-50346

COUNTERPATH
CORPORATION(Exact Name of Registrant as Specified in its
Charter)

|Nevada                                           | 20-0004161                       
|------------------------------------------------ | ---------------------------------
|(State or Other Jurisdiction of Incorporation or | (IRS Employer Identification No.)
|Organization)                                    |                                  

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

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

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

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

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

Common Stock, par value $0.001

Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]

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 [ ]

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Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and
will not be contained, to the best of registrants knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]

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]

State the aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference to the price at which
the common equity was sold, or the average bid and asked prices of such common
equity, as of the last business day of the registrants most recently completed
second fiscal quarter.

Approximately $33,992,588 based on a price of $1.48 per share,
being the average of bid and ask prices on October 29, 2010 as quoted on
stockwatch.com.

APPLICABLE ONLY TO CORPORATE REGISTRANTS:

Indicate the number of shares outstanding of each of the
registrants classes of common stock, as of the latest practicable date:
37,961,481 shares of common stock issued and outstanding as of July 25, 2011.

2

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COUNTERPATH CORPORATION APRIL 30, 2011 ANNUAL
REPORT ON FORM 10-K

INDEX

|               |                                                                                                                          | Page
|-------------- | ------------------------------------------------------------------------------------------------------------------------ | ----
|               | PART I                                                                                                                   |     
|Item
      1.  | Business                                                                                                                 | 4   
|Item
      1A. | Risk
      Factors                                                                                                       | 13  
|Item
      1B. | Unresolved
      Staff Comments                                                                                          | 17  
|Item
      2.  | Properties                                                                                                               | 17  
|Item
      3.  | Legal
      Proceedings                                                                                                  | 17  
|Item
      4.  | [Removed
      and Reserved]                                                                                             | 17  
|               | PART II                                                                                                                  |     
|Item
      5.  | Market
      for Registrants Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities | 18  
|Item
      6.  | Selected
      Financial Data                                                                                            | 20  
|Item
      7.  | Managements
      Discussion and Analysis of Financial Condition and Results of Operations                              | 20  
|Item
      7A. | Quantitative
      and Qualitative Disclosures About Market Risk                                                         | 30  
|Item
      8.  | Financial
      Statements and Supplementary Data                                                                        | 30  
|Item
      9.  | Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure                         | 65  
|Item
      9A. | Controls
      and Procedures                                                                                            | 65  
|Item
      9B. | Other
      Information                                                                                                  | 65  
|               | PART III                                                                                                                 |     
|Item
      10. | Directors,
      Executive Officers and Corporate Governance                                                             | 66  
|Item
      11. | Executive
      Compensation                                                                                             | 71  
|Item
      12. | Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters               | 75  
|Item
      13. | Certain
      Relationships and Related Transactions, and Director Independence                                          | 77  
|Item
      14. | Principal
      Accountant Fees and Services                                                                             | 78  
|               | PART IV                                                                                                                  |     
|Item
      15. | Exhibits
      and Financial Statement Schedules                                                                         | 79  

3

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PART I

|Item 1. | Business.
|------- | ---------

This annual 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
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", "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", that may
cause our company's or our industry's actual results, levels of activity,
performance or achievements to be materially different from any future results,
levels of activity, performance or achievements 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, performance or
achievements. 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.

In this annual report, unless
otherwise specified, all dollar amounts are expressed in United States dollars
and all references to "common shares" refer to our shares of common stock. As
used in this annual report, and unless otherwise indicated, the terms "we", "us"
and "our" refer to CounterPath Corporation and our wholly-owned subsidiaries.

Summary

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 customers include: (1) large
incumbent telecommunications service providers, Internet telephony service
providers; (2) original equipment manufacturers serving the telecommunication
market; (3) small, medium and large sized businesses and (4) end users.
Telecommunication service providers deploy a VoIP service along with our
applications to enable their customers to communicate using voice calls, video
calls, instant messaging and presence monitoring (presence is the ability to
monitor a person's availability). Original equipment manufacturers combine our
applications with additional software and/or services as part of their solution
offerings for their customers. Businesses deploy our desktop and mobile
applications to enable their workforces to communicate over VoIP and extend
their business phone system's features to desktop and mobile devices. Typically,
small and medium sized businesses, or individual end users, purchase our desktop
applications through our website and are then responsible for selecting their
own Internet telephony service provider to allow them to communicate over VoIP.

Our software uses the session
initiation protocol which is a protocol standard for voice, video, instant
messaging and presence communication. Certain of our applications can operate on
personal computers running Windows XP, Windows Vista, Windows 7, Mac OS X and
Linux operating systems as well as on mobile devices running Symbian, RIM, Apple
iOS and Googles Android operating systems.

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We began selling our desktop
applications in 2003 and our mobile applications and gateway server software in
2008. Since that time, over 300 customers, in over 50 countries, have purchased
our software products where the value of the purchase is at least $10,000. This
list includes several of the largest telecom service providers and original
equipment manufacturers in the world.

Our mission is to be the dominant
provider of unified communications software applications that enable people to
connect, communicate and collaborate using voice, video, messaging and presence
on multiple devices, over both fixed and mobile networks.

On August 2, 2007, we completed
the acquisition of all of the shares of NewHeights Software Corporation,
previously a competitor of ours. NewHeights' products included an enterprise
focused desktop communication application with business communication features
and a conferencing application.

On February 1, 2008, we acquired
FirstHand Technologies Inc. FirstHand's products include an enterprise gateway
server software application and related mobile applications to enable mobile
unified communications by extending enterprise telephony, voicemail and
corporate directory services including presence, instant messaging and
conferencing capabilities to mobile devices.

On February 1, 2008, we acquired
BridgePort Networks, Inc., previously one of our customers. BridgePort Networks'
gateway server software applications enable telecom service providers to extend
single-number mobile voice, text, multimedia messaging and video services over
the Internet to residential, corporate and Wi-Fi hotspot locations with
broadband access.

Our principal executive offices
are located at Suite 300, 505 Burrard Street, Vancouver, British Columbia, V7X
1M3. Our telephone number is (604) 320-3344. Our website address is
www.counterpath.com. Through a link on the investor relations section of our
website, we make available the following filings after they are electronically
filed with or furnished to the SEC: our Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q and any amendments to those reports filed or furnished
pursuant to Section 13 or 15(d) of the Exchange Act. All such filings are
available free of charge. The information contained in our website does not form
part of this annual report.

Corporate History

We were incorporated under the laws of
the State of Nevada on April 18, 2003.

On August 2, 2007, we completed
the acquisition of all of the shares of NewHeights Software Corporation through
the issuance of 7,680,168 shares of common stock and 369,836 preferred shares
issued from a subsidiary of our company, which preferred shares are exchangeable
into 369,836 shares of our common stock.

On February 1, 2008, we acquired
FirstHand Technologies Inc., a private Ontario, Canada corporation, through the
issuance of 5.9 million shares of our common stock.

On February 1, 2008, we acquired
BridgePort Networks, Inc., a private Delaware corporation, by way of merger in
consideration for the assumption of all of the assets and liabilities of
BridgePort Networks.

On February 5, 2008, NewHeights
and our subsidiary CounterPath Solutions R&D Inc. were amalgamated under the
name CounterPath Technologies Inc.

On March 19, 2008, our board of
directors approved a five for one common stock consolidation. As a result, our
authorized capital decreased from 415,384,500 shares of common stock to
83,076,900 shares of common stock. All per share amounts and outstanding shares,
including all common stock equivalents (stock options and warrants) have been
adjusted in this annual report for all periods presented to reflect the stock
consolidation.

On November 1, 2010, our
wholly-owned subsidiary, FirstHand Technologies Inc. was amalgamated with
CounterPath Technologies Inc., carrying on as CounterPath Technologies Inc.

5

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Our Software Applications

CounterPath Multi-Media Communicator Product Suite

The CounterPath softphone product
suite includes five applications: (1) Bria; (2) eyeBeam; (3) Bria iPhone
Edition;(4) Bria Android Edition; and (5) X-Lite. Bria, eyebeam, Bria
iPhone Edition and Bria Android Edition are commercial products which we sell on
a per seat or subscription basis, while X-Lite is a free version of our desktop
softphone application that can be downloaded from our website and connected to
any SIP-compliant VoIP service or network and is used by end users wishing to
test our product quality at no charge or evaluate a VoIP service or network.

Our softphone applications
include quality of service capabilities on both fixed and wireless networks.
This includes the ability to automatically prioritize packets of information
during both video and voice calls to ensure that other applications on the host
computer and, if supported, on the Internet do not interfere with the quality of
the voice or video transmissions. Our softphone applications also enable our
customers to monitor audio quality in real-time. Our softphone applications also
include security features such as server authentication, signalling encryption
enabling confidentiality and integrity protection, as well as confidentiality
and integrity protection of media streams through secure real-time transport
protocol (SRTP). Secure real-time transport can be used to prevent unwanted
monitoring of voice and video communications.

To enhance the ease of use of our
software, Bria and eyeBeam offer no touch configuration for audio and video
devices, such as headsets and web cams, which enables automatic configuration
each time the application is started and whenever devices are changed. This
capability reduces complications for softphone users and decreases the number of
customer support calls to our customers deploying our software by their end
users.

- Bria

Bria is CounterPaths flagship product.
Bria has a number of usability and customization features designed to enable
customers to present a flexible, user-friendly high definition VoIP, messaging
and presence, multiple instant messaging and social network integration and high
definition video softphone solution for consumer and enterprise markets. Bria
has a contact-focused, versus a dial pad-focused, graphical user interface which
highlights a user's address book rather than the more traditional telephone dial
pad. Bria can also be minimized to a computer screen deskbar, enabling a user to
manage their desktop space while still being able to make and receive calls.
Bria is integrated into Microsofts widely used Outlook application and enables
users to expand on Outlooks contact and email features to receive and make
calls and use phone features directly from their contact list within the Outlook
application. Bria is built on the same software code platform as eyeBeam and has
many of the same interoperability and compatibility features of eyeBeam. Bria's
multiple panel layout enables our customers to specify areas for customer
branding or revenue generating advertisements such as banner ads, click-to-call
and interactive video messaging, as well as custom integration with network
infrastructure.

- eyeBeam

eyeBeam is our original softphone
application. The graphical user interface of eyeBeam is designed as a dial pad
similar to a cellular telephone handset and it has generally been targeted at
early adopters of softphone technology due to its graphical familiarity.

- Bria iPhone and Android Editions

Bria iPhone and Android Editions are
secure, standards-based VoIP softphone applications that work over both 3G and
Wi-Fi networks on the Apple iPhone, iPad, iPod Touch or Android devices such as
mobiles and tablets. Bria iPhone and Android Editions work with other
CounterPath desktop and convergence solutions, as well as with enterprise and
carrier infrastructure equipment from major vendors. The Bria iPhone Edition is
compatible with Apples iPhone 3.0+ and iOS 4+ operating systems, and uses the
iPhones native address book and its embedded Bluetooth Technology. The Bria
Android Edition is compatible with a number of
Android-based phones and tablets running Android 2.1 or greater operating
systems and uses the devices native address book and its embedded Bluetooth
Technology.

6

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- X-Lite

X-Lite is a free softphone available
for download on our website and intended for non-commercial, demonstration and
evaluation purposes. Some of the key elements that are not included in X-Lite
compared to our commercial products are the ability to brand, automatic or
network based provisioning, royalty bearing codecs, multiple account support,
and enhanced security and encryption.

The X-Lite graphical user interface has
an area available for advertising although we have not attempted to generate
advertising revenue with this feature to date. As well, X-Lite is only available
with CounterPath branding and may not be redistributed by third parties.

We believe that our free X-Lite
softphone serves as a marketing tool for our company as it allows potential
customers to evaluate our software. In addition, we believe that making our free
softphone widely available to companies which make session initiation protocol
(SIP) compliant devices such as Internet based phones, public switched telephone
network gateways, softphones, video phones, multipoint conference units, and
conference servers, improves the interoperability of our applications with these
products.

Mobility Suite

The Mobility Suite is comprised
of: (1) a mobile service provider targeted offering called the Network
Convergence Gateway for mobile Network Operators; (2) a VoIP or wireline
operator targeted offering called the Network Convergence Gateway for Wireline
Operators (formerly known as MCG); and (3) an enterprise targeted, business user
offering called the Enterprise Mobility Gateway (EMG) and Bria Mobile client.
The Network Convergence Gateway was the flagship product of BridgePort Networks
which we acquired in February 2008. The EMG was the flagship product of
FirstHand Technologies which we acquired in February 2008.

- Network Convergence Gateway for Mobile Network Operators

The Network Convergence Gateway is a
carrier-based server application that bridges communication between the
broadband Internet and mobile networks. The Network Convergence Gateway enables
mobile service providers to provide converged services across the broadband
Internet and mobile networks including voice, text, multimedia messaging and
video services. The Network Convergence Gateway makes it possible for end users
to originate and receive mobile calls on a variety of IP-based telephones
including CounterPath's softphone applications with the flexibility and low cost
of VoIP. Our Network Convergence Gateway applications include:

Convergent Voice and Messaging
for Customers

By using the Network Convergence
Gateway and our softphone applications, mobile service providers can extend
mobile calls and instant messaging to a personal computer with the single
identity of the end user's mobile phone number.

The service may be deployed whereby end
users load our softphone application onto their personal computer or use a USB
key device that contains a subscriber information module (SIM card) found in
mobile phones that also includes our softphone application. In the case of the
USB key device, the user can insert the device into any personal computer USB
port and receive calls over the Internet initiated to their mobile phone
number.

Voice Call Continuity

The seamless handover feature of the
Network Convergence Gateway enables end users to automatically originate or
receive voice calls on Wi-Fi networks, and seamlessly pass the call between
mobile and broadband networks. Also referred to as
voice call continuity, seamless handover is an important capability of fixed
mobile convergence.

7

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NomadicPBX

NomadicPBX is a telecommunications
application which combines mobile and VoIP network elements to enable the
delivery of a unified presence-based, fixed and mobile voice, and instant
messaging/short message service (IM/SMS) communications experience across
desktop computers and mobile phones. The NomadicPBX provides increased device
options for the user with a single number accessible on any mobile phone,
softphone or desktop Internet protocol phone.

The NomadicPBX enables wireless
operators and other service providers to extend their offerings to small and
medium enterprises and increase their revenues. The telecom service providers
that we are targeting for the NomadicPBX are mobile network operators and mobile
virtual network operators.

The NCG for Mobile Network Operators
enables mobile operators to replace an enterprises existing phone system and
wireline service with a wireless solution that increases the enterprises users
productivity and mobility.

- Network Convergence Gateway for Wireline Operators

The Network Convergence Gateway for
Wireline Operators is a carrier-based core network, fixed mobile convergence
server application that bridges broadband and mobile networks in both pre-IMS
(IP Multimedia subsystem) and IMS environments. The Network Convergence Gateway
combines the personalization and mobility of mobile phone services with the
flexibility, innovation and cost economics of the rapidly growing VoIP sector.

With the Network Convergence Gateway,
wireline service providers can extend single-number mobile voice, text
multimedia messaging and video services to residential, corporate and hotspot
locations with broadband access. This is achieved on a service providers
existing networks while preparing them for the IMS platform of the future. Some
particular features include:

Wireline Messaging  SMS, Instant
Messaging and Presence

Provides VoIP users with the ability to
send and receive text messages to and from the mobile network. It also enables
an instant messaging service and presence capability.

Wireline Call
Continuity

Enables users to move calls from their
desktop PC or mobile VoIP phone to another device, including a standard mobile
phone or smartphone. This eliminates the inconvenience with switching phones
when leaving the office or home during a VoIP call.

Wireline Mobility

Enables messaging over any mobile phone
and any mobile network. It also allows extended wireline voice and messaging
services to smartphones and low end mobile phones.

The Network Convergence Gateway enables
wireline operators to offer mobile services to their wireline customers. As
these services work on any mobile phone and on any mobile network, no
relationship with the mobile operators and the wireline operator offering these
services is required. This enables the wireline operators to seek additional
revenue from their customer base.

8

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Enterprise Mobility Gateway and Bria Mobile Client

Our Enterprise Mobility Gateway
and Bria Mobile Client applications enable unified communications for office
workers by extending enterprise telephony, voicemail and corporate directory
services including presence, instant messaging and conferencing capabilities to
mobile devices over Wi-Fi and mobile networks. The Enterprise Mobility Gateway
application enables workers to perform a variety of advanced collaborative
functions such as searching the corporate directory, dialling by extension
number, using visual voicemail and holding group calls with predefined groups of
users.

Our Bria Mobile Client is a
mobile client application for mobile devices including RIM/BlackBerry,
Symbian/Nokia, Windows Mobile/Windows Mobile Smartphones and personal digital
assistants, providing a mobile interface for accessing enterprise VoIP, unified
communications and corporate directory services. Bria Mobile is available in two
editions: (1) a single-mode for GSM and CDMA mobile networks; and (2) a
dual-mode for GSM and CDMA mobile networks and Wi-Fi networks.

Our Enterprise Mobility Gateway
application runs on standard server hardware acting as the convergent point
between back-office servers such as IP PBXs and Bria Mobile Clients running in a
mobile network. The Enterprise Mobility Gateway integrates with common
enterprise telephony, directory and messaging platforms and securely extends
these services to mobile devices. The Enterprise Mobility Gateway web-based user
interface enables administrators to start, stop and reload server processes,
update operating parameters, monitor users, track messaging statistics, and
manage the distribution of Enterprise Mobility Gateway software.

Developer Products

In addition to our ready-made
VoIP softphone products, we also offer several developer products. These
products allow our customers to create customized VoIP communication
applications. Our developer products include:

- C++ Edition

The C++ Edition SDK is a programming
kit that forms the basis for our eyeBeam and Bria applications on Windows, Mac
and Linux operating systems. Typically, customers that license the C++ Edition
SDK prefer to build their own graphical user interface and applications. The SDK
has components for managing audio and video media, as well as signalling and
call control.

- COM Edition

The COM Edition is an easy to use SDK
based on the Microsoft COM platform. Using the COM Edition SDK, customers can
build a sophisticated softphone using a variety of programming languages such as
C++, C#, Delphi, Visual Basic or Java. The COM Edition SDK is suitable for
companies looking for an easy to learn SDK. This is also a suitable SDK for
integrating softphone functionality into an existing Windows application.

- ActiveX  Web Edition

The ActiveX  Web Edition SDK is a
similar application program interface to the COM Edition but can be implemented
inside of a web page. The SDK enables customers to incorporate voice, video,
instant messaging or presence into an existing Web 2.0 application using
Javascript or Java language. Typically, a web page can be voice-enabled using
this SDK in a few days with no prior knowledge of telecommunications protocols
or VoIP.

9

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Sales and Marketing

We generate revenue from the sale
of our products, any applicable related professional services and support
through our sales team, our website and our partners and value added resellers
who distribute our products through their independent distribution channels. We
typically license our software on a one-time fee per user basis, or on a yearly
subscription fee per user basis.

We focus on selling our software
products to companies which provide VoIP Services or mobile services to end
users and enterprises. Our customers include: (1) large incumbent
telecommunications service providers, Internet telephony service providers; (2)
small, medium and large sized businesses; (3) original equipment manufacturers
serving the telecommunication market; and (4) end users. We currently have sold
software and related services to over 300 customers in more than 50 countries
where the value of the sale has exceeded $10,000.

We typically work with our
customers to streamline the process of delivering our software to their end
users. This includes pre-configuring the information required to connect to the
customer's network and enabling or disabling certain features of our products.
Our software products are typically co-labelled with our brand and our
customer's brand, or privately labelled with our customer's brand. Co-labelling
of our products means that the user interface that displays on the computer
screen for the end user to see remains as is, but the customer's brand is also
placed on the user interface. Private labelling of our products means that the
customer can change any and all features of the user interface and can remove
all references to our company from the user interface. We receive professional
service revenue for configuration and customization of our software.

Marketing

Our products are marketed through a
variety of means including by:

- our customers and partners
- advertising on our website;
- direct market campaigns;
- co-marketing with our partners, suppliers and customers;
- offering trial use of X-Lite, our free softphone with fewer features than
  our commercial versions;
- attending industry trade shows; and
- attending developer conferences.

End User Sales

We also market our software
directly to end users and enterprises through our website located at
www.counterpath.com. The information contained in our website does not form part
of this annual report.

Intellectual Property

We rely on a combination of
intellectual property rights, including patents, trade secrets, copyrights and
trademarks, as well as customary contractual protections to protect our
intellectual property.

We own or hold the exclusive
license to twelve granted patents. In addition, we are pursuing four in-house
developed patent applications and six licensed patent applications from Columbia
University. Combined, the ten U.S. patent applications are pending, as well as
counterparts pending in other jurisdictions around the world.

10

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In October 2010, we were granted
patent No. US 7,809,381: Presence detection for cellular and internet protocol
telephony for presence detection in mobile and fixed broadband networks. This
patent describes a way to automatically select the optimal network connection
based on a users location, to enable services such as least-cost routing and
minimize dropped calls by streamlining the process of transferring calls from
the cellular network to broadband network.

In September 2010, we were
granted patent No. US 7,804,821: Circuit Switched Cellular Network to Internet
Calling with Internet Antennas. This patent describes the assigning of single
identity to multiple devices and how to route the communication services to
those devices sharing single identity.

In February 2010, Openwave
Systems Inc. was granted patent No. US 7,656,864: Data network computing device
call processing, to which we hold the exclusive license. This patent describes a
fundamental fixed mobile convergence concept, which enables seamless transition
of voice, data and multimedia sessions across disparate fixed and mobile
networks.

We also hold a number of registered trademarks in the United
States.

In addition to the protections
described above, we generally control access to, and use of our proprietary
software and other confidential information through the use of internal and
external controls, including contractual protections with employees,
contractors, customers and partners, and our software is protected by U.S. and
certain international copyright laws.

We have acquired certain patent
rights from Openwave Systems Inc. including a patent for maintaining Internet
voice communication to mobile devices where the IP address changes from location
to location. We also hold exclusive rights to a patent which is a continuation
to previously granted patents that teaches communication methods between mobile
and packet networks using a gateway connected to both networks preserving single
identity on both networks. We also hold the exclusive right to certain
technologies developed at Columbia University for which we pay a license fee of
5% of net revenues where the technologies are incorporated into the products we
sell. We also incorporate a number of third party software programs into our
software applications pursuant to license agreements.

We may not receive competitive
advantages from the rights granted under our patents and other intellectual
property rights. Our competitors may develop technologies that are similar or
superior to our proprietary technologies, duplicate our proprietary technologies
or design around the patents owned or licensed by us. Our existing and future
patents may be circumvented, blocked, licensed to others or challenged as to
inventorship, ownership, scope, validity or enforceability. Furthermore, our
pending and future patent applications may not be issued with the scope of
claims sought by us, if at all, or the scope of claims we are seeking may not be
sufficiently broad to protect our proprietary technologies. Moreover, we have
adopted a strategy of seeking limited patent protection with respect to the
technologies used in or relating to our products. If our products, patents or
patent applications are found to conflict with any patents held by third
parties, we could be prevented from selling our products, our patents may be
declared invalid or our patent applications may not result in issued patents. In
foreign countries, we may not receive effective patent, copyright and trademark
protection. We may be required to initiate litigation in order to enforce any
patents issued to us, or to determine the scope or validity of a third party's
patent or other proprietary rights. In addition, in the future we may be subject
to lawsuits by third parties seeking to enforce their own intellectual property
rights, as described in "Risk Factors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 license our software pursuant
to agreements that impose restrictions on customers' ability to use the
software, such as prohibiting reverse engineering and limiting the use of
copies. We also seek to avoid disclosure of our intellectual property by
requiring employees and consultants with access to our proprietary information
to execute nondisclosure and assignment of intellectual property agreements and
by restricting access to our source code. Other parties may not comply with the
terms of their agreements with us, and we may not be able to enforce our rights
adequately against these parties.

11

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Research and Development

Development of our products is
primarily done through our Canadian wholly-owned subsidiary, CounterPath
Technologies Inc., and our U.S wholly-owned subsidiary, BridgePort Networks,
Inc. Our research and development team consists of a core engineering department
and a quality assurance department. Core engineering is responsible for
designing, developing and maintaining our core products across our supported
operating systems. Quality assurance is responsible for testing the software
before release to customers on all of our platforms. Total research and
development expenditures for the year ended April 30, 2011 were $4,469,979
(2010: $3,586,425).

After Sales Service and Support

We sell our software on an as-is
or limited warranty basis to end users, and we are not required to update or
upgrade the software nor are we responsible for failure of our software to work
on our customer's computer network; however, we offer two levels of renewable
annual support to our non-end user customers for a specified percentage of the
software license fees. Basic support includes product bug-fixes, nine (9) a.m.
to five (5) p.m. Pacific Time (-8GMT), telephone support and email support
during the one-year period following the date of sale. Bug-fixes are software
updates which fix a known deficiency in the software product. Our extended
support includes basic support and product upgrades. Product upgrades are
separate from bug-fixes and include new or enhanced product features. For
additional fees, we provide professional services, which include assisting our
customers in customizing, deploying and implementing our applications. We
currently maintain a support forum on the Internet at
www.counterpath.com/support.html and product user manuals are available online
at www.counterpath.com.

Warranty

In circumstances where we provide
a warranty on our software, we warrant that our software will perform
substantially in accordance with the materials accompanying the software for
periods of up to three months from the date of sale to cover defects in
workmanship.

Audio and Video Codecs

Our softphones are integrated
with audio and video codecs, which are provided by third-parties either as free
open source software or under license. A codec is a software application that
encodes and decodes audio or video data according to a specification. Currently,
we provide the following royalty-free audio codecs: G.711u/a, G.722, iLBC,
Speex, DVI4, L16 PCM, GSM and BV32. We also provide a number of royalty-bearing
audio codecs: G.722.2, G.723.1, G.726, and G.729 which are licensed from various
third-party patent owners or their representatives. Either we pay, or our
customers pay, a license fee when our software incorporates any third-party,
royalty-bearing codec(s). Our software video phones incorporate third-party
video codecs. We offer the H.263 and H.263+ video codecs, which we have licensed
from UB Video Incorporated, and the H.264 video codec, which we have licensed
from AT&T Corp. and MPEG LA, L.L.C. At this time, no third party patent
holders have required licensing fees for use of H.263 or H.263+ video codecs.The H.264 video codec does have licensing fees, which are licensed from
AT&T and MPEG LA.

Competition

There are numerous developers
which compete with our company for market share. Small software development
companies, typically compete on the basis of price, while large original
equipment manufacturers, typically compete against us by selling their
proprietary software applications as part of a component to an overall
proprietary communications system. We compete by offering applications that are
compatible with a broad spectrum of communication systems and with various
devices and operating systems.

Government Approval

We have obtained approval from
the United States government to export our software that contains encryption
technology to certain approved foreign countries. We are not aware of any
permits that are specific to our industry which are required in order for our
company to operate or to sell our products and services in such jurisdictions.

12

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Employees

As of April 30, 2011, we employed
69 people full-time, 19 of whom are engaged in marketing and sales, 27 in
research and development, 13 in services and support, 10 in general and
administration, and 21 contractors. We are not subject to any collective
bargaining agreements and we consider relations with our employees to be
excellent.

We hire full-time employees and
contractors who are authorized to work in the United States through our company
as well as our wholly-owned subsidiary, BridgePort Networks, Inc. Our
wholly-owned subsidiary, CounterPath Technologies Inc. employs full-time
employees and contractors who are authorized to work in Canada.

|Item 1A. | Risk Factors.
|-------- | -------------

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

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

Risks Associated with our Business and Industry

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

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

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

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

We depend on a mix of revenues
and outside capital to pay for the continued development of our technology and
the marketing of our products. Such outside capital may include the sale of
additional stock and/or commercial borrowing. There can be no assurance that
capital will continue to be available, if necessary, to meet these continuing
development costs or, if the capital is available, that it will be on terms
acceptable to us. 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 this annual report for the year ended April 30, 2011, raise
substantial doubt on our ability to continue as a going concern. Our financial
statements included in this annual report 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.

13

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The current economic
environment has adversely affected business spending patterns, which has and may
continue to 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 have been and may continue to be affected by uncertain or changing
economic conditions particularly germane to that segment or to particular
customer markets within that segment. If our customers delay or cancel spending
on their IT infrastructure, that decision could result in further 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.

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.

14

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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 and X-Lite, invaluable to our ability to continue to develop and
maintain the goodwill and recognition associated with our brand. The measures we
take to protect the proprietary technology software, and other intellectual
property rights, which presently are based upon a combination of patents,
patents pending, copyright, trade secret and trademark laws, may not be adequate
to prevent their unauthorized use. Further, the laws of foreign countries may
provide inadequate protection of such intellectual property rights.

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

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

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

15

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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.

Risks Associated with our Common Stock

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

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

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

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

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

16

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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 1B. | Unresolved Staff Comments.
|-------- | --------------------------

Not Applicable.

|Item 2. | Properties.
|------- | -----------

We do not own any property. Our
Canadian operations are conducted in three leased offices located in Vancouver
and Victoria, British Columbia and Kanata, Ontario. Our U.S. operations are
conducted in two leased offices located in Chicago, Illinois, and Charlestown,
Massachusetts. Our head office is located on the 3rd Floor at Suite
300, One Bentall Centre, 505 Burrard Street, Vancouver, British Columbia,
Canada, V7X 1M3. On July 10, 2006, we entered into a lease for our head office
premises of 15,559 square feet, which commenced on December 1, 2006 and expires
on September 29, 2011 for which a deposit of $87,158 was made. The monthly lease
payment under this agreement is $24,559 plus $23,113 in operating costs. On
January 11, 2011, we entered into a new lease at the same location, for 12,379
square feet, which will commence on October 1, 2011 and expire on September 30,
2014 for which a deposit of $52,615 was made. The monthly lease payment under
the agreement is $21,289 plus $20,702 in operating costs. Management believes
that this office space is adequate for the operations of our company for the
foreseeable future.

|Item 3. | Legal Proceedings.
|------- | ------------------

None.

|Item 4. | [Removed and Reserved]
|------- | ----------------------

17

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PART II

|Item 5. | Market for Registrants Common Equity,
      Related Stockholder Matters and Issuer Purchases of Equity
      Securities.
|------- | -------------------------------------------------------------------------------------------------------------------------

Our common stock is quoted on the
OTC Bulletin Board and the TSX Venture Exchange. Our shares of common stock
began quotation on the OTC Bulletin Board on March 2, 2004 and trading on the
TSX Venture Exchange on August 25, 2008. The following table sets forth, for the
periods indicated, the high and low bids for our common stock on the OTC
Bulletin Board and the TSX Venture Exchange based on inter-dealer prices,
without retail mark-up, mark-down or commission and may not represent actual
transactions as reported by the OTC Bulletin Board and the TSX Venture Exchange,
respectively.

Quarter Ended
    OTC Bulletin
      Board(1) (U.S. dollars)
    TSX Venture
      Exchange(2) (Canadian dollars)High
    Low
    High
    LowJuly 31, 2009
    $0.82
    $0.45
    $0.98
    $0.60October 31, 2009
    $0.83
    $0.53
    $0.90
    $0.68January 31, 2010
    $0.65
    $0.53
    $0.70
    $0.50April 30, 2010
    $0.70
    $0.35
    $0.83
    $0.40July 31, 2010
    $1.35
    $0.61
    $1.34
    $0.85October 31, 2010
    $1.45
    $0.00
    $1.50
    $1.01January 31, 2011
    $2.60
    $0.00
    $2.60
    $1.50April 30, 2011
    $2.55
    $0.00
    $2.45
    $1.95


| | (1) | Since March 19, 2008, our stock has been quoted on the
      OTC Bulletin Board under the trading symbol "CPAH".  
| | --- | ------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                   
| | (2) | Since August 25, 2008, our stock has been quoted on the
      TSX Venture Exchange under the trading symbol
"CCV".

Our shares of common stock are
issued in registered form. Valiant Trust Company of 3rd Floor, 750 Cambie
Street, Vancouver, British Columbia, Canada V6B 0A2 (Telephone: 604.699.4884;
Facsimile: 604.681.3067) is the registrar and transfer agent for our shares of
common stock.

On July 25, 2011, the
shareholders' list of our shares of common stock showed 105 registered
shareholders and37,961,481 shares outstanding.

Dividend Policy

To date, we have not declared or
paid any dividends on our shares of common stock and do not expect to declare or
pay any dividends on our shares of common stock in the foreseeable future.
Payment of any dividends will depend upon our future earnings, if any, our
financial condition, and other factors as deemed relevant by our board of
directors. Although there are no restrictions that limit the ability to pay
dividends on our shares of common stock, our intention is to retain future
earnings for use in our operations and the expansion of our business.

Equity Compensation Plan Information

The following table provides a
summary of the number of options granted under our compensation plans, as well
as options granted outside of our compensation plans, the weighted average
exercise price and the number of options remaining available for issuance all as
at April 30, 2011.

18

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Number of securities to be
      issued upon exercise of outstanding options
    Weighted-Average
      exercise price of outstanding options
    Number of securities remaining
      available for future issuance under equity
      compensation plansEquity compensation plans approved by security holders
    3,607,663 (1)(2)
    $0.97
    915,007 (3)Equity compensation plans not approved by security
      holders
    N/A
    N/A
    N/ATotal
    3,607,663
    $0.97
    915,007


|(1) | As of April 30, 2011, we had issued stock options to
      purchase 3,607,663 shares of our common stock pursuant to our 2010 Stock
      Option Plan.                                                                                                                  
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                         
|(2) | In addition to the 3,607,663 options outstanding as at
      April 30, 2011, we issued 1,000,000 warrants to a customer during fiscal
      year ended April 30, 2011 that were issued against securities available to
      be issued under the 2010 Stock Option Plan.
|    |                                                                                                                                                                                                                                                                         
|(3) | As of April 30, 2011, there were 915,007 underlying
      shares of our common stock remaining and available to be issued under our
      2010 Stock Option Plan.                                                                                                       

2010 Stock Option Plan

On September 27, 2010, our
shareholders approved the 2010 stock option plan for employees, directors,
officers and consultants of our company and our subsidiaries. This plan
effectively merged our Companys 2004 and 2005 stock option plans. Under the
plan, eligible employees, consultants, and such other persons, other than
directors subject to tax in the United States who are not eligible employees,
may receive awards of non-qualified stock options. Also under the plan,
individuals who, at the time of the option grant, are employees of our company
or any related company, as defined in the plan, who are subject to tax in the
United States, may receive incentive stock options, and stock options granted
to non-United States residents may receive awards of options. Unless approved
by the plan administrator and disinterested shareholders, no person shall be
eligible to receive in any fiscal year options to purchase more than 5% of the
outstanding shares of our common stock. The purpose of the plan is to retain the
services of valued key employees, directors, officers and consultants and to
encourage such persons with an increased incentive to make contributions to our
company. We are permitted to issue up to 5,860,000 shares of our common stock
under the 2010 stock option plan.

Employee Share Purchase Plan

On October 1, 2008, our
shareholders approved the employee share purchase plan for employees, directors,
officers and consultants of our company and our subsidiaries. The purpose of the
plan is to give employees access to an equity participation vehicle in addition
to our stock option plans by way of an opportunity to purchase shares of our
common stock through payroll deductions and encourage them to use their combined
best efforts on behalf of our company to improve its profits through increased
sales, reduction of costs and increased efficiency. Participation in the plan is
voluntary. Within the limits of the plan, our company matches fifty percent
(50%) of the aggregate number of shares purchased by the participants. We are
permitted to issue up to 700,000 shares of our common stock under the plan. As
of April 30, 2011, we issued 143,599 shares of our common stock under the plan.

Deferred Share Unit Plan

Under the terms of the deferred
share unit plan (the DSUP) approved by the shareholders on October 22, 2009,
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
our 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 (DSU) granted to a participant who is a
director of the board of our 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. Fair
value of the DSUs, which is based on the closing price of our companys common
stock on the date of grant, is recorded as compensation expense in the period of
grant. We are permitted to issue up to 2,000,000 deferred share units under the
DSUP. As of April 30, 2011, we issued 1,386,713 deferred share units under the
plan.

19

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Purchases of Equity Securities by the Issuer and
Affiliated Purchasers

None.

Recent Sales of Unregistered Securities

On March 9, 2011, we granted
44,052 deferred share units to two employees exchangeable into 44,052 shares of
our common stock on a one for one basis pursuant to our Deferred Share Unit
Plan. The deferred share units 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. We issued 22,026 of the deferred share units to 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. We issued 22,026 of the deferred share units to a non-U.S. person
(as that term is defined in Regulation S of the Securities Act of 1933) in an
offshore transaction relying on Regulation S and/or Section 4(2) of the
Securities Act of 1933.

|Item 6. | Selected Financial Data.
|------- | ------------------------

Not Applicable.

|Item 7. | Managements Discussion and Analysis of
      Financial Condition and Results of Operations.
|------- | --------------------------------------------------------------------------------------------

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 annual
report. This discussion and analysis contains forward-looking statements that
involve risk, uncertainties and assumptions.

In some cases, you can identify
forward-looking statements by terminology such as "may", "will", "should",
"expects", "plans", "anticipates", "believes", "estimates", "predicts",
"potential" or "continue" or the negative of these terms or other comparable
terminology. Our actual results could differ materially from those anticipated
in the forward-looking statements as a result of many factors, including those
identified below, in "Risk Factors" and elsewhere in this annual report. 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 annual report, the
terms "we", "us" and "our" means CounterPath Corporation, unless otherwise
indicated.

Overview

Background

We were incorporated under the laws of
the State of Nevada on April 18, 2003.

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.

20

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On February 1, 2008, we acquired
all of the shares of FirstHand Technologies Inc. through the issuance of 5.9
million shares of our common stock. On February 1, 2008, we acquired all of the
issued and outstanding shares of BridgePort Networks, Inc. by way of merger in
consideration for the assumption of all of the assets and liabilities of
BridgePort Networks.

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.

On November 1, 2010, the
Companys wholly-owned subsidiary, FirstHand Technologies Inc. was amalgamated
with CounterPath Technologies Inc. and carrying on as CounterPath Technologies
Inc.

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, (2) original equipment manufacturers
serving the networking and 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.
Our acquisitions of FirstHand Technologies Inc. and BridgePort Networks, Inc. in
February 2008, expanded the product portfolio of our company to include
fixed-mobile-convergence applications for the enterprise and telecom service
provider markets.

Revenue

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

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

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

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

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

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Operating Expenses

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

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

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

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

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

Restructuring costs are post
acquisition activities related to the acquisition of NewHeights Software
Corporation, FirstHand Technologies Inc. and BridgePort Networks, Inc. We
incurred restructuring costs related to employee severance agreements as a
result of post acquisition consolidation of administration, sales and marketing
and research and development departments. At April 30, 2011 we had 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 annual 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.

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Revenue Recognition

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

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

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

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

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

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

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

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

Stock-Based Compensation

Stock options granted are
accounted for under ASC 718 (prior authoritative literature: 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. ASC 718 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.

23

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The expected volatility of
options granted has been determined using the volatility of our company's stock.
The expected volatility for options granted during the year ended April 30, 2011
was 77.50% . 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 (SAB) No. 107 Share-Based Payment, and SAB 110 Share-Based
Payment, beginning January 1, 2008. The expected term of options granted during
the year ended April 30, 2011 was 3.7 years. For the year ended April 30, 2011,
the weighted-average risk-free interest rate used was 2.0% . The risk-free
interest rate is based on a treasury instrument whose term is consistent with
the expected term of the stock options. We have not paid and do not anticipate
paying cash dividends on our shares of common stock; therefore, the expected
dividend yield is assumed to be zero. In addition, ASC 718 requires companies to
utilize an estimated forfeiture rate when calculating the expense for the
period. We applied an estimated forfeiture rate of 15% in the year ended April
30, 2011, in determining the expense recorded in our consolidated statement of
operations. Cost of sales and operating expenses include stock-based
compensation expense. For the year ended April, 2011, we recorded an expense of
$812,485 in connection with share-based payment awards. A future expense of
non-vested options of $960,886 and non-vested deferred share units of $309,459
is expected to be recognized over a weighted-average period of 3.19 years and
1.38 years respectively.

Research and Development Expense for Software
Products

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

Accounts Receivable and Allowance for Doubtful Accounts

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

Goodwill and Intangible Assets

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

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

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

Determining the fair value of our
reporting unit involves the use of significant estimates and assumptions. These
estimates and assumptions include future economic and market conditions and
determination of appropriate market comparables. We base our fair value
estimates on assumptions we believe to be reasonable but that are unpredictable
and inherently uncertain. Actual future results may differ from those estimates.
In addition, we make certain judgments and assumptions in allocating shared
assets and liabilities to determine the carrying values for our reporting unit.
Our most recent annual goodwill impairment analysis, which was performed at the
end of the fourth quarter of fiscal 2011, did not result in an impairment charge
for fiscal year 2011, nor did we record any goodwill impairment in fiscal 2010.

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

Assumptions and estimates about
future values and remaining useful lives of our intangible and other long-lived
assets are complex and subjective. They can be affected by a variety of factors,
including external factors such as industry and economic trends, and internal
factors such as changes in our business strategy and our internal forecasts.
These estimates and assumptions include revenue growth rates and operating
margins used to calculate projected future cash flows and risk adjusted
discounted rates and future economic and market conditions. Our updated
long-term financial forecast represents the best estimate that our management
has at this time and we believe that its underlying assumptions are reasonable.
As a result of our review of the recoverability of intangibles assets there was
no impairment charge for the current year (2010 - $nil).

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 year ended April 30, 2011, consisted primarily of selling our IP telephony
software and related services to telecom service providers and original
equipment manufacturers serving the telecom industry, and the continued
development of our IP telephony software products.

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Revenue

Revenue for the year ended April 30,
2011 and 2010 were as follows:

|                  |   | 2011       |  |  | 2010     |  |   | Period-to-Period Change | 
|----------------- | - | ---------- |  |  | -------- |  | - | ----------------------- | 
|                  |   |            |  |  | Percent  |  |   |                         | 
|                  |   |            |  |  | of Total |  |   |                         | 
|                  |   | Amount     |  |  | Revenue  |  |   | Amount                  | 
|Revenue by Type   |   |            |  |  |          |  |   |                         | 
|Software          | $ | 7,205,947  |  |  | 65%      |  | $ | 5,974,712               | 
|Service           |   | 3,834,351  |  |  | 35%      |  |   | 2,042,145               | 
|Total revenue     | $ | 11,040,298 |  |  | 100%     |  | $ | 8,016,857               | 
|                  |   |            |  |  |          |  |   |                         | 
|Revenue by Region |   |            |  |  |          |  |   |                         | 
|International     | $ | 4,652,784  |  |  | 42%      |  | $ | 3,055,952               | 
|North America     |   | 6,387,514  |  |  | 58%      |  |   | 4,960,905               | 
|Total revenue     | $ | 11,040,298 |  |  | 100%     |  | $ | 8,016,857               | 

For the year ended April 30,
2011, we generated $11,040,298 in revenue compared to $8,016,857 for the year
ended April 30, 2010, representing an increase of $3,023,441. We generated
$7,205,947 in software revenue for the year ended April 30, 2011 compared to
$5,974,712 for the year ended April 30, 2010, representing an increase of
$1,231,235. The increase in software revenue for the year ended April 30, 2011,
was primarily a result of increases in sales to original equipment manufacturers
and enterprises, as well as, sales from our online store. Software sales from
our online store grew by approximately $448,000 to approximately $1,616,000, in
part as a result of various online promotions offered throughout the year. For
the year ended April 30, 2011, service revenue was $3,834,351 compared to
$2,042,145 for the year ended April 30, 2010, representing an increase of
$1,792,206. The increase in service revenue for the year ended April 30, 2011,
was primarily attributable to the customization services delivered to two new
significant customers in preparation of their deployment of our software
applications. International revenue outside of North America represented 42% of
total revenue for the year ended April 30, 2011, compared to 58% for North
American revenue. This compares to international revenue representing 38% of
total revenue for the year ending April 30, 2010, compared to 62% for North
American revenue. Revenue from Europe and Asia/Africa increased by approximately
$1,240,000 and $384,000, respectively, while revenue from Central/South America
decreased by approximately $27,000 in total, for the year ended April 30, 2011.

Operating Expenses

Cost of Sales

Cost of sales for the year ended April
30, 2011 and 2010 were as follows:

|           |   | April 30, 2011 |  |  | April 30, 2010 |  |   | Period-to-Period Change | 
|---------- | - | -------------- |  |  | -------------- |  | - | ----------------------- | 
|           |   |                |  |  |                |  |   |                         | 
|           |   |                |  |  | Percent        |  |   |                         | 
|           |   |                |  |  | of             |  |   |                         | 
|           |   | Amount         |  |  | Revenue        |  |   | Amount                  | 
|Year ended | $ | 2,864,838      |  |  | 26%            |  | $ | 2,825,480               | 

Cost of sales was $2,864,838 for
the year ended April 30, 2011, compared to $2,825,480 for the year ended April
30, 2010. The increase of $39,358 was the result of an increase in
personnel-related expenses of approximately $166,000. This increase was offset
by a decrease of approximately $158,000 in license costs due to lower sales of
royalty-bearing software. Cost of sales expressed as a percent of revenue was
26% of revenue for the year ended April 30, 2011, as against 35% for the year
ended April 30, 2010. This decrease in percentage was the result of a
substantial increase in revenue of $3,023,441 for the year ended April 30, 2011
as compared to revenue for the year ended April 30, 2010, and further, there was
only a marginal increase of approximately $151,000 in variable costs. This has
resulted in a 25% decrease in cost of sales expressed as a percentage of revenue
for the year ended April 30, 2011 as compared to cost of sales expressed as a
percentage for the year ended April 30, 2010.

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Sales and Marketing

Sales and marketing expenses for the
year ended April 30, 2011 and 2010 were as follows:

|           |   | April 30, 2011 |  |  | April 30, 2010 |  |   | Period-to-Period Change | 
|---------- | - | -------------- |  |  | -------------- |  | - | ----------------------- | 
|           |   |                |  |  | Percent        |  |   |                         | 
|           |   |                |  |  | of             |  |   |                         | 
|           |   | Amount         |  |  | Revenue        |  |   | Amount                  | 
|Year ended | $ | 3,495,274      |  |  | 32%            |  | $ | 3,063,523               | 

Sales and marketing expenses were
$3,495,274 for the year ended April 30, 2011, compared to $3,063,523 for the
year ended April 30, 2010. The increase of $431,751 was primarily the result of
an increase in personnel-related expenses of approximately $307,000 and
travel-related expenses of approximately $50,000. Additionally, other sales and
marketing related expenses including stock-based compensation, office supplies,
and tradeshows increased by approximately $75,000 during the year ended April
30, 2011, compared to the year ending April 30, 2010.

Research and Development

Research and development expenses for
the year ended April 30, 2011 and 2010 were as follows:

|           |   | April 30, 2011 |  |  | April 30, 2010 |  |   | Period-to-Period Change | 
|---------- | - | -------------- |  |  | -------------- |  | - | ----------------------- | 
|           |   |                |  |  | Percent        |  |   |                         | 
|           |   |                |  |  | of             |  |   |                         | 
|           |   | Amount         |  |  | Revenue        |  |   | Amount                  | 
|Year ended | $ | 4,469,979      |  |  | 40%            |  | $ | 3,586,425               | 

Research and development expenses
were $4,469,979 for the year ended April 30, 2011, compared to $3,586,425 for
the year ended April 30, 2010. The increase of $883,554 resulted primarily from
an increase of approximately $510,000 in personnel-related expenses.
Additionally, there was a Scientific Research and Experimental Development
(SR&ED) claim recorded in the year ended April 30, 2010 of approximately
$232,000. During the year ended April 30, 2010, we converted a research fee
liability to Columbia University into shares of common stock which further
resulted in a reduction in research and development expenses of approximately
$153,000. There was no SR&ED claim recorded in the year ended April 30,
2011, which resulted in higher year over year research and development
expenses.

General and Administrative

General and administrative expenses
for the years ended April 30, 2011 and 2010 were as follows:

|           |   | April 30, 2011 |  |  | April 30, 2010 |  |   | Period-to-Period Change | 
|---------- | - | -------------- |  |  | -------------- |  | - | ----------------------- | 
|           |   |                |  |  | Percent        |  |   |                         | 
|           |   |                |  |  | of             |  |   |                         | 
|           |   | Amount         |  |  | Revenue        |  |   | Amount                  | 
|Year ended | $ | 3,997,340      |  |  | 36%            |  | $ | 3,689,900               | 

General and administrative
expenses for the year ended April 30, 2011, were $3,997,340 compared to
$3,689,900 for the year ended April 30, 2010. The increase of $307,440 in
general and administrative expenses was primarily attributable to an increase in
expense related to professional services of approximately $260,000,
personnel-related expenses of approximately $220,000, an increase in
patent-related expenses of approximately $116,000, and an increase of $64,000 in
public relations-related expenses. These increases were partially offset by a
$120,000 decrease in amortization of capital assets as a number of capital
assets became fully amortized in the year ended April 30, 2011, decrease in bad
debts of approximately $150,000 and a decrease in telephone and
communication-related expenses of approximately $60,000.

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Restructuring Charges

Restructuring charges for the years
ended April 30, 2011 and 2010 were as follows:

|           |   | April 30, 2011 |  |  | April 30, 2010 |  |   | Period-to-Period Change | 
|---------- | - | -------------- |  |  | -------------- |  | - | ----------------------- | 
|           |   |                |  |  | Percent        |  |   |                         | 
|           |   |                |  |  | of             |  |   |                         | 
|           |   | Amount         |  |  | Revenue        |  |   | Amount                  | 
|Year ended | $ | nil            |  |  | -%             |  | $ | 44,912                  | 

Restructuring charges for the
year ended April 30, 2011, were $nil compared to $44,912 for the year ended
April 30, 2010. Restructuring charges in fiscal year 2010 were attributable to
the one-time employee termination costs due to the integration of the FirstHand
and BridgePort acquisitions.

Interest and Other Income

nterest income for the year ended
April 30, 2011, was $245,401 compared to $221,493 for the year ended April 30,
2010. Interest expense for the year ended April 30, 2011, was $80,365 compared
to $2,599 for the year ended April 30, 2010. Interest expense during the year
ended April 30, 2011 primarily relates to the accretion of the convertible
debenture discount of approximately $56,000 and cash interest expense of
approximately $26,000.

Foreign exchange loss for the
year ended April 30, 2011, was $166,950 compared to a foreign exchange loss of
$378,828 for the year ended April 30, 2010. 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 April 30, 2011, we had
$1,707,397 in cash compared to $1,556,813 at April 30, 2010, representing an
increase of $150,584. Our working capital was $1,387,588 at April 30, 2011
compared to $1,157,633 at April 30, 2010, representing an increase of $229,955.

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 April 30, 2011, we had cash
of approximately $1.7 million and working capital of approximately $1.4 million;
however, our management projects that under our current operating plan we will
require approximately $12-14 million to fund our ongoing operating expenses and
working capital requirements through April 30, 2012. We anticipate that this
will be funded through cash flow generated from operations, working capital and
external financing.

Subsequent to the year ended
April 30, 2011, on June 14, 2011, we issued an aggregate of 3,145,800 units
under a brokered private placement for aggregate gross proceeds of $5,636,170
(CDN$5,505,150) at a price of $1.79 (CDN$1.75) per unit, with each unit
consisting of one share of our common stock and one-half of one common share
purchase warrant, with each whole warrant entitling the holder to purchase one
additional common share of our common stock at an exercise price of CDN$2.25 per
share until June 14, 2013.

Operating Activities

Our operating activities resulted
in a net cash outflow of $1,369,630 for the year ended April 30, 2011. This
compares with a net cash outflow of $3,503,080 for the year ended April 30,
2010, representing a $2,133,450 decrease in cash outflows from operations. The
net cash outflow from operating activities for the year ended April 30, 2011 was
primarily a result of a net loss of $3,542,331, and an increase in accounts
receivable of $529,447 attributable to higher year over year revenue. The net
cash outflow was offset by adjustment for non-cash expenses including $812,485
for stock-based compensation, $853,677 for amortization of intangible assets,
and $134,880 for depreciation and amortization.

28

---

The net cash outflow from
operating activities for the year ended April 30, 2010, was primarily a result
of a net loss of $5,353,317 and a decrease in accounts payable of $874,926,
partially offset by a decrease in accounts receivable of $262,894. The decrease
in accounts receivable is attributable to lower year over year revenues and
collection of a number of outstanding large receivables during fiscal 2010. The
net cash outflow was further offset by adjustment for non-cash expenses
including $378,828 for foreign exchange loss, $883,225 for stock-based
compensation, $874,700 for amortization of intangible assets, and $276,410 for
depreciation and amortization.

Investing Activities

Investing activities resulted in
a net cash outflow of $132,005 for the year ended April 30, 2011, primarily due
to the purchase of equipment and to deposits made during the year. This compares
with a net cash outflow of $17,173 primarily due to the purchase of equipment
during the year ended April 30, 2010. At April 30, 2011, we did not have any
material commitments for future capital expenditures.

Financing Activities

Financing activities resulted in
a net cash inflow of $1,660,373 for the year ended April 30, 2011, compared to a
net cash inflow of $1,896,082 for the year ended April 30, 2010.

On July 30, 2010, and October 29,
2010, we issued two convertible debentures in the principal amount of $483,300
and $490,750, respectively. The debentures are convertible by the holder, at any
time prior to maturity, in whole or in part into common shares of our company at
a conversion price of $1.00 per share. On October 29, 2010, we issued a third
convertible debenture in the principal amount of $490,750. The debenture is
convertible by the holder at any time prior to maturity, in whole or in part
into common shares of our company at a conversion price of $1.37 per share. On
June 14, 2011, we issued 1,332,261 shares of common stock as a result of the
holders converting all of their debentures.

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 may seek additional funding through public or private
financings to fund our operations beyond 2012. However, if we are unable to
raise additional capital when required or on acceptable terms, or achieve cash
flow positive operations, we may have to significantly delay product development
and scale back operations both of which may affect our ability to continue as a
going concern.

Off-Balance Sheet Arrangements

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

New Accounting Pronouncements

In 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. Our company is currently evaluating the impact, if
any, that the adoption of ASU 2009-13 will have on its consolidated results of
operations, financial condition or cash flows.

29

---

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. Our company is currently evaluating the impact, if
any, that the adoption of ASU 2009-14 will have on its consolidated results of
operations, financial condition or cash flows.

In January 2010, the FASB issued
ASU 2010-06, Improving Disclosures about Fair Value Measurements,which
is included in the ASC in Topic 820 (Fair Value Measurements and Disclosures).
ASU 2010-06 requires new disclosures on the amount and reason for transfers in
and out of Level 1 and 2 fair value measurements. ASU 2010-06 also requires
disclosure of activities, including purchases, sales, issuances, and settlements
within the Level 3 fair value measurements and clarifies existing disclosure
requirements on levels of disaggregation and disclosures about inputs and
valuation techniques. ASU 2010-06 is effective for interim and annual reporting
periods beginning after December 15, 2009. The adopted the provisions of ASU
2010-06 and it did not have a material impact on the financial statements for
the year ended April 30, 2011.

ASC 815: Our company adopted the
provisions of Statement of Financial Accounting Standards No. 161, Disclosures
about Derivative Instruments and Hedging Activities - an amendment of FASB
Statement No. 133 (SFAS 161), effective at the beginning of the first quarter
of fiscal year 2010. SFAS No. 161 was incorporated into ASC 815, Derivatives
and Hedging(ASC 815). ASC 815 expands financial reporting about
derivative instruments and hedging activities by requiring enhanced disclosures
to enable investors to better understand their effects on an entitys financial
position, results of operations and cash flows. ASC 815 also requires
qualitative disclosures about objectives and strategies for using derivatives,
quantitative disclosures about fair value amounts of gains and losses on
derivative instruments, and disclosures about credit-risk-related contingent
features in derivative agreements. Because ASC 815 only requires additional
disclosure, the adoption of ASC 815 did not impact our companys financial
position, results of operations, and cash flows (see Note 11, Derivative
Instruments and Hedging Activities, of the Notes to Consolidated Financial
Statements).

|Item 7A. | Quantitative and Qualitative Disclosures
      About Market Risk.
|-------- | -----------------------------------------------------------------

Not Applicable.

|Item 8. | Financial Statements and Supplementary
      Data.
|------- | --------------------------------------------------

30

---

COUNTERPATH CORPORATIONINDEX TO CONSOLIDATED
FINANCIAL STATEMENTS April 30, 2011

|                                                                   | Page 
|------------------------------------------------------------------ | -----
|Report of Independent Registered Public Accounting Firm            | 32   
|Consolidated Balance Sheets                                        | 33   
|Consolidated Statements of Operations and Comprehensive
      Loss | 34   
|Consolidated Statements of Cash Flows                              | 35   
|Consolidated Statements of Changes in Stockholders' Equity         | 36   
|Notes to the Consolidated Financial Statements                     | 37-64

31

---

|                  | Tel: 604 688 5421           | BDO Canada LLP
|----------------- | --------------------------- | --------------
|Fax: 604 688 5132 | 600 Cathedral Place        
|vancouver@bdo.ca  | 925 West Georgia Street    
|www.bdo.ca        | Vancouver BC V6C 3L2 Canada
|                  |                             |               

|Report of Independent Registered Public Accounting
      Firm
|-------------------------------------------------------------
|                                                             

To the Directors and Stockholders of CounterPath
Corporation:

We have audited the accompanying consolidated balance sheets of
CounterPath Corporation (the Company) as of April 30, 2011 and 2010, and the
related consolidated statements of operations and comprehensive loss, cash flows
and changes in stockholders equity for the years then ended. These financial
statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
CounterPath Corporation at April 30, 2011 and 2010, and the results of its
operations and its cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
2 to the consolidated financial statements, the Company had an accumulated
deficit of $43,323,410 at April 30, 2011 and incurred a net loss for the year
then ended of $3,542,331. These conditions raise substantial doubt about the
Companys ability to continue as a going concern. Managements plans in regard
to these matters are also described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.

/s/ BDO Canada LLP

Chartered Accountants

Vancouver, Canada July 25, 2011

32

---

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

|                                                                                                                                                                                                   |   | April 30,   |   |   | April 30,   |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|                                                                                                                                                                                                   |   | 2011        |   |   | 2010        |  
|Assets                                                                                                                                                                                             |   |             |   |   |             |  
|Current assets:                                                                                                                                                                                    |   |             |   |   |             |  
|Cash                                                                                                                                                                                               | $ | 1,707,397   |   | $ | 1,556,813   |  
|Accounts receivable
      (net of allowance for doubtful accounts of $49,883 (2010 - $1,116,119))                                                                                                  |   | 3,018,188   |   |   | 2,345,633   |  
|Investment tax
      credits recoverable                                                                                                                                                           |   | -           |   |   | 129,285     |  
|Prepaid expenses and deposits                                                                                                                                                                      |   | 110,412     |   |   | 221,041     |  
|Total current assets                                                                                                                                                                               |   | 4,835,997   |   |   | 4,252,772   |  
|                                                                                                                                                                                                   |   |             |   |   |             |  
|Deposits                                                                                                                                                                                           |   | 159,433     |   |   | 101,994     |  
|Equipment  Note 3                                                                                                                                                                                 |   | 59,574      |   |   | 111,150     |  
|Intangible assets (net of
      accumulated amortization of $5,097,578 (2010 - $4,249,895)  Note 2(b)                                                                                             |   | 859,664     |   |   | 1,674,359   |  
|Goodwill  Note 2(b)                                                                                                                                                                               |   | 9,247,993   |   |   | 8,740,025   |  
|Other assets                                                                                                                                                                                       |   | 48,308      |   |   | 58,817      |  
|Total Assets                                                                                                                                                                                       | $ | 15,210,969  |   | $ | 14,939,117  |  
|                                                                                                                                                                                                   |   |             |   |   |             |  
|Liabilities and Stockholders Equity                                                                                                                                                               |   |             |   |   |             |  
|Current liabilities:                                                                                                                                                                               |   |             |   |   |             |  
|Accounts payable and accrued
      liabilities  Note 4                                                                                                                                            | $ | 2,340,897   |   | $ | 2,313,688   |  
|Unearned revenue                                                                                                                                                                                   |   | 958,626     |   |   | 655,361     |  
|Customer deposits                                                                                                                                                                                  |   | 2,018       |   |   | 5,127       |  
|Accrued warranty
       Note 2(b)                                                                                                                                                                 |   | 146,868     |   |   | 120,963     |  
|Total current
      liabilities                                                                                                                                                                    |   | 3,448,409   |   |   | 3,095,139   |  
|                                                                                                                                                                                                   |   |             |   |   |             |  
|Convertible debentures  Note 6                                                                                                                                                                    |   | 1,305,002   |   |   | -           |  
|Deferred lease inducements                                                                                                                                                                         |   | 2,474       |   |   | 4,677       |  
|Unrecognized tax benefit  Notes 2(b) and 9                                                                                                                                                        |   | 98,575      |   |   | 98,575      |  
|Total liabilities                                                                                                                                                                                  |   | 4,854,460   |   |   | 3,198,391   |  
|                                                                                                                                                                                                   |   |             |   |   |             |  
|Stockholders equity:                                                                                                                                                                              |   |             |   |   |             |  
|Preferred stock, $0.001 par value  Note 7
               Authorized:
      100,000,000          Issued
      and outstanding: April 30, 2011  1; April 30, 2010  1                              |   |            |   |   |            |  
|Common stock, $0.001 par value
       Note 8          Authorized:
      83,076,900          Issued and
      outstanding:          April
      30, 2011  33,440,106; April 30, 2010  33,015,627 |   | 33,440      |   |   | 33,016      |  
|Additional paid-in capital                                                                                                                                                                         |   | 53,420,601  |   |   | 51,902,471  |  
|Accumulated deficit                                                                                                                                                                                |   | (43,323,410 | ) |   | (39,781,079 | )
|Accumulated other comprehensive income (loss)
       currency translation adjustment                                                                                                              |   | 225,878     |   |   | (413,682    | )
|Total stockholders equity                                                                                                                                                                         |   | 10,356,509  |   |   | 11,740,726  |  
|Liabilities and Stockholders Equity                                                                                                                                                               | $ | 15,210,969  |   | $ | 14,939,117  |  
|                                                                                                                                                                                                   |   |             |   |   |             |  
|Going concern  Note 2                                                                                                                                                                             |   |             |   |   |             |  
|Commitments and contingent liability 
      Notes 12 and 13                                                                                                                                       |   |             |   |   |             |  

See accompanying notes to the consolidated financial
statements

33

---

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

|                                                                                                                                                                             |   | Years Ended   |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------- | -
|                                                                                                                                                                             |   | April 30,     |  
|                                                                                                                                                                             |   | **2011** **** |  
|                                                                                                                                                                             |   |               |  
|Revenue  Note 10:                                                                                                                                                           |   |               |  
|Software                                                                                                                                                                     | $ | 7,205,947     |  
|Service                                                                                                                                                                      |   | 3,834,351     |  
|Total revenue                                                                                                                                                                |   | 11,040,298    |  
|Operating expenses:                                                                                                                                                          |   |               |  
|Cost of sales (includes depreciation of
      $22,017 (2010 - $6,361) and
    amortization of       intangible assets of $853,677
      (2010 - $874,700))  
     Note 2(b) |   | 2,864,838     |  
|Sales and marketing                                                                                                                                                          |   | 3,495,274     |  
|Research and development                                                                                                                                                     |   | 4,469,979     |  
|General and administrative                                                                                                                                                   |   | 3,997,340     |  
|Restructuring costs  Note 14                                                                                                                                                |   |              |  
|Total
      operating expenses                                                                                                                                               |   | 14,827,431    |  
|Loss from operations                                                                                                                                                         |   | (3,787,133    | )
|Interest and other income (expense), net                                                                                                                                     |   |               |  
|Interest and other income                                                                                                                                                    |   | 245,401       |  
|Interest expense                                                                                                                                                             |   | (80,365       | )
|Foreign exchange loss                                                                                                                                                        |   | (166,949      | )
|Gain on settlement of debt 
      Note 15                                                                                                                                   |   | 246,715       |  
|Net loss for the year                                                                                                                                                        |   | (3,542,331    | )
|Other comprehensive income
      (loss):                                                                                                                                     |   |               |  
|Foreign currency translation adjustments                                                                                                                                     |   | 639,560       |  
|Comprehensive loss                                                                                                                                                           | $ | (2,902,771    | )
|Net loss per share:                                                                                                                                                          |   |               |  
|Basic and diluted                                                                                                                                                            | $ | (0.11         | )
|                                                                                                                                                                             |   |               |  
|Weighted average common shares
      outstanding:                                                                                                                            |   | 33,191,749    |  

See accompanying notes to the consolidated financial
statements

34

---

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

|                                                                                  |   | Years Ended |  
|--------------------------------------------------------------------------------- | - | ----------- | -
|                                                                                  |   | April 30,   |  
|                                                                                  |   | 2011        |  
|                                                                                  |   |             |  
|Cash flows from operating
      activities:                                       |   |             |  
|Net loss for the year                                                             | $ | (3,542,331  | )
|Adjustments to reconcile net
      loss to net cash used in operating activities: |   |             |  
|Depreciation and
      amortization                                               |   | 134,880     |  
|Amortization of intangible assets                                                 |   | 853,677     |  
|Shares issued as
      part of share purchase plan                                |   | 25,327      |  
|Stock-based compensation                                                          |   | 812,485     |  
|Warrant expense                                                                   |   | 269,633     |  
|Foreign exchange loss                                                             |   | 166,949     |  
|Accretion of
      debenture discount                                             |   | 55,738      |  
|Changes in assets and
      liabilities:                                          |   |             |  
|Accounts
      receivable                                                         |   | (529,447    | )
|Prepaid expenses and deposits                                                     |   | 111,801     |  
|Accounts payable
      and accrued liabilities                                    |   | (35,745     | )
|Other assets                                                                      |   | (18,658     | )
|Unearned revenue                                                                  |   | 303,265     |  
|Customer deposits                                                                 |   | (3,109      | )
|Accrued warranty                                                                  |   | 25,905      |  
|Net cash used in operating activities                                             |   | (1,369,630  | )
|                                                                                  |   |             |  
|Cash flows from investing
      activities:                                       |   |             |  
|Purchase of equipment                                                             |   | (83,304     | )
|Deposits                                                                          |   | (48,701     | )
|Net cash used in investing activities                                             |   | (132,005    | )
|                                                                                  |   |             |  
|Cash flows from financing activities:                                             |   |             |  
|Common stock issued                                                               |   | 195,573     |  
|Convertible debenture                                                             |   | 1,464,800   |  
|Net cash provided by financing activities                                         |   | 1,660,373   |  
|                                                                                  |   |             |  
|Foreign exchange effect on cash                                                   |   | (8,154      | )
|                                                                                  |   |             |  
|Increase (decrease) in cash                                                       |   | 150,584     |  
|                                                                                  |   |             |  
|Cash, beginning of the year                                                       |   | 1,556,813   |  
|Cash, end of the year                                                             | $ | 1,707,397   |  
|                                                                                  |   |             |  
|Supplemental disclosure of cash flow information                                  |   |             |  
|Cash paid for:                                                                    |   |             |  
|Interest                                                                          | $ | 25,835      |  
|Taxes                                                                             | $ |            |  
|                                                                                  |   |             |  
|Non cash transactions  Notes
      7 and 8                                       |   |             |  

See accompanying notes to the consolidated financial
statements

35

---

|COUNTERPATH CORPORATION                                         
|----------------------------------------------------------------
|CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
      EQUITY
|for the Years Ended April 30, 2011 and 2010                     
|(Stated in U.S. Dollars)                                        

Common shares
    
    
    Preferred SharesAccumulatedNumber
    
    
    
    
    
    Number
    
    
    
    
    
    Additional
    
    
    
    
    
    Otherof
    
    
    
    
    
    of
    
    
    
    
    
    Paid-in
    
    
    Accumulated
    
    
    ComprehensiveShares
    
    
    Par
      Value
    
    
    Shares
    
    
    Par
      Value
    
    
    Capital
    
    
    Deficit
    
    
    Income (Loss)
    
    
    TotalBalance, April 30, 2009
    
    28,832,050
    
    $
    28,832
    
    
    1
    
    $
    
    
    $
    48,718,443
    
    $
    (34,427,762
    )
    $
    (2,738,143
    )
    $
    11,581,370Shares issued:Private placements  Note 8
    
    3,333,334
    
    
    3,333
    
    
    
    
    
    
    
    
    1,849,793
    
    
    
    
    
    
    
    
    1,853,126Issued as part of debt
      settlement  Note 8
    
    527,370
    
    
    527
    
    
    
    
    
    
    
    
    392,889
    
    
    
    
    
    
    
    
    393,416Exercise of stock options
    
    25,875
    
    
    26
    
    
    
    
    
    
    
    
    11,952
    
    
    
    
    
    
    
    
    11,978Employee Share Purchase Plan
    
    88,028
    
    
    89
    
    
    
    
    
    
    
    
    46,378
    
    
    
    
    
    
    
    
    46,467Exchange of subsidiary preferred shares 
      Note 7
    
    208,970
    
    
    209
    
    
    
    
    
    
    
    
    (209
    )
    
    
    
    
    
    
    
    Stock-based compensation -
      Note 8
    
    
    
    
    
    
    
    
    
    
    
    
    
    883,225
    
    
    
    
    
    
    
    
    883,225Net loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,353,317
    )
    
    
    
    
    (5,353,317
    )Foreign currency translation
      adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,324,461
    
    
    2,324,461Balance, April 30, 2010
    
    33,015,627
    
    
    33,016
    
    
    1
    
    
    
    
    
    51,902,471
    
    
    (39,781,079
    )
    
    (413,682
    )
    
    11,740,726Shares issued:Exercise of stock options
    
    308,037
    
    
    308
    
    
    
    
    
    
    
    
    145,236
    
    
    
    
    
    
    
    
    145,544Employee Share Purchase Plan
    
    55,571
    
    
    56
    
    
    
    
    
    
    
    
    75,300
    
    
    
    
    
    
    
    
    75,356Exchange of subsidiary
      preferred shares  Note 7
    
    60,871
    
    
    60
    
    
    
    
    
    
    
    
    (60
    )
    
    
    
    
    
    
    
    Stock-based compensation - Note 8
    
    
    
    
    
    
    
    
    
    
    
    
    
    812,485
    
    
    
    
    
    
    
    
    812,485Share purchase warrants 
      Note 8
    
    
    
    
    
    
    
    
    
    
    
    
    
    269,633
    
    
    
    
    
    
    
    
    269,633Discount on Convertible debenture beneficial
      conversion feature  Note 6
    
    
    
    
    
    
    
    
    
    
    
    
    
    215,536
    
    
    
    
    
    
    
    
    215,536Net loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,542,331
    )
    
    
    
    
    (3,542,331
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    639,560
    
    
    639,560Balance, April 30, 2011
    
    33,440,106
    
    $
    33,440
    
    
    1
    
    $
    
    
    $
    53,420,601
    
    $
    (43,323,410
    )
    $
    225,878
    
    $
    10,356,509


Seeaccompanyingnotes to theconsolidatedfinancialstatements

36

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      

|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 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 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.

On November 1, 2010, the Company's
wholly-owned subsidiary, FirstHand Technologies Inc. was amalgamated with
CounterPath Technologies Inc. and carrying on as CounterPath Technologies Inc.

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

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

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

These 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.

37

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      

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

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 debt and 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 April 30, 2011, the Company
has not yet achieved profitable operations and had an accumulated deficit of
$43,323,410 since incorporation and incurred a net loss for the year ended April
30, 2011 totalling $3,542,331. 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 $12-14 million to fund ongoing operations and
working capital requirements through April 30, 2012. Management is implementing
a plan to address these uncertainties to enable the Company to continue as a
going concern through the end of fiscal 2012 and beyond. This plan includes new
equity financing in amounts sufficient to sustain operations, such as the
private placement discussed in Note 16, 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, 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. (which
      subsequently was merged with CounterPath 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) | Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | Revenue Recognition:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | The Company recognizes revenue in accordance with the ASC
      985-605 (prior authoritative literature: 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
      accordance with these standards, revenue is recognized when persuasive
      evidence of an arrangement exists, delivery has occurred, the fee is fixed
      or determinable, and collection of the related accounts receivable is
      deemed probable. In making these judgments, management evaluates these
      criteria as follows:                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

38

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      

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

| | b) | Significant Accounting Policies
  (contd)
| | -- | -------------------------------------------
| |    |                                            
| |    |                                            
| |    |                                            
| |    |                                            

A substantial amount of the Companys
sales involve multiple element arrangements, such as products, support,
professional services, and training. When arrangements include multiple
elements, the Company allocates the total fee among the various elements using
the residual method. Under the residual method, revenue is recognized when
vendor specific objective evidence (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 the Company
to analyze the individual elements in the transaction and to estimate the fair
value of each undelivered element, which typically represents support services.

Revenue is allocated to each of the
undelivered elements based on its respective fair value.

For contracts with elements related to
customized network solutions and certain network build-outs, we apply FASB
Accounting Standards Codification (ASC) Subtopic 605-25 (Prior authoritative
literature: Emerging Issues Task Force Issue No. 00-21, "Revenue Arrangements
with Multiple Deliverables") and revenues are recognized under ASC 605-35 (prior
authoritative literature: 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.

Service revenue includes sales of
support and other services, including professional services, training, and
reimbursable travel. Support services include telephone support, e-mail support
and unspecified rights to product updates and upgrades, and are recognized
ratably over the term of the service period, which is generally 12 months.
Support revenue is generally 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 has been
performed.

39

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      

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

| | b) | Significant Accounting Policies
  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | Stock-Based Compensation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | The Company adopted ASC 718 (prior authoritative
      literature: Statement of Financial Accounting Standards (SFAS) No. 123R,
      Accounting for Stock-Based Compensation), using the modified prospective
      method on May 1, 2006. Under this application, the Company is required to
      record compensation expense, based on the fair value of the awards, for
      all awards granted after the date of adoption and for the unvested portion
      of previously granted awards that remain outstanding as at the date of
      adoption. In accordance with ASC 718, the compensation expense is
      amortized on a straight-line basis over the requisite service period which
      approximates the vesting period.         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | Stock options granted to non-employees were accounted for
      in accordance with ASC 718 and ASC 505-50 (prior authoritative literature:
      EITF No. 96-18, "Accounting for Equity Instruments that are Issued to
      Other Than Employees for Acquiring, or in Conjunction With Selling Goods
      or Services") and were measured at the fair value of the options as
      determined by an option pricing model on the measurement date and
      compensation expense is amortized over the vesting period or, if none
      exists, over the service period. Compensation expense for unvested options
      to non-employees is revalued at each balance sheet date and is being
      amortized over the vesting period of the options.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | With the adoption of ASC 718, the Company has elected to
      use the Black-Scholes option pricing model to determine the fair value of
      stock options granted. The Company has estimated the fair value of option
      awards to employees and non-employees for the years ended April 30, 2011
      and April 30, 2010 using the assumptions more fully described in Note
      8.                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | Use of Estimates:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | The preparation of financial statements in conformity
      with generally accepted accounting principles in the United States
      requires the Companys 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.                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | Equipment and Amortization:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | Equipment is recorded at cost. Depreciation is provided
      for using the straight-line method over the estimated useful lives as
      follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

| | Computer hardware      | Two years                                             
| | ---------------------- | ------------------------------------------------------
| | Computer software      | Two years                                             
| | Leasehold improvements | Shorter of lease term or
      estimated economic life
| | Office furniture       | Five years                                            
| | Website                | Three years                                           

40

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      

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

| | b) | Significant Accounting Policies
  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | Research and Development:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | 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. Management has determined
      that technological feasibility is established at the time a working model
      of software is completed. Because management believes that the current
      process for developing software will be essentially completed concurrently
      with the establishment of technological feasibility, no costs have been
      capitalized to date.                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | Restructuring Costs:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | The Company accounts for our restructuring activities in
      accordance with ASC 420 (prior authoritative literature: Statement of
      Financial Accounting Standards No. 146, Accounting for Costs Associated
      with Exit or Disposal Activities).In accordance with ASC 420, a
      business restructuring is defined as an exit activity that includes but is
      not limited to a program that is planned and controlled by management, and
      materially changes either the scope of a business or the manner in which
      that business is conducted. Business restructuring charges include (i)
      one-time termination benefits related to employee separations, (ii)
      contract termination costs, and (iii) other costs associated with
      consolidating or closing of facilities The Companys restructuring costs
      for its post acquisition activities are more fully described in Note
      14.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | Website Development Costs:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | The Company recognizes the costs associated with
      developing a website in accordance with ACS Topic 350- 40 (prior
      authoritative literature: the American Institute of Certified Public
      Accountants (AICPA) Statement of Position (SOP) No. 98-1, Accounting
      for the Costs of Computer Software Developed or Obtained for Internal
      Use). Relating to website development costs, the Company follows the
      guidance pursuant to ASC Topic 350-50 (prior authoritative literature:
      Emerging Issues Task Force (EITF) No. 00-2, Accounting for Website
      Development Costs).                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | Internal and external costs incurred during the
      preliminary project stage are expensed as they are incurred. Internal and
      external costs incurred to develop internal-use computer software during
      the application development stage are capitalized. Training costs are not
      internal-use software development costs and, if incurred during this
      stage, are expensed as incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | These capitalized costs are amortized based on their
      estimated useful life over three years. Payroll and other related costs
      are not capitalized, as the amounts principally relate to
    maintenance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | Impairment of Long-Lived Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | In accordance with ASC Topic 360-10-15 (prior
      authoritative literature: 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.                                                                                                                                                                           

41

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      

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

| | b) | Significant Accounting Policies
  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | 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.                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | The expected amortization to be recorded for years ended
      April 30, 2012, and April 30, 2013, of the acquired technologies and
      customer asset is as follows:                                                                                                                                                                                                                                                                                                                                                                                                              

| |      |   | NewHeights |  |   | FirstHand |  |   | BridgePort |  |   | Total   | 
| | ---- | - | ---------- |  | - | --------- |  | - | ---------- |  | - | ------- | 
| |      |   |            |  |   |           |  |   |            |  |   |         | 
| | 2012 | $ | 214,099    |  | $ | 534,087   |  | $ | 70,564     |  | $ | 818,750 | 
| | 2013 |   | 40,914     |  |   |          |  |   |           |  |   | 40,914  | 

The above intangible assets are
expected to be fully amortized as at April 30, 2013.

In accordance with ASC Topic 360-10-15
(prior authoritative literature: SFAS 144), the Company performed an assessment
as of April 30, 2011 and determined that there was no impairment of its
intangible assets (2010 - $nil).

The Company performed its assessment
at the asset group level which represented the lowest level of cash flows that
are largely independent of cash flows of other assets and liabilities. For the
Company this asset grouping is deemed to be at the reporting unit level and
consists of acquired technology and customer relationships (which were recorded
as a result of the acquisitions of FirstHand and NewHeights), and equipment.
When performing this test at the reporting unit level, goodwill is included in
the carrying value of the asset group. The Company assessed the recoverability
of the carrying value of its long-lived assets based on estimated undiscounted
cash flows to be generated from such assets. For the year ended April 30, 2011,
the carrying value of the asset group was less than the undiscounted cash flows,
indicating no impairment (2010 - $nil).

42

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      

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

| | b) | Significant Accounting Policies
  (contd)                                               
| | -- | ------------------------------------------------------------------------------------------
| |    |                                                                                           
| |    | A summary of the Companys intangible assets, net, at
      April 30, 2011, is as follows:

| |                                   |   |           |  |   | Accumulated  |  |   | Impairment |  |   | Net Carrying | 
| | --------------------------------- | - | --------- |  | - | ------------ |  | - | ---------- |  | - | ------------ | 
| |                                   |   | Cost      |  |   | Amortization |  |   | Charge     |  |   | Amount       | 
| | Acquired technologies             | $ | 6,314,811 |  | $ | 4,038,003    |  | $ | 1,888,658  |  | $ | 388,150      | 
| | Customer assets                   |   | 2,747,117 |  |   | 1,059,575    |  |   | 1,216,028  |  |   | 471,514      | 
| | Intangible assets, April 30, 2011 | $ | 9,061,928 |  | $ | 5,097,578    |  | $ | 3,104,686  |  | $ | 859,664      | 

A summary of the Companys intangible
assets, net at April 30, 2010 is as follows:

| |                                   |   |           |  |   | Accumulated  |  |   | Impairment |  |   | Net Carrying | 
| | --------------------------------- | - | --------- |  | - | ------------ |  | - | ---------- |  | - | ------------ | 
| |                                   |   | Cost      |  |   | Amortization |  |   | Charge     |  |   | Amount       | 
| | Acquired technologies             | $ | 6,304,947 |  | $ | 3,370,200    |  | $ | 1,888,658  |  | $ | 1,046,089    | 
| | Customer assets                   |   | 2,723,993 |  |   | 879,695      |  |   | 1,216,028  |  |   | 628,270      | 
| | Intangible assets, April 30, 2010 | $ | 9,028,940 |  | $ | 4,249,895    |  | $ | 3,104,686  |  | $ | 1,674,359    | 

Accounts Receivable and Allowance
for Doubtful Accounts:

Accounts receivable are presented net
of an allowance for doubtful accounts. The allowance was $49,883 at April 30,
2011 (2010 - $1,116,119). Bad debt expense for the year ended April 30, 2011,
was $183,893 (2010 - $296,887).

The Company evaluates, on a periodic
basis, the collectability of its accounts receivable balances on an individual
customer basis considering a number of factors including the length of time
accounts receivable are beyond the contractual payment terms, the Companys
previous loss history with the customer and the customers ability to pay its
obligation to the Company.

When the Company becomes aware of a
specific customers inability to meet its financial obligations to the Company,
the Company records a specific bad debt provision to reduce the customers
related accounts.

Foreign Currency Translation:

The Companys wholly-owned
subsidiaries with a functional currency other than the U.S. dollar translate
amounts to the reporting currency, United States dollars, in accordance with ASC
Topic 830 (prior authoritative literature: SFAS No. 52, Foreign Currency
Translation). At each balance sheet date, assets and liabilities that are
denominated in a currency other than U.S. dollars are adjusted to reflect the
current exchange rate which may give rise to a foreign currency translation
adjustment accounted for as a separate component of stockholders equity and
included in comprehensive loss.

For transactions undertaken by the
Company in foreign currencies, monetary assets and liabilities are translated
into the functional currency at the exchange rate in effect at the end of the
year. Non-monetary assets and liabilities are translated at the exchange rate
prevailing when the assets were acquired or the liabilities assumed. Revenues
and expenses are translated at the rate approximating the rate of exchange on
the transaction date. Exchange gains and losses are included in the
determination of net income (loss) for the year.

43

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      

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

| | b) | Significant Accounting Policies
  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | Accrued Warranty:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | The Companys warranty policy generally provides for one
      year of warranty for its products. The Company records a liability for
      estimated warranty obligations at the date products are sold. The
      estimated cost of warranty coverage is based on the Companys actual
      historical experience with its current products or similar products. For
      new products, the required reserve is based on historical experience of
      similar products until such time as sufficient historical data has been
      collected on the new product. Estimated liabilities for warranty
      exposures, which relate to normal product warranties and a one-year
      obligation to provide for potential future liabilities for product sales
      for the years ended April 30, 2011 and 2010 were as
  follows:

| |                            |   | Years Ended April 30, | 
| | -------------------------- | - | --------------------- | 
| |                            |   | 2011                  | 
| |                            |   |                       | 
| | Balance, beginning of year | $ | 120,963               | 
| | Change                     |   | 19,905                | 
| | Balance, end of year       | $ | 146,868               | 

Trademarks:

Costs related to trademark
applications have been deferred and are included in other assets. Once granted,
trademark costs will be amortized over their useful lives.

Fair Value of Financial
Instruments:

The fair value of the Companys
financial instruments, which consist of cash, accounts receivable, accounts
payable and accrued liabilities, customer deposits and accrued warranty. The
fair value for convertible debt approximates book value using current rates of
interest.

As a basis for considering market
participant assumptions in fair value measurements, ASC 820-10 establishes a
fair value hierarchy that distinguishes between market participant assumptions
based on market data obtained from sources independent of the reporting entity
(observable inputs that are classified within Levels 1 and 2 of the hierarchy)
and the reporting entitys own assumptions about market participant assumptions
(unobservable inputs classified within Level 3 of the hierarchy).

The fair value hierarchy, as defined
by ASC 820-10, contains three levels of inputs that may be used to measure fair
value as follows:

Level 1 inputs utilize quoted prices
(unadjusted) in active markets for identical assets or liabilities;

Level 2 inputs are inputs other than
quoted prices included in Level 1 that are observable for the asset or
liability, either directly or indirectly such as interest rates, foreign
exchange rates, and yield curves that are observable at commonly quoted
intervals; and Level 3 inputs are unobservable inputs for the asset or liability
which are typically based on an entitys own assumptions, as there is little, if
any, related market activity.

In instances where the determination
of the fair value measurement is based on inputs from different levels of the
fair value hierarchy, the level in the fair value hierarchy within which the
entire fair value measurement falls is based on the lowest level input that is
significant to the fair value measurement in its entirety. The Companys
assessment of the significance of a particular input to the fair value
measurement in its entirety requires judgment and considers factors specific to
the asset or liability.

44

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      

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

| | b) | Significant Accounting Policies
  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | The Companys derivative financial instruments are valued
      using observable market-based inputs to industry valuation models. These
      valuation models require a variety of inputs, including contractual terms,
      market prices, yield curves, and measures of volatility obtained from
      various market sources.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | The Company measures certain financial assets, including
      any foreign currency option or forward contracts at fair value. Unless
      otherwise noted, it is managements opinion that the Company is not
      exposed to significant interest, currency or credit risks arising from
      these financial instruments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | Income Taxes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | The Company accounts for income taxes by the asset and
      liability method in accordance with ASC Topic 740 (prior authoritative
      literature: SFAS 109, Accounting for Income Taxes). Under this
      method, current income taxes are recognized for the estimated income taxes
      payable for the current year. Deferred income tax assets and liabilities
      are recognized in the current year for temporary differences between the
      tax and accounting bases of assets and liabilities as well as for the
      benefit of losses available to be carried forward to future years for tax
      purposes that are likely to be realized. In addition, a valuation
      allowance is established to reduce any deferred tax asset for which it is
      determined that it is more likely than not that some portion of the
      deferred tax asset will not be realized.                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | The Company has not recorded a deferred tax liability
      related to its investment in foreign subsidiaries. The Company has
      determined that its investment in these subsidiaries is permanent in
      nature and it does not intend to dispose of these investments in the
      foreseeable future. The amount of the deferred tax liability related to
      the Company's investment in foreign subsidiaries is not reasonably
      determinable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | On May 1, 2007, the Company adopted Financial Accounting
      Standards Board (FASB) interpretation No. 48 (FIN 48), Accounting
      for Uncertainty in Income Taxes, (codified in FASB ASC Topic 740).
      FIN 48 contains a two-step approach to recognizing and measuring uncertain
      tax positions taken or expected to be taken in a tax return. The first
      step is to determine if the weight of available evidence indicates that it
      is more likely than not that the tax position will be sustained in an
      audit, including resolution of any related appeals or litigation
      processes. The second step is to measure the tax benefit as the largest
      amount that is more than 50% likely to be realized upon ultimate
      settlement. The Company recognizes interest and penalties accrued on
      unrecognized tax benefits within general and administrative expense. To
      the extent that accrued interest and penalties do not ultimately become
      payable, amounts accrued will be reduced and reflected as a reduction in
      general and administrative expenses in the period that such determination
      is made.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | The cumulative effect of adopting FIN 48 of $72,413 was
      recorded as an increase to accumulated deficit on May 1, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | Comprehensive Loss:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | The Company has adopted ASC Topic 220 (prior
      authoritative literature: SFAS No. 130 Reporting Comprehensive
      Income). Comprehensive loss is comprised of foreign currency
      translation adjustments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | Basic and Diluted Loss per Share:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | The Company computes net loss per share in accordance
      with ASC Topics 260 and ASC 260-10 (prior authoritative literature: SFAS
      No. 128, "Earnings Per Share", and EITF No. 03-06, Participating
      Securities and the Two-Class Method under FASB Statement No. 128,
      respectively).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

45

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      

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

| | b) | Significant Accounting Policies
  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | Basic earnings per share is computed based on the
      weighted average number of ordinary shares outstanding and assumes an
      allocation of net income to the preferred shares issued from 6789722
      Canada Inc., a subsidiary of the Company, that are exchangeable shares of
      common stock of the Company (Note 7) for the period or portion of the
      period that this security is outstanding. There are no exchangeable shares
      remaining as all have been exchanged into shares of common stock of the
      Company as of April 30, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | ASC 260 requires presentation of both basic and diluted
      earnings per share (EPS) on the face of the income statement. Basic EPS
      is computed by dividing net loss available to common shareholders by the
      weighted average number of common shares outstanding during the year.
      Diluted EPS gives effect to all dilutive potential common shares
      outstanding during the year including stock options and warrants using the
      treasury stock method. In computing diluted EPS, the average stock price
      for the year is used in determining the number of shares assumed to be
      purchased from the exercise of stock options or warrants. For the year
      ended April 30, 2011, loss per share excludes 7,606,591 (April 30, 2010 
      7,549,795) potentially dilutive common shares (related to stock options,
      warrants, and convertible debt) as their effect was
  anti-dilutive.                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | Investment tax credits:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | Investment tax credits are accounted for under the cost
      reduction method whereby they are netted against the expense or property
      and equipment to which they relate. Investment tax credits are recorded
      when the qualifying expenditures have been incurred and if it is more
      likely not that the tax credits will be realized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | Goodwill:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | Goodwill represents the excess purchase price over the
      estimated fair value of net assets acquired as of the acquisition date.
      ASC Topic 350 (prior authoritative literature: Statement of Financial
      Accounting Standards No. 142, Goodwill and Other Intangible
      Assets (SFAS No. 142)). ASC 350 requires goodwill to be tested for
      impairment annually or more frequently if an event occurs or circumstances
      change that would more likely than not reduce the fair value of the
      Company's business enterprise below its carrying value. These events or
      circumstances could include a significant change in the business climate,
      legal factors, operating performance indicators, competition, or sale or
      disposition of a significant portion of a reporting unit. Recoverability
      of goodwill is measured at the reporting unit level by comparing the
      reporting units carrying amount, including goodwill, to the fair value of
      the reporting unit, which is measured based upon, among other factors,
      market multiples for comparable companies as well as a discounted cash
      flow analysis.           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | Management has determined that the Company currently has
      a single reporting unit which is CounterPath Corporation. 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | 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 April 30, 2011 was $7,055,616
      (CDN$6,704,947) (April 30, 2010 - $6,668,070) and $2,192,377
      (CDN$2,083,752) (April 30, 2010 - $2,071,955), respectively. During the
      fourth quarter of its fiscal year ended April 30, 2011, the Company
      performed its annual impairment test. In the first step, Management
      compared the fair value of the Company to its carrying value based upon an
      analysis of a number of factors including the Companys market
      capitalization and transaction values of comparable companies as at April
      30, 2011. On this basis Management determined that the Companys implied
      fair value exceeded its carrying value and has not recognized any
      impairment of goodwill in the consolidated financial statements for the
      year ended April 30, 2011 (2010 - $nil).

46

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      

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

| | b) | Significant Accounting Policies
  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | Derivative Instruments and Hedging
    Activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | The Company accounts for derivative instruments,
      consisting of foreign currency forward contracts, pursuant to the
      provisions of Statement of Financial Accounting Standards No. 161,
      Disclosures about Derivative Instruments and Hedging Activities  an
      amendment of FASB Statement No. 133 (SFAS 161), effective at the
      beginning of the first quarter of fiscal year 2010. SFAS No. 161 was
      incorporated into ASC 815, Derivatives and Hedging (ASC 815). ASC 815
      requires the Company to measure derivative instruments at fair value and
      record them in our balance sheet as either an asset or liability and
      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. The Company does not use derivative instruments
      for trading purposes. ASC 815 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.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | The Company manages foreign currency market risk using
      option or forward contracts to offset the risk associated with the effects
      of certain foreign currency exposures primarily related to non-functional
      currency intercompany loans and advances between our international
      subsidiaries as well as other balance sheet accounts, particularly
      accounts receivable, accounts payable and certain accrual accounts. The
      Company revalues all contracts to their current market value at the end of
      each reporting period and unrealized gains and losses are included in our
      results of operations for that period. These gains and losses largely
      offset gains and losses recorded from the revaluation of our
      non-functional currency balance sheet exposures. We expect this to
      mitigate some foreign currency transaction gains or losses in future
      periods. Our net realized gain or loss with respect to currency
      fluctuations will depend on the currency exchange rates and other factors
      in effect as the contracts mature.                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | We record our foreign currency forward contracts on our
      Consolidated Balance Sheets as other current assets or other current
      liabilities depending on whether the net fair value of such contracts is a
      net asset or net liability, respectively (see Note 11 Derivative
      Instruments and Hedging Activities, of the Notes to the Consolidated
      Financial Statements).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | c) | New Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | In September 2009, the FASB revised the authoritative
      guidance for revenue recognition for arrangements with multiple
      deliverables. The new guidance modifies the requirements for determining
      whether a deliverable can be treated as a separate unit of accounting by
      removing the criteria that verifiable and objective evidence of fair value
      exists for the undelivered elements. In allocating transaction
      consideration among the deliverables, the guidance also introduced the
      concept of using management's best estimate of a stand along selling price
      as an alternate basis for allocation. The guidance is effective in fiscal
      years beginning on or after June 15, 2010, and the Company is required to
      adopt this guidance in its first quarter of fiscal 2012. The Company is
      currently evaluating the impact this guidance may have on its financial
      position, results of operations and cash flows.                                                                                                                                                                                                                                                                                                                                                           

47

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      

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

| | c) | New Accounting Pronouncements (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | In September 2009, FASBs Emerging Issues Task Force
      issued ASU 2009-14 Certain Revenue Arrangements That Include Software
      Elements. ASU 2009-14 addresses certain revenue arrangements that include
      software elements. This guidance states that tangible products with
      hardware and software components that work together to deliver the product
      functionality are considered non-software products, and the accounting
      guidance under the revenue arrangements with multiple deliverables is to
      be followed. This guidance is effective for arrangements entered into, or
      materially modified, in periods beginning on or after June 15, 2010, with
      earlier adoption permitted, and the Company is required to adopt this
      guidance in its first quarter of fiscal 2012. The Company is currently
      evaluating the impact this guidance may have on its financial position,
      results of operations and cash flows.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | In January 2010, the FASB issued ASU 2010-06,
      Improving Disclosures about Fair Value Measurements,which is
      included in the ASC in Topic 820 (Fair Value Measurements and
      Disclosures). ASU 2010-06 requires new disclosures on the amount and
      reason for transfers in and out of Level 1 and 2 fair value measurements.
      ASU 2010-06 also requires disclosure of activities, including purchases,
      sales, issuances, and settlements within the Level 3 fair value
      measurements and clarify existing disclosure requirements on levels of
      disaggregation and disclosures about inputs and valuation techniques. ASU
      2010-06 is effective for interim and annual reporting periods beginning
      after December 15, 2009. The Company adopted the provisions of ASU 2010-06
      and it did not have a material impact on the financial statements for the
      year ended April 30, 2011.                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | In February 2010, the FASB issued ASU 2010-09,
      Subsequent Events. ASU 2010-09 was issued to amend ASC 855 to
      remove the requirement for SEC filers to disclose the date through which
      an entity has evaluated subsequent events. This change is intended to
      alleviate potential conflicts with current SEC guidance. The provisions of
      ASU 2010-09 are effective upon issuance. The adoption of ASC 855 and ASU
      2010-09 did not have a material impact on the Company's financial
      statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | In April 2010, the FASB issued Accounting Standards
      Update No. 2010-17, Revenue RecognitionMilestone Method (Topic 605) Revenue Recognition(ASU 2010-17). ASU 2010-17 provides
      guidance on defining the milestone and determining when the use of the
      milestone method of revenue recognition for research or development
      transactions is appropriate. It provides criteria for evaluating if the
      milestone is substantive and clarifies that a vendor can recognize
      consideration that is contingent upon achievement of a milestone as
      revenue in the period in which the milestone is achieved, if the milestone
      meets all the criteria to be considered substantive. ASU 2010-17 is
      effective for us in fiscal 2012 and should be applied prospectively. The
      Company is currently evaluating the impact of the pending adoption of ASU
      2010-17 on our consolidated financial statements.                            

48

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      

|Note 3 | Equipment
|------ | ---------

| |                        |   | April 30, 2011 | 
| | ---------------------- | - | -------------- | 
| |                        |   |                | 
| |                        |   | Cost           | 
| |                        |   |                | 
| | Computer hardware      | $ | 730,148        | 
| | Computer software      |   | 774,769        | 
| | Leasehold improvements |   | 206,941        | 
| | Office furniture       |   | 228,422        | 
| | Websites               |   | 49,915         | 
| |                        | $ | 1,990,195      | 

| |                        |   | April 30, 2010 | 
| | ---------------------- | - | -------------- | 
| |                        |   |                | 
| |                        |   | Cost           | 
| |                        |   |                | 
| | Computer hardware      | $ | 686,844        | 
| | Computer software      |   | 734,769        | 
| | Leasehold improvements |   | 206,941        | 
| | Office furniture       |   | 228,422        | 
| | Websites               |   | 49,915         | 
| |                        | $ | 1,906,891      | 

|Note 4 | Accounts Payable and Accrued
      Liabilities
|------ | ----------------------------------------------

Accounts payable and accrued
liabilities at April 30, 2011 and 2010 are comprised of the following:

| |                             |   | April 30, | 
| | --------------------------- | - | --------- | 
| |                             |   | 2011      | 
| | Accounts payable  trade    | $ | 658,904   | 
| | Accrued commissions         |   | 162,147   | 
| | Accrued vacation            |   | 472,830   | 
| | Codec royalties             |   | 462,423   | 
| | Research fees               |   |          | 
| | Accrued severance  Note 12 |   | 225,719   | 
| | Other accrued liabilities   |   | 358,874   | 
| |                             | $ | 2,340,897 | 

|Note 5 | Related Party Transactions
|------ | --------------------------

The Companys Chairman is the Chairman
and founding shareholder of Mitel Networks Corporation (Mitel). On July 31,
2008 the Company entered into a source code license agreement whereby the
Company licensed to Mitel the source code for the Your Assistant product in
consideration of a payment of $650,000. Associated with the agreement are
ongoing license fees to be paid by Mitel of $13.50 per copy deployed, declining
to $9.00 per copy deployed after two years and declining from $9.00 to nil after
four years. In addition, the agreement provides Mitel with a first right to
match any third party offer to purchase the source code software and related
intellectual property. The Companys software license revenue for the year ended
April 30, 2011, pursuant to the terms of these agreements, was $525,968 (2010 -
$560,636).

As at April 30, 2011, the Company had
an accounts receivable balance from Mitel of $114,369 (April 30, 2010 -
$170,802).

49

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      

|Note 5 | Related Party Transactions 
      (contd)
|------ | -------------------------------------------

During the year ended April 30, 2011,
the Company provided consulting services totalling $15,176 (2010 - $nil) to
Wesley Clover, a company controlled by the Chairman of the Company.

During the year ended April 30, 2011,
the Company through its wholly owned subsidiary, CounterPath Technologies Inc.,
paid $84,121 (2010 - $79,500) to Kanata Research Park Corporation (KRP) for
leased office space. KRP is controlled by the Companys Chairman.

In connection with a non-brokered
private placement which closed on October 29, 2010, the Company issued a
convertible debenture in the principal amount of $490,750 (CDN$500,000) to
Wesley Clover, a company controlled by the Chairman of the Company. The
debenture is convertible by the holder at any time prior to maturity, in whole
or in part into common shares of the Company at a conversion price of $1.37 per
share. The convertible debenture is unsecured, bearing interest at the prime
bank rate as quoted by the Bank of Montreal with interest payable monthly and
maturing on July 30, 2012. During the year ended April 30, 2011, the Company
paid interest of $7,381 to Wesley Clover towards interest on convertible
debentures.

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

In addition, the Company entered into
warrant exercise agreements with Wesley Clover to exercise 833,334 warrants at
an exercise price of $0.90 per share Wesley Clover acquired on October 29, 2009,
on or before July 30, 2011, prior to the expiry of the warrants on October 29,
2011. In the event that Wesley Clover does not exercise all of the warrants on
or before August 31, 2011, a default amount of $250,000 will be immediately due
and payable to the Company and will incur interest at the rate of 2% per month
(on a pro-rata basis) on the default amount until the default amount is paid in
full.

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

|Note 6 | Convertible Debentures
|------ | ----------------------

On July 30, 2010 and October 29, 2010,
the Company issued two convertible debentures in the principal amounts of
$483,300 and $490,750, respectively, to an investor. The debentures are
convertible by the holder, at any time prior to maturity, in whole or in part
into common shares of the Company at a conversion price of $1.00 per share. On
October 29, 2010, the Company issued a third convertible debenture in the
principal amount of $490,750 to a company controlled by the Chairman of the
Company. The debenture is convertible by the holder at any time prior to
maturity, in whole or in part into common shares of the Company at a conversion
price of $1.37 per share. The three convertible debentures are unsecured,
bearing interest at the prime bank rate as quoted by the Bank of Montreal with
interest payable monthly and maturing on July 30, 2012.

The convertible debentures may all be
prepaid in whole or in part by the Company by paying 105% of the principal to be
prepaid together with accrued and unpaid interest on or before July 30, 2011, or
by paying 102.5% of the principal to be prepaid together with accrued and unpaid
interest between July 31, 2011 and April 30, 2012, or by paying 100% of the
principal to be prepaid together with accrued and unpaid interest between May 1,
2012 and July 30, 2012.

50

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      

|Note 6 | Convertible Debentures  (contd)
|------ | ---------------------------------

Pursuant to ASC Topic 470-20, Debt
with Conversion and Other Options, The Company has determined that the
convertible debentures issued on October 29, 2010 contain a beneficial
conversion feature, as the fair value of the Companys common stock on the date
of issuance was greater than the initial conversion price. Accordingly, the
Company allocated $765,964 to the convertible debentures and $215,536 to the
beneficial conversion feature. The amounts allocated to the beneficial
conversion feature represent a discount on the debt financing which is accreted
to income over the term of the debt. During the year ended April 30, 2011, the
Company accreted $55,738 by way of discount on the debentures issued.

The convertible debentures issued on
July 30, 2010 did not contain a beneficial conversion feature, as the fair value
of the Companys common stock on the date of issuance was equal to or less than
the initial conversion price.

The following table summarizes the
Companys outstanding debentures for the year ended April 30, 2011, and April
30, 2010.

| |                                             |   | April 30, |  
| | ------------------------------------------- | - | --------- | -
| |                                             |   | 2011      |  
| | Issuance of convertible debenture           | $ | 1,464,800 |  
| | Beneficial conversion feature               |   | (215,536  | )
| | Accretion of debenture discount             |   | 55,738    |  
| | Convertible debentures as at April 30, 2011 | $ | 1,305,002 |  

|Note 7 | 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, and November 19,
2008, the Company issued 50,000 shares each totaling to 100,000 shares of common
stock pursuant to a holder of 100,000 shares of exchangeable preferred shares of
its subsidiary 6789722 Canada Inc. exercising their exchange rights. There were
269,841 outstanding exchangeable shares as of April 30, 2009 (April 30, 2008 -
369,841). 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.

On May 11, 2009, the Company issued
50,000 shares of common stock pursuant to a holder of 50,000 shares of
exchangeable preferred shares of its subsidiary 6789722 Canada Inc. exercising
their exchange rights. On December 16, 2009, the Company issued 154,546 shares
of common stock pursuant to a holder of 154,546 shares of exchangeable preferred
shares of its subsidiary 6789722 Canada Inc. exercising their exchange rights.
On April 27, 2010, the Company issued 4,424 shares of common stock pursuant to a
holder of 4,424 shares of exchangeable preferred shares of its subsidiary
6789722 Canada Inc. exercising their exchange rights. On May 14, 2010, the
Company issued 50,000 shares of common stock pursuant to a holder of 50,000
shares of exchangeable preferred shares of its subsidiary 6789722 Canada Inc.
exercising their exchange rights. On January 27, 2011, the Company issued 1,122
shares of common stock pursuant to a holder of 1,122 shares of exchangeable
preferred shares of its subsidiary 6789722 Canada Inc. exercising their exchange
rights.

51

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      

|Note 7 | Exchangeable Shares
      (contd)
|------ | -----------------------------------

On January 28, 2011, the Company
redeemed all of the remaining 9,749 exchangeable shares outstanding pursuant to
the Company's redemption call right under the provisions attaching to the
exchangeable shares of 6789722 Canada Inc. As a result there were no outstanding
exchangeable shares as of April 30, 2011 (April 30, 2010  60,871). As the
exchangeable shares have already been recognized in connection with the
acquisition of NewHeights, the value ascribed to these shares on exchange is
$nil.

|Note 8 | 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, and was calculated as the average daily actual sales
price of the common stock on the TSX-V on each of the ten trading days
immediately preceding July 17, 2009.

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
$14,636 of transaction costs. Each unit consists of one share of common stock in
the capital of the 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 the Company 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
(the 2010 Stock Option Plan) under which options to purchase common shares of
the Company may be granted to employees, directors and consultants. This plan is
effectively a merging of the Companys 2004 and 2005 stock option plans. 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 plan is 5,860,000 under the 2010
Stock Option Plan.

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

52

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      

|Note 8 | Common Stock (contd)
|------ | ----------------------

Stock Options  (contd)

The expected term of options granted
to employees in the current fiscal year has been determined utilizing the
simplified method as prescribed by SAB No. 107, Share-Based Payment, as
amended by SAB No. 110 on January 1, 2008. The simplified method was used
because the Company does not have sufficient detailed information about employee
exercise behaviour. For non-employees, the expected term of the options
approximates the full term of the options. The risk-free interest rate is based
on a treasury instrument whose term is consistent with the expected term of the
stock options. The Company has not paid and does not anticipate paying dividends
on its common stock; therefore, the expected dividend yield is assumed to be
zero. In addition, ASC 718 requires companies to utilize an estimated forfeiture
rate when calculating the expense for the period, whereas prior to the adoption
of ASC 718 the Company recorded forfeitures based on actual forfeitures and
recorded a compensation expense recovery in the period when the awards were
forfeited. As a result, based on the Companys experience, the Company applied
an estimated forfeiture rate of 15% in fiscal 2011 and 2010 in determining the
expense recorded in the accompanying consolidated statement of operations.

The weighted-average fair values of
options granted during the year ended April 30, 2011 and 2010 were $1.14 and
$0.34 respectively. The weighted-average assumptions utilized to determine such
values are presented in the following table:

| |                             |   | Year Ended     |  |   | Year Ended     | 
| | --------------------------- | - | -------------- |  | - | -------------- | 
| |                             |   | April 30, 2011 |  |   | April 30, 2010 | 
| | Risk-free interest rate     |   | 2.00%          |  |   | 2.31%          | 
| | Expected volatility         |   | 77.5%          |  |   | 84.5%          | 
| | Expected term               |   | 3.7 yrs        |  |   | 3.7 yrs        | 
| | Dividend yield              |   | 0%             |  |   | 0%             | 
| | Weighted average fair value | $ | 1.14           |  | $ | 0.34           | 

The following is a summary of the
status of the Companys stock options as of April 30, 2011 and the stock option
activity during the years ended April 30, 2011 and 2010:

| |                               |  | Number of  |   | Weighted-Average         | 
| | ----------------------------- |  | ---------- | - | ------------------------ | 
| |                               |  | Options    |   | Exercise Price per Share | 
| | Outstanding at April 30, 2009 |  | 4,650,768  |   | $1.13                    | 
| | Granted                       |  | 1,050,000  |   | $0.57                    | 
| | Exercised                     |  | (25,875    | ) | $0.46                    | 
| | Forfeited / Cancelled         |  | (904,144   | ) | $1.14                    | 
| | Expired                       |  | (153,042   | ) | $0.62                    | 
| | Outstanding at April 30, 2010 |  | 4,617,707  |   | $1.03                    | 
| | Granted                       |  | 827,000    |   | $1.93                    | 
| | Exercised                     |  | (308,037   | ) | $0.47                    | 
| | Forfeited / Cancelled         |  | (1,093,407 | ) | $1.80                    | 
| | Expired                       |  | (435,600   | ) | $1.76                    | 
| | Outstanding at April 30, 2011 |  | 3,607,663  |   | $0.97                    | 
| |                               |  |            |   |                          | 
| | Exercisable at April 30, 2011 |  | 1,930,647  |   | $0.78                    | 
| | Exercisable at April 30, 2010 |  | 2,602,619  |   | $1.32                    | 

53

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      

|Note 8 | Common Stock (contd)
|------ | ----------------------

Stock Options  (contd)

The following table summarizes
information regarding stock options outstanding as of April 30, 2011:

Number of
    
    
    Aggregate
    
    
    
    
    
    Number of
    
    
    AggregateExercise
    
    Options
    
    
    Intrinsic
    
    
    
    
    
    Options
    
    
    IntrinsicPrice
    
    Outstanding
    
    
    Value
    
    
    Expiry Date
    
    
    Exercisable
    
    
    Value$0.44
    
    456,963
    
    $
    740,280
    
    
    December 15,
      2013
    
    
    264,527
    
    $
    428,534June 13, 2010 to$0.47
    
    755,522
    
    
    1,201,280
    
    
    September 26,
      2016
    
    
    734,957
    
    
    1,168,582$0.60
    
    483,459
    
    
    705,850
    
    
    December 14, 2014
    
    
    181,444
    
    
    264,908$0.62
    
    850,000
    
    
    1,224,000
    
    
    April 17, 2014
    
    
    425,000
    
    
    612,000March 8, 2015 to$1.90
    
    701,719
    
    
    112,275
    
    
    December 14,
      2015
    
    
    66,719
    
    
    10,675October 1, 2012 to$2.00
    
    18,000
    
    
    1,080
    
    
    February 28,
      2015
    
    
    18,000
    
    
    1,080$2.15
    
    240,000
    
    
    
    
    
    September 7, 2016
    
    
    240,000
    
    
    $2.27
    
    102,000
    
    
    
    
    
    March 10, 2016
    
    
    
    
    
    April 30, 2011
    
    3,607,663
    
    $
    3,984,765
    
    
    
    
    
    1,930,647
    
    $
    2,485,779April 30, 2010
    
    4,617,707
    
    $
    895,060
    
    
    
    
    
    2,602,619
    
    $
    404,859


The aggregate intrinsic value in the
preceding table represents the total intrinsic value, based on the Companys
closing stock price of $2.06 per share as of April 30, 2011 (April 30, 2010 
$0.82), which would have been received by the option holders had all option
holders exercised their options as of that date. The total number of
in-the-money options vested and exercisable as of April 30, 2011 was 1,690,647
(April 30, 2010  1,239,933). The total intrinsic value of options exercised
during the year ended April 30, 2011 was $488,907 (2010  $6,135). The grant
date fair value of options vested during the year ended April 30, 2011 was
$302,915 (April 30, 2010  $3,711,399).

The following table summarizes
information regarding the non-vested stock purchase options outstanding as of
April 30, 2011:

| |                                      |  |           |   |   | Weighted Average | 
| | ------------------------------------ |  | --------- | - | - | ---------------- | 
| |                                      |  | Number of |   |   | Grant-Date Fair  | 
| |                                      |  | Options   |   |   | Value            | 
| |                                      |  |           |   |   |                  | 
| | Non-vested options at April 30, 2009 |  | 2,176,561 |   | $ | 0.64             | 
| | Granted                              |  | 1,050,000 |   | $ | 0.34             | 
| | Vested                               |  | (828,797  | ) | $ | 0.86             | 
| | Forfeited                            |  | (382,676  | ) | $ | 1.04             | 
| | Non-vested options at April 30, 2010 |  | 2,015,088 |   | $ | 0.39             | 
| | Granted                              |  | 827,000   |   | $ | 1.14             | 
| | Vested                               |  | (690,011  | ) | $ | 0.44             | 
| | Forfeited                            |  | (475,061  | ) | $ | 0.57             | 
| | Non-vested options at April 30, 2011 |  | 1,677,016 |   | $ | 0.69             | 

As of April 30, 2011 there was
$960,886 of total unrecognized compensation cost related to unvested stock
options. This unrecognized compensation cost is expected to be recognized over a
weighted average period of 3.19 years.

54

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      

|Note 8 | Common Stock (contd)
|------ | ----------------------

Stock Options  (contd)

Employee and non-employee stock-based
compensation amounts classified in the Companys consolidated statements of
operations for the year ended April 30, 2011 and 2010 are as follows:

| |                                |   | Years Ended | 
| | ------------------------------ | - | ----------- | 
| |                                |   | April 30,   | 
| |                                |   | 2011        | 
| |                                |   |             | 
| | Cost of sales                  | $ | 27,399      | 
| | Sales and marketing            |   | 111,636     | 
| | Research and development       |   | 35,335      | 
| | General and administrative     |   | 165,944     | 
| | Total stock-based compensation | $ | 340,314     | 

Warrants

During the year ended April 30, 2011,
the Company entered into a warrant agreement, as amended, with a customer
whereby the Company issued 1,000,000 stock purchase warrants as part of a
software licensing contract that the Company entered into with the customer. The
warrants enable the holder thereof the right to purchase up to 1,000,000 shares
of the Companys common stock, exercisable for two years at a price of $1.50 per
share until July 30, 2012. Under an amendment agreement, 50% of the warrants
vest on a proportional basis to invoices delivered by the Company at the rate of
one warrant for every $3.00 invoiced and 50% of the warrants vest on a change of
control of the Company. As the likelihood of a change of control was not
determinable at the time of revenue recognition, the value of the applicable
warrants subject to vesting on change of control was deemed to be nil during the
year ended April 30, 2011. The warrants are held in trust and delivered once
vested and payment, as applicable, has been received by the Company. The fair
value of the 500,000 stock purchase warrants that was charged to revenue during
the year ended April 30, 2011, was $269,633 (2010  $nil). The remaining 500,000
warrants will be valued and charged against revenue if and when a change of
control of the Company occurs.

During the year ended April 30, 2010,
the Company issued 1,666,667 warrants on October 22, 2009 as a part of unit
offering. The fair value of the stock purchase warrants granted was $412,414.
The warrants enable the holders the right to purchase up to 1,666,667 shares of
the Companys common stock, exercisable for two years from the date of
issue.

The assumptions utilized to determine
such values for the years ended April 30, 2011 and April 30, 2010 are presented
in the following table:

| |                                         |   | Year Ended     |  |   | Year Ended     | 
| | --------------------------------------- | - | -------------- |  | - | -------------- | 
| |                                         |   | April 30, 2011 |  |   | April 30, 2010 | 
| |                                         |   |                |  |   |                | 
| | Risk-free interest rate                 |   | 0.23%          |  |   | 0.90%          | 
| | Expected volatility                     |   | 67.83%         |  |   | 79.94%         | 
| | Expected term                           |   | 1.25 yrs       |  |   | 2 yrs          | 
| | Dividend yield                          |   | 0%             |  |   | 0%             | 
| | Weighted average fair value per warrant | $ | 0.95           |  | $ | 0.23           | 

55

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      

|Note 8 | Common Stock (contd)
|------ | ----------------------

Warrants  (contd)

The following table summarizes
information regarding the warrants outstanding as of April 30, 2011 and April
30, 2010.

WeightedNumber of
    
    
    AverageWarrants
    
    
    Exercise Price
    
    
    Expiry DatesWarrants at April 30, 2009
    
    2,265,421
    
    $
    3.04
    
    
    November 30, 2009 to October
      24, 2010Granted
    
    1,666,667
    
    $
    0.90
    
    
    October 29, 2011Forfeited/Cancelled
    
    (750,000
    )
    $
    4.00
    
    
    November 30, 2009Expired
    
    (250,000
    )
    $
    4.00
    
    
    November 30, 2009Warrants at April 30, 2010
    
    2,932,088
    
    $
    1.50
    
    
    July 31, 2010 to October 29,
      2011Granted
    
    1,000,000
    
    $
    1.50
    
    
    July 31, 2012Expired
    
    (1,265,421
    )
    $
    2.25
    
    
    July 31, 2010 to October 28,
      2010Warrants at April 30, 2011
    
    2,666,667
    
    $
    1.12
    
    
    October 29, 2011 to July 30, 2012


Employee Stock Purchase Plan

Under the terms of the ESPP all
regular salaried (non-probationary) employees can purchase up to 6% of their
base salary in common shares 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. During the year ended April 30, 2011 the
Company matched $25,327 (2010 - $15,489) in shares purchased by employees under
the ESSP.

A total of 700,000 shares have been
reserved for issuance under the ESPP. As of April 30, 2011, a total of 556,401
shares were available for issuance under the ESPP. During the years ended April
30, 2011, 55,571 (2010 - 88,028) shares were sold or issued to employees under
the ESPP.

Deferred Share Unit Plan

Under the terms of the DSUP which is
effective as at October 22, 2009, 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 (DSU) 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. Fair value of the DSUs, which
is based on the closing price of the Companys common stock on the date of
grant, is recorded as compensation expense over the vesting period.

A total of 2,000,000 shares have been
reserved for issuance under the DSUP. During the year ended April 30, 2011,
866,552 (2010 - 520,161) deferred share units were issued under the DSUP, of
which 672,026 were granted to officers and 172,500 were granted to directors.
For the year ended April 30, 2011, a total of 613,287 shares were available for
issuance under the DSUP.

56

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      

|Note 8 | Common Stock (contd)
|------ | ----------------------

Deferred Share Unit Plan 
(contd)

The following table summarizes the
Companys outstanding deferred share unit (DSU) awards as of April 30, 2011, and
changes during the period then ended:

| |                               |  |                 |  |   | Weighted Average | 
| | ----------------------------- |  | --------------- |  | - | ---------------- | 
| |                               |  |                 |  |   | Grant Date Fair  | 
| |                               |  | Number of DSUs |  |   | Value per Unit   | 
| |                               |  |                 |  |   |                  | 
| | DSUs at April 30, 2009       |  |                |  | $ |                 | 
| | Granted                       |  | 520,161         |  | $ | 0.60             | 
| | Conversions                   |  |                |  | $ |                 | 
| | DSUs at April 30, 2010       |  | 520,161         |  | $ | 0.60             | 
| | Granted                       |  | 866,552         |  | $ | 0.96             | 
| | Conversions                   |  |                |  | $ |                 | 
| | Outstanding at April 30, 2011 |  | 1,386,713       |  | $ | 0.83             | 

As of April 30, 2011 there was
$309,459 (2010  $121,400) of total unrecognized compensation cost related to
unvested deferred share units awards. This unrecognized compensation cost is
expected to be recognized over a weighted average period of 1.38 years (2010 
2.62) . The total fair value of DSUs that vested during the year was $313,906
(2010 - $166,936).

Employee and non-employee deferred
share unit based compensation amounts classified in the Companys consolidated
statements of operations for the year ended April 30, 2011 and 2010 are as
follows:

| |                                              |   | Year Ended | 
| | -------------------------------------------- | - | ---------- | 
| |                                              |   | April30,   | 
| |                                              |   | 2011       | 
| |                                              |   |            | 
| | General and administrative                   | $ | 472,171    | 
| | Total deferred share unit-based compensation | $ | 472,171    | 

The following table summarizes
information regarding the non-vested deferred share units outstanding as of
April 30, 2011:

| |                                    |  |                 |   |   | Weighted Average | 
| | ---------------------------------- |  | --------------- | - | - | ---------------- | 
| |                                    |  |                 |   |   | Grant Date Fair  | 
| |                                    |  | Number of DSUs |   |   | Value per Unit   | 
| |                                    |  |                 |   |   |                  | 
| | Non-vested DSUs at April 30, 2009 |  |                |   | $ |                 | 
| | Granted                            |  | 520,161         |   | $ | 0.60             | 
| | Vested                             |  | (278,226        | ) | $ | 0.60             | 
| | Non-vested DSUs at April 30, 2010 |  | 241,935         |   | $ | 0.60             | 
| | Granted                            |  | 866,552         |   | $ | 0.96             | 
| | Vested                             |  | (682,404        | ) | $ | 0.46             | 
| | Non-vested DSUs at April 30, 2011 |  | 426,083         |   | $ | 0.89             | 

57

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      

|Note 9 | Income Taxes
|------ | ------------

Deferred tax assets and liabilities
are recognized for temporary differences between the carrying amount of the
balance sheet items and their corresponding tax values as well as for the
benefit of losses available to be carried forward to future years for tax
purposes that are likely to be realized.

Significant components of the
Companys deferred tax assets and liabilities, after applying enacted corporate
income tax rates, are as follows:

| |                                                     |   | Years Ended |  
| | --------------------------------------------------- | - | ----------- | -
| |                                                     |   | April 30,   |  
| |                                                     |   | 2011        |  
| | Tax loss carry forwards                             | $ | 15,189,000  |  
| | Capital losses carried forward                      |   | 314,000     |  
| | Equipment                                           |   | 91,000      |  
| | Other                                               |   | 72,000      |  
| | Undeducted research and development
      expenses  |   | 3,916,000   |  
| | Investment tax credits                              |   | 625,000     |  
| | Cumulative unrealized foreign exchange gain         |   | 704,000     |  
| | Acquired technology and other intangibles           |   | (751,000    | )
| | Valuation allowance established by
      management |   | (20,160,000 | )
| | Net deferred tax assets                             | $ |            |  

The provision for income taxes differ
from the amount calculated using the U.S. federal and state statutory income tax
rates as follows:

| |                                                                       |   | Years Ended |  
| | --------------------------------------------------------------------- | - | ----------- | -
| |                                                                       |   | April 30,   |  
| |                                                                       |   | 2011        |  
| | Benefit from net loss, at U.S. rates                                  | $ | (1,204,000  | )
| | Foreign loss at other than U.S. rates                                 |   |            |  
| | Non-deductible expenses                                               |   | (191,000    | )
| | Non-deductible stock option compensation                              |   | 295,000     |  
| | Effect of reduction in foreign statutory
      rates                  |   | 19,000      |  
| | Foreign exchange losses on revaluation of deferred tax
      balances |   | (1,613,000  | )
| | Other                                                                 |   | (347,000    | )
| | Expiry of non-operating losses                                        |   |            |  
| | Increase in valuation allowance                                       |   | 3,041,000   |  
| | Income tax expense for year                                           | $ |            |  

The Company establishes its valuation
allowance based on projected future operations. Management has determined that
the allowance should be 100% of the deferred tax assets. When circumstances
cause a change in managements judgment about the recoverability of deferred tax
assets, the impact of the change on the valuation allowance will be reflected in
current income.

58

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      

|Note 9 | Income Taxes (contd)
|------ | ----------------------

As at April 30, 2011, the Company had
net operating loss carry-forwards available to reduce taxable income in future
years as follows:

| | Country             |  |  |  |   | Amount      |  |  | Expiration Dates | 
| | ------------------- |  |  |  | - | ----------- |  |  | ---------------- | 
| |                     |  |  |  |   |             |  |  |                  | 
| | United States  US$ |  |  |  | $ | 28,092,000  |  |  | 2026  2031      | 
| | Canada  CDN$       |  |  |  | $ | 21,431,000* |  |  | 2012  2031      | 

*These losses are subject to tax
legislation that limits the use of the losses against future income of the
Companys Canadian subsidiaries.

On May 1, 2007, the Company adopted
Financial Accounting Standards Board (FASB) interpretation No. 48,
Accounting for Uncertainty in Income Taxes-an Interpretation of FASB
Statement, (codified in FASB ASC Topic 740). The Company is subject to
taxation in the U.S., Canada, and the U.K. It is subject to tax examinations by
tax authorities for all taxation years commencing in or after 2002. The Company
does not expect any material increase or decrease in its income tax expense, in
the next twelve months, related to examinations or changes in uncertain tax
positions.

Changes in the Companys uncertain tax
positions for the year ended April 30, 2011 and April 30, 2010 were as follows:

| |                                                                                |   | Years Ended | 
| | ------------------------------------------------------------------------------ | - | ----------- | 
| |                                                                                |   | April 30,   | 
| |                                                                                |   | 2011        | 
| | Balance at beginning of year                                                   | $ | 98,575      | 
| | Increases related to prior year tax positions (interest and
      penalties)   |   |            | 
| | Increases related to current year tax
      positions (interest and penalties) |   |            | 
| | Settlements                                                                    |   |            | 
| | Lapses in statute of limitations                                               |   |            | 
| | Balance at end of year                                                         | $ | 98,575      | 

|Note 10 | Segmented Information
|------- | ---------------------

Our chief operating decision maker
reviews financial information presented on a consolidated basis, accompanied by
desegregated information about revenues by geographic region for purposes of
making operating decisions and assessing financial performance. Accordingly, we
have concluded that we have one reportable operating segment. The Company has
determined that it is impracticable to report the revenues from external
customers for each product and service or each group of similar products and
services.

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 years ended April 30, 2011 and 2010:

| |                           |   | Years Ended | 
| | ------------------------- | - | ----------- | 
| |                           |   | April 30,   | 
| |                           |   | 2011        | 
| | North America             | $ | 6,387,514   | 
| | Europe                    |   | 3,200,291   | 
| | Asia and Africa           |   | 955,713     | 
| | Central and South America |   | 496,780     | 
| |                           | $ | 11,040,298  | 

59

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      

|Note 10 | Segmented Information-
      (contd)
|------- | -------------------------------------

Contained within the results of North
America for the year ended April 30, 2011 are revenues from the United States of
$4,049,673 (2010 - $4,281,828) and from Canada of $2,337,841 (2010 - $679,077).

Contained within the results of Europe
for the year ended April 30, 2011 are revenues from the United Kingdom of
$1,627,526 (2010 - $461,470), from Germany of $210,002 (2010 - $320,039), from
France of $185,441 (2010 - $50,906), from Iceland of $164,890 (2010 - $37,655),
from Switzerland $160,062 (2010 - $146,375), and from the Netherlands of
$155,533 (2010 - $233,095).

Contained within the results of
Central and South America for the year ended April 30, 2011 are revenues from
Mexico of $163,318 (2010 - $313,436), from Chile of $134,798 (2010 - $52,203),
from Colombia of $82,847 (2010 - $47,689), from Brazil of $63,254 (2010 -
$70,952), and from Argentina of $12,704 (2010 - $16,774).

Contained within the results of Asia
and Africa for the year ended April 30, 2011 are revenues from Japan of $270,926
(2010 - $34,548), from Russian Federation of $216,944 (2010 - $18,989), from
South Africa of $87,282 (2010 - $15,010), from Saudi Arabia of $85,510 (2010 -
$nil), and from Australia of $73,633 (2010 - $68,427).

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

| |               |   | **As at**  | 
| | ------------- | - | ---------- | 
| |               |   | April 30,  | 
| |               |   | 2011       | 
| | Canada        | $ | 10,190,468 | 
| | United States |   | 25,071     | 
| |               | $ | 10,215,539 | 

Revenue from significant customers for
the years ended April 30, 2011 and 2010 is summarized as follows:

| |            |  | Years Ended | 
| | ---------- |  | ----------- | 
| |            |  | April 30,   | 
| |            |  | 2011        | 
| | Customer A |  | 12%         | 
| | Customer B |  | 12%         | 
| | Customer C |  | 11%         | 
| |            |  | 35%         | 

Accounts receivable balance for
Customer A was $93,837 as at April 30, 2011 (April 30, 2010 - $1,000,975).
Accounts receivable balance for Customer B was $881,400 as at April 30, 2011
(April 30, 2010 - $nil). Accounts receivable balance for Customer C was $311,100
as at April 30, 2011 (April 30, 2010 - $nil).

60

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      

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

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

Foreign Currency Exchange Rate
Risk

The Company accounts for derivative
instruments, consisting of foreign currency forward contracts, pursuant to the
provisions of Statement of Financial Accounting Standards No. 161, Disclosures
about Derivative Instruments and Hedging Activities  an amendment of FASB
Statement No. 133 (SFAS 161), effective at the beginning of the first quarter
of fiscal year 2010. SFAS No. 161 was incorporated into ASC 815, Derivatives and
Hedging (ASC 815). ASC 815 requires the Company to measure derivative
instruments at fair value and record them in our balance sheet as either an
asset or liability and 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. The Company does not use derivative instruments for
trading purposes. ASC 815 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.

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
year ended April 30, 2011, 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 option or 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. Valuations are based on exchange-quoted prices,
which are classified as Level 1. Some of the valuations are adjusted by a
forward yield curve or interest rates. In such cases, these derivative contracts
are classified within Level 2. Changes in the fair market values of these
contracts are recognized in the Consolidated Financial Statements as a component
of foreign exchange (gain) loss.

During the year ended April 30, 2010
the Company purchased $1,000,000 of forward contracts denominated in Canadian
dollars which resulted in a gain of $56,496 which was credited against the
foreign exchange loss on the consolidated statement of operations. These forward
contracts were settled prior to April 30, 2010. The Company did not enter any
forward contracts during the year ended April 30, 2011.

61

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      

|Note 12 | Commitments
|------- | -----------

| | a) | On December 30, 2010, the Company entered into an
      extension agreement on an existing lease, which commenced on April 1, 2011
      and expires March 31, 2012. The monthly lease payment under the extension
      agreement is $1,715. The lease expense for the year ended April 30, 2011
      was $25,729 (2010 - $28,569).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | 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 $10,448 was made. The monthly
      lease payment under this agreement is $10,448 plus $9,154 in operating
      costs. The Company is subleasing part of these premises for a monthly
      charge of $7,898. 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 $3,384 (CDN$3,216) plus $3,337 (CDN$3,171) in
      operating costs. The lease expense net of rental revenue for the year
      ended April 30, 2011 was $59,792 (2010 - $75,901).
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | c) | On July 10, 2006, the Company entered into a lease for
      our head office premises of 15,559 square feet, which commenced on
      December 1, 2006 and expires on September 29, 2011 for which a deposit of
      $87,158 was made. The monthly lease payment under this agreement is
      $24,559 plus $23,113 in operating costs. On January 11, 2011, the Company
      entered into a new agreement on this lease, which commences on October 1,
      2011, and expires September 30, 2014 for which a deposit of $52,615was
      made. The monthly lease payment under the agreement is $21,289 plus
      $20,702 in operating costs. The lease expense net of rental revenue for
      the year ended April 30, 2011 was $531,550 (2010 - $554,736). Management
      believes that this office space is adequate for the operations of the
      Company for the foreseeable future.               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | d) | On May 1, 2009, the Company modified its existing lease
      agreement for office premises, as a result of which it surrendered a
      substantial part of the previously leased area. The new agreement
      commenced on May 1, 2009 and expires on April 20, 2012. The monthly lease
      payment under this agreement is $7,010 (CDN$ 6,662). This lease expense is
      a related party transaction as it was incurred with a company with a
      director in common with the Company. The lease expense for the year ended
      April 30, 2011 was $84,121 (2010 - $84,121).                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | e) | On March 12, 2009, the Company and its wholly-owned
      subsidiary, CounterPath Technologies Inc., entered into a settlement
      agreement with a founder and former officer of the Company. Under the
      settlement agreement, the Company will pay a total of $520,889
      (CDN$495,000) over 45 months at a rate of CDN$11,000 per month and pay for
      health benefits for 33 months from the date of the agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | f) | On July 29, 2010, the Company entered into extension of
      an existing lease agreement which commenced on August 1, 2010 and expires
      on July 31, 2011. The monthly lease payment under the new extension
      agreement is $7,275. The lease expense for the year ended April 30, 2011
      was $93,075 (2010 - $109,800).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

Total rent expense for the year ended April 30, 2011 was $1,011,913 (2010 - $921,691). Total sublease income for the year ended April 30, 2011 was $223,098 (2010 - $150,727).

The total payable over the term of the
agreements for the years ended April 30, are as follows:

Office LeasesOffice Leases 
    
    
     Unrelated
    
    
    Sub Lease
    
    
    Total Office
    
    
    SettlementRelated Party
    
    
    Party
    
    
    Income
    
    
    Leases
    
    
    Agreement2012
    $
    84,121
    
    $
    669,398
    
    $
    (175,432
    )
    $
    578,087
    
    $
    225,7192013
    
    
    
    
    627,578
    
    
    (73,097
    )
    
    554,481
    
    
    2014
    
    
    
    
    542,594
    
    
    
    
    
    542,594
    
    
    2015
    
    
    
    
    182,674
    
    
    
    
    
    182,674
    
    
    $
    84,121
    
    $
    2,022,244
    
    $
    (248,529
    )
    $
    1,857,836
    
    $
    225,719


62

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      

|Note 13 | 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 14 | Restructuring
|------- | -------------

As a result of the Companys post
acquisition activities, the Company incurred restructuring costs of $nil (2010 
$44,912). Restructuring costs were related to employee severance arrangements as
a result of the consolidation of administrative, sales, marketing, and research
and development departments after the completion 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.

| |                            |   | Years Ended April 30, |  
| | -------------------------- | - | --------------------- | -
| |                            |   | 2011                  |  
| | Balance, beginning of year | $ | 344,433               |  
| | Provision                  |   |                      |  
| | Settlement                 |   | (118,714              | )
| | Balance, end of year       | $ | 225,719               |  

|Note 15 | Gain on Settlement of Debt
|------- | --------------------------

During the year ended April 30, 2011,
the Company recorded a gain on settlement of debt of $246,715 as a result of the
transfer of certain of non-core intellectual property rights (having no book
value) licensed from an institution in settlement of a $246,715 liability for
research fees performed by the institution.

|Note 16 | Subsequent Events
|------- | -----------------

| | (a) | On June 14, 2011, the Company issued an aggregate of
      3,145,800 units under a brokered private placement for aggregate gross
      proceeds of $5,636,170 (CDN$5,505,150) at a price of $1.79 (CDN$1.75) per
      unit, with each unit consisting of one share of the Companys common stock
      and one-half of one common share purchase warrant, with each whole warrant
      entitling the holder to purchase one additional common share of the
      Companys common stock at an exercise price of $2.30 (CDN$2.25) per share
      until June 14, 2013. In connection with the offering, the Company paid an
      aggregate of $394,533 (CDN$385,361) in cash commissions and issued an
      aggregate of 220,206 broker warrants, with each broker warrant entitling
      the holder thereof to purchase one common share of the Company at an
      exercise price of CDN$1.75 per share until December 14, 2012.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | In addition, all of the outstanding convertible
      debentures of the Company in the aggregate principal amount of $1,464,800
      were converted on the closing of the Offering with a total of 1,332,261
      common shares being issued to the holders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | In addition, the Company entered into warrant exercise
      agreements with two insiders that have agreed to each exercise 833,334
      warrants at the original exercise price of $0.90 per share on or before
      July 29, 2011, prior to the expiry of the warrants on October 29, 2011. In
      the event that a warrant holder does not exercise all of their respective
      warrants on or before August 31, 2011, a default amount of $250,000 will
      be immediately due and payable to the Company by that respective warrant
      holder, and such default amount will incur interest at the rate of 2% per
      month (on a pro-rata basis) until the default amount is paid in
    full.                                                                                                                                                                                                                       

63

---

|COUNTERPATH CORPORATION                       
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Stated in U.S. Dollars)                      

|Note 16 | Subsequent Events  (contd)
|------- | ----------------------------

| |     | The Company has agreed to use its best commercially
      reasonable efforts to file, and keep effective, a resale registration
      statement with the U.S. Securities and Exchange Commission relating to the
      securities sold in the private placement.                                                                                                                                                                                                                                                                                                                                                                                                               
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (b) | On July 25, 2011, the Company granted 201,351 deferred
      share units to six non-employee directors and two officers and one
      employee pursuant to its deferred share unit plan. 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. 77,027 of the deferred share units vest immediately and 124,324 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.

64

---

|Item 9. | Changes in and Disagreements with
      Accountants on Accounting and Financial Disclosure.
|------- | -------------------------------------------------------------------------------------------

None.

|Item 9A. | 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 annual
report, as required by Rule 13a-15 under the Securities Exchange Act of 1934, we
have carried out an evaluation of the effectiveness of the design and operation
of our company's disclosure controls and procedures. This evaluation was carried
out under the supervision and with the participation of our company's
management, including our company's Chief Executive Officer and Chief Financial
Officer. Based upon that evaluation, our company's Chief Executive Officer and
Chief Financial Officer concluded that as of April 30, 2011, our disclosure
controls and procedures are effective as at the end of the period covered by
this report.

Management's Report on Internal Control over Financial
Reporting

Our management is responsible for
establishing and maintaining adequate internal control over financial reporting.
Internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies and
procedures may deteriorate.

Under the supervision and with
the participation of our management, including our Chief Executive Officer and
Chief Financial Officer, we conducted an assessment of the effectiveness of our
internal control over financial reporting based on certain criteria established
in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this evaluation, management
concluded that our internal control over financial reporting is effective as of
April 30, 2011.

Changes in Internal Control Over Financial
Reporting

There has been no change in our
internal controls over financial reporting that occurred during our latest
fiscal quarter ended April 30, 2011 that has materially affected, or is
reasonably likely to materially affect our internal controls over financial
reporting.

|Item 9B. | Other Information.
|-------- | ------------------

None.

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PART III

|Item 10. | Directors, Executive Officers and Corporate
      Governance.
|-------- | -------------------------------------------------------------

The following table sets forth
the names, positions and ages of our executive officers and directors. All our
directors serve until the next annual meeting of our shareholders or until their
successors are elected and qualify. Our board of directors appoints officers and
their terms of office are, except to the extent governed by employment contract,
at the discretion of our board of directors.

Name and Residence
    Position Held with the
      Company
    Age
    Date First Elected or
      AppointedDonovan Jones(1)British Columbia, Canada
    President, Chief Executive Officer,
      Director
    42
    April 24, 2006David Karp British Columbia, Canada
    Chief Financial Officer, Treasurer,
      Secretary
    46
    September 7, 2006Terence Matthews Ontario, Canada
    Chairman of the Board, Director
    68
    August 2, 2007Owen Matthews(2)British Columbia, Canada
    Vice-Chairman of the Board, Director
    39
    August 2, 2007Peter Charbonneau(3)Ontario, Canada
    Director
    57
    October 1, 2008Chris Cooper(2)(3)British Columbia, Canada
    Director
    41
    August 17, 2005William Jin(3)Ontario, Canada
    Director
    42
    October 1, 2008Larry Timlick(2)British Columbia, Canada
    Director
    54
    June 17, 2005


|(1) | Appointed President and Chief Operating Officer on April
      24, 2006, Director on June 1, 2007 and President and Chief Executive
      Officer on April 30, 2008.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Member of our Compensation Committee.                                                                                                                               
|(3) | Member of our Audit Committee.                                                                                                                                      

Business Experience

The following is a brief account
of the education and business experience of each of our directors, executive
officers and key employees during at least the past five years, indicating each
person's principal occupation during the period, and the name and principal
business of the organization in which he or she was employed.

Donovan Jones

Mr. Jones is a director of our
company, has been our President and Chief Executive Officer since April 30, 2008
and was President and Chief Operating Officer since April 2006. Between May 2005
and April 2006, he was our companys Vice President of Sales. Prior to this,
from February 2005 and June 2006, Mr. Jones was with a boutique investment
banking firm, where he was responsible for sourcing and executing transactions
for mid-market private companies. From May 1996 to October 2004, with TELUS
Communications, Canadas second largest telecommunications company, Mr. Jones
held increasingly senior positions in corporate development and client
solutions, which had him involved in planning and executing a series of merger,
acquisition and divestiture activities in the telecommunications, application
development and data network integration space. Additionally, Mr. Jones was
involved with the strategic planning process for businesses focused on
application and web development, hosting, human resources, supply operations and
sales efficiency. Mr. Jones efforts with TELUS culminated in his position of
Director/Chief Operating Officer Marketing with responsibility for a business
unit focused on the selling, implementing and management of enterprise voice,
data and IP infrastructure. Prior to this, Mr. Jones consulted on strategy,
process improvement, human resource strategy, and funding for several software
and high technology companies. Mr. Jones holds a Masters in Business Administration
from the University of Calgary and an Economics degree from the University of
Alberta.

66

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David Karp

Mr. Karp has been our Chief Financial
Officer since September 2006. Mr. Karp became Treasurer and Corporate Secretary
on November 3, 2006. From May 2004 to August 2006, Mr. Karp was Chief Financial
Officer of Chemokine Therapeutics Corp., where he led the companys initial
public offering and listing on the TSX. From February 2002 to May 2004, Mr. Karp
was Chief Financial Officer of Neuro Discovery Inc., a Vancouver based, publicly
traded investment management company focused on biotechnology investing. Mr.
Karp assisted in raising capital and making private investments in early stage
biotechnology companies in addition to having overall responsibility for all
treasury, reporting and control functions. From August 1997 to September 2001,
Mr. Karp was Vice President, Investment Banking for BMO Nesbitt Burns in
Vancouver. His experience includes raising capital and managing a number of
merger, acquisition and restructuring assignments for companies in a variety of
industries. Mr. Karp holds a Bachelor of Science degree in Mechanical
Engineering from the University of Waterloo in Ontario and an MBA from the Ivey
School of Business at the University of Western Ontario in London, Ontario. He
is a Chartered Financial Analyst (CFA) charter holder and a Professional
Engineer.

Terence Matthews

Sir Terence Matthews is our
Chairman of the Board and a director of our company. Mr. Matthews is the founder
and Chairman of Wesley Clover Corporation, an investment vehicle and holding
company. Mr. Matthews has either founded or funded over 80 companies since 1972
including Newbridge Networks, a company he founded in 1986 and which became a
leader in the worldwide data networking industry. When France-based Alcatel
acquired Newbridge in May 2000, the company employed more than 6,500 employees
and recorded FY 1999 revenue of $1.8 billion. In 1972, before launching
Newbridge, Mr. Matthews co-founded Mitel, a world leader in the design and
manufacture of enterprise communications solutions. Wesley Clover now has
interests in a broad range of next-generation technology companies, real estate,
hotels and resorts. In addition to being the Chairman of Wesley Clover, Mr.
Matthews is also Chairman of a number of private and publicly traded companies
including Mitel, March Networks, Bridgewater Systems and Solace Systems and sits
as a director on the Boards of several others. Mr. Matthews holds an honours
degree in electronics from the University of Wales and is a Fellow of the
Institute of Electrical Engineers and of the Royal Academy of Engineering. He
has been awarded honorary doctorates by several universities, including the
University of Wales and Carleton University in Ottawa. In 1994, he was appointed
an Officer of the Order of the British Empire, and in the 2001 Queen's Birthday
Honours, he was awarded a Knighthood. In 2011, he was appointed Patron of the
Cancer Stem Cell Research Institute at Cardiff University.

Owen Matthews

Mr. Matthews is our Vice-Chairman of
the Board and a director of our company. Mr. Matthews also currently serves as
the Executive Vice-President of Wesley Clover Corporation, an investment
management company. Between October 1998 and August 2, 2007, Mr. Matthews was
Chief Executive Officer of NewHeights Software Inc. In this capacity, Mr.
Matthews was responsible for NewHeights overall corporate growth and ensuring
that the company delivers the most evolved personal communications management
solutions in the industry. Mr. Matthews was active in driving the NewHeights
sales process, both domestically and internationally, and regularly engaged in
technology strategy sessions with carriers, customer-premise equipment vendors
and PC equipment manufacturers. In 1998, Mr. Matthews co-founded NewHeights in
response to the emerging shift towards the development of commercial IP
Telephony systems. Foreseeing the widespread adoption of IP PBXs and hosted IP
Centrex, Mr. Matthews launched NewHeights to develop an intuitive,
next-generation software client that would bring together the power of both the
telephony and data networks in an intuitive graphic interface. Mr. Matthews has
been extensively involved in the business of telecommunications and delivering
innovation to market for over a decade and is also the son of Terence Matthews,
founder of Mitel Networks and NewBridge Networks. Mr. Matthews business and
technology acumen was in part seasoned under various Matthews business
holdings, including NewBridge Networks and Wesley Clover and its portfolio of
technology corporations.

67

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Peter Charbonneau

Mr. Charbonneau is a director of
our company. Mr. Charbonneau is a principal of the general partner of SkyPoint
Telecom Fund II. Mr. Charbonneau joined the general partner, a venture capital
company focused on communications and information technology, in 2001. He also
sits on the boards of Mitel Networks Corporation, March Networks Corporation,
Teradici Corporation, Trellia Networks Inc., and TrueContext Corporation, as
well as, the board of directors and audit committee of CBC/Radio Canada. Prior
to Skypoint, Mr. Charbonneau was a senior executive with Newbridge Networks
Corporation holding a number of positions including Chief Financial Officer,
President and Chief Operating Officer, and Vice-Chairman. He was also a member
of the company's board of directors from 1996 until 2000. Mr. Charbonneau is a
member of the Institute of Chartered Accountants of Ontario. In June 2003, he
was elected a Fellow of the Institute in recognition of his outstanding career
achievements and leadership contributions to the community and his profession.
He holds a Bachelor of Science from the University of Ottawa and a Master's in
Business Administration degree from the Richard Ivey School of Business. Mr.
Charbonneau also holds the ICD.D certification, having completed the Directors'
Education Program of the Institute of Corporate Directors of Canada.

Chris Cooper

Mr. Cooper is a director of our
company. Mr. Cooper has 15 years of experience in management and finance in the
oil and gas industry starting several junior issuers. Over the past several
years, Mr. Cooper has successfully raised over $120 million primarily through
brokered and non-brokered equity issues as well as debt financing. Currently,
Mr. Cooper is the President, Chief Executive Officer and founder of Aroway
Energy Inc., a junior oil and gas issuer. Mr. Cooper received his Bachelor of
Business Administration from Hofstra University and his Masters in Business
Administration from Dowling College, both in New York State.

William Jin

Mr. Jin is a director of our
company. Mr. Jin is Senior Vice-President of Covington Capital, a venture
capital investment company, based in Toronto. Covington Capital is one of
Canadas largest providers of venture capital investment funds Mr. Jin joined
Covington Capital in November 2002 and his responsibilities include the
assessment, execution and management of existing investments and management of
exit investment opportunities. Mr. Jin focuses on transactions in the service,
distribution, manufacturing, and software sectors. He represents Covington on
the board of directors of a number of investee companies. Prior to joining
Covington, Mr. Jin was a partner with a Toronto based investment banking
boutique, with over 11 years financial industry experience specializing in
M&A advisory and valuations. There he was responsible for providing fairness
opinions and formal OSC 9.1 valuations for public and private companies. He
holds an HBA and an MBA degree from the Richard Ivey School of Business. Mr. Jin
is a Chartered Financial Analyst and a member of the Toronto Society of
Financial Analysts.

Larry Timlick

Mr. Timlick is a director of our
company. Mr. Timlick has extensive knowledge of the enterprise and service
provider markets with over 24 years of technical sales and management experience
and has been a director of our company since June 2005. Mr. Timlick has been
Vice President of Corporate Planning since November 2006 for the Kingsway Group
of Companies, a corporate vehicle for real estate investments. Mr. Timlick acted
as interim President of our company between June 2005 and August 2005. Between
1991 and 2004, Mr. Timlick was with Cisco Systems Canada. While with Cisco
Systems Canada, Mr. Timlick was responsible for developing a sales region for
TELUS, a major telecommunications carrier in Canada, which was named Region of
the Year, Americas International in FY 2004. Mr. Timlick gained many
accomplishments with Cisco Systems including: Top Americas International
Performer  Regional Manager FY 2000; Highest Regional Percentage of Goal 
Americas International FY 2000; Top Canadian Regional Performance FY 2001 
Western Region Service Providers; and Top Customer Satisfaction Americas
International FY 2002. As the first Cisco Systems employee in Western Canada,
Mr. Timlick expanded the business and opened offices in Vancouver, Calgary,
Edmonton, Regina and Winnipeg. Mr. Timlick has also held management positions
with AT&T Canada and Telex/Tulsa Computer Products. Mr. Timlick is also a
director of Kensington Court Ventures Inc., a publicly traded investment
vehicle.

68

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Family Relationships

Except as set forth below, there are
no family relationships among our directors or our executive officers.

Owen Matthews, our Vice-Chairman of
the Board, is the son of Terence Matthews, our Chairman of the Board.

Involvement in Certain Legal Proceedings.

Except as set forth below, none of our
directors, nominees, executive officers and control persons have been involved
in any of the following events during the past five years:

- any bankruptcy petition filed by or against any business of which such
  person was an executive officer either at the time of the bankruptcy or within
  two years prior to that time;
- any conviction in a criminal proceeding or being subject to a pending
  criminal proceeding (excluding traffic violations and other minor offenses);
- being subject to any order, judgment, or decree, not subsequently reversed,
  suspended or vacated, of any court of competent jurisdiction, permanently or
  temporarily enjoining, barring, suspending or otherwise limiting his
  involvement in any type of business, securities or banking activities; or
- being found by a court of competent jurisdiction (in a civil action), the
  SEC or the Commodity Futures Trading Commission to have violated a federal or
  state securities or commodities law, and the judgment has not been reversed,
  suspended, or vacated.

Peter Charbonneau was a director
of Metconnex Canada Inc. from October 6, 2004 to June 19, 2007. An application
was made to the courts under Section 47(1) of the Bankruptcy and Insolvency Act,
R.S.C. 1985, C. B3, as amended, to appoint an interim receiver of 4061101 Canada
Inc. (formerly known as Metconnex Canada Inc.) as provided for in the court
filing no: 06-CL-6670 (dated September 26, 2006). The receiver has submitted a
proposal to creditors and distribution of proceeds is pending final approval
from creditors.

Peter Charbonneau was a director
of Trellia Networks Inc. from May 2006 to present. On November 24, 2010, Trellia
Networks Inc. filed a Notice of Intention to File a Proposal under the
Bankruptcy and Insolvency Act. On January 14, 2011, the proposal was filed and
was subsequently accepted by creditors on February 3, 2011, with court approval
on February 10, 2011. The company disbursed all amounts on March 21, 2011 and
successfully exited the bankruptcy process.

Chris Cooper is currently the
President and Chief Executive Officer of Northern Sun Exploration Company Inc.
On August 1, 2008, Northern Sun filed a Notice of Intention to make a proposal
pursuant to the Bankruptcy and Insolvency Act. The company is currently under
Bankruptcy and Insolvency Act protection while it attempts to restructure its
creditor obligations.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities
Exchange Act of 1934 requires our officers and directors, and persons who own
more than 10% of a registered class of our equity securities, to file reports of
ownership and changes in ownership with the SEC. Officers, directors and greater
than 10% stockholders are required by SEC regulation to furnish us with copies
of all Section 16(a) forms they file.

Based solely on our review of the
copies of such forms received by our company, or written representations from
certain reporting persons that no Form 5s were required for those persons, we
believe that, during the year ended April 30, 2011 all filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with, with the exception of the following:

69

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Name
    Number of Late Reports
    Number of Transactions Not
      Reported on a Timely Basis
    Failure to File Requested
      FormsTerence Matthews
    1(1)
    1
    NilDavid Karp
    3(1)
    3
    NilDonovan Jones
    5(1)
    10
    Nil


|(1) | The named director, officer or greater than 10%
      shareholder, as applicable, filed a late Form 3  Initial Statement of
      Beneficial Ownership of Securities.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

Code of Ethics

Effective April 24, 2008, our board of
directors adopted a Code of Business Conduct and Ethics and Compliance Program
that applies to, among other persons, members of our board of directors, our
officers, contractors, consultants and advisors. As adopted, our Code of
Business Conduct and Ethics and Compliance Program sets forth written standards
that are designed to deter wrongdoing and to promote:

- honest and ethical conduct, including the ethical handling of actual or
  apparent conflicts of interest between personal and professional
  relationships;
- full, fair, accurate, timely, and understandable disclosure in reports and
  documents that we file with, or submit to, the SEC and in other public
  communications made by us;
- compliance with applicable governmental laws, rules and regulations;
- the prompt internal reporting of violations of the Code of Business Conduct
  and Ethics and Compliance Program to an appropriate person or persons
  identified in the Code of Business Conduct and Ethics and Compliance Program;
  and
- accountability for adherence to the Code of Business Conduct and Ethics and
  Compliance Program.

Our Code of Business Conduct and
Ethics and Compliance Program requires, among other things, that all of our
company's personnel shall be accorded full access to our Chief Executive Officer
with respect to any matter which may arise relating to the Code of Business
Conduct and Ethics and Compliance Program. Further, all of our company's
personnel are to be accorded full access to our company's board of directors if
any such matter involves an alleged breach of the Code of Business Conduct and
Ethics and Compliance Program by our officers.

In addition, our Code of Business
Conduct and Ethics and Compliance Program emphasizes that all employees, and
particularly managers and/or supervisors, have a responsibility for maintaining
financial integrity within our company, consistent with generally accepted
accounting principles, and federal, provincial and state securities laws. Any
employee who becomes aware of any incidents involving financial or accounting
manipulation or other irregularities, whether by witnessing the incident or
being told of it, must report it to his or her immediate supervisor or to our
corporate secretary. If the incident involves an alleged breach of the Code of
Business Conduct and Ethics and Compliance Program by an executive officer, the
incident must be reported to any member of our board of directors. Any failure
to report such inappropriate or irregular conduct of others is to be treated as
a severe disciplinary matter.

It is against our company policy to
retaliate against any individual who reports in good faith the violation or
potential violation of our company's Code of Business Conduct and Ethics and
Compliance Program by another.

Our Code of Business Conduct and
Ethics and Compliance Program was filed with the SEC as Exhibit 14.2 to our
quarterly report on Form 10-Q dated July 31, 2008 filed on September 15, 2008.
Our Code of Business Conduct and Ethics and Compliance Program and Compliance
Program is also posted on our website at www.counterpath.com. We will provide a copy of the Code of
Business Conduct and Ethics and Compliance Program to any person without charge,
upon request. Requests can be sent to: CounterPath Corporation, Suite 300, One
Bentall Centre, 505 Burrard Street, Vancouver, British Columbia, Canada V7X 1M3,
Attention Corporate Secretary.

70

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Director Nominations

As of the date of this annual report,
we did not effect any material changes to the procedures by which our
shareholders may recommend nominees to our board of directors. Our company does
not currently have a policy with regard to the consideration of any director
candidates recommended by our stockholders. Our board of directors does not
believe that it is necessary to have a policy with regard to the consideration
of any director candidates recommended by stockholders as any such candidates
can be appropriately evaluated by our board of directors. We, however, encourage
stockholders to recommend candidates directly to the Corporate Secretary by
sending communications to The Secretary of CounterPath Corporation, c/o
CounterPath Corporation, Suite 300 - 505 Burrard Street, Box 95, Vancouver,
British Columbia, Canada V7M 1X3.

Committees Of The Board Of Directors

We currently act with a standing Audit
Committee and Compensation Committee. We do not have a standing nominating
committee or corporate governance committee but our entire board of directors
acts as our nominating and corporate governance committee.

Audit Committee

The Audit Committee was formed in
September 2007. During the year ended April 30, 2011, the Audit Committee held
four meetings. The Audit Committee currently consists of Peter Charbonneau,
Chris Cooper and William Jin. Mr. Cooper acts as the Audit Committee Chairman.
Messrs. Charbonneau, Cooper and Jin are also non-employee directors of our
company. Messrs. Charbonneau, Cooper and Jin are considered independent
directors as defined by Rule 5605 (a)(2) of the NASDAQ Listing Rules and
National Instrument 52-110, adopted by various Canadian securities commissions.
Each of the members of the Audit Committee are financially literate as defined
by National Instrument 52-110. For a description of Messrs. Charbonneau, Cooper
and Jins education and experience, see Item 10 of this annual report under
section entitled Business Experience.

The Audit Committee was established in
accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The
Audit Committee is directed to review the scope, cost and results of the
independent audit of our books and records, the results of the annual audit with
management and the adequacy of our accounting, financial and operating controls;
to recommend annually to our board of directors the selection of the independent
registered accountants; to consider proposals made by the independent registered
accountants for consulting work; and to report to our board of directors, when
so requested, on any accounting or financial matters. Our board of directors
adopted a charter for the Audit Committee on December 13, 2007, a copy of which
is attached as Exhibit B to our definitive proxy statement filed with the SEC on
August 29, 2008.

Audit Committee Financial Expert

The Securities Exchange Act requires
the board of directors to determine if a member of its Audit Committee is an
audit committee financial expert as defined in Item 407 (d)(5)(ii) of
Regulation S-K. According to these requirements, an Audit Committee member can
be designated an Audit Committee financial expert only when the Audit Committee
member satisfies specified qualification requirements, such as experience (or
experience actively supervising others engaged in) preparing, auditing,
analyzing, or evaluating financial statements presenting a level of accounting
complexity comparable to what is encountered in connection with our company's
financial statements. Such qualifications may be acquired through specified
means of experience or education. The board of directors has determined that Mr.
Charbonneau qualifies as an Audit Committee financial expert.

|Item 11. | Executive Compensation.
|-------- | -----------------------

The particulars of compensation paid
to the following persons:

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(a) our principal executive officer;

(b) each of our two most highly
compensated executive officers who were serving as executive officers at the end
of the year ended April 30, 2011; and

(c) up to two additional individuals
for whom disclosure would have been provided under (b) but for the fact that the
individual was not serving as our executive officer at the end of the year ended
April 30, 2011,

who we will collectively refer to as our named executive
officers, of our company for the years ended April 30, 2011 and 2010, are set
out in the following summary compensation table, except that no disclosure is
provided for any named executive officer, other than our principal executive
officer, whose total compensation does not exceed $100,000 for the respective
fiscal year:

Name and Principal Position
    Year
    Salary ($)
    Bonus ($)
    Stock Awards
      ($)(1)
    Option Awards
      ($)(2)
    Other Annual
      Compen- sation ($)(3)
    Total ($)Donovan Jones President, Chief Executive Officer
      and Director
    2011 2010
    295,687 279,466
    121,823 46,671
    293,998 96,774
    Nil Nil
    27,258 25,762
    738,767 448,673David Karp Chief Financial Officer, Treasurer
      and Secretary
    2011 2010
    186,064 159,055
    55,296 25,202
    82,541 48,387
    Nil Nil
    11,282 10,096
    335,183 242,740Todd Carothers(4)VP, Product Management
    2011 2010
    175,000 137,621
    1,417 Nil
    Nil Nil
    30,554 52,996
    Nil Nil
    206,971 190,617Jim OBrien Director, NCG Customer Engineering
    2011 2010
    147,200 148,342
    4,573 Nil
    Nil Nil
    5,730 4,652
    Nil Nil
    157,503 152,994Michael Hryb VP, Carrier Sales
    2011 2010
    120,882 114,251
    21,595 47,497
    Nil Nil
    16,048 8,833
    Nil Nil
    158,525 173,445


|(1) | The amount in this column reflects the grant date fair
      value of the deferred share units granted to named executive officers in
      each fiscal year listed. For a description of the methodology and
      assumptions used in valuing the deferred share units granted to our
      officers and directors during the year ended April 30, 2011, please review
    Note 8 to the financial statements included herein.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(2) | For a description of the methodology and assumptions used
      in valuing the option awards granted to our named executive officers and
      directors during the year ended April 30, 2011, please review Note 8 to
    the financial statements included herein.                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(3) | The value of perquisites and other personal benefits,
      securities and property for the individuals included in the summary
      compensation table that does not exceed $10,000 is not reported
    herein.                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(4) | Mr. Carothers was not employed by our company between
      July 30, 2009 and October 11, 2009.                                                                                                                                                                                                                                                                                                                                 

Employment Agreements with Named Executive Officers

Donovan Jones entered into an
employment agreement with our company dated September 13, 2007, as amended,
whereby we pay to Mr. Jones CDN$299,400 per year. In addition, Mr. Jones may
earn a bonus of up to 12.5% of his annual salary per fiscal quarter based upon
the achievement of pre-determined objectives. Mr. Jones is also entitled to a
monthly expense allowance of CDN$2,000. If Mr. Jones employment agreement is
terminated without cause, or there is a change of control (to the extent of at
least 40.01% of the equity of our company), we, or Mr. Jones may, without cause,
terminate his employment upon 6 months' written notice to our company. Following
such notice, we will pay to Mr. Jones (i) CDN$675,000 (in
addition to any applicable bonus and/or incentive in respect of the last pay
periods in which such bonus and/or incentive has not yet been awarded with
objectives being considered fully met); (ii) extended medical and dental
insurance coverage for a period of 24 months from termination; and (iii) all
options and deferred share units, which have not vested shall immediately vest
and become exercisable.

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David Karp entered into an employment
agreement with our company dated September 11, 2006, as amended, whereby we
appointed Mr. Karp our Chief Financial Officer. Mr. Karps current annual salary
is CDN$194,400. In addition, Mr. Karp may earn a bonus of up to 30% of his
salary based upon the achievement of pre-determined objectives. Mr. Karp is also
entitled to a monthly expense allowance of CDN$800. If we terminate the
agreement for any reason other than for cause, we are required to pay Mr. Karp a
sum equal to CDN$120,000, plus any monthly allowance, in addition to any
applicable bonus or compensation as set out in the Employment Agreement. In
addition, for each year of employment, our company is required to pay Mr. Karp
an amount equal to one month of his total compensation, including his monthly
expense allowance, for each year of employment, with partial years pro-rated. In
addition, 1/24th of the number of stock options granted, multiplied by the
number of months Mr. Karp is employed with us from the date of each respective
grant, is immediately vested and exercisable. In the event of a change of
control or greater than 50.01% of the issued and outstanding common shares of
our company, all stock options and deferred share units granted to Mr. Karp will
become immediately vested and exercisable.

Outstanding Equity Awards at Fiscal Year End

The following table summarizes
the outstanding equity awards held by each named executive officer of our
company as of April 30, 2011. 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 deferred share units 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.

Option Awards
    Stock AwardsName
    Number ofSecuritiesUnderlyingunexercisedOptions(#)Exercisable
    Number ofSecuritiesUnderlyingunexercisedOptions(#)Unexercisable
    EquityIncentivePlanAwards:Number ofSecuritiesUnderlyingUnexercisedUnearnedOptions(#)
    OptionExercisePrice($)
    Option
      ExpirationDate
    Number ofshares orunits ofstock thathave notvested(#)
    Marketvalue ofshares ofunits ofstock thathave notvested($)
    Equityincentiveplanawards:Number ofunearnedshares, unitsor otherrights thathave notvested(#)
    Equityincentiveplanawards:Market orpayoutvalue
      ofunearned**shares, units**or
      otherrights thathave notvested($)Donovan Jones
    300,000 (1)
    300,000 (1)
    
    $0.62
    April 17, 2014
    107,527(14)
      100,000 (15)70,741(16)
    $221,505 
      $206,000 $145,726
    
    David Karp
    240,000(2)
      43,750(3)125,000(4)
     
      31,250(3)125,000(4)
     
       
    $2.15 
      $0.44 $0.62
    September 7, 2016 December
      15,2013 April 17, 2014
    53,763(17)
      50,000(18)22,026(19)
    $110,752 
      $103,000 $45,374
    
    Michael Hryb
    28,333(5)
      15,079(6)8,333(7)
    11,667(5)
      9,921(6)16,667(7)
     
       
    $0.47 
      $0.44 $0.60
    June 3, 2013 December 15,
      2013 December 14, 2014
    
    
    
    


73

---

Option Awards
    Stock AwardsName
    Number of
      Securities Underlying unexercised
      Options (#) Exercisable
    Number of
      Securities Underlying unexercised
      Options (#) Unexercisable
    Equity Incentive
      Plan Awards: Number of
      Securities Underlying Unexercised
      Unearned Options (#)
    Option
      Exercise Price ($)
    Option
      Expiration Date
    Number of
      shares or units of stock that have
      not vested (#)
    Market
      value of shares of units of stock
      that have not vested ($)
    Equity incentive
      plan awards: Number of
      unearned shares, unitsor other
      rights that have not vested
      (#)
    Equity incentive
      plan awards: Market or payout
      value of unearned **shares, units**
      or other rights that have not
      vested ($)Jim OBrien
    14,555(8)
      20,417(9)333(10)
     
      14,583(9)667(10)35,000(11)
     
        
    $0.47 
      $0.44 $0.60 $1.90
    February 2, 2013 
      December 15, 2013
      December 14, 2014 December 14, 2015
    
    
    
    Todd Carothers
    50,000(12)
      
    100,000(12)
      150,000(13)
     
      
    $0.60 
      $1.90
    December 14, 2014 
      December 14, 2015
    22,026(20)
    $45,374
    
    


|(1)  | Granted on April 17, 2009.    
|---- | ------------------------------
|(2)  | Granted on September 7, 2006. 
|(3)  | Granted on December 15, 2008. 
|(4)  | Granted on April 17, 2009.    
|(5)  | Granted on June 3, 2008.      
|(6)  | Granted on December 15, 2008. 
|(7)  | Granted on December 14, 2009. 
|(8)  | Granted on February 2, 2008.  
|(9)  | Granted on December 15, 2008. 
|(10) | Granted on December 14, 2009. 
|(11) | Granted on December 14, 2010. 
|(12) | Granted on December 14, 2009. 
|(13) | Granted on December 14, 2010. 
|(14) | Granted on December 14, 2009. 
|(15) | Granted on June 18, 2010.     
|(16) | Granted on September 27, 2010.
|(17) | Granted on December 14, 2009. 
|(18) | Granted on June 18, 2010.     
|(19) | Granted on March 9, 2011.     
|(20) | Granted on March 9, 2011.     

Compensation of Directors

During the fiscal year ended April 30,
2011, we compensated our non-employee directors for their services in fiscal
year 2011 according to the following schedule: A retainer of CDN$15,000 for each
board member; a retainer of CDN$15,000 for the chairman; a retainer of CDN$5,000
for the audit committee chair; a retainer of CDN$2,500 for the compensation
committee chair; and a retainer of CDN$5,000 for each audit committee or
compensation committee member. Directors may be paid the retainers in cash, or
at the Boards option, in a form of equity compensation under an existing equity
compensation plan of our company. During the fiscal year ended April 30, 2011,
we issued 172,500 deferred share units in lieu of cash to our directors.

Directors are entitled to
reimbursement for reasonable travel and other out-of-pocket expenses incurred in
connection with attendance at meetings of our Board. The Board may award special
remuneration to any director undertaking any special services on our behalf
other than services ordinarily required of a director.

74

---

The following table summarizes
compensation paid to all of our non-employee directors for the fiscal year ended
April 30, 2011:

Name
    Fees Earned or
      Paid in Cash ($)
    Stock Awards
      ($)(9)
    Option Awards
      ($)
    Non-Equity Incentive
      Plan Compensation ($)
    Non-Qualified Deferred
      Compensation Earnings ($)
    All Other
      Compensation ($)
    Total ($)Mark Bruk(1)
    Nil
    29,516
    Nil
    N/A
    N/A
    Nil
    29,516Peter Charbonneau(2)
    Nil
    39,355
    Nil
    N/A
    N/A
    Nil
    39,355Chris Cooper(3)
    Nil
    59,032
    Nil
    N/A
    N/A
    Nil
    59,032William Jin(4)
    Nil
    39,355
    Nil
    N/A
    N/A
    Nil
    39,355Terence Matthews(5)
    Nil
    59,032
    Nil
    N/A
    N/A
    Nil
    59,032Owen Matthews(6)
    Nil
    44,274
    Nil
    N/A
    N/A
    Nil
    44,274Greg Pelling(7)
    Nil
    29,516
    Nil
    N/A
    N/A
    Nil
    29,516Larry Timlick(8)
    Nil
    39,355
    Nil
    N/A
    N/A
    Nil
    39,355


|(1) | Resigned from the Board on March 10, 2011. As at April
      30, 2011, Mr. Bruk held an aggregate of 39,194 deferred share
  units.     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------
|(2) | At April 30, 2011, Mr. Charbonneau held an aggregate of
      52,258 deferred share units.                                              
|(3) | At April 30, 2011, Mr. Cooper held an aggregate of 40,000
      stock options and 78,387 deferred share units.                          
|(4) | At April 30, 2011, Mr. Jin held an aggregate of 52,258
      deferred share units.                                                      
|(5) | At April 30, 2011, Mr. Terence Matthews held an aggregate
      of 18,000 stock options and 78,387 deferred share units.                
|(6) | At April 30, 2011, Mr. Owen Matthews held an aggregate of
      58,790 deferred share units.                                            
|(7) | Resigned from the Board on March 10, 2011. As at April
      30, 2011, Mr. Pelling held an aggregate of 39,194 deferred share
    units.
|(8) | At April 30, 2011, Mr. Timlick held an aggregate of
      40,000 stock options and 52,258 deferred share units.                         
|(9) | Represents value on grant date of vested deferred share
      units.                                                                    

|Item 12. | Security Ownership of Certain Beneficial
      Owners and Management and Related Stockholder Matters.
|-------- | -----------------------------------------------------------------------------------------------------

Security Ownership of Certain Beneficial Owners and
Management

The following table sets forth certain
information regarding beneficial ownership of our shares of common stock as of
July 25, 2011, by each person who is known by us to beneficially own more than
5% of our shares of common stock, by each of our officers and directors and by
all of our officers and directors as a group. In general, a person is deemed to
be a beneficial owner of a security if that person has or shares the power to
vote or direct the voting of such security, or the power to dispose or to direct
the disposition of such security. A person is also deemed to be a beneficial
owner of any securities of which the person has the right to acquire beneficial
ownership within 60 days. As of July 25, 2011, we had 37,961,481 shares of
common stock issued and outstanding.

75

---

Name and Address of Beneficial Owner
    Amount and Nature of
      Beneficial Ownership(1)
    Percentage of
      Class(2)Terence Matthews 350 Legget Drive, P.O. Box 13089
      Kanata, Ontario
    8,745,628 (3)
    22.5%Covington Venture Fund Inc. 87 Front St. East Suite
      400, Toronto, Ontario Canada, M5E 1B8
    5,640,241 (4)
    14.5%Steven Bruk 3790 Southridge Avenue West Vancouver,
      BC, 
      Canada V7V 3J1
    3,270,518 (5)
    8.6%Owen Matthews Suite 300, One Bentall Centre 505
      Burrard Street Vancouver, British Columbia Canada, V7X 1M3
    2,348,419
    6.2%Donovan Jones Suite 300, One Bentall Centre 505
      Burrard Street Vancouver, British Columbia Canada, V7X 1M3
    940,706 (6)
    2.4%David Karp Suite 300, One Bentall Centre 505
      Burrard Street Vancouver, British Columbia Canada, V7X 1M3
    507,095 (7)
    1.3%Chris Cooper 1910-1055 West Hastings Street,
      Vancouver, British Columbia Canada V6E 2E9
    118,760 (8)
    **Larry Timlick Suite 300, One Bentall Centre 505
      Burrard Street Vancouver, British Columbia Canada, V7X 1M3
    80,569 (9)
    **Peter Charbonneau Tower B, 830  555 Legget Drive
      Ottawa, Ontario Canada K2K 2X3
    63,069(10)
    **William Jin 200 Front Street West, Suite 3003 P.O.
      Box 10 Toronto, Ontario Canada M5V 3K2
    63,069 (11)
    **Directors and Executive Officers as a Group
    16,137,883
    42.5%


|**  | Less than 1%                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Beneficial ownership is determined in accordance with the
      rules of the SEC and generally includes voting or investment power with
      respect to securities. Except as otherwise indicated, we believe that the
      beneficial owners of the common stock listed above, based on information
      furnished by such owners, have sole investment and voting power with
      respect to such shares, subject to community property laws where
      applicable.

76

---

|(2)  | Percentage based on 37,961,481 shares of common stock
      outstanding on July 25, 2011, including shares of common stock subject to
      options, deferred share units, or warrants currently exercisable or
      convertible, or exercisable or convertible within 60 days of July 25, 2011
      which are deemed outstanding for computing the percentage of the person
      holding such option or warrant but are not deemed outstanding for
      computing the percentage of any other person.                                                                                                                                                                                                                                                                                         
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3)  | Includes 7,799,691 shares of common stock held by Wesley
      Clover Corporation. Also includes shares subject to stock options of a
      total of 18,000 shares of common stock issued on August 2, 2007 and held
      by Mr. Matthews that are vested and are exercisable at a price of $2.00
      per common share, expiring between October 1, 2012 and February 28, 2015.
      Also includes 833,334 warrants held by Wesley Clover Corporation, each
      warrant of which entitles the holder to purchase one share of common stock
      at the exercise price of $0.90 per share on or before October 29, 2011.
      Also includes 94,603 shares subject to deferred share units.                                                                                                  
|(4)  | Includes 833,334 warrants held by Covington Venture Fund
      Inc., each warrant of which entitles the holder to purchase one share of
      common stock at the exercise price of $0.90 per share on or before October
      29, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(5)  | Includes 146,000 shares of common stock held by the
      spouse of Mr. Bruk and 2,974,050 shares of common stock held by KMB Trac
      Two Holdings Ltd. (KMB). Mr. Bruks spouse is the sole shareholder of
      KMB.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(6)  | Includes 362,500 shares of common stock subject to vested
      stock options of a total of 600,000 shares of common stock subject to
      stock options and held by Mr. Jones that are exercisable within 60 days of
      July 25, 2011, issued on April 17, 2009 that are exercisable at a price of
      $0.62 per share, expiring on April 17, 2014 . Also includes 516,355 shares
      of a total of 761,290 shares subject to deferred share units.                                                                                                                                                                                                                                                                                                                                       
|(7)  | Includes 442,604 shares of common stock subject to vested
      stock options of a total of 565,000 shares of common stock subject to
      stock options and held by Mr. Karp that will be vested within 60 days of
      July 25, 2011, including 240,000 stock options issued on September 7, 2006
      that are exercisable at a price of $2.15 per share, expiring on September
      7, 2016, 51,562 stock options issued on December 15, 2008 that are
      exercisable at a price of $0.44 per share, expiring on December 15, 2013,
      and 151,042 stock options issued on April 17, 2009 that are exercisable at
      a price of $0.62 per share, expiring on April 17, 2014. Also includes
      43,548 shares of a total of 152,671 shares subject to deferred share
      units.
|(8)  | Includes 40,000 shares of common stock subject to vested
      stock options issued on December 14, 2010 and held by Mr. Cooper that are
      vested, and are exercisable at a price of $1.90 per share, expiring on
      December 14, 2015. Also includes 94,603 shares subject to deferred share
      units.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(9)  | Includes 40,000 shares of common stock subject to vested
      stock options issued on December 14, 2010 and held by Mr. Timlick that are
      vested, and are exercisable at a price of $1.90 per share, expiring on
      December 14, 2015. Also includes 63,069 shares subject to deferred share
      units.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(10) | Mr. Charbonneau is a principal of the general partner of
      Skypoint Telecom Fund II, which holds 1,807,692 shares of common stock.
      Represents 63,069 shares subject to deferred share units.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(11) | Mr. Jin is senior vice president of Covington Capital, a
      venture capital company which manages Covington Venture Fund Inc. which
      holds 4,806,907 shares of common stock and 833,334 warrants, each warrant
      of which entitles Covington Venture Fund Inc. to purchase one common share
      at the exercise price of $0.90 per share on or before October 31, 2011.
      Represents 63,069 shares subject to deferred share
units.                                                                                                                                                                                                                                                                                                                                              

Changes in Control

As of July 25, 2011, management had no
knowledge of any arrangements which may at a subsequent date result in a change
in control of our company.

|Item 13. | Certain Relationships and Related
      Transactions, and Director Independence.
|-------- | --------------------------------------------------------------------------------

Transaction with related persons, promoters and certain
control persons

No director, nominee, executive
officer, principal shareholder holding at least 5% of our shares of common
stock, or any family member thereof, had any material interest, direct or
indirect, in any transaction, or proposed transactions, since May 1, 2010, the
beginning of our last fiscal year, in which the amount involved in the
transaction exceeded or exceeds the lesser of $120,000 or one percent of the
average of our total assets at year-end for the last two completed fiscal years
other than the following:

Our chairman of our board is the
chairman and founding shareholder of Mitel Networks Corporation. 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 our company on August 2, 2007 and was amalgamated on February 5, 2008 with
our companys wholly-owned subsidiary, CounterPath Solutions R&D Inc. under
the name CounterPath Technologies Inc. Under the terms of the distribution
agreement, we earn a specified fee from Mitel based on the number of product
licenses sold to Mitel. Our software revenue for the year ended April 30, 2010,
pursuant to the terms of these agreements, was $525,968 (2010 - $560,636). On
July 31, 2008 we entered into a source code license agreement whereby we
licensed to Mitel the source code for our Your Assistant product in
consideration of a payment of $650,000. Associated with the agreement are
ongoing license fees per copy deployed to be paid by Mitel over four years and
declining from $13.50 to $9.00 per copy 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.

77

---

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

In connection with a non-brokered
private placement which closed on October 29, 2010, our company issued a
convertible debenture in the principal amount of $490,750 (CDN$500,000) to
Wesley Clover, a company controlled by the chairman of the board of our company.
The debenture is convertible by the holder at any time prior to maturity, in
whole or in part into common shares of our company at a conversion price of
$1.37 per share. The convertible debenture is unsecured, bearing interest at the
prime bank rate as quoted by the Bank of Montreal with interest payable monthly
and maturing on July 30, 2012. During the year ended April 30, 2011, our company
paid interest of $7,381 to Wesley Clover towards interest on convertible
debentures.

In connection with a private
placement on June 14, 2011, the Wesley Clover agreed to convert all of their
outstanding convertible debentures of the Company in the aggregate principal
amount of $490,750 to 358,211 shares of common stock concurrent with the closing
of the private placement. In addition, Wesley Clover and another insider agreed
to each exercise 833,334 warrants at the original exercise price of $0.90 per
share on or before July 29, 2011, prior to the expiry of the warrants on October
29, 2011. In the event that a warrant holder does not exercise all of their
respective warrants on or before August 31, 2011, a default amount of $250,000
will be immediately due and payable to us by that respective warrant holder, and
such default amount will incur interest at the rate of 2% per month (on a
pro-rata basis) until the default amount is paid in full.

Director Independence

We currently act with seven directors,
consisting of Donovan Jones, Terrence Mathews, Owen Matthews, Chris Cooper,
Larry Timlick, Peter Charbonneau and William Jin. We have determined that Chris
Cooper, Larry Timlick, Peter Charbonneau and William Jin are independent
directors as defined by Rule 5605 (a)(2) of the Nasdaq Listing Rules and
National Instrument 52-110, adopted by various Canadian securities
commissions.

|Item 14. | Principal Accountant Fees and Services.
|-------- | ---------------------------------------

Audit fees and other services
provided by our independent registered public accounting firms, BDO Canada LLP
for the years ended April 30, 2011 and 2010, were as follows:

2011
    
    
    2010Audit Fees
    $
    151,854
    
    $
    132,196Audit Related Fees
    
    Nil
    
    
    NilTax Fees
    
    Nil
    
    
    NilAll Other Fees
    
    Nil
    
    
    NilTotal Fees
    $
    151,854
    
    $
    132,196


Audit Fees

This category includes the fees
for the audit of our consolidated financial statements and the quarterly reviews
of interim financial statements. This category also includes advice on audit and
accounting matters that arose during or as a result of the audit or the review
of interim financial statements and services in connection with Securities and
Exchange filings including the Form S-8 and Form S-8/A in respect of
registration of common shares of our company pursuant to our Employee Share Purchase Plan and
the 2004 Stock Option Plan and the Amended and Restated 2005 Stock Option Plan
during the year ended April 30, 2010.

78

---

Audit Related Fees

There were no audit related fees
paid to BDO Canada LLP, for our fiscal years ended April 30, 2011 and April 30,
2010.

Tax Fees

This category includes the fees
for professional services rendered for tax compliance, tax advice and tax
planning.

All Other Fees

There were no fees paid to BDO
Canada LLP, that are not covered under the headings set out above for our fiscal
years ended April 30, 2011 and April 30, 2010.

We do not use BDO Canada LLP, for
financial information system design and implementation. These services, which
include designing or implementing a system that aggregates source data
underlying the financial statements or generates information that is significant
to our financial statements, are provided internally or by other service
providers. We do not engage BDO Canada LLP, to provide compliance outsourcing
services.

Effective May 6, 2003, the SEC
adopted rules that require that before BDO Canada LLP is engaged by us to render
any auditing or permitted non-audit related service, the engagement be:

- approved by our audit committee; or
- entered into pursuant to pre-approval policies and procedures established
  by the audit committee, provided the policies and procedures are detailed as
  to the particular service, the audit committee is informed of each service,
  and such policies and procedures do not include delegation of the audit
  committee's responsibilities to management.

Our audit committee who act as
our audit committee pre-approved all services provided by our independent
accountant. All of the services and fees described under the categories of
"Audit Fees", "Audit Related Fees", "Tax Fees" and "All Other Fees" were
reviewed and approved by our board of directors before the respective services
were rendered.

Our audit committee has
considered the nature and amount of the fees billed by BDO Canada LLP, and
believes that the provision of the services for activities unrelated to the
audit is compatible with maintaining the independence of BDO Canada LLP.

PART IV

|Item 15. | Exhibits and Financial Statement
      Schedules.
|-------- | -------------------------------------------------

List of documents filed as part of the report

The following documents are filed as
part of this report:

|(a)(1) | Financial Statements:
|------ | ---------------------

| | 1. | Report of Independent Registered Public Accounting
      Firm;
| | -- | --------------------------------------------------------------
| |    |                                                               
| | 2. | Consolidated Balance Sheets;                                  

79

---

| | 3. | Consolidated Statements of Operations and Comprehensive
      Loss; 
| | -- | --------------------------------------------------------------------
| |    |                                                                     
| | 4. | Consolidated Statements of Cash Flows;                              
| |    |                                                                     
| | 5. | Consolidated Statement of Changes in Stockholders
      Equity; and
| |    |                                                                     
| | 6. | Notes to the Consolidated Financial
  Statements.                   

|(a)(2) | Financial Statement
      Schedules:                                                                                                                                                
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | None.                                                                                                                                                                               
|(a)(3) | Exhibits:                                                                                                                                                                           
|(3)    | Articles of Incorporation and By-laws                                                                                                                                               
|3.1    | Articles of Incorporation (incorporated by reference from
      our Registration Statement on Form SB-2 filed on July 16, 2003).                                                    
|3.2    | Bylaws (incorporated by reference from our Registration
      Statement on Form SB-2 filed on July 16, 2003).                                                                       
|3.3    | Amended Bylaws (incorporated by reference from our
      Registration Statement on Form SB-2/A filed on September 3, 2003).                                                         
|3.4    | Articles of Merger (incorporated by reference from our
      Current Report on Form 8-K filed on September 15, 2005).                                                               
|3.5    | Amended Bylaws (incorporated by reference from our
      Current Report on Form 8-K filed on April 28, 2006).                                                                       
|3.6    | Amended Bylaws (incorporated by reference from our
      Current Report on Form 8-K filed on April 22, 2008).                                                                       
|(4)    | Instruments defining the rights of security holders,
      including indentures                                                                                                     
|4.1    | 2004 Stock Option Plan effective May 18, 2004
      (incorporated by reference from our Registration Statement on Form S-8
      filed on June 14, 2005).                           
|4.2    | Form of Stock Option Agreement for 2004 Stock Option Plan
      (incorporated by reference from our Registration Statement on Form S-8
      filed on June 14, 2005).               
|4.3    | 2005 Stock Option Plan effective March 4, 2005
      (incorporated by reference from our Registration Statement on Form S-8
      filed on June 14, 2005).                          
|4.4    | Form of Stock Option Agreement for 2005 Stock Option Plan
      (incorporated by reference from our Registration Statement on Form S-8
      filed on June 14, 2005).               
|4.5    | Form of Amended & Restated Stock Option and
      Subscription Agreement (Canadian) (incorporated by reference from our
      Current Report on Form 8-K filed On October 14, 2005).
|4.6    | Form of Amended & Restated Stock Option and
      Subscription Agreement (US) (incorporated by reference from our Current
      Report on Form 8-K filed On October 14, 2005).      
|4.7    | 2010 Stock Option Plan effective September 27, 2010
      (incorporated by reference from our Definitive Proxy Statement filed on
      August 31, 2010).                           

80

---

|(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  | Piggyback Registrations Rights
      Agreement among our company and various shareholders, dated as of August
      2, 2007 (incorporated by reference from our Current Report on Form 8-K
      filed on August 8, 2007).                                                                        
|10.9  | 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).                          
|10.10 | 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).
|10.11 | 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).                                                                  
|10.15 | 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).                                                                                           
|10.16 | 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).                                                             
|10.17 | 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).                                               
|10.18 | Deferred Share Unit Plan effective October 22,
      2009 (incorporated by reference from our Definitive Proxy Statement on
      Schedule 14A filed on September 8, 2009).                                                                                                                       
|10.19 | 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).                                                                                      

81

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|10.20 | Form of Subscription
        Agreement dated July 30, 2010 between our company and various investors
        (incorporated by reference from our Current Report on Form 8-K filed on
        August 4, 2010).                                                                                                                                                             
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.21 | 2010 Stock Option Plan effective
        September 27, 2010 (incorporated by reference from our Definitive Proxy
        Statement filed on August 31, 2010).                                                                                                                                                                                                             
|(14)  | Code of Ethics                                                                                                                                                                                                                                                                                                                                                            
|14.1  | Code of Business Conduct and
        Ethics (incorporated by reference from our Annual Report on Form 10- KSB
        filed on July 29, 2004).                                                                                                                                                                                                                            
|14.2  | Code of Business
        Conduct and Ethics and Compliance Program (incorporated by reference from
        our Quarterly Report on Form 10-QSB filed on September 15, 2008).                                                                                                                                                                                              
|(21)  | Subsidiaries
        of CounterPath Corporation 
        CounterPath Technologies Inc. (incorporated in the Province of British
        Columbia, Canada) 
        6789722 Canada Inc. (incorporated in Canada) 
        BridgePort Networks, Inc. (incorporated in the state of Delaware) 
        BridgePort Networks (Europe) Ltd. (incorporated in the United Kingdom)
|(23)  | Consent of
        Experts and Counsel                                                                                                                                                                                                                                                                                                                                    
|23.1  | Consent of Independent Registered
    Public Accounting Firm (filed herewith)                                                                                                                                                                                                                                                                                             
|(31)  | Section 302
        Certifications                                                                                                                                                                                                                                                                                                                                        
|31.1  | Section
        302 Certification of Donovan Jones (filed herewith).                                                                                                                                                                                                                                                                                                      
|31.2  | Section
        302 Certification of David Karp (filed herewith).                                                                                                                                                                                                                                                                                                         
|(32)  | Section 906 Certifications                                                                                                                                                                                                                                                                                                                                                
|32.1  | Section
        906 Certification of Donovan Jones (filed herewith).                                                                                                                                                                                                                                                                                                      
|32.2  | Section
        906 Certification of David Karp (filed herewith).                                                                                                                                                                                                                                                                                                         

82

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SIGNATURES

Pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

COUNTERPATH CORPORATION

|By: | /s/ Donovan Jones                                  
|--- | ---------------------------------------------------
|    | Donovan Jones                                      
|    | President, Chief Executive Officer &
      Director
|    | Date: July 26, 2011                                

Pursuant to the requirements of
Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

|Signature                   | Title                                  | Date         
|--------------------------- | -------------------------------------- | -------------
|                            |                                        |              
|/s/ Terence
      Matthews  |                                        |              
|Terence Matthews            | Chairman and Director                  | July 26, 2011
|                            |                                        |              
|/s/ Donovan Jones           |                                        |              
|Donovan Jones               | President, Chief Executive Officer and | July 26, 2011
|                            | Director                               |              
|/s/ David Karp              |                                        |              
|David Karp                  | Chief Financial Officer, Treasurer and | July 26, 2011
|                            | Secretary                              |              
|/s/ Owen Matthews           |                                        |              
|Owen Matthews               | Vice Chairman and Director             | July 26, 2011
|                            |                                        |              
|/s/ Peter
      Charbonneau |                                        |              
|Peter Charbonneau           | Director                               | July 26, 2011
|                            |                                        |              
|/s/ Chris Cooper            |                                        |              
|Chris Cooper                | Director                               | July 26, 2011
|                            |                                        |              
|/s/ William Jin             |                                        |              
|William Jin                 | Director                               | July 26, 2011
|                            |                                        |              
|/s/ Larry Timlick           |                                        |              
|Larry Timlick               | Director                               | July 26, 2011

83

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