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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-K/A**Amendment No. 1**

(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, 2010

[ ] 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
      Organization) | (IRS Employer Identification No.)

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 $8,441,464 based on a price of $0.59 per share,
  being the average of bid and ask prices on October 30, 2009 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: 33,080,645 shares
  of common stock issued and outstanding as of July 23, 2010.

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**EXPLANATORY NOTE**

This amended annual report on Form 10-K/A  for the period ended April 30, 2010 discloses and discusses the impact and  effect of a restatement of our previously filed financial statements as at April  30, 2010 and 2009 and for the years then ended related to the consolidated  balance sheets as at April 30, 2010 and 2009, the consolidated statements of  operations and comprehensive loss, stockholders’ equity and cash flows for the  years ended April 30, 2010 and 2009, for the effects of a computational error in  accounting for the foreign currency translation adjustments to our Canadian  dollar denominated intangible assets, and for an overstatement of accrued  liabilities due to an overstatement of estimated royalty costs for certain  third party software.

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

As a result of the review, our company concluded  that a computational error occurred  in  translating Canadian dollar denominated intangible assets to United States  dollar denominated assets.  Therefore, we  are restating previously issued financial statements to properly record the year  end amounts of intangible assets and accumulated other comprehensive loss –  foreign currency translation adjustments and the related revision to the  impairment of intangible assets charge taken in fiscal year 2009 and the  related tax effects.  These adjustments  result in an increase in net loss of $6,254 for the year ending April 30, 2010  (2009 - $349,353).  The adjustments also  result in a decrease in the carrying amount of intangible assets by $1,256,257  as at April 30, 2010 (2009 – $713).  In addition the adjustments result in an  increase of $349,353 in accumulated deficit as of April 30, 2009 and a decrease  of $348,640 in accumulated other comprehensive loss – foreign currency  translation adjustments as of April 30, 2009 to reflect the cumulative effect  of the error.  This restatement has no  effect on our reported taxes, cash flows or liquidity.

In addition, the Company  determined through its recent investigation of third party intellectual  property rights that it overstated the accrual of its estimated royalty costs  for certain third party software.  Therefore, we are restating previously issued financial  statements to reverse the overstated amount of the cost of sales and the  accrued liabilities.  These adjustments  result in a decrease in net loss of $114,523 for the year ending April 30, 2010  (2009 – $67,932).  These adjustments resulted in a decrease of  $354,309 in accumulated deficit as of April 30, 2010 (2009-$239,786) to reflect  the cumulative effect of the error. This restatement has no effect on our  reported cash flows, no tax effect and improves our working capital by $354,309  as of April 30, 2010 (2009 - $239,786) as a result of the reduction of the  liability.

The combined effect of the restated figures is a  decrease in our basic and diluted loss per share by $0.01 to $0.17  per share for the year ended April 30, 2010 and an increase in our basic and diluted loss per  share by $0.01 to $0.58 per share for the year ended April 30, 2009.   The combined effect on our company’s  consolidated balance sheet as of April 30, 2010 is a decrease in intangible  assets of $1,256,257 (2009 – $713), a decrease in accounts payable and accrued  liabilities of $354,309 (2009 – $239,786), an increase in accumulated deficit  of $1,298 (2009 – $109,567) and an increase in accumulated other comprehensive  loss – foreign currency translation adjustments of $900,650 (2009 – decrease of  $348,640).

This amended annual report  on Form 10-K/A for the fiscal year ended April 30, 2010 amends and restates  only those items of the previously filed annual report on Form 10-K which have  been affected by the restatement.  In  order to preserve the nature and character of the disclosures set forth in such  items as originally filed, no attempt has been made in this amendment (i) to  modify or update such disclosures except as required to reflect the effects of  the restatement or (ii) to make revisions to the Notes to the Consolidated  Financial Statements except for those which are required by or result from the  effects of the restatement.  For  additional information regarding the restatement, see Note 15 to our annual  audited consolidated financial statements included in Part II - Item 8.  No other information contained in our  previously filed Form 10-K for the year ended April 30, 2010 has been updated  or amended.

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COUNTERPATH CORPORATION APRIL 30, 2010 ANNUAL
REPORT ON FORM 10-K /A

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                                                                                                  | 18  
|Item
      4.     | [Removed
      and Reserved]                                                                                             | 18  
|                  |                                                                                                                          |     
|                  | 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                                                                                            | 21  
|Item
      7.     | Managements
      Discussion and Analysis of Financial Condition and Results of Operations                              | 21  
|Item
      7A.    | Quantitative
      and Qualitative Disclosures About Market Risk                                                         | 33  
|Item
      8.     | Financial
      Statements and Supplementary Data                                                                        | 33  
|Item
      9.     | Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure                         | 65  
|Item
      9A(T). | Controls
      and Procedures                                                                                            | 65  
|Item
      9B.    | Other
      Information                                                                                                  | 66  
|                  |                                                                                                                          |     
|                  | PART III                                                                                                                 |     
|                  |                                                                                                                          |     
|Item
      10.    | Directors,
      Executive Officers and Corporate Governance                                                             | 67  
|Item
      11.    | Executive
      Compensation                                                                                             | 74  
|Item
      12.    | Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters               | 77  
|Item
      13.    | Certain
      Relationships and Related Transactions, and Director Independence                                          | 80  
|Item
      14.    | Principal
      Accountant Fees and Services                                                                             | 81  
|                  |                                                                                                                          |     
|                  | PART IV                                                                                                                  |     
|                  |                                                                                                                          |     
|Item
      15.    | Exhibits
      and Financial Statement Schedules                                                                         | 82  

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 and content 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 or fixed-mobile
convergence 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 via VoIP and extend their business phone system's
features to desktop and mobile devices. 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 via VoIP.

Our software uses the session
initiation protocol which is a protocol standard for voice, video, instant
messaging and presence communication. Certain of our desktop applications can
operate on personal computers running, but not limited to 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.

4

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We began selling our desktop
applications in 2003 and our mobile applications and gateway software in 2008.
Since that time, over 250 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 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, and 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
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'
products 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. Following incorporation, we
commenced the business of operating an entertainment advertising website.

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

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

On August 2, 2007, we 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 5, 2008, NewHeights and
CounterPath Solutions R&D Inc. were amalgamated under the name CounterPath
Technologies Inc.

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

5

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

Our Software Applications

CounterPath Multi-Media Communicator Product Suite

The CounterPath Multimedia
Communicator product suite includes five softphone applications: (1) Bria; (2)
eyeBeam; (3) Bria for Microsoft Outlook®;(4) Bria iPhone Edition; and
(5) X-Lite. Bria, Bria for Microsoft Outlook, Bria iPhone Edition and eyeBeam
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 has a number of usability
and customization features designed to enable customers to present a flexible,
user-friendly high definition VoIP, messaging and presence, and high definition
video softphone solution for consumer and enterprise markets. Bria has a
contact-focused, versus a dialpad-focused, graphical user interface which
highlights a user's address book rather than the more traditional telephone
dialpad. 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 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.

*  Bria for Microsoft Outlook®

Bria Add-in for Microsoft Outlook
offers a standards-based softphone application with audio which is fully
integrated into Microsofts widely used Outlook application. The Bria Add-in is
easy to install 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.

6

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*  eyeBeam

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

*  Bria iPhone Edition

Bria iPhone Edition is a secure,
standards-based VoIP softphone that works over both 3G and Wi-Fi networks on the
Apple iPhone, iPad and iPod Touch. Bria iPhone Edition works seamlessly 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 new iOS 4, and uses the iPhones
native address book and its embedded Bluetooth Technology.

We plan to support other mobile
platforms, such as Android, in the future.

* 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 our interoperability with these products.

Mobility Suite

The Mobility Suite offers
enterprise mobile unified communications and fixed mobile convergence
capabilities for consumer and business users. Enterprise mobile unified
communications makes it possible for a smartphone to seamlessly roam between
mobile and corporate Wi-Fi networks, and support unified communications tools
such as e-mail, presence, instant messaging and contacts, and office desk-phone
functions such as extension dialling, call forwarding and call transfer.

The Mobility Suite is comprised
of: (1) a mobile operator targeted offering called the Network Convergence
Gateway (NCG); (2) a VoIP operator targeted offering called the Message
Convergence Gateway (MCG); and (3) an enterprise targeted, business user
offering called the Enterprise Mobility Gateway (EMG) and Bria Mobile client.
The NCG was the flagship product of BridgePort Networks which we acquired in
February 2008. The MCG was built by the NCG team and released in April 2009 and
the EMG was the flagship product of FirstHand Technologies which we acquired in
February 2008.

* Network Convergence Gateway
(NCG)

The NCG is a carrier-based server
application that bridges communication between the broadband Internet and mobile
networks. The NCG enables mobile service providers to provide converged services across the broadband Internet
and mobile networks including voice, text, multimedia messaging and video
services. The NCG 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 NCG
applications include:

7

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PC Desktop Mobile
Communications

By using the NCG 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
NCG 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.

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
multiple endpoints, including desktop computers and mobile phones.

Based on our Network Convergence
Gateway (NCG) platform and our Bria softphone application, NomadicPBX enables
wireless operators and other service providers to extend their offerings to
small and medium enterprises. The service providers that we are targeting for
the NomadicPBX are mobile network operators and mobile virtual network
operators.

* Messaging Convergence
Gateway (MCG)

The MCG is a server application that
enables VoIP service providers to provide SMS services (receiving and sending of
short text messages) for their end users via the mobile network without the need
for the VoIP service provider to enter into any agreement with any mobile
operator. The MCG application enables end users to send and receive SMS messages
from within a SIP enabled phone, specifically our Bria and eyeBeam softphones.
This means that VoIP service providers and/or VoIP end users can publish VoIP
phone numbers as SMS enabled numbers. This allows the receiving party of an SMS
message to be able to identify the sender of the message by the sending partys
VoIP phone number. This caller identification feature is a feature that we
believe is unique to our MCG product.

*  Enterprise Mobility Gateway
(EMG) and Bria Mobile Client

Our Enterprise Mobility Gateway (EMG)
and Bria Mobile Client 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.

8

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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 EMG 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 EMG
integrates with common enterprise telephony, directory and messaging platforms
and securely extends these services to mobile devices.

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 ideal for
companies looking for an easy to learn SDK. This is also an ideal 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.

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 Internet protocol telephony or mobile
services to end users and enterprises. Our customers include: (1) large
incumbent telecommunications service providers, Internet telephony service
providers and content 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 250
customers in more than 50 countries where the value of the sale has exceeded
$10,000.

9

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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.

Significant Customers

Our largest customer during the
year ended April 30, 2010 was Cisco Systems, Inc., from whom we generated
approximately 15% of our total revenue. Our largest customers during the year
ended April 30, 2009 were Cisco Systems, Inc. and Mitel Networks Corporation,
from whom we generated approximately 13% and 12%, respectively, of our total
revenue. No other customers exceeded 10% of our total revenue for the years
ended April 30, 2010 and 2009.

Marketing

Our products are marketed through a
variety of means including:

- Advertising on our website;
- Co-marketing with our partners, suppliers and
  customers;
- Offering X-Lite 3.0, a 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.

As of April 30, 2010, we own or
hold the exclusive license to six granted patents. In addition, we are pursuing
16 in house developed patent applications and six licensed patent applications
from Columbia University. Combined, the 22 U.S. patent applications are pending,
as well as counterparts pending in other jurisdictions around the world. In
February 2010, Openwave Systems Inc. was granted patent No. 7,656,864: Data
network computing device call processing, to which we hold the exclusive
license. This patent describes 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.

10

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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 the patent application 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.

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, 2010 were $3,586,425
(2009: $7,075,640).

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 three 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 and our premium support
includes extended support and twenty-four hour, seven days per week telephone
support. 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 designing, deploying and
implementing their solutions. 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.

11

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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, G.729(core), G729(b), and EVRC which are
licensed by various third-party patent owners and 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 by AT&T and MPEG LA.

Competition

There are numerous developers
which compete with our company for market share. To the best of our knowledge,
the following describes some of our main competitors:

Related CounterPath Products
    Competitor
    Target MarketSoftphones
    Microsoft Corp.
    Enterprise, Service provider, mobileSoftphones
    Eyeball Networks
    Service provider offering instant messaging
      servicesSoftphones
    Movial Corp.
    Service provider offering instant messaging
      servicesSoftphones
    eyeP Media SA
    Service provider, mobileSoftphones/EMG
    Avaya Inc.
    EnterpriseSoftphones/EMG
    Siemens AG
    EnterpriseEMG
    DiVitas Networks, Inc.
    Enterprise mobile unified communications
      providersEMG
    Cisco Systems, Inc.
    EnterpriseEMG
    Agito Networks, Inc.
    Enterprise mobile unified communications
      providersEMG
    OnRelay Limited
    Enterprise mobile unified communications
      providersEMG & NCG
    Tango Networks, Inc.
    Mobile operators and network equipment
      providersNCG
    VocalTec Communications, Ltd.
    Fixed mobile convergence providersNCG
    Alcatel-Lucent
    Fixed mobile convergence providersNCG
    Mavenir Systems
    Fixed mobile convergence providers


12

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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.

Employees

As of April 30, 2010, we employed
69 people full-time, 20 of whom are engaged in marketing and sales, 25 in
research and development, 15 in services and support, 9 in general and
administration, and 19 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 subsidiaries, CounterPath Technologies Inc. and FirstHand
Technologies Inc. employ 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
will require additional financing to finance working capital and pay for
operating expenses and capital requirements until we achieve a positive cash
flow. However, there is no assurance that actual cash requirements will not
exceed our estimates. In particular, additional capital may be required in the
event that:

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

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

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.

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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, 2010, 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.

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. The challenges we have seen in the United
States have expanded overseas. If our customers continue to 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.

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

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

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

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

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

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

Our success and ability to
compete depends to a significant degree on our proprietary technology
incorporated in our software. If any of our competitors' copies or otherwise
gains access to our proprietary technology or develops similar technologies
independently, we would not be able to compete as effectively. We also consider
our family of registered and unregistered trademarks including CounterPath,
Bria, eyeBeam 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.

15

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

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

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

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

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

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

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

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

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.

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

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

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

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

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

**Item
1B.**     **Unresolved Staff
Comments.**

Not Applicable.

**Item
2.**     **Properties.**

We do not own any property. Our
Canadian operations are conducted in two leased offices located in Vancouver,
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 $81,757 was made. The monthly lease payment under
this agreement is $23,210 plus $21,843 in operating costs. Our office space is
adequate for the operations of our company for the foreseeable future.

17

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**Item
3.**     **Legal
Proceedings.**

None.

**Item 4.**     **[Removed and Reserved]**

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 
      (U.S.
      dollars)
    TSX Venture
      Exchange(2) 
    (Cdn dollars)High
    Low
    High
    LowJuly 31, 2008(1)
    $1.80
    $1.35
    N/A
    N/AOctober 31, 2008(1)
    $1.91
    $0.60
    $1.95
    $0.90January 31, 2009(1)
    $0.87
    $0.30
    $1.01
    $0.32April 30, 2009(1)
    $0.70
    $0.10
    $0.85
    $0.25July 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
    $0.40


| | (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 23, 2010, the
shareholders' list of our shares of common stock showed 77 registered
shareholders and33,080,645 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.

18

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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, 2010.

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
    N/A
    N/A
    N/AEquity compensation plans not approved by security
      holders
    4,617,707 (1)
    $1.03
    1,242,293 (2)Total
    4,616,707
    $1.03
    1,242,293


|(1) | As of April 30, 2010, we had issued stock options to
      purchase 474,000 shares of our common stock pursuant to our 2004 Stock
      Option Plan and stock options to purchase 4,143,707 shares of our common
      stock pursuant to our 2005 Stock Option Plan.                               
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                    
|(2) | As of April 30, 2010, there were 326,000 underlying
      shares of our common stock remaining and available to be issued under our
      2004 Stock Option Plan and 916,293 underlying shares of our common stock
      remaining and available to be issued under our 2005 Stock Option
    Plan.

2004 Stock Option Plan

On May 18, 2004, our board of
directors approved the 2004 stock option plan for employees, directors, officers
and consultants of our company and our subsidiaries. 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. 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 800,000 shares of our common stock
under the 2004 stock option plan.

2005 Stock Option Plan

On March 4, 2005, our board of
directors approved the 2005 stock option plan for our employees, directors,
officers and consultants of our company and our subsidiaries. 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. 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. Our board of directors increased the number of shares of our
common stock that are issuable under the 2005 stock option plan on the dates and
in the amounts as follows:

19

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Date
    Number of Shares Issuable
    Increased Number of Shares IssuableJanuary 10, 2006
    1,200,000 shares
    1,800,000 sharesSeptember 5, 2006
    1,800,000 shares
    2,400,000 sharesAugust 2, 2007
    2,400,000 shares
    3,000,000 sharesFebruary 1, 2008
    3,000,000 shares
    4,260,000 sharesOctober 22, 2009(1)
    4,260,000 shares
    5,060,000 shares


| | (1) | On October 22, 2009, our shareholders approved the
      increase in the number of shares of common stock issuable under our 2005
      Stock Option Plan by 800,000 shares, from 4,260,000 shares to 5,060,000
      shares.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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, 2010, we issued 88,028 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. As of April 30, 2010, we issued 520,161 deferred share units under the plan.

Purchases of Equity Securities by the Issuer and
Affiliated Purchasers

None.

Recent Sales of Unregistered Securities

On December 16, 2009, we issued
154,546 shares of our common stock to a holder of 154,546 exchangeable preferred
shares of our subsidiary, 6789722 Canada Inc., exercising the exchange right.
The exchangeable preferred shares of 6789722 Canada Inc. were issued in
connection with the closing of the Arrangement Agreement among our company,
6789722 Canada Inc. and NewHeights Software Corporation on August 2, 2007. Each
exchangeable preferred share of 6789722 Canada Inc. is exchangeable into one
share of our common stock at the election of the holder, or, in certain
circumstances, our company. The 154,546 shares of common stock were issued to
one 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.

20

---

On April 27, 2009, we issued
4,424 shares of our common stock to a holder of 4,424 exchangeable preferred
shares of our subsidiary, 6789722 Canada Inc., exercising the exchange right.
The exchangeable preferred shares of 6789722 Canada Inc. were issued in
connection with the closing of the Arrangement Agreement among our company,
6789722 Canada Inc. and NewHeights Software Corporation on August 2, 2007. Each
exchangeable preferred share of 6789722 Canada Inc. is exchangeable into one
share of our common stock at the election of the holder, or, in certain
circumstances, our company. The 4,424 shares of common stock were issued to one
non-U.S. person (as that term is defined in Regulation S of the Securities Act
of 1933), in an offshore transaction relying on Regulation S and/or Section 4(2)
of the Securities Act of 1933.

On May 14, 2010, we issued 50,000
shares of our common stock to a holder of 50,000 exchangeable preferred shares
of our subsidiary, 6789722 Canada Inc., exercising the exchange right. The
exchangeable preferred shares of 6789722 Canada Inc. were issued in connection
with the closing of the Arrangement Agreement among our company, 6789722 Canada
Inc. and NewHeights Software Corporation on August 2, 2007. Each exchangeable
preferred share of 6789722 Canada Inc. is exchangeable into one share of our
common stock at the election of the holder, or, in certain circumstances, our
company. The 50,000 shares of common stock were issued to one 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. Following incorporation, we
commenced the business of operating an entertainment advertising website.

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

21

---

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

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

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

Business of CounterPath

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

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

22

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

Operating Expenses

Operating expenses consist of
cost of sales, sales and marketing, research and development, 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, 2010 we had a
restructuring accrual for severance of $350,520.

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.

23

---

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.

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 ratably over the term of the
service period, which is generally twelve months.

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

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

Stock-Based Compensation

Stock options granted are
accounted for under ASC 718 (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.

24

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

The expected volatility of
options granted has been determined using the volatility of our company's stock.
The expected volatility for options granted during the year ended April 30, 2010
was 84.5% . 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, 2010 was 3.7 years. For the year ended April 30, 2010,
the weighted-average risk-free interest rate used was 2.31% . 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, 2010 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, 2010, we recorded an expense of
$883,225 in connection with share-based payment awards. A future expense of
non-vested options of $681,413 and non-vested deferred share units of $121,400
is expected to be recognized over a weighted-average period of 2.72years
and 2.63 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.

25

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

Goodwill and Intangible AssetsImpairment
Assessments

We review goodwill for impairment
annually and whenever events or changes in circumstances indicate its carrying
value may not be recoverable in accordance with FASB 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 2010, did not result in an impairment charge
for fiscal year 2010, 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 (2009 - $3.10 million, consisting of $2.01 million for the  intangible assets of NewHeights and $1.09 million for the intangible assets of  FirstHand).

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.

26

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Results of Operations

Our operating activities during
the year ended April 30, 2010 consisted primarily of selling our IP telephony
software and related services to service providers and original equipment
manufacturers serving the telecom industry, and the continued development of our
IP telephony software products.

Revenue

Revenue for the year ended April
30, 2010 and 2009 were as follows:

|                  |   | 2010      |  |  | 2009     |  |   | Period-to-Period Change | 
|----------------- | - | --------- |  |  | -------- |  | - | ----------------------- | 
|                  |   |           |  |  | Percent  |  |   |                         | 
|                  |   |           |  |  | of Total |  |   |                         | 
|                  |   | Amount    |  |  | Revenue  |  |   | Amount                  | 
|Revenue by Type   |   |           |  |  |          |  |   |                         | 
|Software          | $ | 5,974,712 |  |  | 75%      |  | $ | 6,868,980               | 
|Service           |   | 2,042,145 |  |  | 25%      |  |   | 2,964,121               | 
|Total revenue     | $ | 8,016,857 |  |  | 100%     |  | $ | 9,833,101               | 
|                  |   |           |  |  |          |  |   |                         | 
|Revenue by Region |   |           |  |  |          |  |   |                         | 
|International     | $ | 3,055,952 |  |  | 38%      |  | $ | 4,141,583               | 
|North America     |   | 4,960,905 |  |  | 62%      |  |   | 5,691,518               | 
|Total revenue     | $ | 8,016,857 |  |  | 100%     |  | $ | 9,833,101               | 

For the year ended April 30,
2010, we generated $8,016,857 in revenue compared to $9,833,101 for the year
ended April 30, 2009, representing a decrease of $1,816,244. We generated
$5,974,712 in software revenue for the year ended April 30, 2010 compared to
$6,868,980 for the year ended April 30, 2009, representing a decrease of
$894,268. The decrease in software revenue was partially due to a decrease of
approximately $675,000 in software revenue from a significant customer, as well
as a general decrease in sales to original equipment manufacturers. For the year
ended April 30, 2010, service revenue was $2,042,145 compared to $2,964,121 for
the year ended April 30, 2009. The decrease of $921,976 in service revenue was
partially due to lower service revenue generated on the applications acquired in
the acquisitions of BridgePort and FirstHand. International revenue outside of
North America represented 38% of total revenue for the year ended April 30, 2010
compared to 62% for North American revenues. This compares to international
revenues representing 42% of total revenue for the year ending April 30, 2009
compared to 58% for North American revenues. Revenue from Asia and Africa,
Central and South America, and Europe for the year ended April 30, 2010
decreased by approximately $246,000, $205,000, and $634,000 respectively.

Operating Expenses

Cost of Sales

Cost of sales for the year ended April 30, 2010 and 2009 were
as follows:

|           |   | April 30, 2010       |  |  | April 30, 2009       |  |   | Period-to-Period Change | 
|---------- | - | -------------------- |  |  | -------------------- |  | - | ----------------------- | 
|           |   | **Restated-Note 15** |  |  | **Restated-Note 15** |  |   | **Restated-Note 15**    | 
|           |   |                      |  |  | Percent              |  |   |                         | 
|           |   |                      |  |  | of                   |  |   |                         | 
|           |   | Amount               |  |  | Revenue              |  |   | Amount                  | 
|Year ended | $ | 2,825,480            |  |  | 35%                  |  | $ | 4,115,694               | 

Cost of sales was $2,825,480  for the year ended April 30, 2010 compared to $4,115,694 for the year ended  April 30, 2009.  The decrease of $1,290,214  was mainly due to a $1,136,130 reduction in amortization of intangible assets  as well as decreases in personnel and associated wages and benefits of  approximately $181,000.

27

---

Sales and Marketing

Sales
and marketing expenses for the year ended April 30, 2010 and 2009 were as
follows:

|           |   | April 30, 2010 |  |  | April 30, 2009 |  |   | Period-to-Period Change | 
|---------- | - | -------------- |  |  | -------------- |  | - | ----------------------- | 
|           |   |                |  |  | Percent        |  |   |                         | 
|           |   |                |  |  | of             |  |   |                         | 
|           |   | Amount         |  |  | Revenue        |  |   | Amount                  | 
|Year ended | $ | 3,063,523      |  |  | 38%            |  | $ | 4,147,626               | 

Sales and marketing expenses were
$3,063,523 for the year ended April 30, 2010 compared to $4,147,626 for the year
ended April 30, 2009. The decrease of $1,084,103 was primarily attributable to
decreases in sales and marketing personnel and associated wages and commissions
of approximately $1,205,000 partially offset by an increase of approximately
$60,000 in consultancy services.

Research and Development

Research
and development expenses for the year ended April 30, 2010 and 2009 were as
follows:

|           |   | April 30, 2010 |  |  | April 30, 2009 |  |   | Period-to-Period Change | 
|---------- | - | -------------- |  |  | -------------- |  | - | ----------------------- | 
|           |   |                |  |  | Percent        |  |   |                         | 
|           |   |                |  |  | of             |  |   |                         | 
|           |   | Amount         |  |  | Revenue        |  |   | Amount                  | 
|Year ended | $ | 3,586,425      |  |  | 45%            |  | $ | 7,075,640               | 

Research and development expenses
were $3,586,425 for the year ended April 30, 2010 compared to $7,075,640 for the
year ended April 30, 2009. The decrease of $3,489,215 was primarily attributable
to decreases in research and development personnel and associated wages of
approximately $3,180,000. Additionally, there were decreases in professional
services of approximately $90,000 and office rent and related office expenses of
approximately $115,000 and $104,000, respectively.

General and Administrative

General
and administrative expenses for the years ended April 30, 2010 and 2009 were as
follows:

|           |   | April 30, 2010 |  |  | April 30, 2009 |  |   | Period-to-Period Change | 
|---------- | - | -------------- |  |  | -------------- |  | - | ----------------------- | 
|           |   |                |  |  | Percent        |  |   |                         | 
|           |   |                |  |  | of             |  |   |                         | 
|           |   | Amount         |  |  | Revenue        |  |   | Amount                  | 
|Year ended | $ | 3,689,900      |  |  | 46%            |  | $ | 6,507,332               | 

General and administrative
expenses for the year ended April 30, 2010 were $3,689,900 compared to
$6,507,332 for the year ended April 30, 2009. The decrease of $2,817,432 in
general and administrative expenses was primarily attributable to decreases in
general and administrative personnel and associated wages of approximately
$1,660,000 and in professional services of approximately $840,000. There was
also a reduction in bad debt expenses of approximately $390,000.

28

---

Restructuring Charges

Restructuring
charges for the years ended April 30, 2010 and 2009 were as follows:

|           |   | April 30, 2010 |  |  | April 30, 2009 |  |   | Period-to-Period Change | 
|---------- | - | -------------- |  |  | -------------- |  | - | ----------------------- | 
|           |   |                |  |  | Percent        |  |   |                         | 
|           |   |                |  |  | of             |  |   |                         | 
|           |   | Amount         |  |  | Revenue        |  |   | Amount                  | 
|Year ended | $ | 44,912         |  |  | 1%             |  | $ | 1,565,347               | 

Restructuring charges for the
year ended April 30, 2010 were $44,912 compared to $1,565,347 for the year ended
April 30, 2009. Restructuring charges in fiscal year 2010 and 2009 were
attributable to the one time employee termination costs due to the integration
of FirstHand and BridgePort which were acquired on February 1, 2008 as well as
the settlement amounts with two former officers of our company. Included in the
$1,565,347 of restructuring costs were $258,234 paid to one former officer,
representing a cash termination cost of $132,428 (CDN$150,000) and non-cash
termination cost $125,806 (CDN$142,500) paid by way of the issuance of 279,412
common shares of our company, as well as restructuring costs of $409,068
representing a termination cost related to a settlement agreement entered into
with a former officer to be paid out equally over 45 months commencing on March
2009.

Interest and Other Income

Interest income for the year
ended April 30, 2010 was $221,493 compared to $107,931 for the year ended April
30, 2009. The increase in interest income from the prior year was due to
reversal of prior accruals and higher average cash balances during the year
ended April 30, 2010. Interest expense for the year ended April 30, 2010 was
$2,599 compared to $11,676 for the year ended April 30, 2009. Interest expense
during the year ended April 30, 2010 pertains to all cash interest expense.

Foreign exchange loss for the
year ended April 30, 2010 was $378,828 compared to a foreign exchange gain of
$466,836 for the year ended April 30, 2009. 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, 2010, we had $1,556,813 in cash  compared to $2,931,932 at April 30, 2009, representing a decrease of $1,375,119.  Our working capital was $1,157,633 at April 30, 2010 compared to $1,806,269 at  April 30, 2009, representing a decrease of $648,636.

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, 2010, we had cash of  approximately $1.6 million and working capital of approximately $1.2 million; however,  our management projects that under our current operating plan we will require  approximately $11-13 million to fund our ongoing operating expenses and working  capital requirements through April 30, 2011.   We anticipate that this will be funded through cash flow generated from  operations, working capital, potential rationalization beyond the completed  employee rationalization and external financing. 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).  We incurred $14,637 of transaction  costs.  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 $0.90 per  share.

29

---

Operating Activities

Our operating activities resulted in a  net cash outflow of $3,503,080 for the year ended April 30, 2010.  This compares with a net cash outflow of $6,535,523  for the year ended April 30, 2009, representing a $3,032,443 decrease in cash  outflows from operations.  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.

The net cash outflow from operating  activities for the year ended April 30, 2009 was primarily a result of a net  loss of $16,120,133 and a decrease in accounts payable of $704,494, partially  offset by a decrease in accounts receivable of $3,463,001. The decrease in  accounts receivable is attributable to relatively flat year over year revenues  and collection of a number of outstanding large receivables during fiscal 2009.  The net cash outflow was also offset by non-cash expenses of $2,010,830 for  amortization of intangible assets, $3,104,686 for impairment of intangibles,  $1,443,864 for stock-based compensation and $590,349 for depreciation and  amortization and $242,141 for unearned revenue.

Investing Activities

Investing activities resulted in
a net cash outflow of $17,173 for the year ended April 30, 2010 primarily due to
purchase of equipment and lease hold improvements during the year. This compares
with a net cash outflow of $99,425 primarily due to purchase of equipment during
the year ended April 30, 2009. At April 30, 2010 we did not have any material
commitments for future capital expenditures.

Financing Activities

Financing activities resulted in
a net cash inflow of $1,896,082 for the year ended April 30, 2010 compared to a
net cash inflow of $3,752,835 for the year ended April 30, 2009.

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.

On July 30, 2008, we announced a
private placement of up to approximately 3.3 million units at a price of $1.50
(CDN$1.54) per unit for gross proceeds of up to approximately $5 million
(CDN$5.1 million). On July 31, 2008 and October 28, 2008, we issued 2,433,439
units and 97,402 units, respectively, at a price of $1.50 (CDN$1.54) per unit
for gross proceeds of $3,784,439 (CDN$3,897,497). We incurred $31,604 of
transaction costs. Each unit consisted 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 the date of issue at an exercise price of $2.25 per warrant
share.

We intend to seek additional
funding through public or private financings to fund our operations through
fiscal 2011 and beyond. However, if we are unable to raise additional capital
when required or on acceptable terms, or achieve cash flow positive operations,
we may have to significantly delay product development and scale back operations
both of which may affect our ability to continue as a going concern.

30

---

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 December 2007, the FASB issued
ASC 805 (prior authoritative literature: SFAS No. 141(R),Business
Combinations). ASC 805 requires all business combinations completed after the
effective date to be accounted for by applying the acquisition method
(previously referred to as the purchase method). Companies applying this method
will have to identify the acquirer, determine the acquisition date and purchase
price and recognize at their acquisition date fair values of the identifiable
assets acquired, liabilities assumed, and any non-controlling interests in the
acquirer. In the case of a bargain purchase the acquirer is required to
reevaluate the measurements of the recognized assets and liabilities at the
acquisition date and recognize a gain on that date if an excess remains. ASC 805
was effective for fiscal periods beginning after December 15, 2008. ASC 805 was
adopted by our company effective May 1, 2009 and did not have a significant
effect on our companys financial statements.

In December 2007, the FASB issued
ASC 810-10-65 (prior authoritative literature: FAS No. 160, Non-controlling
Interests in Financial Statementsan amendment of ARB No. 51). ASC 810-10-65
establishes accounting and reporting standards for a non-controlling interest in
a subsidiary and for deconsolidation of a subsidiary. This standard applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. This standard may not be applied before that date. ASC
810-10-65 was adopted by our company effective May 1, 2009 and did not have a
significant effect on our companys financial statements.

In February 2008, the FASB issued
ASC 820-10-65 (prior authoritative literature: Staff Position (FSP) FAS 157-2),
Effective Date of FASB Statement No. 157, which defers the implementation for
non-recurring financial assets and liabilities from fiscal years beginning after
November 15, 2007 to fiscal years beginning after November 15, 2008. The
provisions of SFAS 157 will be applied prospectively. The adoption as of May 1,
2009 of the provisions did not have a material effect on our companys financial
position and results of operations.

In March 2008, the FASB issued
ASC 815-10-50 (prior authoritative literature: SFAS No. 161, Disclosures about
Derivative Instruments and Hedging Activities, an amendment of FASB Statement
No. 133). ASC 815-10-50 amends and expands the disclosure requirements of ASC
815 (prior authoritative literature SFAS 133, Accounting for Derivative
Instruments and Hedging Activities) to include qualitative disclosures
regarding the objectives and strategies for using derivatives, fair value
amounts of gains and losses on derivative instruments and disclosures about
credit-risk-related contingent features in derivative agreements. The
pronouncement also requires the cross-referencing of derivative disclosures
within the financial statements and notes thereto. ASC 815-10-50 was adopted by
our company as of May 1, 2009, and did not have an impact on our companys
results of operations, cash flows or financial positions. However, we were
required to expand our disclosures around the use of and purpose for our
derivative instruments.

In April 2009, the FASB issued
ASC 820-10-65 (prior authoritative literature: Staff Position (FSP) FAS 157-4),
which is effective for interim or annual reporting ending after June 15, 2009
and shall be applied prospectively. This FSP provides additional guidance for
estimating fair value in accordance with FASB Statement No. 157, Fair Value
Measurements, when the volume and level of activity for the asset or liability
have significantly decreased. This FSP also includes guidance on identifying
circumstances that indicate a transaction is not orderly. The adoption did not
have an impact on our companys financial statements.

In May 2009, the FASB issued
Statement of ASC 855 (prior authoritative literature: FAS No. 165, Subsequent
Events) which establishes general standards of accounting for and disclosure of
events that occur after the balance sheet date but before the financial
statements are issued or are available to be issued. ASC 855 provides guidance
on the period after the balance sheet date during which management of a
reporting entity should evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements, the
circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements and the
disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. Our company adopted ASC 855 during the
first quarter of fiscal 2010, and its application had no impact on our companys condensed consolidated financial
statements.

31

---

In June 2009, the FASB issued ASC
105-10-65 (prior authoritative literature: SFAS No. 168, The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting
Principlesa replacement of FASB Statement No. 162). On the effective date of
this standard, FASB Accounting Standards Codification (ASC) will become the
source of authoritative U.S. accounting and reporting standards for
nongovernmental entities, in addition to guidance issued by the Securities and
Exchange Commission (SEC). ASC significantly changes the way financial statement
preparers, auditors, and academics perform accounting research but is not
intended to change GAAP. This statement is effective for financial statements
issued for interim and annual periods ending after September 15, 2009. ASC
105-10-65 was adopted by our company as of August 1, 2009 and the principal
impact on our financial statements is limited to disclosures as all future
references to authoritative accounting literature will be referenced in
accordance with the Codification. In order to ease the transition to the
Codification, our company is providing the Codification cross-reference
alongside the references to the standards issued and adopted prior to the
adoption of the Codification.

In August 2009, the FASB issued
ASU No. 2009-05, Measuring Liabilities at Fair Value. This Standard amends ASC
820, Fair Value Measurements (ASC 820). The new guidance provides clarification
that in circumstances in which a quoted price in an active market for the
identical liability is not available, a reporting entity is required to measure
fair value using one or more of the following methods: 1) a valuation technique
that uses a) the quoted price of the identical liability when traded as an asset
or b) quoted prices for similar liabilities or similar liabilities when traded
as assets and/or 2) a valuation technique that is consistent with the principles
of ASC 820 (e.g. an income approach or market approach). The new guidance also
clarifies that when estimating the fair value of a liability, a reporting entity
is not required to adjust to include inputs relating to the existence of
transfer restrictions on that liability. This Standard is effective the first
reporting period, including interim periods, beginning after issuance. Our
company adopted this Standard effective November 1, 2009. The adoption did not
have a material impact on the consolidated financial statements.

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 our company is required to adopt this
guidance in its first quarter of fiscal 2012. Our company is currently
evaluating the impact this guidance may have on its financial position, results
of operations and cash flows.

In September 2009, FASBs
Emerging Issues Task Force issued EITF 09-3 Certain Revenue Arrangements That
Include Software Elements. EITF 09-3 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 our company is required to adopt this guidance in its first
quarter of fiscal 2012. Our 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
Accounting Standards Update No. 2010-06, Improving Disclosures about Fair Value
Measurements (Topic 820)Fair Value Measurements and Disclosures (ASU 2010-06),
to add additional disclosures about the different classes of assets and
liabilities measured at fair value, the valuation techniques and inputs used,
the activity in Level 3 fair value measurements, and the transfers between
Levels 1, 2, and 3. Certain provisions of this update will be effective for us
in the first quarter of fiscal 2011 and we are currently evaluating the impact
of the pending adoption of this standards update on our consolidated financial
statements.

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 our
companys financial statements.

32

---

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. Early adoption is permitted. Our company is currently evaluating
the impact of the pending adoption of ASU 2010-17 on our consolidated financial
statements.

**Item
7A.**     **Quantitative and
Qualitative Disclosures About Market Risk.**

Not
Applicable.

**Item
8.**     **Financial Statements and
Supplementary Data.**

33

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|COUNTERPATH CORPORATION                   
|------------------------------------------
|INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|April 30, 2010                            

|                                                                   | Page 
|------------------------------------------------------------------ | -----
|                                                                   |      
|Report
      of Independent Registered Public Accounting Firm      | 35   
|                                                                   |      
|Consolidated
      Balance Sheets                                  | 36   
|                                                                   |      
|Consolidated
      Statements of Operations and Comprehensive Loss | 37   
|                                                                   |      
|Consolidated
      Statements of Cash Flows                        | 38   
|                                                                   |      
|Consolidated
      Statements of Changes in Stockholders' Equity   | 39   
|                                                                   |      
|Notes to the Consolidated Financial Statements                     | 40-63

34

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|                  | 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
  CounterPath Corporation

We have audited the accompanying consolidated balance sheets
  of CounterPath Corporation (the “Company”) as of April 30, 2010
  and 2009, 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, 2010 and 2009, 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 $39,781,079 at April 30, 2010 and incurred a net loss for the year  then ended of $5,353,317.  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.

The consolidated  financial statements as of April 30, 2010 and 2009 and for the years then ended  have been restated to correct errors in the accounting for the foreign currency  translation adjustments to our Canadian dollar denominated intangible assets  and  overstatement of certain accrued  liabilities as described in Note 15.

/s/ BDO Canada LLP

Chartered Accountants

Vancouver, Canada
  July 27, 2010 (except for Note 15, December  9, 2010)



BDO Canada LLP, a Canadian limited liability partnership,
  is a member of BDO International Limited, a UK company limited by guarantee,
  and forms part of the international BDO network of independent member firms.

35

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

|                                                                                                                                                                                                                |   | April 30,   |   |   | April 30,   |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|                                                                                                                                                                                                                |   | 2010        |   |   | 2009        |  
|                                                                                                                                                                                                                |   | Restated-   |   |   | Restated-   |  
|                                                                                                                                                                                                                |   | Note 15     |   |   | Note 15     |  
|Assets                                                                                                                                                                                                          |   |             |   |   |             |  
|Current assets:                                                                                                                                                                                                 |   |             |   |   |             |  
|Cash                                                                                                                                                                                                            | $ | 1,556,813   |   | $ | 2,931,932   |  
|Accounts receivable (net of
          allowance for doubtful accounts of $1,116,119 (2009 - $755,114))                                                                                                          |   | 2,345,633   |   |   | 2,524,220   |  
|Investment tax credits
          recoverable                                                                                                                                                                    |   | 129,285     |   |   | 143,334     |  
|Prepaid expenses and deposits                                                                                                                                                                                   |   | 221,041     |   |   | 310,274     |  
|Total
          current assets                                                                                                                                                                                  |   | 4,252,772   |   |   | 5,909,760   |  
|                                                                                                                                                                                                                |   |             |   |   |             |  
|Deposits                                                                                                                                                                                                        |   | 101,994     |   |   | 114,267     |  
|Equipment  Note 3                                                                                                                                                                                              |   | 111,150     |   |   | 258,442     |  
|Intangible assets (net of accumulated
          amortization of $4,249,895 (2009 - $3,375,194)  Note 2(b)                                                                                                      |   | 1,674,359   |   |   | 2,201,181   |  
|Goodwill  Note 2(b)                                                                                                                                                                                            |   | 8,740,025   |   |   | 7,262,701   |  
|Other assets                                                                                                                                                                                                    |   | 58,817      |   |   | 92,101      |  
|Total Assets                                                                                                                                                                                                    | $ | 14,939,117  |   | $ | 15,838,452  |  
|                                                                                                                                                                                                                |   |             |   |   |             |  
|Liabilities and Stockholders Equity                                                                                                                                                                            |   |             |   |   |             |  
|Current liabilities:                                                                                                                                                                                            |   |             |   |   |             |  
|Accounts payable and accrued
          liabilities  Note 4                                                                                                                                                     | $ | 2,313,688   |   | $ | 3,248,215   |  
|Unearned revenue                                                                                                                                                                                                |   | 655,361     |   |   | 708,455     |  
|Customer deposits                                                                                                                                                                                               |   | 5,127       |   |   | 9,443       |  
|Accrued warranty  Note
          2(b)                                                                                                                                                                          |   | 120,963     |   |   | 137,378     |  
|Total current liabilities                                                                                                                                                                                       |   | 3,095,139   |   |   | 4,103,491   |  
|                                                                                                                                                                                                                |   |             |   |   |             |  
|Deferred lease inducements                                                                                                                                                                                      |   | 4,677       |   |   | 55,016      |  
|Unrecognized tax benefit 
          Notes 2(b) and 8                                                                                                                                                           |   | 98,575      |   |   | 98,575      |  
|Total liabilities                                                                                                                                                                                               |   | 3,198,391   |   |   | 4,257,082   |  
|                                                                                                                                                                                                                |   |             |   |   |             |  
|Stockholders equity:                                                                                                                                                                                           |   |             |   |   |             |  
|Preferred stock, $0.001 par value 
          Note 6 
                 Authorized: 100,000,000 
                  Issued and outstanding:
          April 30, 2010  1; April 30, 2009  1                      |   |            |   |   |            |  
|Common stock, $0.001 par value  Note 7 
                 Authorized: 83,076,900 
                 Issued and outstanding: 
                 April 30, 2010  33,015,627;
          April 30, 2009  28,832,050 |   | 33,016      |   |   | 28,831      |  
|Additional paid-in capital                                                                                                                                                                                      |   | 51,902,471  |   |   | 48,718,444  |  
|Accumulated deficit                                                                                                                                                                                             |   | (39,781,079 | ) |   | (34,427,762 | )
|Accumulated other
          comprehensive loss  currency translation adjustment                                                                                                                                |   | (413,682    | ) |   | (2,738,143  | )
|Total stockholders equity                                                                                                                                                                                      |   | 11,740,726  |   |   | 11,581,370  |  
|Liabilities and Stockholders Equity                                                                                                                                                                            | $ | 14,939,117  |   | $ | 15,838,452  |  
|                                                                                                                                                                                                                |   |             |   |   |             |  
|Going concern  Note 2                                                                                                                                                                                          |   |             |   |   |             |  
|Commitments and contingent liability  Notes 10 and 11                                                                                                                                                          |   |             |   |   |             |  

See accompanying notes to the consolidated financial
statements

36

---

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

|                                                                                                                                                                                                     |   | Years Ended    |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | -------------- | -
|                                                                                                                                                                                                     |   | April 30,      |  
|                                                                                                                                                                                                     |   | **2010**       |  
|                                                                                                                                                                                                     |   | Restated- **** |  
|                                                                                                                                                                                                     |   | Note 15        |  
|Revenue  Note 9:                                                                                                                                                                                    |   |                |  
|Software                                                                                                                                                                                             | $ | 5,974,712      |  
|Service                                                                                                                                                                                              |   | 2,042,145      |  
|Total
          revenue                                                                                                                                                                              |   | 8,016,857      |  
|Operating expenses:                                                                                                                                                                                  |   |                |  
|Cost of sales (includes depreciation of $6,361 (2009
          - $50,743) and 
              amortization of intangible assets of
          $874,700 (2009 - $2,010,830))  
              Note 2(b) |   | 2,825,480      |  
|Sales and marketing                                                                                                                                                                                  |   | 3,063,523      |  
|Research and development                                                                                                                                                                             |   | 3,586,425      |  
|General and administrative                                                                                                                                                                           |   | 3,689,900      |  
|Impairment of intangible assets  Note 2(b)                                                                                                                                                          |   |               |  
|Restructuring costs  Note 12                                                                                                                                                                        |   | 44,912         |  
|Total operating
          expenses                                                                                                                                                                   |   | 13,210,240     |  
|Loss from operations                                                                                                                                                                                 |   | (5,193,383     | )
|Interest and other income (expense), net                                                                                                                                                             |   |                |  
|Interest income                                                                                                                                                                                      |   | 221,493        |  
|Interest expense                                                                                                                                                                                     |   | (2,599         | )
|Foreign exchange gain (loss)                                                                                                                                                                         |   | (378,828       | )
|Net loss for the year                                                                                                                                                                                |   | (5,353,317     | )
|Other comprehensive income (loss):                                                                                                                                                                   |   |                |  
|Foreign currency translation adjustments                                                                                                                                                             |   | 2,324,461      |  
|Comprehensive loss                                                                                                                                                                                   | $ | (3,028,856     | )
|Net loss per share:                                                                                                                                                                                  |   |                |  
|Basic and diluted                                                                                                                                                                                    | $ | (0.17          | )
|                                                                                                                                                                                                     |   |                |  
|Weighted average common shares
          outstanding:                                                                                                                                                |   | 31,067,445     |  

See accompanying notes to the consolidated financial
statements

37

---

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

|                                                                                      |   | Years Ended       |  
|------------------------------------------------------------------------------------- | - | ----------------- | -
|                                                                                      |   | April 30,         |  
|                                                                                      |   | 2010              |  
|                                                                                      |   | Restated-         |  
|                                                                                      |   | Note
          15 |  
|Cash flows from operating
          activities:                                       |   |                   |  
|Net loss for the year                                                                 | $ | (5,353,317        | )
|Adjustments to reconcile net loss to
          net cash used in operating activities: |   |                   |  
|Depreciation and
          amortization                                               |   | 276,410           |  
|Amortization of intangible assets                                                     |   | 874,700           |  
|Impairment of intangible
          assets                                             |   |                  |  
|Severance
          paid by issuance of common stock                                  |   |                  |  
|Shares issued as part of
          share purchase plan                                |   | 15,489            |  
|Stock-based compensation                                                              |   | 883,225           |  
|Foreign exchange (gain)
          loss                                                |   | 378,828           |  
|Changes in assets and liabilities:                                                    |   |                   |  
|Accounts receivable                                                                   |   | 262,894           |  
|Prepaid
          expenses and deposits                                               |   | 109,906           |  
|Accounts payable and
          accrued liabilities                                    |   | (874,926          | )
|Other
          assets                                                                |   | (16,716           | )
|Unearned revenue                                                                      |   | (38,840           | )
|Customer
          deposits                                                           |   | (4,316            | )
|Warranty payable                                                                      |   | (16,417           | )
|Net cash used in operating activities                                                 |   | (3,503,080        | )
|                                                                                      |   |                   |  
|Cash flows from investing
          activities:                                       |   |                   |  
|Purchase of equipment                                                                 |   | (53,641           | )
|Deposits                                                                              |   | 36,468            |  
|Net cash used in investing activities                                                 |   | (17,173           | )
|                                                                                      |   |                   |  
|Cash flows from financing activities:                                                 |   |                   |  
|Common stock issued                                                                   |   | 1,896,082         |  
|Decrease in due to related parties                                                    |   |                  |  
|Net cash provided by financing activities                                             |   | 1,896,082         |  
|                                                                                      |   |                   |  
|Foreign exchange effect on cash                                                       |   | 249,052           |  
|                                                                                      |   |                   |  
|Increase (decrease) in cash                                                           |   | (1,375,119        | )
|                                                                                      |   |                   |  
|Cash, beginning of the year                                                           |   | 2,931,932         |  
|Cash, end of the year                                                                 | $ | 1,556,813         |  
|                                                                                      |   |                   |  
|Supplemental disclosure of cash flow information                                      |   |                   |  
|Cash paid for:                                                                        |   |                   |  
|Interest                                                                              | $ | 2,599             |  
|Taxes                                                                                 | $ |                  |  
|                                                                                      |   |                   |  
|Common stock issued for severance                                                     | $ |                  |  
|Non cash transactions  Notes 6 and 7                                                 |   |                   |  

See accompanying notes to the consolidated financial
statements

38

---

|COUNTERPATH CORPORATION                                         
|----------------------------------------------------------------
|CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
      EQUITY
|for the Years Ended April 30, 2010 and 2009                     
|(Stated in U.S. Dollars)                                        

|                                                           |  | Common shares |  |   | Preferred Shares    |  |  |        |  |   |                     |  |   |            |   |   |                  |  
|---------------------------------------------------------- |  | ------------- |  | - | ------------------- |  |  | ------ |  | - | ------------------- |  | - | ---------- | - | - | ---------------- | -
|                                                           |  |               |  |   |                     |  |  |        |  |   |                     |  |   |            |   |   |                  |  
|                                                           |  |               |  |   |                     |  |  |        |  |   |                     |  |   |            |   |   |                  |  
|                                                           |  |               |  |   |                     |  |  |        |  |   |                     |  |   |            |   |   |                  |  
|                                                           |  | Number        |  |   |                     |  |  | Number |  |   |                     |  |   | Additional |   |   | Accumulated      |  
|                                                           |  | of            |  |   |                     |  |  | of     |  |   |                     |  |   | Paid-in    |   |   | Deficit          |  
|                                                           |  | Shares        |  |   | Par
          Value |  |  | Shares |  |   | Par
          Value |  |   | Capital    |   |   | Restated-Note 15 |  
|Balance May 1, 2008                                        |  | 25,921,797    |  | $ | 25,922              |  |  | 1      |  | $ |                    |  | $ | 43,398,848 |   | $ | (18,307,629      | )
|                                                           |  |               |  |   |                     |  |  |        |  |   |                     |  |   |            |   |   |                  |  
|Shares issued:                                             |  |               |  |   |                     |  |  |        |  |   |                     |  |   |            |   |   |                  |  
|Private placements  Note 7                                |  | 2,530,841     |  |   | 2,531               |  |  |       |  |   |                    |  |   | 3,750,304  |   |   |                 |  
|Issued for severance  Note 7                              |  | 279,412       |  |   | 279                 |  |  |       |  |   |                    |  |   | 125,527    |   |   |                 |  
|Exchange of subsidiary preferred shares 
          Note 6 |  | 100,000       |  |   | 100                 |  |  |       |  |   |                    |  |   | (100       | ) |   |                 |  
|Stock-based compensation -
          Note 7                |  |              |  |   |                    |  |  |       |  |   |                    |  |   | 1,443,864  |   |   |                 |  
|Net loss for the year                                      |  |              |  |   |                    |  |  |       |  |   |                    |  |   |           |   |   | (16,120,133      | )
|Foreign currency translation
          adjustment          |  |              |  |   |                    |  |  |       |  |   |                    |  |   |           |   |   |                 |  
|Balance, April 30, 2009                                    |  | 28,832,050    |  |   | 28,832              |  |  | 1      |  |   |                    |  |   | 48,718,443 |   |   | (34,427,762      | )
|                                                           |  |               |  |   |                     |  |  |        |  |   |                     |  |   |            |   |   |                  |  
|Shares issued:                                             |  |               |  |   |                     |  |  |        |  |   |                     |  |   |            |   |   |                  |  
|Private placements  Note 7                                |  | 3,333,334     |  |   | 3,333               |  |  |       |  |   |                    |  |   | 1,849,793  |   |   |                 |  
|Issued as part of debt settlement                          |  | 527,370       |  |   | 527                 |  |  |       |  |   |                    |  |   | 392,889    |   |   |                 |  
|Exercise of stock options                                  |  | 25,875        |  |   | 26                  |  |  |       |  |   |                    |  |   | 11,952     |   |   |                 |  
|Employee Share Purchase Plan                               |  | 88,028        |  |   | 89                  |  |  |       |  |   |                    |  |   | 46,378     |   |   |                 |  
|Exchange of subsidiary
          preferred shares  Note 6 |  | 208,970       |  |   | 209                 |  |  |       |  |   |                    |  |   | (209       | ) |   |                 |  
|Stock-based compensation - Note 7                          |  |              |  |   |                    |  |  |       |  |   |                    |  |   | 883,225    |   |   |                 |  
|Net loss for the year                                      |  |              |  |   |                    |  |  |       |  |   |                    |  |   |           |   |   | (5,353,317       | )
|Foreign currency translation adjustment                    |  |              |  |   |                    |  |  |       |  |   |                    |  |   |           |   |   |                 |  
|Balance, April 30, 2010                                    |  | 33,015,627    |  | $ | 33,016              |  |  | 1      |  | $ |                    |  | $ | 51,902,471 |   | $ | (39,781,079      | )

Seeaccompanyingnotes to theconsolidatedfinancialstatements

39

---

|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 that are
      exchangeable into 369,836 shares of common stock of the Company. For
      accounting purposes, the Company was deemed to be the acquirer of
      NewHeights based on certain factors including the number of common shares
      issued in the transaction as a proportion of the total common shares
      outstanding, and the composition of the board after the transaction.                                                                                                                                                                                                                                                                                                        
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       | On February 1, 2008, the Company acquired FirstHand
      Technologies Inc. (FirstHand), a private Ontario, Canada corporation,
      through the issuance of 5,900,014 shares of the Companys common stock.
      For accounting purposes, the Company was deemed to be the acquirer of
      FirstHand based on certain factors including the number of common shares
      issued in the transaction as a proportion of the total common shares
      outstanding, and the composition of the board after the transaction.                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       | On February 1, 2008, the Company acquired BridgePort
      Networks, Inc. (BridgePort), a private Delaware corporation, by way of
      merger in consideration for the assumption of all of the assets and
      liabilities of BridgePort. For accounting purposes, the Company was deemed
      to be the acquirer of BridgePort based on certain factors primarily being
      the composition of the board after the transaction.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       | On February 5, 2008, the Company's wholly-owned
      subsidiaries, NewHeights and CounterPath Solutions R&D Inc. were
      merged as a wholly-owned subsidiary of the Company under the name
      CounterPath Technologies Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       | On March 19, 2008, the Companys Board of Directors
      approved a five for one common stock consolidation. As a result, the
      Company's authorized capital decreased from 415,384,500 shares of common
      stock to 83,076,900 shares of common stock. The par value of the common
      stock was unaffected by the stock consolidation and remains at $0.001 per
      share. All per share amounts and outstanding shares, including all common
      stock equivalents (stock options and warrants) have been retroactively
      adjusted in the Consolidated Financial Statements and in the Notes to the
      Consolidated Financial Statements for all periods presented to reflect the
      stock consolidation.                                                                                                                                                                                                                                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       | The Company focuses on the design, development, marketing
      and sales of desktop and mobile communications application software,
      conferencing software, gateway (server) software and related professional
      services, such as pre and post sales technical support and customization
      services. The Companys products are sold into the Voice over Internet
      Protocol (VoIP) market primarily to carriers, infrastructure manufacturers
      and businesses in North America, Central and South America, Europe and
      Asia.                                                                                                                                                                                                                                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Note 2 | Significant Accounting Policies and Going
      Concern                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       | These 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.  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, 2010, the  Company has not yet achieved profitable operations and had an accumulated  deficit of $39,781,079 since incorporation and incurred a net loss for the year  ended April 30, 2010 totalling $5,353,317. These factors raise substantial  doubt regarding the Company’s ability to continue as a going concern.

40

---

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

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

Under its current operating plan the
Company will require approximately $11-13 million to fund ongoing operations and
working capital requirements through April 30, 2011. Management is implementing
a plan to address these uncertainties to enable the Company to continue as a
going concern through the end of fiscal 2011 and beyond. This plan includes new
equity financing in amounts sufficient to sustain operations, such as the
private placement discussed in Note 7, and to increase revenues and decrease
costs from operations.

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

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

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)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | 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 generally
      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.                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | 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, 2010
      and April 30, 2009 using the assumptions more fully described in Note
      7.                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | 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                                           

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)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | 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 12.
|
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | Website Development Costs:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | The Company recognizes the costs associated with
      developing a website in accordance with ACS Topic 350-40 (pior
      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.                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | 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.                                                                                                                                                                                                                                                                                                                                                                

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)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | 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, 2011 to 2013 of the acquired technologies and customer asset is
      as follows:                                                                                                                                                                                                                                                                                                                                                                                                                      

| |      |   | NewHeights       |  |   | FirstHand        |  |   | BridgePort       |  |   | Total            | 
| | ---- | - | ---------------- |  | - | ---------------- |  | - | ---------------- |  | - | ---------------- | 
| |      |   | Restated-Note 15 |  |   | Restated-Note 15 |  |   | Restated-Note 15 |  |   | Restated-Note 15 | 
| |      |   |                  |  |   |                  |  |   |                  |  |   |                  | 
| | 2011 | $ | 434,800          |  | $ | 329,460          |  | $ | 93,777           |  | $ | 858,037          | 
| | 2012 |   | 202,339          |  |   | 504,752          |  |   | 70,591           |  |   | 777,682          | 
| | 2013 | $ | 38,640           |  | $ |                 |  | $ |                 |  | $ | 38,640           | 

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, 2010 and determined that there was no impairment of its
intangible assets (2009 - $3,104,686).

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, 2010,
  the carrying value of the asset group was less than the undiscounted cash flows,
  indicating no impairment.

For the year ended April 30, 2009 the
Company determined that the significant adverse change in the business climate
in the last six months of 2009 affected the value of the Companys intangible
assets acquired through the acquisitions of FirstHand and NewHeights. In
addition the cash flow losses as at April 30, 2009 had exceeded expectations for
both of the groups of long-lived assets originating from those acquisitions. 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. 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. The carrying value of the reporting unit,, was
greater than the undiscounted cash flows, indicating impairment. The Company
performed step two of the impairment test and determined there was a partial
impairment of its intangible assets reducing those assets to their fair value.
The fair value was determined based on the price that a willing buyer would pay
in an orderly liquidation of those assets using discounted cash-flow analysis.
As a result, the Company recorded an impairment charge in fiscal 2009 of
$3,104,686 related to the intangible assets.

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)                                                              

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

| |                                   |   |                  |  |   | Accumulated      |  |   | Impairment       |  |   | Net Carrying     | 
| | --------------------------------- | - | ---------------- |  | - | ---------------- |  | - | ---------------- |  | - | ---------------- | 
| |                                   |   | Cost             |  |   | Amortization     |  |   | Charge           |  |   | Amount           | 
| |                                   |   | Restated-Note 15 |  |   | Restated-Note 15 |  |   | Restated-Note 15 |  |   | Restated-Note 15 | 
| | 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        | 

A summary of the Companys intangible
assets, net at April 30, 2009 is as follows:

| |                                   |   |                  |  |   | Accumulated      |  |   | Impairment       |  |   | Net Carrying     | 
| | --------------------------------- | - | ---------------- |  | - | ---------------- |  | - | ---------------- |  | - | ---------------- | 
| |                                   |   | Cost             |  |   | Amortization     |  |   | Charge           |  |   | Amount           | 
| |                                   |   | Restated-Note 15 |  |   | Restated-Note 15 |  |   | Restated-Note 15 |  |   | Restated-Note 15 | 
| | Acquired technologies             | $ | 6,083,733        |  | $ | 2,730,825        |  | $ | 1,888,658        |  | $ | 1,464,250        | 
| | Customer assets                   |   | 2,597,328        |  |   | 644,369          |  |   | 1,216,028        |  |   | 736,931          | 
| | Intangible assets, April 30, 2009 | $ | 8,681,061        |  | $ | 3,375,194        |  | $ | 3,104,686        |  | $ | 2,201,181        | 

Accounts Receivable and Allowance
for Doubtful Accounts:

Accounts receivable are presented net
of an allowance for doubtful accounts. The allowance was $1,116,119 at April 30,
2010 (2009 - $755,114). Bad debt expense for the year ended April 30, 2010 was
$296,887 (2009 - $594,589).

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.

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)                                                              

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, 2010 and 2009
were as follows:

| |                            |   | Years Ended April 30, |  
| | -------------------------- | - | --------------------- | -
| |                            |   | 2010                  |  
| |                            |   |                       |  
| | Balance, beginning of year | $ | 137,378               |  
| | Change                     |   | (16,415               | )
| | Balance, end of year       | $ | 120,963               |  

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 Company applies the provisions of
ASC 820 (prior authoritative literature: Statement of Financial Accounting
Standards No. 157, Fair Value Measurements (SFAS No. 157)). ASC 820
defines fair value, establishes a framework for measuring fair value under
generally accepted accounting principles and enhances disclosures about fair
value measurements. Fair value is defined under ASC 820 as the exchange price
that would be received for an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for the asset or liability
in an orderly transaction between market participants on the measurement date.
Valuation techniques used to measure fair value under ASC 820 must maximize the
use of observable inputs and minimize the use of unobservable inputs. The
standard describes a fair value hierarchy based on three levels of inputs, of
which the first two are considered observable and the last unobservable, that
may be used to measure fair value which are the following:

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

Level 2 - observable inputs other than
Level I, quoted prices for similar assets or liabilities in active markets,
quoted prices for identical or similar assets and liabilities in markets that
are not active, and model-derived prices whose inputs are observable or whose
significant value drivers are observable; and

Level 3 - assets and liabilities whose
significant value drivers are unobservable by little or no market activity and
that are significant to the fair value of the assets or liabilities.

The Companys financial instruments
consist of cash, accounts receivables, accounts payable and accrued liabilities,
customer deposits and accrued warranty approximate. The carrying values of the
majority of the Companys financial instruments approximate fair value due to
the short maturity of these instruments. We measure certain financial assets,
including our foreign currency 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.

The fair value of forward contracts as
of April 30, 2010 was $nil (2009 - $nil), as all forward contracts have since
been settled. The forward contracts were considered as Level 2 inputs during the
year ended April 30, 2010. The Company did not have any Level 1 or Level 3
inputs as at April 30, 2010.

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)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | 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). 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | 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, 2010, loss per share excludes 7,549,795 (April 30, 2009 
      6,916,189) potentially dilutive common shares (related to stock options
      and warrants) as their effect was anti-dilutive.                                                                                                                                                                                                                                                                   

47

---

|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)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | 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, 2010 was $6,668,070
      (CDN$6,704,947) (April 30, 2009-$5,540,968) and $2,071,955 (CDN$2,083,752)
      (April 30, 2009 - $1,721,733), respectively. During the fourth quarter of
      its fiscal year ended April 30, 2010, 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, 2010. 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, 2010 (2009
      - $nil).                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | 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
      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. We
      revalue 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.                                                                                                                                                                                                                                                    

48

---

|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)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | 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. For these derivatives, the
      Company reports the after-tax gain or loss from the effective portion of
      the hedge as a component of accumulated other comprehensive income (loss)
      in stockholders equity and reclassifies it into earnings in the same
      period in which the hedged transaction affects earnings, and within the
      same line item on the consolidated statements of operations as the impact
      of the hedged transaction (see Note 10 Derivative Instruments and Hedging
      Activities, of the Notes to the Consolidated Financial
  Statements).                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | c) | Comparative Figures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | Certain comparative figures have been reclassified to
      conform to the current periods presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | d) | New Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | In December 2007, the FASB issued ASC 805 (prior
      authoritative literature:SFAS No. 141(R),Business
      Combinations). ASC 805 requires all business combinations completed
      after the effective date to be accounted for by applying the acquisition
      method (previously referred to as the purchase method). Companies applying
      this method will have to identify the acquirer, determine the acquisition
      date and purchase price and recognize at their acquisition date fair
      values of the identifiable assets acquired, liabilities assumed, and any
      non-controlling interests in the acquirer. In the case of a bargain
      purchase the acquirer is required to reevaluate the measurements of the
      recognized assets and liabilities at the acquisition date and recognize a
      gain on that date if an excess remains. ASC 805 was effective for fiscal
      periods beginning after December 15, 2008. ASC 805 was adopted by the
      Company effective May 1, 2009 and did not have a significant effect on the
      Companys financial statements.                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | In December 2007, the FASB issued ASC 810-10-65 (prior
      authoritative literature:FAS No. 160, Non-controlling
      Interests in Financial Statementsan amendment of ARB No. 51). ASC
      810-10-65 establishes accounting and reporting standards for a
      non-controlling interest in a subsidiary and for deconsolidation of a
      subsidiary. This standard applies prospectively to business combinations
      for which the acquisition date is on or after the beginning of the first
      annual reporting period beginning on or after December 15, 2008. This
      standard may not be applied before that date. ASC 810- 10-65 was adopted
      by the Company effective May 1, 2009 and did not have a significant effect
      on the Companys financial statements.                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | In February 2008, the FASB issued ASC 820-10-65 (prior
      authoritative literature:Staff Position (FSP) FAS 157-2), Effective
      Date of FASB Statement No. 157, which defers the implementation for
      non-recurring financial assets and liabilities from fiscal years beginning
      after November 15, 2007 to fiscal years beginning after November 15, 2008.
      The provisions of SFAS 157 will be applied prospectively. The adoption as
      of May 1, 2009 of the provisions did not have a material effect on the
      Companys financial position and results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | In March 2008, the FASB issued ASC 815-10-50 (prior
      authoritative literature:SFAS No. 161, Disclosures about
      Derivative Instruments and Hedging Activities, an amendment of FASB
      Statement No. 133). ASC 815-10-50 amends and expands the disclosure
      requirements of ASC 815 (prior authoritative literatureSFAS 133,
      Accounting for Derivative Instruments and Hedging Activities) to
      include qualitative disclosures regarding the objectives and strategies
      for using derivatives, fair value amounts of gains and losses on
      derivative instruments and disclosures about credit-risk- related
      contingent features in derivative agreements. The pronouncement also
      requires the cross-referencing of derivative disclosures within the
      financial statements and notes thereto. ASC 815-10-50 was adopted by the
      Company as of May 1, 2009, and did not have an impact on the Companys
      results of operations, cash flows or financial positions. However, the
      Company was required to expand its disclosures around the use of and
      purpose for its derivative instruments.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | In April 2009, the FASB issued ASC 820-10-65 (prior
      authoritative literature:Staff Position (FSP) FAS 157-4), which is
      effective for interim or annual reporting ending after June 15, 2009 and
      shall be applied prospectively. This FSP provides additional guidance for
      estimating fair value in accordance with FASB Statement No. 157, Fair
      Value Measurements, when the volume and level of activity for the
      asset or liability have significantly decreased. This FSP also includes
      guidance on identifying circumstances that indicate a transaction is not
      orderly. The adoption did not have an impact on the Companys financial
      statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                

49

---

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

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

| | d) | New Accounting Pronouncements (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | In May 2009, the FASB issued Statement of ASC 855
      (prior authoritative literature:FAS No. 165, Subsequent
      Events) which establishes general standards of accounting for and
      disclosure of events that occur after the balance sheet date but before
      the financial statements are issued or are available to be issued. ASC 855
      provides guidance on the period after the balance sheet date during which
      management of a reporting entity should evaluate events or transactions
      that may occur for potential recognition or disclosure in the financial
      statements, the circumstances under which an entity should recognize
      events or transactions occurring after the balance sheet date in its
      financial statements and the disclosures that an entity should make about
      events or transactions that occurred after the balance sheet date. The
      Company adopted ASC 855 during the first quarter of fiscal 2010, and its
      application had no impact on our companys condensed consolidated
      financial statements.                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | In June 2009, the FASB issued ASC 105-10-65 (prior
      authoritative literature:SFAS No. 168, The FASB Accounting
      Standards Codification and the Hierarchy of Generally Accepted Accounting
      Principlesa replacement of FASB Statement No. 162).On the
      effective date of this standard, FASB Accounting Standards
      Codification(ASC) will become the source of authoritative U.S.
      accounting and reporting standards for nongovernmental entities, in
      addition to guidance issued by the Securities and Exchange Commission
      (SEC). ASC significantly changes the way financial statement preparers,
      auditors, and academics perform accounting research but is not intended to
      change GAAP. This statement is effective for financial statements issued
      for interim and annual periods ending after September 15, 2009. ASC
      105-10-65 was adopted by the Company as of August 1, 2009 and the
      principal impact on our financial statements is limited to disclosures as
      all future references to authoritative accounting literature will be
      referenced in accordance with the Codification. In order to ease the
      transition to the Codification, the Company is providing the Codification
      cross- reference alongside the references to the standards issued and
      adopted prior to the adoption of the Codification.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | In August 2009, the FASB issued ASU No. 2009-05,
      Measuring Liabilities at Fair Value. This Standard amends ASC 820,
      Fair Value Measurements(ASC 820). The new guidance provides
      clarification that in circumstances in which a quoted price in an active
      market for the identical liability is not available, a reporting entity is
      required to measure fair value using one or more of the following methods:
      1) a valuation technique that uses a) the quoted price of the identical
      liability when traded as an asset or b) quoted prices for similar
      liabilities or similar liabilities when traded as assets and/or 2) a
      valuation technique that is consistent with the principles of ASC 820
      (e.g. an income approach or market approach). The new guidance also
      clarifies that when estimating the fair value of a liability, a reporting
      entity is not required to adjust to include inputs relating to the
      existence of transfer restrictions on that liability. This Standard is
      effective the first reporting period, including interim periods, beginning
      after issuance. The Company adopted this Standard effective November 1,
      2009. The adoption did not have a material impact on the consolidated
      financial statements.                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | 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.                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | In September 2009, FASBs Emerging Issues Task Force
      issued EITF 09-3 Certain Revenue Arrangements That Include Software
      Elements. EITF 09-3 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 Accounting Standards
      Update No. 2010-06, Improving Disclosures about Fair Value Measurements
      (Topic 820)Fair Value Measurements and Disclosures(ASU
      2010-06), to add additional disclosures about the different classes of
      assets and liabilities measured at fair value, the valuation techniques
      and inputs used, the activity in Level 3 fair value measurements, and the
      transfers between Levels 1, 2, and 3. Certain provisions of this update
      will be effective for us in fiscal 2011 and we are currently evaluating
      the impact of the pending adoption of this standards update on our
      consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

50

---

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

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

| | d) | New Accounting Pronouncements (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | 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. Early
      adoption is permitted. The Company is currently evaluating the impact of
      the pending adoption of ASU 2010-17 on our consolidated financial
      statements.

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

| |                        |   | 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      | 

| |                        |   | April 30, 2009 | 
| | ---------------------- | - | -------------- | 
| |                        |   |                | 
| |                        |   | Cost           | 
| |                        |   |                | 
| | Computer hardware      | $ | 636,993        | 
| | Computer software      |   | 726,908        | 
| | Leasehold improvements |   | 183,498        | 
| | Office furniture       |   | 230,459        | 
| | Websites               |   | 49,915         | 
| |                        | $ | 1,827,773      | 



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

Accounts payable and accrued
liabilities at April 30, 2010 and 2009 are comprised of the following:

| |                             |   | April 30,        | 
| | --------------------------- | - | ---------------- | 
| |                             |   | 2010             | 
| |                             |   | Restated-Note 15 | 
| | Accounts payable  trade    | $ | 499,900          | 
| | Accrued commissions         |   | 158,343          | 
| | Accrued vacation            |   | 362,618          | 
| | Codec royalties             |   | 493,868          | 
| | Research fees               |   | 246,706          | 
| | Accrued severance  Note 12 |   | 344,433          | 
| | Other accrued liabilities   |   | 207,820          | 
| |                             | $ | 2,313,688        | 

51

---

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

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

During the years ended April 30, 2010
and 2009, the Company incurred the following lease expense to a company with a
director in common with the Company:

| |               |   | Years Ended | 
| | ------------- | - | ----------- | 
| |               |   | April 30,   | 
| |               |   | 2010        | 
| | Lease payment | $ | Nil         | 

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

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

On July 31, 2008 the Company entered
into a source code license agreement whereby the Company licensed to Mitel the
source code for the Your Assistant product in consideration of a payment of
$650,000. Associated with the agreement are ongoing license fees to be paid by
Mitel of $13.50 per copy deployed, declining to $9.00 per copy deployed after
two years and declining from $9.00 to nil after four years. In addition, the
agreement provides Mitel with a first right to match any third party offer to
purchase the source code software and related intellectual property.

The Companys software license revenue
for the year ended April 30, 2010, pursuant to the terms of these agreements,
was $560,636 (2009 - $1,225,757).

As at April 30, 2010, the Company had
an accounts receivable balance from Mitel of $170,802 (April 30, 2009 -
$155,208).

During the year ended April 30, 2010,
the Company through its wholly owned subsidiary, FirstHand Technologies Inc.,
paid $79,500 (2009 - $277,451) to Kanata Research Park Corporation (KRP) for
leased office space. KRP is controlled by the Companys Chairman. As at April
30, 2010, the Company had an accounts payable balance to KRP of $nil (April 30,
2009 - $13,210).

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s Board,
purchased 1,666,667 units, at a price of $0.56 (CDN$0.60) per unit, for
aggregate proceeds of $933,881 (CDN$1,000,000). Each unit consisted of one share
of common stock and one-half of one non-transferable common share purchase
warrant. Each whole warrant entitles the holder to purchase one share of common
stock at a price of $0.90 for a period of two years from the closing of the
private placement.

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

52

---

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

|Note 6 | 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. There were 60,871
outstanding exchangeable shares as of April 30, 2010 (April 30, 2009 - 269,841).
As the exchangeable shares have already been recognized in connection with the
acquisition of NewHeights, the value ascribed to these shares on exchange is
$nil.



|Note 7 | **Common Stock**
|------ | ----------------

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

On April 11, 2008, certain officers,
directors and affiliates of the Company entered into an escrow agreement with
the TSX-V whereby a total of 11,481,635 shares of common stock in the Company
were deposited into escrow with Valiant Trust acting as escrow agent as a
condition to listing of the Companys shares of common stock on the TSX-V. The
shares were released as to 25% upon entering in to the agreement and 25% on each
date that is 6, 12 and 18 months from the date of the escrow agreement. As of
April 30, 2009, 8,611,226 shares of common stock had been released from escrow
and as of April 30, 2010, all shares of common stock had been released from
escrow.

On July 30, 2008, the Company
announced a private placement of up to approximately 3.3 million units at a
price of $1.50 (CDN$1.54) per unit for gross proceeds of up to approximately $5
million (CDN$5.1 million). On July 31, 2008 and October 28, 2008, the Company
issued 2,433,439 units and 97,402 units, respectively, at a price of $1.50
(CDN$1.54) per unit for gross proceeds of $3,784,439 (CDN$3,897,497). The
Company incurred $31,604 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 shall entitle the
holder thereof to purchase one share of common stock in the capital of the
Company for a period of two years commencing from the date of issue at an
exercise price of $2.25 per warrant share. Certain officers and directors of the
Company subscribed for 759,559 units at a price of $1.50 (CDN$1.54) per unit,
including warrants entitling the holders thereof to purchase one share of common
stock in the capital of the Company for a period of two years commencing from
the date of issue at an exercise price of $2.25 per warrant share for gross
proceeds of $1,142,306 (CDN$1,169,721). As the unit price of $1.50 (CDN$1.54)
per unit was below the closing market price of $1.60 (CDN$1.64) per share of the
Companys common stock on the date of the transaction and included one-half of
one common share purchase warrant, the Company recorded a compensatory charge to
general and administrative expenses for the year ended April 30, 2009 of
$195,293.

On March 12, 2009, the Company issued
279,412 shares in lieu of severance of $125,806 (CDN$142,500) to an officer of
the Company as part of a settlement agreement.

53

---

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

|Note 7 | Common Stock (contd)
|------ | ----------------------

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

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

The Company 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. 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 behavior. 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 2010 and 2009 in determining the expense recorded in the accompanying
consolidated statement of operations.

On March 12, 2009, the Company reduced
the exercise price of 1,282,711 employee incentive stock options to $0.47 (CDN
$0.60) per common share for all of its employees and contractors holding stock
options, other than for its officers and directors. In accordance with ASC 718
the Company measured the new fair value of the repriced options and also
revalued the original options as of the date of modification. The excess fair
value of the repriced options over the re-measured value of the original options
represents incremental compensation cost. The total incremental cost of the
repriced options is approximately $191,425 of which $139,281 has been recognized
to the statement of operations on the transaction date with $52,144 to recognize
over the remaining service period of the repriced options.

54

---

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

|Note 7 | Common Stock (contd) 
|------ | -----------------------
|       |                        
|       | Stock Options (contd)

The weighted-average fair values of
options granted during the year ended April 30, 2010 and 2009 were $0.34 and
$0.44 respectively. The weighted-average assumptions utilized to determine such
values are presented in the following table:

| |                             |   | Year Ended     |  |   | Year Ended     | 
| | --------------------------- | - | -------------- |  | - | -------------- | 
| |                             |   | April 30, 2010 |  |   | April 30, 2009 | 
| | Risk-free interest rate     |   | 2.31%          |  |   | 2.12%          | 
| | Expected volatility         |   | 84.5%          |  |   | 71.9%          | 
| | Expected term               |   | 3.7 yrs        |  |   | 3.7 yrs        | 
| | Dividend yield              |   | 0%             |  |   | 0%             | 
| | Weighted average fair value | $ | 0.34           |  | $ | 0.44           | 

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

| |                               |  |            |   |  | Weighted-Average | 
| | ----------------------------- |  | ---------- | - |  | ---------------- | 
| |                               |  | Number of  |   |  | Exercise Price   | 
| |                               |  | Options    |   |  | per Share        | 
| | Outstanding at April 30, 2008 |  | 3,794,263  |   |  | $2.20            | 
| | Granted                       |  | 2,146,000  |   |  | $0.85            | 
| | Exercised                     |  |           |   |  | $      -         | 
| | Forfeited / Cancelled         |  | (1,116,440 | ) |  | $1.84            | 
| | Expired                       |  | (173,055   | ) |  | $2.00            | 
| | 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            | 
| |                               |  |            |   |  |                  | 
| | Exercisable at April 30, 2010 |  | 2,602,619  |   |  | $1.32            | 
| | Exercisable at April 30, 2009 |  | 2,474,207  |   |  | $1.41            | 

The following table summarizes
information regarding stock options outstanding as of April 30, 2010:

| |                | Number of   | Aggregate |                                             | Number of   | Aggregate
| | -------------- | ----------- | --------- | ------------------------------------------- | ----------- | ---------
| | Exercise       | Options     | Intrinsic |                                             | Options     | Intrinsic
| | Price          | Outstanding | Value     | Expiry Date                                 | Exercisable | Value    
| | $0.44          | 527,125     | $200,308  | December 15,
      2013                     | 178,568     | $67,856  
| | $0.45          | 200,000     | 74,000    | February 9, 2015                            |            |         
| | $0.47          | 889,863     | 311,452   | June 13, 2010 to
      September 26, 2016   | 828,865     | 290,103  
| | $0.49          | 20,000      | 6,600     | March 11, 2015                              |            |         
| | $0.60          | 580,000     | 127,600   | December 14,
      2014                     | 20,000      | 4,400    
| | $0.62          | 850,000     | 170,000   | April 17, 2014                              | 212,500     | 42,500   
| | $0.65          | 30,000      | 5,100     | April 27, 2015                              |            |         
| | $1.75          | 250,000     |          | May 14, 2013                                | 119,792     |         
| | $1.90          | 66,719      |          | March 8, 2015                               | 66,719      |         
| | $1.95          | 582,400     |          | September 7, 2010 to January 10,
      2016 | 582,400     |         
| | $2.00          | 246,000     |          | January 1, 2011
      to February 28, 2015  | 246,000     |         
| | $2.15          | 240,000     |          | September 7, 2016                           | 215,000     |         
| | $3.05          | 135,600     |          | May 23, 2016                                | 132,775     |         
| |                |             |           |                                             |             |          
| | April 30, 2010 | 4,617,707   | $895,060  |                                             | 2,602,619   | $404,859 
| |                |             |           |                                             |             |          
| | April 30, 2009 | 4,650,768   | $494,764  |                                             | 2,474,207   | $214,046 

55

---

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

|Note 7 | Common Stock (contd)
|------ | ----------------------

Stock Options  (contd)

The aggregate intrinsic value in the
preceding table represents the total intrinsic value, based on the Companys
closing stock price of $0.82 per share as of April 30, 2010 (April 30, 2009 
$0.69), which would have been received by the option holders had all option
holders exercised their options as of that date. The total number of
in-the-money options vested and exercisable as of April 30, 2010 was 1,239,933
(April 30, 2009  972,936). The total intrinsic value of options exercised
during the year ended April 30, 2010 was $6,135 (2009  $nil). The grant date
fair value of options vested during the year ended April 30, 2010 was $3,711,399
(April 30, 2009  $3,511,509).

The following table summarizes
information regarding the non-vested stock purchase options outstanding as of
April 30, 2010:

| |                                      |  |                   |   |   | Weighted Average      | 
| | ------------------------------------ |  | ----------------- | - | - | --------------------- | 
| |                                      |  | Number of Options |   |   | Grant-Date Fair Value | 
| |                                      |  |                   |   |   |                       | 
| | Non-vested options at April 30, 2008 |  | 1,433,284         |   | $ | 1.48                  | 
| | Granted                              |  | 2,146,000         |   | $ | 0.45                  | 
| | Vested                               |  | (876,511          | ) | $ | 1.47                  | 
| | Forfeited                            |  | (526,212          | ) | $ | 1.04                  | 
| | 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          | ) | $ | 0.47                  | 
| | Non-vested options at April 30, 2010 |  | 2,015,088         |   | $ | 0.39                  | 

As of April 30, 2010 there was
$681,413 of total unrecognized compensation cost related to unvested share-based
compensation awards. This unrecognized compensation cost is expected to be
recognized over a weighted average period of 2.72 years.

Employee and non-employee stock-based
compensation amounts classified in the Companys consolidated statements of
operations for the year ended April 30, 2010 and 2009 are as follows:

| |                                |   | Years Ended | 
| | ------------------------------ | - | ----------- | 
| |                                |   | April 30,   | 
| |                                |   | 2010        | 
| |                                |   |             | 
| | Cost of sales                  | $ | 55,494      | 
| | Sales and marketing            |   | 91,346      | 
| | Research and development       |   | 78,535      | 
| | General and administrative     |   | 657,850     | 
| | Total stock-based compensation | $ | 883,225     | 
| |                                |   |             | 
| | Warrants                       |   |             | 

During the year ended April 30, 2010,
the Company issued 1,666,667 (2009- 1,265,421) warrants on October 22, 2009 as a
part of unit offering. The fair value of the stock purchase warrants granted was
$412,414 (2009-$394,372). 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. During the year ended April 30, 2009, the Company issued
1,216,720 warrants on July 31, 2008 and 48,701 warrants on October 28, 2008 as
part of a unit offering. The fair value of the stock purchase warrants granted
was $394,372. The warrants enable the holders the right to purchase up to
1,265,421 shares of the Companys common stock, exercisable for two years from
the date of issue. The assumptions utilized to determine such values are
presented in the following table:

| |                                         |  | Year Ended     |  |  | Year Ended      | 
| | --------------------------------------- |  | -------------- |  |  | --------------- | 
| |                                         |  | April 30, 2010 |  |  | April 30, 2009  | 
| |                                         |  |                |  |  |                 | 
| | Risk-free interest rate                 |  | 0.90%          |  |  | 1.58% - 2.52%   | 
| | Expected volatility                     |  | 79.94%         |  |  | 48.54% - 66.34% | 
| | Expected term                           |  | 2 yrs          |  |  | 2 yrs           | 
| | Dividend yield                          |  | 0%             |  |  | 0%              | 
| | Weighted average fair value per warrant |  | $0.23          |  |  | $0.31 - $0.44   | 

56

---

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

|Note 7 | Common Stock (contd)                                                                                                            
|------ | ----------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                   
|       | Warrants (contd)                                                                                                                
|       |                                                                                                                                   
|       | The following table summarizes information
      regarding the warrants outstanding as of April 30, 2010 and April 30,
      2009.

| |                            |  | Number of |   |  | Weighted Average |  |  |                                             | 
| | -------------------------- |  | --------- | - |  | ---------------- |  |  | ------------------------------------------- | 
| |                            |  | Options   |   |  | Exercise Price   |  |  | Expiry
      Dates                          | 
| | Warrants at April 30, 2008 |  | 1,000,000 |   |  | $4.00            |  |  | November 30, 2009                           | 
| | Granted                    |  | 1,265,421 |   |  | $2.25            |  |  | July 31, 2010 to October 24, 2010           | 
| | Warrants at April 30, 2009 |  | 2,265,421 |   |  | $3.04            |  |  | November 30, 2009 to October
      24, 2010 | 
| | Granted                    |  | 1,666,667 |   |  | $0.90            |  |  | October 29, 2011                            | 
| | Forfeited/Cancelled        |  | (750,000  | ) |  | $4.00            |  |  | November 30, 2009                           | 
| | Expired                    |  | (250,000  | ) |  | $4.00            |  |  | November 30, 2009                           | 
| | Warrants at April 30, 2010 |  | 2,932,088 |   |  | $1.50            |  |  | July 31, 2010 to October
      29, 2011     | 

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.

A total of 700,000 shares have been
reserved for issuance under the ESPP. As of April 30, 2010, a total of 611,972
shares were available for issuance under the ESPP. During the years ended April
30, 2010 and 2009, 88,028 and nil 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 in the period of grant.

A total of 1,500,000 shares have been
reserved for issuance under the DSUP. During the year ended April 30, 2010,
520,161 deferred share units were issued under the DSUP, of which 241,935 were
granted to officers and 278,226 were granted to directors. For the year ended
April 30, 2010, a total of 979,839 shares were available for issuance under the
DSUP.

The following table summarizes the
Companys outstanding DSU awards as of April 30, 2010, 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                   |  |                |  | $ | -                | 
| | Outstanding at April 30, 2010 |  | 520,161         |  | $ | 0.60             | 

57

---

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

|Note 7 | Common Stock (contd)                                                                                                                                                                                                                                                                      
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                             
|       | Deferred Share Unit Plan (contd)                                                                                                                                                                                                                                                          
|       |                                                                                                                                                                                                                                                                                             
|       | As of April 30, 2010 there was $121,400 (2009 
      $nil) of total unrecognized compensation cost related to unvested deferred
      share units awards. This unrecognized compensation cost is expected to be
      recognized over a weighted average period of 2.62 years (2009  nil).
|       |                                                                                                                                                                                                                                                                                             
|       | 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, 2010 and 2009 are as
      follows:                                                                     

| |                                              |   | Year Ended April 30, | 
| | -------------------------------------------- | - | -------------------- | 
| |                                              |   | 2010                 | 
| |                                              |   |                      | 
| | General and administrative                   | $ | 190,697              | 
| | Total deferred share unit-based compensation | $ | 190,697              | 

|Note 8 | 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, |  
| | -------------------------------------------------- | - | --------------------- | -
| |                                                    |   | 2010                  |  
| |                                                    |   | Restated-Note 15      |  
| | Tax loss carry forwards                            | $ | 13,027,000            |  
| | Equipment                                          |   | 1,123,000             |  
| | Undeducted research and development
      expenses |   | 2,645,000             |  
| | Investment tax credits                             |   | 1,322,000             |  
| | Undeducted financing costs                         |   |                      |  
| | Cumulative unrealized foreign exchange gain        |   | (159,000              | )
| | Acquired technology and other intangibles          |   | (706,000              | )
| | Valuation allowance established by management      |   | (17,252,000           | )
| | Net deferred tax assets                            | $ |                      |  

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

| |                                                                       |   | Years Ended April 30, |  
| | --------------------------------------------------------------------- | - | --------------------- | -
| |                                                                       |   | 2010                  |  
| |                                                                       |   | Restated-Note 15      |  
| | Benefit from net loss, at US rates                                    | $ | (1,895,000            | )
| | Foreign loss at other than US rates                                   |   | 28,000                |  
| | Non-deductible expenses                                               |   | 8,000                 |  
| | Non-deductible stock option compensation                              |   | 300,000               |  
| | Non-deductible loss on extinguishment of
      debt                   |   |                      |  
| | Adjustment of valuation allowance                                     |   |                      |  
| | Effect of reduction in foreign statutory
      rates                  |   | 46,000                |  
| | Foreign exchange losses on revaluation of deferred tax
      balances |   | (1,777,000            | )
| | Expiry of non-operating losses                                        |   | 415,000               |  
| | Increase in valuation allowance                                       |   | 2,875,000             |  
| | Income tax expense for year                                           | $ |                      |  

58

---

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

|Note 8 | Income Taxes (contd)                                                                                                                                                                                                                                                                                                                                                                                          
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | 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.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | As at April 30, 2010, 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$ | $ | 20,000,000  |  |  | 2026  2030      | 
| | Canada  CDN$       | $ | 24,000,000* |  |  | 2010  2030      | 

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

These financial statements do not
reflect the potential effect on future income taxes of the application of these
losses.

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, U.K. and Japan. 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, 2010 and April 30, 2009 were as follows:

| |                                                                                |   | Years Ended | 
| | ------------------------------------------------------------------------------ | - | ----------- | 
| |                                                                                |   | April 30,   | 
| |                                                                                |   | 2010        | 
| | 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 9** | **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, 2010 and 2009:

59

---

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

|Note 9 | Segmented Information
      (contd)
|------ | -------------------------------------

| |                           |   | Years Ended | 
| | ------------------------- | - | ----------- | 
| |                           |   | April 30,   | 
| |                           |   | 2010        | 
| | North America             | $ | 4,960,905   | 
| | Europe                    |   | 1,960,691   | 
| | Asia and Africa           |   | 571,471     | 
| | Central and South America |   | 523,790     | 
| |                           | $ | 8,016,857   | 

Contained within the results of North
America for the year ended April 30, 2010 are revenues from the United States of
$4,281,828 (2009 - $4,373,763) and from Canada of $679,077 (2009 - $1,317,755).

Contained within the results of Europe
for the year ended April 30, 2010 are revenues from the United Kingdom of
$461,470 (2009 - $659,637), from Germany of $320,039 (2009 - $663,609), from the
Netherlands of $233,095 (2009 - $100,216), from Switzerland $146,375 (2009 -
$21,899), and from Slovenia $112,454 (2009 - $135,570).

Contained within the results of
Central and South America for the year ended April 30, 2010 are revenues from
Mexico of $313,436 (2009 - $238,730), from Brazil of $70,952 (2009 - $176,168),
from Chile of $52,203 (2009 - $26,063), from Colombia of $47,689 (2009 -
$54,886), and from Argentina of $16,774 (2009 - $73,124).

Contained within the results of Asia
and Africa for the year ended April 30, 2010 are revenues from Nigeria of
$176,700 (2009 - $nil), from Israel of $94,320 (2009 - $61,999), from Australia
of $68,427 (2009 - $5,791), from Philippines of $36,503 (2009 -$nil), and from
Japan of $34,548 (2009 - $249,806).

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,        | 
| |               |   | 2010             | 
| |               |   | Restated-Note 15 | 
| | Canada        | $ | 10,568,931       | 
| | United States |   | 15,420           | 
| |               | $ | 10,584,351       | 

| | Revenue from significant customers for the years
      ended April 30, 2010 and 2009 is summarized as follows:
| | --------------------------------------------------------------------------------------------------------------
| |                                                                                                               
| |                                                                                                               
| |                                                                                                               
| |                                                                                                               
| | Customer A                                                                                                    
| | Customer B                                                                                                    
| |                                                                                                               

Accounts receivable balance for
Customer A was $1,000,975 as at April 30, 2010 (April 30, 2009 - $323,285).
Accounts receivable balance for Customer B was $170,802 as at April 30, 2010
(April 30, 2009 - $155,208).

60

---

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

|Note 10 | Derivative Instruments and Hedging
      Activities
|------- | ---------------------------------------------------

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

Foreign Currency Exchange Rate
Risk

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

Volume of Derivative
Activity

| | Total gross notional amounts for foreign currency
      forward contracts, presented by currency, are as follows: |   |             |  | 
| | ----------------------------------------------------------------------------------------------------------------- | - | ----------- |  | 
| |                                                                                                                   |   |             |  | 
| |                                                                                                                   |   | Years Ended | 
| |                                                                                                                   |   | April 30,   | 
| |                                                                                                                   |   | 2010        |  | 
| |                                                                                                                   |   |             |  | 
| | Canadian Dollar                                                                                                   | $ | 1,000,000   |  | 
| | Total                                                                                                             | $ | 1,000,000   |  | 

The fair value of forward contracts as
of April 30, 2010 was $nil, as all forward contracts have since been settled.

|Note 11 | Commitments
|------- | -----------

| | a) | On March 14, 2008 the Company entered into a lease for
      accommodation which commenced on April 1, 2008 and expired on March 31,
      2009. On January 14, 2010, the Company entered into extension agreement on
      this lease for the third time which commences on April 1, 2010 and expires
      March 31, 2011. The monthly lease payment under the new extension
      agreement is $2,339.                                                                                                                                                                                                                                                                                                                                                                                         
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | b) | On April 29, 2005, the Company entered into a lease for
      office premises, which commenced on October 1, 2005 and expires on
      September 30, 2012 for which a deposit of $9,874 was made. The monthly
      lease payment under this agreement is $9,874 plus $8,652 in operating
      costs. The Company is subleasing part of these premises for a monthly
      charge of $7,464. 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 $3,198 (CDN$3,216) plus $3,154 (CDN$3,171) in
      operating costs.

61

---

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

|Note 11 | Commitments (contd)
|------- | ---------------------

| | c) | 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 $81,757 was made.
      The monthly lease payment under this agreement is $23,210 plus $21,843 in
      operating costs. Our office space is adequate for the operations of our
      company for the foreseeable future.                                                   
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | d) | On May 1, 2009 the Company modified its existing lease
      agreement for office premises, as a result of which it surrendered a
      substantial part of the previously leased area. The new agreement
      commenced on May 1, 2009 and expires on April 20, 2012. The monthly lease
      payment under this agreement is $6,625. This lease expense is a related
      party transaction as it was incurred with a company with a director in
      common with the Company.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | e) | On 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 $492,278
      (CDN$495,000) over 45 months at a rate of CDN$11,000 per month and pay for
      health benefits for 21 months from the date of the
  agreement.                                             

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

| |      |   |                 |  |   |                 |  |   |           |   |   |              |  |   |            | 
| | ---- | - | --------------- |  | - | --------------- |  | - | --------- | - | - | ------------ |  | - | ---------- | 
| |      |   | Office Leases  |  |   | Office Leases  |  |   | Sub Lease |   |   | Total Office |  |   | Settlement | 
| |      |   | Related Party   |  |   | Unrelated Party |  |   | Income    |   |   | Leases       |  |   | Agreement  | 
| | 2011 | $ | 79,500          |  | $ | 816,275         |  | $ | (165,796  | ) | $ | 729,979      |  | $ | 131,274    | 
| | 2012 |   | 79,500          |  |   | 447,572         |  |   | (165,796  | ) |   | 361,276      |  |   | 131,274    | 
| | 2013 |   |                |  |   | 92,627          |  |   | (69,082   | ) |   | 23,545       |  |   | 82,046     | 
| |      | $ | 159,000         |  | $ | 1,356,474       |  | $ | (400,674  | ) | $ | 1,114,800    |  | $ | 344,594    | 

|Note 12 | 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 13 | Restructuring                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | As a result of the Companys post acquisition activities,
      the Company incurred restructuring costs of $44,912 (2009  $1,565,347).
      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, | 
| | -------------------------- | - | --------------------- | 
| |                            |   | 2010                  | 
| | Balance, beginning of year | $ | 395,432               | 
| | Provision                  |   |                      | 
| | Settlement                 |   | 44,912                | 
| | Balance, end of year       | $ | 350,520               | 

62

---

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

|Note 14     | Subsequent Events                                                                                                                                                                                                                                                                                                                                                                     
|----------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |                                                                                                                                                                                                                                                                                                                                                                                       
|            | (a)                                                                                                                                                                                                                                                                                                                                                                                   
|            |                                                                                                                                                                                                                                                                                                                                                                                       
|            | (b)                                                                                                                                                                                                                                                                                                                                                                                   
|            |                                                                                                                                                                                                                                                                                                                                                                                       
|            | (c)                                                                                                                                                                                                                                                                                                                                                                                   
|            |                                                                                                                                                                                                                                                                                                                                                                                       
|**Note 15** | **Restatement**                                                                                                                                                                                                                                                                                                                                                                       
|            |                                                                                                                                                                                                                                                                                                                                                                                       
|            | On December 3, the Company announced that it would  restate its Annual Report on Form 10-K/A for the fiscal years ending April  30, 2010 and 2009 for  the effects of a computational error for the foreign currency translation  adjustments to our Canadian dollar denominated intangible assets, and an  overstatement of estimated royalty costs for certain third party software.
|            |                                                                                                                                                                                                                                                                                                                                                                                       
|            | a)                                                                                                                                                                                                                                                                                                                                                                                    
|            |                                                                                                                                                                                                                                                                                                                                                                                       
|            |                                                                                                                                                                                                                                                                                                                                                                                       
|            |                                                                                                                                                                                                                                                                                                                                                                                       
|            | b)                                                                                                                                                                                                                                                                                                                                                                                    
|            |                                                                                                                                                                                                                                                                                                                                                                                       
|            |                                                                                                                                                                                                                                                                                                                                                                                       
|            |                                                                                                                                                                                                                                                                                                                                                                                       
|            | The following represents the combined effect of the  restatements to the consolidated financial statements as at April 30, 2010 and  2009 and for the years ending April 30, 2010 and 2009:                                                                                                                                                                                           

63

---

COUNTERPATH CORPORATIONNOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS(Stated in U.S. Dollars)

|Note 15 | Restatement (contd)
|------- | ---------------------

| |                                                                                                           |  |   | As Previously |   |   | Adjustment |   |   |          |  
| | --------------------------------------------------------------------------------------------------------- |  | - | ------------- | - | - | ---------- | - | - | -------- | -
| | As at April 30,
      2009                                                                                |  |   | Recorded      |   |   | (a)        |   |   | (b)      |  
| | Intangible assets                                                                                         |  | $ | 2,201,894     |   | $ | (713       | ) | $ |         |  
| | Accounts payable and accrued liabilities                                                                  |  |   | 3,488,001     |   |   |           |   |   | (239,786 | )
| | Accumulated deficit - opening                                                                             |  |   | (18,479,483   | ) |   |           |   |   | 171,854  |  
| | Accumulated deficit  ending                                                                              |  |   | (34,318,195   | ) |   | (349,353   | ) |   | 239,786  |  
| | Accumulated other comprehensive loss  
            currency translation adjustment                       |  |   | (3,086,783    | ) |   | 348,640    |   |   |         |  
| | Stockholders equity                                                                                      |  |   | 11,342,297    |   |   | (713       | ) |   | 239,786  |  
| |                                                                                                           |  |   |               |   |   |            |   |   |          |  
| | For the year
      ended April 30, 2009                                                                   |  |   |               |   |   |            |   |   |          |  
| | Cost of sales                                                                                             |  | $ | 4,183,626     |   | $ |           |   | $ | (67,932  | )
| | Impairment of intangible assets                                                                           |  |   | 2,755,333     |   |   | 349,353    |   |   |         |  
| | Loss from operations                                                                                      |  |   | (16,401,803   | ) |   | (349,353   | ) |   | 67,932   |  
| | Net loss for the year                                                                                     |  |   | (15,838,712   | ) |   | (349,353   | ) |   | 67,932   |  
| | Foreign currency translation adjustments                                                                  |  |   | (3,818,372    | ) |   | 348,045    |   |   |         |  
| | Net loss per share                                                                                        |  |   | (0.57         | ) |   | (0.01      | ) |   |         |  
| | Comprehensive loss                                                                                        |  |   | (19,657,084   | ) |   | (713       | ) |   | 67,932   |  
| |                                                                                                           |  |   |               |   |   |            |   |   |          |  
| |                                                                                                           |  |   | As Previously |   |   | Adjustment |   |   |          |  
| | As at April 30,
      2010                                                                                |  |   | Recorded      |   |   | (a)        |   |   | (b)      |  
| | Intangible assets                                                                                         |  | $ | 2,930,616     |   | $ | (1,256,257 | ) | $ |         |  
| | Accounts payable and accrued liabilities                                                                  |  |   | 2,667,997     |   |   |           |   |   | (354,309 | )
| | Accumulated deficit                                                                                       |  |   | (39,779,781   | ) |   | (355,607   | ) |   | 354,309  |  
| | Accumulated other comprehensive
      income  
            (loss)  currency
      translation adjustment |  |   | 486,968       |   |   | (900,650   | ) |   |         |  
| | Stockholders equity                                                                                      |  |   | 12,642,674    |   |   | (900,650   | ) |   | (1,298   | )
| |                                                                                                           |  |   |               |   |   |            |   |   |          |  
| | For the year ended April 30, 2010                                                                         |  |   |               |   |   |            |   |   |          |  
| | Cost of sales                                                                                             |  | $ | 2,933,749     |   | $ | 6,254      |   | $ | (114,523 | )
| | Loss from operations                                                                                      |  |   | (5,301,652    | ) |   | (6,254     | ) |   | 114,523  |  
| | Net loss for the year                                                                                     |  |   | (5,461,586    | ) |   | (6,254     | ) |   | 114,523  |  
| | Foreign currency translation adjustments                                                                  |  |   | 3,573,751     |   |   | (1,249,290 | ) |   |         |  
| | Net loss per share                                                                                        |  |   | (0.18         | ) |   | 0.01       |   |   |         |  
| | Comprehensive loss                                                                                        |  |   | (1,887,835    | ) |   | (1.255.544 | ) |   | 114,523  |  

64

---

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

Not applicable.

Item 9A(T). Controls and Procedures.

***Restatements***

Our  company has effected a restatement of its financial results for the periods  ended April 30, 2010 and 2009.

The restatement was  effected to correct the computational effects of an error   in accounting for the foreign currency translation adjustments to our  Canadian dollar denominated intangible assets, and an overstatement of accrued  royalty costs for certain third party software for the years ended April 30,  2010 and April 30, 2009.  As a result of these corrections, the net  loss decreased by $108,269 for the year ending April 30, 2010 and increased by  $281,421 for the year ending April 30, 2009.   Basic and diluted loss per share for the years ended April 30, 2010 and  April 2009 decreased by $0.01 to $0.17 per share, and increased by $0.01 to  $0.58, respectively.  The effect on our  company’s consolidated balance sheet as of April 30, 2010 is a decrease in intangible  assets of $1,256,257 (2009 – $713), a decrease in accounts payable and accrued  liabilities of $354,309 (2009 – $239,786), an increase in accumulated deficit  of $1,298 (2009 – $109,567) and an increase in accumulated other comprehensive  loss of $900,650 (2009 – decrease of $348,640).

Disclosure Controls and Procedures

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

***Evaluation of Disclosure Controls  and Procedures and Remediation***

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

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

In connection with  this annual report, as required by Rule 13a-15 under the Securities Exchange  Act of 1934, we have carried out a re-evaluation of the effectiveness of the  design and operation of our company's disclosure controls and procedures.  This 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 re-evaluation, our company's  Chief Executive Officer and Chief Financial Officer concluded that as of April  30, 2010, our disclosure controls and procedures are not effective as at the  end of the period covered by this report.

On  December 3, 2010, the company announced that following an internal review by  our company and our auditors, the company would restate its historical  financial statements in our annual report for the period ended April 30, 2010  and 2009.  Our conclusion to restate the  above periods resulted in the company recognizing that its disclosure controls  and procedures were not effective as of the periods ended April 30, 2009 and  2010 and constituted a material   weakness.

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

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

65

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***Limitations on the Effectiveness  of Disclosure Controls and Procedures***

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

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 a re-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 re-evaluation, management  concluded that our internal control over financial reporting is not effective as of  April 30, 2010.

This annual report does not
  include an attestation report of our registered public accounting firm regarding
  internal control over financial reporting. Management's report was not subject
  to attestation by our registered public accounting firm pursuant to temporary
  rules of the SEC that permit us to provide only management's report in this
  annual report.

Changes in Internal Control Over Financial
  Reporting

There were no changes in our internal controls over financial reporting that occurred during the fiscal quarter ended April 30, 2010 that would have materially affected, or are reasonably likely to materially affect, our internal control 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
    41
    April 24, 2006David Karp British Columbia, Canada
    Chief Financial Officer, Treasurer,
      Secretary
    45
    September 7, 2006Terence Matthews Ontario, Canada
    Chairman of the Board, Director
    67
    August 2, 2007Mark Bruk(2)British Columbia, Canada
    Vice-Chairman of the Board, Director
    51
    April 27, 2004Owen Matthews(3)British Columbia, Canada
    Vice-Chairman of the Board, Director
    38
    August 2, 2007Peter Charbonneau(4)Ontario, Canada
    Director
    56
    October 1, 2008Chris Cooper(3)(4)British Columbia, Canada
    Director
    40
    August 17, 2005William Jin(4)Ontario, Canada
    Director
    41
    October 1, 2008Greg Pelling(5)Ontario, Canada
    Director
    51
    August 2, 2007Larry Timlick(3)(6)British Columbia, Canada
    Director
    53
    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) | Chief Executive Officer between April 27, 2004 and August
      2, 2007.                                                                                            
|(3) | Member of our Compensation Committee.                                                                                                                               
|(4) | Member of our Audit Committee.                                                                                                                                      
|(5) | Appointed Chief Executive Officer on August 2, 2007 until
      April 30, 2008 and Chief Strategy Officer between April 30, 2008 and
      February 11, 2009.       
|(6) | Appointed interim President between June 2005 and August
      2005.                                                                                                

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.

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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. He
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. Prior to 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 such as 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.

**Mark Bruk**

Mr. Bruk
is a founder and a director of our company, our Vice-Chairman of the Board, and
was the Chief Executive Officer from October 2002 to August 2007. Mr. Bruk is an
entrepreneur and technologist who has worked in the software industry for the
past 25 years. His primary focus is the design of new software technologies
which deliver significant benefits to end users and affect their daily lives.
Prior to founding CounterPath, Mr. Bruk founded, and was Chairman and Chief
Executive Officer of eduverse.com. eduverse.com developed English as a Second
Language (ESL) phonetic instruction solutions and partnered with Ministries of
Education to deliver this advertising embedded educational software to students.
eduverse.com signed agreements with the Ministry of Education, China, the
Ministry of Education, Malaysia, the Ministry of University Affairs, Thailand,
Acer, AOL, Proctor and Gamble, Sina.com, and StarTV. Prior to founding
eduverse.com, Mr. Bruk served as Vice President of Applications and Research
& Development for PNI Digital Media Inc., a multimedia software company,
which developed image management software included with digital cameras
manufactured by Casio, Nikon, Olympus and Kodak. Under Mr. Bruks initiative and
management PNI developed industry leading multimedia software.

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**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.

**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, where he played a key role during the
company's period of growth. He joined Newbridge in its early days as chief
financial officer and over the next 13 years was promoted to the positions of
Executive Vice-President, President and Chief Operating Officer, and
Vice-Chairman. He was also a member of the company's board of directors from
1996 until 2000. As the Chief Financial Officer of Newbridge, he led the
company's successful cross-border IPO in 1989 and its second cross-border
offering three years later. As Vice-Chairman, he focused on enhancing the
company's relations with key external stakeholders. While at Newbridge, Mr.
Charbonneau was instrumental in establishing the company's Affiliates Program
and was involved in the funding of more than 40 affiliate companies and
representing Newbridge as a board member for many of these affiliates. 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 14 years of experience in
management and finance in the oil and gas industry. Over the past several years
Mr. Cooper has successfully raised funds primarily through brokered and
non-brokered equity issues as well as debt financing. Since April 2003, Mr.
Cooper has been the President, Chief Executive Officer and founder of Northern
Sun Exploration Company Inc., a junior oil and gas issuer. In 2000, Mr. Cooper
co-founded Choice Resources Corp., an intermediate oil and gas producer that has
since been acquired by Buffalo Resources Corp. He is a co-founder and member of
the board of directors of Watch Resources Ltd., a public gas producer that was
acquired by Pearl Exploration. He acted as the Chief Financial Officer and
Treasurer for Velvet Exploration Ltd. in its start-up phase, and assisted it in
raising early stage financing. Mr. Cooper received his Bachelor of Arts 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.

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**Greg Pelling**

Mr.
Pelling is a director of our company. Mr. Pelling is a 20-year technology and IT
industry veteran, whose career includes Senior Industry Partner at
PricewaterhouseCoopers (PwC) and as part of Cisco Systems, Inc.s strategic
leadership team. Between August 2007 and April 2008, Mr. Pelling acted as our
Chief Executive Officer and between May 2008 and February 2009, he acted as our
Chief Strategy Officer. Prior to joining our company in August 2007 as Chief
Executive Officer, Mr. Pelling was the President of NewHeights Software
Corporation and was responsible for leading the company in corporate strategy 
M&A based growth, business development, product innovation, market gains and
profitability commitments. Prior to joining NewHeights, Mr. Pelling was Global
Managing Director, Advanced IT and Global Development Services of Cisco Systems,
Inc., responsible for building out the companys Global Development Centers;
prior to which he was Managing Director, Asia Pacific/Japan, Internet Business
Solutions Group of Cisco Systems from January 2001 to August 2004, where he was
responsible for delivering $200 million in annual new business. As the Managing
Director Asia Pacific and Japan for Cisco Systems Internet Business Solutions
Group, he was also an advisor to governments and Fortune 500 corporations where
he provided strategic advice on creating competitive advantage from IT and the
Internet to the top corporations and governments in the region. Prior to Cisco,
he was a senior leader with PwC from 1995 to 2001 and was Asias Senior Partner
for PwCs Technology Consulting practice. Prior to joining PwC, Mr. Pelling held
management positions in several Canadian companies including Intergraph, SHL
Systemhouse, Wang Labs and Richmond Technologies. Considered a thought leader,
Mr. Pelling is also the author of Cisco Net Impact: Competitive Advantage from
Internet Innovators in Asia Pacific and Japan. Mr. Pelling is a graduate of the
University of British Columbia and holds an Executive Masters in Business
Administration in International Management.

**Larry Timlick**

Mr.
Timlick is a director of our company. Mr. Timlick has extensive knowledge of the
enterprise and service provider markets with over 23 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 and a Territory Manager for Aruba Networks.

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;

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- 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.

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, 2010 all filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with, with the exception of the following:

71

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Name
    Number of Late Reports
    Number of Transactions Not
      Reported on a Timely Basis
    Failure to File Requested
      FormsTerence Matthews
    2(2)
    3
    NilMark Bruk
    1(2)
    1
    NilChris Cooper
    1(2)
    1
    NilDavid Karp
    8(2)
    8
    NilDonovan Jones
    9(2)
    9
    NilGreg Pelling
    2(2)
    8
    NilPeter Charbonneau
    1(1)1(2)
    0 1
    NilWilliam Jin
    1(1)1(2)
    0 1
    NilCovington Venture Fund
    1(2)
    2
    NilLarry Timlick
    1(2)
    1
    NilOwen Matthews
    1(2)
    1
    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.   
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                          
|(2) | The named director, officer or greater than 10%
      shareholder, as applicable, filed a late Form 4  Statement of Changes in
      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.

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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.

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, 2010, 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.

73

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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:

(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, 2010; 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, 2010,

who we will collectively refer to as our named executive
officers, of our company for the years ended April 30, 2010 and 2009, 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 PrincipalPosition
    Year
    Salary($)
    Bonus($)
    StockAwards($)(1)
    OptionAwards($)(2)
    OtherAnnualCompen-sation($)(3)
    Total($)Donovan Jones (4)President, Chief
      Executive Officer and Director
    2010 2009
    279,466 223,560
    46,671 92,394
    96,774 Nil
    Nil 421,645
    25,762 22,689
    448,673 760,288David Karp Chief Financial Officer, Treasurer
      and Secretary
    2010 2009
    159,055 160,326
    25,202 33,999
    48,387 Nil
    Nil 101,117
    10,096 Nil
    242,740 295,442Michael Hryb
      VP, Carrier Sales
    2010 2009
    114,251 107,355
    47,497 60,483
    Nil Nil
    8,833 43,497
    Nil Nil
    173,445 176,690Jim OBrien 
      Director, NCG
      Customer 
      Engineering
    2010 2009
    148,342 147,779
    Nil Nil
    Nil Nil
    353 7,766
    Nil Nil
    152,994 152,326Todd Carothers (5)
      VP, Product
      Management
    2010 2009
    137,621 162,000
    Nil 8,809
    Nil Nil
    52,996 97,575
    Nil Nil
    190,617 268,384


|(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, 2010, please review
      Note 7 to the financial statements included
herein.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

74

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|(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, 2010, please review Note 7 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. Jones was appointed as our President and Chief
      Operating Officer on April 24, 2006 and our President and Chief Executive
      Officer on April 30, 2008.                                                                                                   
|    |                                                                                                                                                                                                                                                                       
|(5) | 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 $25,000 per fiscal quarter based upon the achievement of
pre-determined objectives. Mr. Jones is also entitled to a bi-monthly expense
allowance of CDN$1,000. 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, which have not vested shall immediately
vest and become exercisable.

David Karp entered into an employment
agreement with our company dated September 11, 2006, whereby we appointed Mr.
Karp our Chief Financial Officer. Mr. Karps current annual salary is
CDN$182,400. 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 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 for each year of employment. 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
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, 2010. 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.

75

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|Name                                                          | Option Awards                                                         | Stock Awards                                                                                              
|------------------------------------------------------------- | --------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------
|Number of Securities Underlying Options
      (#) Exercisable | Number
      of Securities Underlying Options
      (#) Unexercisable | Equity Incentive
      Plan Awards: Number of Securities
      Underlying Unexercised Unearned Options (#)
|Donovan 
      Jones                                          | 180,000(1)                                                            |                                                                                                          
|23,400(2)                                                     |                                                                      |                                                                                                          
|132,775(3)                                                    | 2,825(3)                                                              |                                                                                                          
|119,792(4)                                                    | 130,208(4)                                                            |                                                                                                          
|150,000(5)                                                    | 450,000(5)                                                            |                                                                                                          
|David 
    Karp                                               | 215,000(6)                                                            | 25,000(6)                                                                                                 
|25,000(7)                                                     | 50,000(7)                                                             |                                                                                                          
|62,500(8)                                                     | 187,500(8)                                                            |                                                                                                          
|Michael 
      Hryb                                           | 18,333(9)                                                             | 21,667(9)                                                                                                 
|9,127(10)                                                     | 15,873(10)                                                            |                                                                                                          
|                                                             | 25,000(11)                                                            |                                                                                                          
|Jim 
      OBrien                                            | 14,555(12)                                                            |                                                                                                          
|11,667(13)                                                    | 23,333(13)                                                            |                                                                                                          
|                                                             | 1,000(14)                                                             |                                                                                                          
|Todd Carothers                                                |                                                                      | 150,000(15)                                                                                               

|(1)  | Granted on October 10, 2005. 
|---- | -----------------------------
|(2)  | Granted on January 10, 2006. 
|(3)  | Granted on May 23, 2006.     
|(4)  | Granted on May 14, 2008.     
|(5)  | Granted on April 17, 2009.   
|(6)  | Granted on September 7, 2006.
|(7)  | Granted on December 15, 2008.
|(8)  | Granted on April 17, 2009.   
|(9)  | Granted on June 3, 2008.     
|(10) | Granted on December 15, 2008.
|(11) | Granted on December 14, 2009.
|(12) | Granted on February 2, 2008. 
|(13) | Granted on December 15, 2008.
|(14) | Granted on December 14, 2009.
|(15) | Granted on December 14, 2009.
|(16) | Granted on December 14, 2009 
|(17) | Granted on December 14, 2009 

Compensation of Directors

During the fiscal year ended April 30,
  2010, we introduced compensation for our non-employee directors for their services
  in fiscal year 2010 and thereafter 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; and 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

76

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compensation under an existing equity compensation plan of our
company. During the fiscal year ended April 30, 2010, we issued 278,226 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.

The following table summarizes
compensation paid to all of our non-employee directors for the fiscal year ended
April 30, 2010:

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
      14,516
      Nil
      N/A
      N/A
      Nil
      14,516Peter Charbonneau(2)
      Nil
      19,355
      Nil
      N/A
      N/A
      Nil
      19,355Chris Cooper(3)
      Nil
      29,032
      Nil
      N/A
      N/A
      Nil
      29,032William Jin(4)
      Nil
      19,355
      Nil
      N/A
      N/A
      Nil
      19,355Terence Matthews(5)
      Nil
      29,032
      Nil
      N/A
      N/A
      Nil
      29,032lOwen Matthews(6)
      Nil
      21,774
      Nil
      N/A
      N/A
      Nil
      21,774Greg Pelling(7)
      Nil
      14,516
      Nil
      N/A
      N/A
      Nil
      14,516Larry Timlick(8)
      Nil
      19,355
      Nil
      N/A
      N/A
      Nil
      19,355


|(1) | At April 30, 2010, Mr. Bruk held an aggregate of 339,000
      stock options and 24,194 deferred share units.           
|--- | ------------------------------------------------------------------------------------------------------------------------
|(2) | At April 30, 2010, Mr. Charbonneau held an aggregate of
      32,258 deferred share units.                              
|(3) | At April 30, 2010, Mr. Cooper held an aggregate of 40,000
      stock options and 48,387 deferred share units.          
|(4) | At April 30, 2010, Mr. Jin held an aggregate of 32,258
      deferred share units.                                      
|(5) | At April 30, 2010, Mr. Terence Matthews held an aggregate
      of 18,000 stock options and 48,387 deferred share units.
|(6) | At April 30, 2010, Mr. Owen Matthews held an aggregate of
      36,290 deferred share units.                            
|(7) | At April 30, 2010, Mr. Pelling held an aggregate of
      200,000 stock options and 24,194 deferred share units.        
|(8) | At April 30, 2010, Mr. Timlick held an aggregate of
      40,000 stock options and 32,258 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 27, 2010, 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 27, 2010, we had
  33,073,926 shares of common stock issued and outstanding. In addition, as of
  July 27, 2010, there was one (1) series A special voting share and 60,871 exchangeable
  shares of 6789722 Canada Inc. outstanding. The voting share entitles the holder
  to one (1) vote for each exchangeable share of 6789722 Canada outstanding as
  of July 27, 2010. Each exchangeable share of 6789722 Canada is exchangeable
  at any time, at the election of the holder thereof, or in certain circumstances,
  our company, into one (1) share of common stock.

77

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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
    8,704,338 (3)
    25.4%Steven Bruk 3790 Southridge Avenue West Vancouver,
      BC, Canada V7V 3J1
    2,496,468 (4)
    7.5%Owen Matthews Suite 300, One Bentall Centre 505
      Burrard Street Vancouver, British Columbia Canada, V7X 1M3
    2,336,257
    7.1%Mark Bruk Suite 300, One Bentall Centre 505 Burrard
      Street Vancouver, British Columbia Canada, V7X 1M3
    1,515,335 (5)
    4.5%Donovan Jones Suite 300, One Bentall Centre 505
      Burrard Street Vancouver, British Columbia Canada, V7X 1M3
    767,588 (6)
    2.3%Greg Pelling Suite 908-360 Bloor Street East
      Toronto, Ontario, M4W 3M3
    722,836 (7)
    2.2%David Karp Suite 300, One Bentall Centre 505
      Burrard Street Vancouver, British Columbia Canada, V7X 1M3
    383,111 (8)
    1.1%Chris Cooper 1910-1055 West Hastings Street,
      Vancouver, British Columbia Canada V6E 2E9
    143,372 (9)
    **Larry Timlick Suite 300, One Bentall Centre 505
      Burrard Street Vancouver, British Columbia Canada, V7X 1M3
    102,258 (10)
  **


78

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Name and Address of Beneficial Owner
    Amount and Nature of Beneficial
      Ownership(1)
    Percentage of Class(2)Peter Charbonneau Tower B, 830  555 Legget Drive
      Ottawa, Ontario Canada K2K 2X3
    52,258 (11)
    **William Jin 200 Front Street West, Suite 3003 P.O.
      Box 10 Toronto, Ontario Canada M5V 3K2
    52,258 (12)
    **Michael Hryb Suite 300, One Bentall Centre 505
      Burrard Street Vancouver, British Columbia Canada, V7X 1M3
    57,589 (13)
    **Jim OBrien 40 Warren Street, 3rd Floor
      Charlestown, MA 02129 USA
    30,663 (14)
    **Todd Carothers 651 W. Washington Blvd., Suite 500
      Chicago, IL 60661 USA
    30,595 (15)
    **Directors and Executive Officers as a Group
    17,394,926
    46.3%


|**  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(2) | Percentage based on 33,080,645
        shares of common stock outstanding on July 27, 2010, 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 27, 2010 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 7,441,408 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 333,137 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 $2.25 per share on or before
        July 31, 2010, and 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 48,387 shares subject to deferred share units.                                                                                                                                                                                                                                      
|(4) | Includes 146,000 shares of
        common stock held by the spouse of Mr. Bruk and 2,000,000 shares of common
        stock held by KMB Trac Two Holdings Ltd. (KMB). Mr. Bruks
        spouse is the sole shareholder of KMB.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(5) | Includes 339,000 shares of
        common stock issued on January 10, 2006 and held by Mr. Bruk that are
        vested and are exercisable at a price of $1.95 per share, expiring on
        January 10, 2011. Also includes 16,667 warrants, each warrant of which
        entitles Mr. Bruk to purchase one share of common stock at the exercise
        price of $2.25 per share on or before July 31, 2010. Also includes 24,194
        shares subject to deferred share units.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(6) | Includes 697,333 shares of
        common stock subject to vested stock options of a total of 1,189,000 shares
        of common stock subject to stock options and held by Mr. Jones that are
        exercisable within 60 days of July 27, 2010, including 180,000 stock options
        issued on June 1, 2005 and repriced on October 10, 2005 that are exercisable
        at $1.95 per share until October 7, 2010, 23,400 stock options issued
        on January 10, 2006 that are exercisable at $1.95 per share until January
        10, 2016, 135,600 stock options issued on May 23, 2006 that are exercisable
        at $3.05 per share until May 23, 2016, 145,833 stock options issued on
        May 14, 2008 that are exercisable at $1.75 per share until May 14, 2014
        and 212,500 shares of common stock subject to 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 16,667 warrants, each warrant of which
        entitles Mr. Jones to purchase one share of common stock at the exercise
        price of $2.25 per share on or before July 31, 2010.
|(7) | Includes 200,000 shares of
        common stock subject to stock options issued on August 2, 2007 and held
        by Mr. Pelling that are vested and are exercisable at a price of $2.00
        per share, expiring on December 31, 2014. Also includes 50,000 exchangeable
        shares, each exchangeable share of which entitles Mr. Pelling to exchange
        one exchangeable share for one share of common stock. Also includes 24,194
        shares subject to deferred share units.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(8) | Includes 361,354 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 27, 2010, 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, 32,812 stock options issued on December
        15, 2008 that are exercisable at a price of $0.44 per share, expiring
        on December 15, 2013, and 88,542 stock options issued on April 19, 2009
        that are                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

79

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|     | exercisable at a price of $0.62 per share, expiring on
      April 17, 2014. Also includes 5,000 warrants, each warrant of which
      entitles Mr. Karp to purchase one common share at the exercise price of
      $2.25 per share on or before July 31, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                          
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(9)  | Includes 40,000 shares of common stock subject to vested
      stock options issued on September 7, 2005 and held by Mr. Cooper that are
      vested, and are exercisable at a price of $2.15 per share, expiring on
      September 7, 2010. Also includes 8,328 warrants, each warrant of which
      entitles Mr. Cooper to purchase one common share at the exercise price of
      $2.25 per share on or before July 31, 2010. Also includes 48,387 shares
      subject to deferred share units.                                                                                                                                                                                   
|(10) | Includes 40,000 shares of common stock subject to vested
      stock options issued on September 7, 2005 and held by Mr. Timlick that are
      vested, and are exercisable at a price of $2.15 per share, expiring on
      September 7, 2010. Also includes 32,258 shares subject to deferred share
      units.                                                                                                                                                                                                                                                                                                                                                                        
|(11) | Mr. Charbonneau is a principal of the general partner of
      Skypoint Telecom Fund II, which holds 1,807,692 shares of common stock.
      Also includes 32,258 shares subject to deferred share units.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(12) | Mr. Jin is senior vice president of Covington Capital, a
      venture capital company which manages Covington Venture Fund Inc. which
      holds 3,140,240 shares of common stock and 666,274 warrants, each warrant
      of which entitles Covington Venture Fund Inc. to purchase one common share
      at the exercise price of $2.25 per share on or before July 31, 2010. Also
      includes 32,258 shares subject to deferred share units.                                                                                                                                                                                                                                     
|(13) | Includes 38,794 shares of common stock subject to vested
      stock options of a total of 90,000 shares of common stock subject to stock
      options and held by Mr. Hryb that are exercisable within 60 days of July
      27, 2010, including 40,000 stock options issued on June 3, 2008 and
      repriced on March 12, 2009 that are exercisable at $0.47 per share,
      expiring on June 3, 2013, 25,000 stock options issued on December 15, 2008
      that are exercisable at $0.44 per share, expiring on December 15, 2013,
      25,000 stock options issued on December 14, 2009 that are exercisable at
      $0.60 per share, expiring on December 14, 2014.          
|(14) | Includes 30,663 shares of common stock subject to vested
      stock options of a total of 50,555 shares of common stock subject to stock
      options and held by Mr. OBrien that are exercisable within 60 days of
      July 27, 2010, including 14,555 stock options issued on February 2, 2008
      and repriced on March 12, 2009 that are exercisable at $0.47 per share,
      expiring on February 2, 2013, 35,000 stock options issued on December 15,
      2008 that are exercisable at $0.44 per share, expiring on December 15,
      2013, 1,000 stock options issued on December 14, 2009 that are exercisable
      at $0.60 per share, expiring on December 14, 2014.
|(15) | Includes 28,125 shares of common stock subject to vested
      stock options of a total of 150,000 shares of common stock subject to
      stock options and held by Mr. Carothers that are exercisable within 60
      days of July 27, 2010, including 28,125 stock options issued on December
      14, 2009 that are exercisable at $0.60 per share, expiring on December 14,
      2014.                                                                                                                                                                                                                                                                                             

Changes in Control

As of July 27, 2010, 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, 2009, 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 the 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 $560,636 (2009 - $1,225,757). 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.

In connection with a
non-brokered private placement of 2,433,439 units which closed on July 31, 2008,
Wesley Clover Corporation, a company controlled by the Chairman of our Board,
purchased 666,274 units, at a price of $1.50 (CDN$1.54) per unit, for aggregate
proceeds of $1,002,463 (CDN$1,026,062). 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 $2.25 for a period of two years from the closing of the private
placement. As the unit price of $1.50 (CDN$1.54) per unit was below the closing
market price of $1.60 (CDN$1.64) per share of our common stock on the date of the transaction and included
one-half of one common share purchase warrant, our company recorded a
compensatory charge to general and administrative expenses for the year ended
April 30, 2009 of $171,308.

80

---

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 our Board, 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.

During the year ended April 30,
2010, our wholly owned subsidiary, FirstHand Technologies Inc., paid $79,500
(2009 - $277,451) to Kanata Research Park Corporation for leased office space.
Kanata Research Park is controlled by the Chairman of our Board.

Director Independence

We currently act with nine directors,
  consisting of Donovan Jones, Greg Pelling, Terrence Mathews, Mark Bruk, 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, 2010 and 2009, were as follows:

2010
    
    
    2009Audit Fees
    $
    132,196
    
    $
    152,188Audit Related Fees
    
    Nil
    
    
    NilTax Fees
    
    Nil
    
    $
    4,017All Other Fees
    
    Nil
    
    
    NilTotal Fees
    $
    132,196
    
    $
    156,205


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 S8 and Form S8/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.

Audit Related Fees

There were no audit related fees
paid to BDO Canada LLP, for our fiscal years ended April 30, 2010 and April 30,
2009.

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, 2010 and April 30, 2009.

81

---

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;                                        
| |    |                                                                     
| | 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)                         
|                            
|3.1                         
|                            
|3.2                         

82

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|3.3  | Amended Bylaws (incorporated by
      reference from our Registration Statement on Form SB-2/A filed on
      September 3, 2003).                                                                                                                                                         
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                           
|3.4  | Articles of Merger
      (incorporated by reference from our Current Report on Form 8-K filed on
      September 15, 2005).                                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                           
|3.5  | Amended Bylaws (incorporated by
      reference from our Current Report on Form 8-K filed on April 28, 2006).                                                                                                                                                                             
|     |                                                                                                                                                                                                                                                                                           
|3.6  | Amended Bylaws (incorporated by
      reference from our Current Report on Form 8-K filed on April 22, 2008).                                                                                                                                                                             
|     |                                                                                                                                                                                                                                                                                           
|(4)  | Instruments defining the
      rights of security holders, including indentures                                                                                                                                                                                                           
|     |                                                                                                                                                                                                                                                                                           
|4.1  | 2004 Stock Option Plan
      effective May 18, 2004 (incorporated by reference from our Registration
      Statement on Form S-8 filed on June 14, 2005).                                                                                                                                 
|     |                                                                                                                                                                                                                                                                                           
|4.2  | Form of Stock Option Agreement
      for 2004 Stock Option Plan (incorporated by reference from our
      Registration Statement on Form S-8 filed on June 14, 2005).                                                                                                                     
|     |                                                                                                                                                                                                                                                                                           
|4.3  | 2005 Stock Option Plan
      effective March 4, 2005 (incorporated by reference from our Registration
      Statement on Form S-8 filed on June 14, 2005).                                                                                                                                
|     |                                                                                                                                                                                                                                                                                           
|4.4  | Form of Stock Option Agreement
      for 2005 Stock Option Plan (incorporated by reference from our
      Registration Statement on Form S-8 filed on June 14, 2005).                                                                                                                     
|     |                                                                                                                                                                                                                                                                                           
|4.5  | Form of Amended & Restated
      Stock Option and Subscription Agreement (Canadian) (incorporated by
      reference from our Current Report on Form 8-K filed On October 14, 2005).                                                                                                      
|     |                                                                                                                                                                                                                                                                                           
|4.6  | Form of Amended & Restated
      Stock Option and Subscription Agreement (US) (incorporated by reference
      from our Current Report on Form 8-K filed On October 14, 2005).                                                                                                            
|     |                                                                                                                                                                                                                                                                                           
|(10) | Material Contracts                                                                                                                                                                                                                                                                        
|     |                                                                                                                                                                                                                                                                                           
|10.1 | Employment Agreement between
      CounterPath Solutions, Inc. and Jason Fischl dated August 29, 2005
      (incorporated by reference from our Annual Report on Form 10-KSB filed on
      July 31, 2006).                                                                               
|     |                                                                                                                                                                                                                                                                                           
|10.2 | Employment Agreement between
      CounterPath Solutions, Inc. and Donovan Jones dated June 1, 2005
      (incorporated by reference from our Annual Report on Form 10-KSB filed on
      July 31, 2006).                                                                                 
|     |                                                                                                                                                                                                                                                                                           
|10.3 | Employment Agreement between
      CounterPath Solutions, Inc. and David Karp dated September 11, 2006
      (incorporated by reference from our Quarterly Report on Form 10-QSB filed
      on September 14, 2006).                                                                      
|     |                                                                                                                                                                                                                                                                                           
|10.4 | Form of Subscription Agreement
      dated November 30, 2006, between our company and various investors
      (incorporated by reference from our Current Report on Form 8-K filed on
      December 7, 2006).                                                                            
|     |                                                                                                                                                                                                                                                                                           
|10.5 | Form of Subscription Agreement
      dated November 30, 2006, between our company and KMB Trac Two Holdings Ltd
      (incorporated by reference from our Current Report on Form 8-K filed on
      December 7, 2006).                                                                    
|     |                                                                                                                                                                                                                                                                                           
|10.6 | Form of Convertible Note dated
      November 30, 2006 (incorporated by reference from our Current Report on
      Form 8-K filed on December 7, 2006).                                                                                                                                   
|     |                                                                                                                                                                                                                                                                                           
|10.7 | Form of Warrant Certificate
      dated November 30, 2006 (incorporated by reference from our Current Report
      on Form 8-K filed on December 7, 2006).                                                                                                                                
|     |                                                                                                                                                                                                                                                                                           
|10.8 | Amended Employment Agreement
      between Donovan Jones and CounterPath Solutions R&D Inc., a wholly
      owned subsidiary of CounterPath Solutions, Inc. dated February 1, 2007
      (incorporated by reference from our Quarterly Report on Form 10QSB filed
      on March 9, 2007).

83

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|10.9  | Employment Agreement between Mark Bruk and CounterPath
      Solutions R&D Inc., a wholly owned subsidiary of CounterPath
      Solutions, Inc. dated March 8, 2007 (incorporated by reference from our
      Quarterly Report on Form 10QSB filed on March 9, 2007).                                                     
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                           
|10.10 | Arrangement Agreement among CounterPath Solutions, Inc.,
      6789722 CANADA INC., a wholly owned subsidiary of CounterPath Solutions,
      Inc. and NewHeights Software Corporation dated as of June 15, 2007
      (incorporated by reference from our Current Report on Form 8-K filed on
      June 18, 2007).      
|      |                                                                                                                                                                                                                                                                                                                           
|10.11 | Support and Lock-Up Agreements between CounterPath
      Solutions, Inc and each of Owen Matthews and Wesley Clover dated as of
      June 15, 2007 (incorporated by reference from our Current Report on Form
      8-K filed on June 18, 2007).                                                                         
|      |                                                                                                                                                                                                                                                                                                                           
|10.12 | Subscription Agreement between CounterPath Solutions, Inc
      and Wesley Clover dated as of June 15, 2007 (incorporated by reference
      from our Current Report on Form 8-K filed on June 18, 2007).                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                           
|10.13 | Amended Employment Agreement between Mark Bruk and
      CounterPath Solutions R&D Inc., a wholly owned subsidiary of
      CounterPath Solutions, Inc. dated July 24, 2007 (incorporated by reference
      from our Annual Report on Form 10-KSB/A filed on July 30, 2007).                                             
|      |                                                                                                                                                                                                                                                                                                                           
|10.14 | Exchangeable Share Support Agreement between CounterPath
      Solutions, Inc. and 6789722 Canada Inc., a wholly owned subsidiary of
      CounterPath Solutions, Inc. dated as of August 2, 2007 (incorporated by
      reference from our Current Report on Form 8-K filed on August 8,
    2007).                      
|      |                                                                                                                                                                                                                                                                                                                           
|10.15 | Voting and Exchange Trust Agreement among CounterPath
      Solutions, Inc., 6789722 Canada Inc., a wholly owned subsidiary of
      CounterPath Solutions, Inc. and Valiant Trust Company dated as of August
      2, 2007 (incorporated by reference from our Current Report on Form 8-K
      filed on August 8, 2007).
|      |                                                                                                                                                                                                                                                                                                                           
|10.16 | Piggyback Registrations Rights Agreement among our
      company and various shareholders, dated as of August 2, 2007 (incorporated
      by reference from our Current Report on Form 8-K filed on August 8,
      2007).                                                                                                
|      |                                                                                                                                                                                                                                                                                                                           
|10.17 | Form of Subscription Agreement dated August 2, 2007,
      between our company and various investors (incorporated by reference from
      our Current Report on Form 8-K filed on August 8, 2007).                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                                           
|10.18 | Installment Subscription Agreement dated August 2, 2007,
      between our company and various investors (incorporated by reference from
      our Current Report on Form 8-K filed on August 8, 2007).                                                                                                                   
|      |                                                                                                                                                                                                                                                                                                                           
|10.19 | Loan Conversion Agreement dated August 2, 2007, between
      our company and various investors (incorporated by reference from our
      Current Report on Form 8-K filed on August 8, 2007).                                                                                                                            
|      |                                                                                                                                                                                                                                                                                                                           
|10.20 | Form of Stock Option and Subscription Agreement dated
      August 2, 2007, between our company and each of the former optionees of
      NewHeights Software Corporation (incorporated by reference from our
      Current Report on Form 8-K filed on August 8, 2007).                                                  
|      |                                                                                                                                                                                                                                                                                                                           
|10.21 | Escrow Agreement among our company, Owen Matthews, Wesley
      Clover and Clark Wilson LLP dated as of August 2, 2007 (incorporated by
      reference from our Current Report on Form 8-K filed on August 8,
    2007).                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                           
|10.22 | Employment Agreement between Greg Pelling and CounterPath
      Solutions R&D Inc., a wholly owned subsidiary of CounterPath
      Solutions, Inc. dated September 13, 2007 (incorporated by reference from
      our Quarterly Report on Form 10-QSB filed on September 14,
2007).                                       
|      |                                                                                                                                                                                                                                                                                                                           
|10.23 | Amended Employment Agreement between Donovan Jones and
      CounterPath Solutions R&D Inc., a wholly owned subsidiary of
      CounterPath Solutions, Inc. dated September 13, 2007 (incorporated by
      reference from our Quarterly Report on Form 10-QSB filed on September 14,
      2007).                        
|      |                                                                                                                                                                                                                                                                                                                           
|10.24 | Employment Agreement between Mark Bruk and CounterPath
      Corporation dated December 13, 2007 (incorporated by reference from our
      Quarterly Report on Form 10-QSB filed on December 17,
  2007).                                                                                                                 

84

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|10.25 | Share Exchange Agreement dated
      January 28, 2008 among CounterPath Corporation, FirstHand Technologies
      Inc. and certain shareholders of FirstHand Technologies Inc. (incorporated
      by reference from our Current Report on Form 8-K filed on January 29,
      2008).                                                                                                                                                                                            
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.26 | Escrow Agreement dated February
      1, 2008 among CounterPath Corporation, FirstHand Technologies Inc. and
      certain shareholders of FirstHand Technologies Inc. (incorporated by
    reference from our Current Report on Form 8-K filed on February 5, 2008).                                                                                                                                                                                                            
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.27 | Agreement of Merger and Plan of
      Reorganization dated February 1, 2008 among our company, CounterPath
      Acquisition Corp., BridgePort Networks, Inc. and certain shareholders of
      BridgePort Networks, Inc. (incorporated by reference from our Current
      Report on Form 8-K filed on February 5, 2008).                                                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.28 | Form of Subscription Agreement
      dated July 31, 2008 between our company and various
      investors  (incorporated by reference from our Quarterly Report
      on Form 10-Q filed on September 15, 2008).                                                                                                                                                                                                                                                                  
|     
|10.29 | Form of Subscription Agreement
      dated October 28, 2008 between our company and an investor (filed
      herewith).                                                                                                                                                                                                                                                                                                                                                          
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.30 | Settlement Agreement amongst
      Greg Pelling, CounterPath Corporation and CounterPath Technologies Inc.
      dated October 31, 2008 (incorporated by reference from our Quarterly
      Report on Form 10-Q filed on December 15, 2008).                                                                                                                                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.31 | Settlement Agreement amongst
      Mark Bruk, CounterPath Corporation, and CounterPath Technologies Inc.
      dated March 12, 2009 (incorporated by reference from our Quarterly Report
      on Form 10-Q filed on March 12, 2009).                                                                                                                                                                                                                                            
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.32 | Form of Debt Conversion
      Agreement dated July 17, 2009 between our company and The Trustees of
      Columbia University in the City of New York (filed herewith).                                                                                                                                                                                                                                                                                                          
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.33 | Form of Subscription Agreement
      dated October 29, 2009 between our company and various investors
      (incorporated by reference from our Current Report on Form 8-K filed on
      November 4, 2009).                                                                                                                                                                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(14)  | Code of Ethics                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|14.1  | Code of Business Conduct and
      Ethics (incorporated by reference from our Annual Report on Form 10-KSB
      filed on July 29, 2004).                                                                                                                                                                                                                                                                                                                                        
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|14.2  | Code of Business Conduct and
      Ethics and Compliance Program (incorporated by reference from our
      Quarterly Report on Form 10-QSB filed on September 15, 2008).                                                                                                                                                                                                                                                                                                         
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(21)  | Subsidiaries of CounterPath
      Corporation 
      CounterPath Technologies Inc. (incorporated in the
      Province of British Columbia, Canada) 
      6789722 Canada Inc.
      (incorporated in Canada) 
      FirstHand Technologies Inc. (continued
      into the Province of British Columbia, Canada) 
      BridgePort
      Networks, Inc. (incorporated in the state of Delaware) 
      BridgePort
    Networks (Europe) Ltd. (incorporated in the United Kingdom)
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(23)  | Consent of Experts and
      Counsel                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|23.1  | Consent of Independent
      Registered Public Accounting Firm (filed herewith)                                                                                                                                                                                                                                                                                                                                                                                                  

85

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|(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).   

86

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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: December 9, 2010                             

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                  | December 9, 2010
|                            |                                        |                 
|/s/ Donovan Jones           |                                        |                 
|Donovan Jones               | President, Chief Executive Officer and | December 9, 2010
|                            | Director                               |                 
|/s/ David Karp              |                                        |                 
|David Karp                  | Chief Financial Officer, Treasurer and | December 9, 2010
|                            | Secretary                              |                 
|/s/ Owen Matthews           |                                        |                 
|Owen Matthews               | Vice Chairman and Director             | December 9, 2010
|                            |                                        |                 
|/s/ Mark Bruk               |                                        |                 
|Mark Bruk                   | Vice Chairman and Director             | December 9, 2010
|                            |                                        |                 
|/s/ Peter
      Charbonneau |                                        |                 
|Peter Charbonneau           | Director                               | December 9, 2010
|                            |                                        |                 
|/s/ Chris Cooper            |                                        |                 
|Chris Cooper                | Director                               | December 9, 2010
|                            |                                        |                 
|/s/ William Jin             |                                        |                 
|William Jin                 | Director                               | December 9, 2010
|                            |                                        |                 
|/s/ Greg Pelling            |                                        |                 
|Greg Pelling                | Director                               | December 9, 2010
|                            |                                        |                 
|/s/ Larry Timlick           |                                        |                 
|Larry Timlick               | Director                               | December 9, 2010

87

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