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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-K

(Mark One)

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

For the year ended April 30, 2009

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

For the transition period from ______________ to
______________

Commission file number 000-50346

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

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

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

(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 (§ 229.405 of this chapter) during the preceding 12 months (or for
  such shorter period that the registrant was required to submit and post such
  files). Yes [   ]    No [   ]

---

Indicate by check mark if disclosure of delinquent filers pursuant
  to Item 405 of Regulation S-K (§ 229.405 of this chapter) 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 $12,576,747 based on a price of $0.90 per share,
  being the average of bid and ask prices on July 23, 2009 as quoted on stockwatch.com.

APPLICABLE ONLY TO CORPORATE REGISTRANTS:

Indicate the number of shares outstanding of each of the issuers
  classes of common stock, as of the latest practicable date: 29,409,420 shares
  of common stock issued and outstanding as of July 23, 2009.

2

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COUNTERPATH CORPORATION APRIL 30, 2009 ANNUAL
REPORT ON FORM 10-K

INDEX

|                  |                                                                                                                          | Page
|----------------- | ------------------------------------------------------------------------------------------------------------------------ | ----
|                  |                                                                                                                          |     
|                  | PART
      I                                                                                                             |     
|                  |                                                                                                                          |     
|Item
      1.     | Business                                                                                                                 | 4   
|                  |                                                                                                                          |     
|Item
      1A.    | Risk
      Factors                                                                                                       | 13  
|                  |                                                                                                                          |     
|Item
      1B.    | Unresolved
      Staff Comments                                                                                          | 18  
|                  |                                                                                                                          |     
|Item
      2.     | Properties                                                                                                               | 18  
|                  |                                                                                                                          |     
|Item
      3.     | Legal
      Proceedings                                                                                                  | 18  
|                  |                                                                                                                          |     
|Item
      4.     | Submission
      of Matters to a Vote of Security Holders                                                                | 18  
|                  |                                                                                                                          |     
|                  | PART
      II                                                                                                            |     
|                  |                                                                                                                          |     
|Item
      5.     | Market
      for Registrants Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities | 19  
|                  |                                                                                                                          |     
|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                         | 62  
|                  |                                                                                                                          |     
|Item
      9A(T). | Controls
      and Procedures                                                                                            | 62  
|                  |                                                                                                                          |     
|Item
      9B.    | Other
      Information                                                                                                  | 62  
|                  |                                                                                                                          |     
|                  | PART
      III                                                                                                           |     
|                  |                                                                                                                          |     
|Item
      10.    | Directors,
      Executive Officers and Corporate Governance                                                             | 63  
|                  |                                                                                                                          |     
|Item
      11.    | Executive
      Compensation                                                                                             | 70  
|                  |                                                                                                                          |     
|Item
      12.    | Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters               | 73  
|                  |                                                                                                                          |     
|Item
      13.    | Certain
      Relationships and Related Transactions, and Director Independence                                          | 75  
|                  |                                                                                                                          |     
|Item
      14.    | Principal
      Accountant Fees and Services                                                                             | 76  
|                  |                                                                                                                          |     
|                  | PART
      IV                                                                                                            |     
|                  |                                                                                                                          |     
|Item
      15.    | Exhibits
      and Financial Statement Schedules                                                                         | 77  

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, 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
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 certain of 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.

4

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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 Windows 2000,
Windows XP, Windows Vista, Mac OS X and Linux operating systems as well as on
mobile devices running Symbian, RIM and Windows Mobile operating systems.

We
began selling our desktop applications in 2003 and our mobile applications and
gateway software in 2008. Since that time, over 200 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., previously a
competitor of ours. 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.

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

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

5

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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.

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.

Our Software Applications

CounterPath Multi-Media Communications Product Suite

The
CounterPath Multimedia Communicator product suite includes four softphone
applications: (1) Bria; (2) eyeBeam; (3) Bria for Microsoft Outlook®;and
(4) X-Lite. Bria, eyeBeam, and Bria for Microsoft Outlook 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.

6

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•     
  Bria

Bria has a number of usability and
customization features designed to enable customers to present a flexible,
user-friendly VoIP 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.

•     
  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 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, emails within the Outlook application.

•     
  X-Lite

X-Lite is a free softphone available
for download on our website. 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 test 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 dialing, call forwarding and call
transfer.

7

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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:

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.

•     
  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 parties
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. In August 2009, CounterPath
launched a Bria Mobile web client that offers a subset of the functionality of
Bria Mobile clients. 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
onetime 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
  200 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 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.

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, 2009, we own our hold the exclusive license to six patents. In
addition, we are pursuing 15 in house developed patent applications, one
exclusively licensed patent application from Openwave Systems Inc. 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 March 2009, we were granted patent No.
7,502,615: Handoff for cellular and internet protocol telephony. This patent
describes an active call handover mechanism to improve efficiency and end user
experience on a dual-mode mobile device.

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

10

---

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 international copyright laws.

We
have acquired certain patent rights from Openwave Systems Inc. including a
patent for maintaining Internet voice communication to mobile devices where the
IP address changes from location to location. We also hold exclusive rights to
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., formerly known as CounterPath Solutions R&D
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, 2009 were $7,075,640 (2008: $6,863,235).

After Sales Service and Support

We
  sell our software on an as-is 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
  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.

11

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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.

Warranty

We
warrant that our software will perform substantially in accordance with the
materials accompanying the software for a period of 30 days 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
    Adobe
      Systems Inc.
    Service provider, mobileSoftphones
    Movial
      Corp.
    Service provider, mobileSoftphones
    eyeP
      Media SA
    Service provider, mobileSoftphones
    Global
      IP Solutions, Inc.
    Service provider and original equipment manufacturerSoftphones
    Nortel
      Networks Limited
    EnterpriseSoftphones/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 providers


12

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Related CounterPath Products
    Competitor
    Target MarketEMG & NCG
    Tango
      Networks, Inc.
    Enterprise mobile unified communications providersNCG
    Outsmart, Ltd.
    Fixed mobile convergence providersNCG
    Huawei
      Technologies Co., Ltd.
    Fixed mobile convergence providersNCG
    Alcatel-Lucent
    Fixed mobile convergence providersNCG
    Sonus
      Networks Inc.
    Fixed mobile convergence providers


Government Approval

We
have obtained approval from the United States government to export our software
that contains strong 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, 2009, we employed 88 people full-time, 24 of whom are engaged in
marketing and sales, 25 in research, development, 13 in services and support, 8
in general and administration, and 18 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. hire 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:

13

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

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

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

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

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

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

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

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

14

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

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

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

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

15

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

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

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

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.

16

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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.

*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.

17

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

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

Item 1B.     Unresolved Staff Comments.

Not
Applicable

Item 2.       
Properties.

We
do not own any property. Our Canadian operations are conducted in three leased
offices located in Vancouver and Victoria, British Columbia and Kanata, Ontario.
Our U.S. operations are conducted in two leased offices located in Chicago,
Illinois, and Charlestown, Massachusetts. Our head office is located on the
3rd Floor at Suite 300, One Bentall Centre, 505 Burrard Street,
Vancouver, British Columbia, Canada, V7X 1M3. On July 10, 2006, we entered into
a lease for our head office premises of 15,559 square feet, which commenced on
December 1, 2006 and expires on September 29, 2011 for which a deposit of
$81,757 was made. The monthly lease payment under this agreement is $20,478 plus
$21,681 in operating costs. These amounts increase as of October 31, 2010 to
$23,037 and $21,681, respectively. Our office space is adequate for the
operations of our company for the foreseeable future.

Item 3.        Legal
Proceedings.

None.

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

None.

18

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PART II

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

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

Quarter Ended
      OTC
        Bulletin Board 
        (U.S. dollars)
      TSX
        Venture Exchange 
        (Cdn dollars)High
      Low
      High
      LowJuly 31, 2007(1)
      $2.15
      $1.55
      N/A
      N/AOctober 31, 2007(1)(2)
      $2.70
      $1.75
      N/A
      N/AJanuary 31, 2008(2)
      $2.70
      $1.55
      N/A
      N/AApril 30, 2008(2)(3)
      $2.05
      $0.10
      N/A
      N/AJuly 31, 2008(3)
      $1.80
      $1.35
      N/A
      N/AOctober 31, 2008(3)
      $1.91
      $0.60
      $1.95
      $0.90January 31, 2009(3)
      $0.87
      $0.30
      $1.01
      $0.32April 30, 2009(3)
      $0.70
      $0.10
      $0.85
      $0.25


| | (1) | From September 16, 2006 to October 16, 2007, our stock
      was quoted on the OTC BB under the trading symbol "CTPS".
| | --- | ----------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                       
| | (2) | From October 17, 2007 to March 18, 2008, our stock was
      quoted on the OTC BB under the trading symbol "COPA".    
| |     |                                                                                                                       
| | (3) | Since March 19, 2008, our stock has been quoted on the
      OTC BB under the trading symbol "CPAH".                  
| |     |                                                                                                                       
| | (4) | 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, 2009, the shareholders' list of our shares of common stock showed 83
registered shareholders and29,409,420 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.

19

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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, 2009.

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
    4,650,768 (1)
    $1.13
    409,232 (2)Total
    4,650,768
    $1.13
    409,232


|(1) | As of April 30, 2009, we had issued stock options to
      purchase 392,340 shares of our common stock pursuant to our 2004 Stock
      Option Plan and stock options to purchase 4,258,428 shares of our common
      stock pursuant to our 2005 Stock Option Plan.                             
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                  
|(2) | As of April 30, 2009, there were 407,660 underlying
      shares of our common stock remaining and available to be issued under our
      2004 Stock Option Plan and 1,572 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:

20

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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 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 1,500,000 shares
of our common stock under the plan. As of April 30, 2009, no shares of our
common stock had been issued under the plan.

Purchases of Equity Securities by the Issuer and
Affiliated Purchasers

None.

Recent Sales of Unregistered Securities

On
May 11, 2009, 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.

21

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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.

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.

22

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Our software enables voice communication from the end user through
  the network to another end user and enables the service provider to deliver
  other streaming content to end users such as video, radio or the weather. Our
  acquisitions of FirstHand Technologies Inc. and BridgePort Networks, Inc. in
  February 2008, expanded our product portfolio of our company to include fixed-mobile-convergence
  applications for the enterprise and telecom service provider markets.

Revenue

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

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

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

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

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

Operating Expenses

Operating
expenses consist of cost of sales, sales and marketing, research and
development, 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.

23

---

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, 2009 we have a
restructuring accrual for severance of $395,432.

Application of Critical Accounting Policies and Use of
Estimates

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

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

Revenue Recognition

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

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

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

24

---

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

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

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

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

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

Stock-Based Compensation

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

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

The
expected volatility of options granted has been determined using the volatility
of our company's stock. The expected volatility for options granted during the
year ended April 30, 2009 was 71.9% . The expected life of options granted after
April 30, 2006 has been determined utilizing the "simplified" method as
prescribed by the SEC's Staff Accounting Bulletin No. 107, Share-Based Payment.
The expected term of options granted during the year ended April 30, 2009 was
3.7 years. For the year ended April 30, 2009, the weighted-average risk free
interest rate used was 2.12% . The risk-free interest rate is based on a
treasury instrument whose term is consistent with the expected term of the stock
options. We have not paid and do not anticipate paying cash dividends on our
shares of common stock; therefore, the expected dividend yield is assumed to be
zero. In addition, SFAS No. 123R requires companies to utilize an estimated
forfeiture rate when calculating the expense for the period. We applied an
estimated forfeiture rate of 15.0% in the year ended April 30, 2009 in
determining the expense recorded in our consolidated statement of
operations.

25

---

Cost
of sales and operating expenses include stock-based compensation expense. For
the year ended April, 2009, we recorded an expense of $1,443,864 in connection
with share-based payment awards. A future expense of non-vested options of
$1,248,757 is expected to be recognized over a weighted-average period of 1.15
years.

Research and Development Expense for Software
Products

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

Accounts Receivable and Allowance for Doubtful Accounts

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

Goodwill and Intangible Assets

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

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

Goodwill and Intangible AssetsImpairment
Assessments

We
  review goodwill for impairment annually and whenever events or changes in circumstances
  indicate its carrying value may not be recoverable in accordance with FASB Statement
  No. 142, Goodwill and Other Intangible Assets. The provisions of Statement
  142 require that a two-step impairment test be performed on goodwill. In the
  first step, we compare the fair value of our reporting unit to its carrying
  value. If the fair value of the reporting unit exceeds the carrying value of
  the net assets assigned to that unit, goodwill is not considered impaired and
  we are not required to perform further testing.

26

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If the carrying value of the net assets assigned to the reporting
  unit exceeds the fair value of the reporting unit, then we must perform the
  second step of the impairment test in order to determine the implied fair value
  of the reporting units goodwill. If the carrying value of our reporting
  units goodwill exceeds its implied fair value, then we would record an
  impairment loss equal to the difference.

Determining
the fair value of our reporting unit involves the use of significant estimates
and assumptions. These estimates and assumptions include future economic and
market conditions and determination of appropriate market comparables. We base
our fair value estimates on assumptions we believe to be reasonable but that are
unpredictable and inherently uncertain. Actual future results may differ from
those estimates. In addition, we make certain judgments and assumptions in
allocating shared assets and liabilities to determine the carrying values for
our reporting unit. Our most recent annual goodwill impairment analysis, which
was performed during the fourth quarter of fiscal 2009, did not result in an
impairment charge, nor did we record any goodwill impairment in fiscal 2008.

We
make judgments about the recoverability of purchased intangible assets whenever
events or changes in circumstances indicate that an other than temporary
impairment may exist. Each period we evaluate the estimated remaining useful
lives of purchased intangible assets and whether events or changes in
circumstances warrant a revision to the remaining periods of amortization. In
accordance with FASB Statement No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, recoverability of these assets is measured by
comparison of the carrying amount of the asset to the future undiscounted cash
flows the asset is expected to generate. If the asset is considered to be
impaired, the amount of any impairment is measured as the difference between the
carrying value and the fair value of the impaired asset.

Assumptions
and estimates about future values and remaining useful lives of our intangible
and other long-lived assets are complex and subjective. They can be affected by
a variety of factors, including external factors such as industry and economic
trends, and internal factors such as changes in our business strategy and our
internal 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.

The
significant adverse change in the business climate in the last six months has
affected the value of our intangible assets acquired through the acquisitions of
FirstHand and NewHeights. In addition the cash flow losses have exceeded
expectations for both the groups of long-lived assets originating from the
acquisitions of FirstHand and NewHeights. 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 we recorded an impairment
charge of $2.72 million consisting of $1.75 million for the intangible assets of
NewHeights and $0.97 million for the intangible assets of FirstHand. There was
no impairment charge related to the intangible assets for the year ended April
30, 2008.

Use of Estimates

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

Results of Operations

Our
operating activities during the year ended April 30, 2009 consisted primarily of
selling our IP telephony software and related services to service providers and
original equipment manufacturers serving the telecom industry, and the continued
development of our IP telephony software products.

27

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Revenue

**Year Ended
        April 30,**2009
      
      
      2008
      
      
      Period-to-Period ChangePercent
      
      
      
      
      
      Percent
      
      
      
      
      
      Percentof Total
      
      
      
      
      
      of Total
      
      
      
      
      
      Increase /Amount
      
      
      Revenue
      
      
      Amount
      
      
      Revenue
      
      
      Amount
      
      
      (Decrease)Revenue by TypeSoftware
      $
      6,868,980
      
      
      70%
      
      $
      6,437,192
      
      
      71%
      
      $
      431,788
      
      
      7%Service
      
      2,964,121
      
      
      30%
      
      
      2,649,708
      
      
      29%
      
      
      314,413
      
      
      12%Total revenue
      $
      9,833,101
      
      
      100%
      
      $
      9,086,900
      
      
      100%
      
      $
      746,201
      
      
      8%Revenue by RegionInternational
      $
      4,141,583
      
      
      42%
      
      $
      4,121,121
      
      
      45%
      
      $
      20,462
      
      
      0%North America
      
      5,691,518
      
      
      58%
      
      
      4,965,779
      
      
      55%
      
      
      725,739
      
      
      15%Total revenue
      $
      9,833,101
      
      
      100%
      
      $
      9,086,900
      
      
      100%
      
      $
      746,201
      
      
      8%


For
the year ended April 30, 2009, we generated $9,833,101 in revenue compared to
$9,086,900 for the year ended April 30, 2008, representing an increase of
$746,201 or 8%. We generated $6,868,980 in software revenue for the year ended
April 30, 2009 compared to $6,437,192 for the year ended April 30, 2008,
representing an increase of $431,788 or 7%. The increase in software revenue was
driven by continued growth in sales of our consumer oriented softphone software
as well as new sales of our mobile applications as a result of the acquisitions
of BridgePort and FirstHand in February 2008. The increase in revenue for the
year ended April 30, 2009 from BridgePort and FirstHand was $392,184 and
$870,403 respectively, which was partially offset by a decline in revenue from
CounterPath Technologies of $875,847. For the year ended April 30, 2009, service
revenue was $2,964,121 compared to $2,649,708 for the year ended April 30, 2008.
The increase of $314,413 in service revenue was attributable to the service
revenue generated on the applications acquired in the acquisitions of BridgePort
and FirstHand. The increase in service revenue for the year ended April 30, 2009
from BridgePort, FirstHand and CounterPath Technologies was $20,600, $247,472
and $90,891 respectively. International revenue outside of North America
represented 42% of total revenue for the year ended April 30, 2009 compared to
58% for North American revenues. This compares to international revenues
representing 45% of total revenue for the year ending April 30, 2008 compared to
55% for North American revenues. Revenue for the year ended April 30, 2009 from
Asia declined by $462,194 resulting in a marginally lower percentage of revenue
outside of North America.

Operating Expenses

Cost of Sales

Cost
of sales for the year ended April 30, 2009 and 2008 were as follows:

April 30, 2009
      
      
      April 30, 2008
      
      
      Period-to-Period ChangePercent
      
      
      
      
      
      Percent
      
      
      
      
      
      Percentof
      
      
      
      
      
      of
      
      
      
      
      
      Increase /Amount
      
      
      Revenue
      
      
      Amount
      
      
      Revenue
      
      
      Amount
      
      
      (Decrease)Year ended
      $
      4,183,626
      
      
      43%
      
      $
      3,089,073
      
      
      34%
      
      $
      1,094,553
      
      
      35%


Cost
of sales was $4,183,626 for the year ended April 30, 2009 compared to $3,089,073
for the year ended April 30, 2008. The increase of $1,094,553 was primarily
attributable to an increase in amortization of intangibles amounting to $646,465
and an increase in personnel related expenses of $564,712.

28

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Sales and Marketing

Sales
and marketing expenses for the year ended April 30, 2009 and 2008 were as
follows:

April 30, 2009
      
      
      April 30, 2008
      
      
      Period-to-Period ChangePercent
      
      
      
      
      Percent
      
      
      
      
      
      Percentof
      
      
      
      
      of
      
      
      
      
      
      Increase /Amount
      
      
      Revenue
      
      Amount
      
      
      Revenue
      
      
      Amount
      
      
      (Decrease)Year ended
      $
      4,147,626
      
      
      42%
      $
      3,945,290
      
      
      43%
      
      $
      202,336
      
      
      5%


Sales
and marketing expenses were $4,147,626 for the year ended April 30, 2009
compared to $3,945,290 for the year ended April 30, 2008. The increase of
$202,336 was primarily attributable to increases in sales and marketing
personnel and associated wages and commissions of approximately $825,000
partially offset by a reduction of approximately $620,000 in consultancy
services and bonus payouts.

Research and Development

Research
and development expenses for the year ended April 30, 2009 and 2008 were as
follows:

April 30, 2009
      
      
      April 30, 2008
      
      
      Period-to-Period ChangePercent
      
      
      
      
      
      Percent
      
      
      
      
      
      Percentof
      
      
      
      
      
      of
      
      
      
      
      
      Increase /Amount
      
      
      Revenue
      
      
      Amount
      
      
      Revenue
      
      
      Amount
      
      
      (Decrease)Year ended
      $
      7,075,640
      
      
      72%
      
      $
      6,863,235
      
      
      76%
      
      $
      212,405
      
      
      3%


Research
and development expenses were $7,075,640 for the year ended April 30, 2009
compared to $6,863,235 for the year ended April 30, 2008. The increase of
$212,405 was primarily attributable to increases in research and development
personnel and associated wages of $281,298 increase in professional services of
$385,208, increase in telephone expenses of $141,006 partially offset by
reduction in stock based compensation expense of $212,136 and bonuses of
$340,547.

General and Administrative

General
and administrative expenses for the years ended April 30, 2009 and 2008 were as
follows:

April 30, 2009
      
      
      April 30, 2008
      
      
      Period-to-Period ChangePercent
      
      
      
      
      
      Percent
      
      
      
      
      
      Percentof
      
      
      
      
      
      of
      
      
      
      
      
      Increase /Amount
      
      
      Revenue
      
      
      Amount
      
      
      Revenue
      
      
      Amount
      
      
      (Decrease)Year ended
      $
      6,507,332
      
      
      66%
      
      $
      6,440,493
      
      
      71%
      
      $
      66,839
      
      
      1%


General
and administrative expenses for the year ended April 30, 2009 were $6,507,332
compared to $6,440,493 for the year ended April 30, 2008. The marginal increase
of $66,839 in general and administrative expenses year over year was primarily
attributable to increases in stock based compensation expense of $142,027 ,
increase in wage related costs of $335,769, increase in professional services of
$123,869 partially offset by reduction in travel expenses of $167,857, and
reduction in bonuses of $311,902.

29

---

Restructuring Charges

Restructuring
charges for the years ended April 30, 2009 and 2008 were as follows:

April 30, 2009
      
      
      April 30, 2008
      
      
      Period-to-Period ChangePercent
      
      
      
      
      
      Percent
      
      
      
      
      
      Percentof
      
      
      
      
      
      of
      
      
      
      
      
      Increase/Amount
      
      
      Revenue
      
      
      Amount
      
      
      Revenue
      
      
      Amount
      
      
      (Decrease)Year ended
      $
      1,565,347
      
      
      16%
      
      $
      558,394
      
      
      6%
      
      $
      1,006,953
      
      
      180%


Restructuring
  charges for the year ended April 30, 2009 were $1,565,347 compared to $558,394
  for the year ended April 30, 2008. Restructuring charges in fiscal year 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. Also included in the $1,565,347 of restructuring
  costs were $409,068 representing a termination cost related to a settlement
  agreement entered into with the other former officer to be paid out over 45
  months from March 12, 2009 in equal amounts. We have accrued a remaining amount
  of $395,432 at April 30, 2009 as a liability. Restructuring charges in fiscal
  year 2008 were attributable to the one time employee termination costs due to
  the integration of NewHeights which was acquired on August 2, 2007. We have
  essentially completed the restructuring plan attributable to the integration
  of NewHeights, FirstHand and BridgePort.

Interest and Other Income

Interest
income for the year ended April 30, 2009 was $107,931 compared to $125,970 for
the year ended April 30, 2008. The decrease in interest income was due to both
lower average cash balances during the year ended April 30, 2009 and lower
interest rates. Interest expense for the year ended April 30, 2009 was $11,676
compared to $695,961 for the year ended April 30, 2008. Interest expense during
fiscal 2009 pertains to all cash interest expense. Interest expense during the
year ended April 30, 2008 included both a cash interest component of $52,222 and
non-cash components of $90,570 relating to the accretion of the discount on the
convertible debenture, as well as $540,200 for the write-off of the remaining
balance of unaccreted debt discount on conversion of the existing convertible
debenture.

Liquidity and Capital Resources

As
of April 30, 2009, we had $2,931,932 in cash compared to $6,223,613 at April 30,
2008, representing a decrease of $3,291,681. Our working capital was $1,566,483
at April 30, 2009 compared to $7,645,909 at April 30, 2008, representing a
decrease of $6,079,426.

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,
  2009, we had cash of approximately $2.9 million and working capital of approximately
  $1.6 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, 2010. 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 July 31, 2008 and October 28, 2008, our 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). 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 the date of grant at an exercise price
  of US$2.25 per warrant share.

30

---

Operating Activities

Our
  operating activities resulted in a net cash outflow of $6,535,523 for the year
  ended April 30, 2009. This compares with a net cash outflow of $10,105,244 for
  the year ended April 30, 2008, representing a $3,569,721 decrease in cash outflows
  from operations. The net cash outflow from operating activities for the year
  ended April 30, 2009 was primarily a result of a net loss of $15,838,712 and
  a decrease in accounts payable of $636,562, 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, $2,755,333
  for impairment of intangibles, $1,443,864 for stock-based compensation and $590,349
  for depreciation and amortization and $242,141 for unearned revenue.

The
net cash outflow from operating activities for the year ended April 30, 2008 of
$10,105,244 was primarily a result of a net loss of $12,534,919 and an increase
in accounts receivable of $1,362,335, partially offset by a decrease in accounts
payable and accrued liabilities of $713,956, non-cash expenses including
$1,601,434 for stock-based compensation, $454,916 for unearned revenue, $540,200
for loss on extinguishment of convertible debenture, $440,312 for depreciation
and amortization and $90,570 for accretion of convertible debenture discount.

Investing Activities

Investing
activities resulted in a net cash outflow of $99,425 for the year ended April
30, 2009 primarily due to purchase of equipment during the year. This compares
with a net cash inflow from investing activities of $9,018,053 primarily from
cash acquired as a result of the acquisitions of NewHeights and FirstHand during
fiscal 2008. At April 30, 2009, we did not have any material commitments for
future capital expenditures.

Financing Activities

Financing
activities resulted in a net cash inflow of $3,752,835 for the year ended April
30, 2009 compared to a net cash inflow of $5,481,415 for the year ended April
30, 2008.

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.

On
August 2, 2007, we announced the closing of the acquisition of NewHeights. As
part of the transaction, our investors completed an investment of $1.3 million,
for 650,000 shares of common stock at $2.00 per share, and entered into
subscription agreements to raise an additional $4.2 million through the issuance
of 2.1 million shares of common stock at $2.00 per share over five months. These
private placements closed on September 30, 2007, November 2, 2007, and February
2, 2008 and March 2, 2008, on which $0.5 million, $1.7 million, $1.0 million and
$1.0 million, respectively, was invested at $2.00 per share.

On
February 1, 2008, we announced the closing of the acquisition of FirstHand
through the issuance of 5.9 million shares of our common stock.

31

---

We
intend to seek additional funding through public or private financings to fund
our operations through fiscal 2010 and beyond. However, if we are unable to
raise additional capital when required or on acceptable terms, or achieve cash
flow positive operations, we may have to significantly delay product development
and scale back operations both of which may affect our ability to continue as a
going concern.

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

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

In
March 2008, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 161, Disclosures about Derivative
Instruments and Hedging Activities  an amendment of FASB Statement No. 133
(FAS 161). FAS 161 modifies existing requirements to include qualitative
disclosures regarding the objectives and strategies for using derivatives, fair
value amounts of gains and losses on derivative instruments and disclosures
about credit-risk-related contingent features in derivative agreements. The
pronouncement also requires the cross-referencing of derivative disclosures
within the financial statements and notes thereto. This statement is effective
for financial statements issued for years beginning after November 15, 2008 and
interim periods within those years. We are currently evaluating the impact of
this statement.

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

FASB
  Staff Position (FSP) EITF 03-06-1, Participating securities and
  instruments granted in share-based payment transactionsaddresses
  whether instruments granted in share-based payment transactions are participating
  securities prior to vesting that should be included in the earnings allocation
  in computing earnings per share under the two-class method described FAS 128,
  Earnings per Share.This FSP iseffective for years beginning
  after December 15, 2008, and interim periods within those years. We are currently
  evaluating the impact of this FASB staff position.

32

---

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

Not
Applicable

Item 8.        Financial
Statements and Supplementary Data.

33

---

COUNTERPATH CORPORATIONINDEX TO CONSOLIDATED
FINANCIAL STATEMENTS April 30, 2009



|                                                                   | 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               | 40-61

34

---

|                      | BDO DunwoodyLLP               | 600 Cathedral Place     
|--------------------- | ----------------------------- | ------------------------
|Chartered Accountants | 925 West Georgia Street      
|                      | Vancouver, BC, Canada V6C 3L2
|                      | Telephone: (604) 688-5421    
|                      |                               | Telefax: (604) 688-5132 
|                      |                               | E-mail: vancouver@bdo.ca
|                      |                               | www.bdo.ca              
|                      |                               |                         

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

To the Directors and Stockholders of CounterPath
Corporation:

We have audited the accompanying consolidated balance sheets of
CounterPath Corporation (the Company) as of April 30, 2009 and 2008, 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, 2009 and 2008, 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 $34,318,195 at April 30, 2009 and incurred a net loss for the year
then ended of $15,838,712. These conditions raise substantial doubt about the
Companys ability to continue as a going concern. Managements plans in regard
to these matters are also described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

/s/ BDO Dunwoody LLP

Chartered Accountants

Vancouver, Canada

July 23, 2009

35

---

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

|                                                                               |   | April 30,   |   |   | April 30,   |  
|------------------------------------------------------------------------------ | - | ----------- | - | - | ----------- | -
|                                                                               |   | 2009        |   |   | 2008        |  
|Assets                                                                         |   |             |   |   |             |  
|Current assets:                                                                |   |             |   |   |             |  
|Cash                                                                           | $ | 2,931,932   |   | $ | 6,223,613   |  
|Accounts receivable (net of allowance
      for doubtful accounts of $755,114  |   |             |   |   |             |  
|(2008 - $407,050))                                                             |   | 2,524,220   |   |   | 5,409,658   |  
|Investment tax credits recoverable                                             |   | 143,334     |   |   | 1,061,133   |  
|Prepaid expenses and
      deposits                                            |   | 310,274     |   |   | 646,679     |  
|Total
      current assets                                                     |   | 5,909,760   |   |   | 13,341,083  |  
|                                                                               |   |             |   |   |             |  
|Deposits                                                                       |   | 114,267     |   |   | 103,017     |  
|Equipment  Note 4                                                             |   | 258,442     |   |   | 736,854     |  
|Intangible assets (net of accumulated amortization of
      $3,375,195 (2008 - |   |             |   |   |             |  
|$1,364,365))  Notes 2(b)                                                      |   | 2,201,894   |   |   | 8,534,666   |  
|Goodwill  Note 2(b)                                                           |   | 7,262,701   |   |   | 8,674,990   |  
|Other assets                                                                   |   | 92,101      |   |   | 177,749     |  
|Total Assets                                                                   | $ | 15,839,165  |   | $ | 31,568,359  |  
|                                                                               |   |             |   |   |             |  
|Liabilities and Stockholders Equity                                           |   |             |   |   |             |  
|Current liabilities:                                                           |   |             |   |   |             |  
|Accounts payable and accrued
      liabilities  Note 5                        | $ | 3,488,001   |   | $ | 4,529,201   |  
|Unearned revenue                                                               |   | 708,455     |   |   | 936,343     |  
|Customer deposits                                                              |   | 9,443       |   |   | 85,283      |  
|Accrued warranty  Note
      2(b)                                             |   | 137,378     |   |   | 144,347     |  
|Total current liabilities                                                      |   | 4,343,277   |   |   | 5,695,174   |  
|                                                                               |   |             |   |   |             |  
|Deferred lease inducements                                                     |   | 55,016      |   |   | 97,734      |  
|Unrecognized tax benefit  Notes 2(b)
      and 9                              |   | 98,575      |   |   | 98,575      |  
|Total liabilities                                                              |   | 4,496,868   |   |   | 5,891,483   |  
|                                                                               |   |             |   |   |             |  
|Stockholders equity:                                                          |   |             |   |   |             |  
|Preferred stock, $0.001 par value 
      Note 7                               |   |             |   |   |             |  
|Authorized: 100,000,000                                                        |   |             |   |   |             |  
|Issued and outstanding:
      April 30, 2009  1; April 30, 2008  1           |   |            |   |   |            |  
|Common stock, $0.001 par value  Note 8                                        |   |             |   |   |             |  
|Authorized:
      83,076,900                                                   |   |             |   |   |             |  
|Issued and outstanding:                                                        |   |             |   |   |             |  
|April 30, 2009 
      28,832,050; April 30, 2008  25,921,797                 |   | 28,831      |   |   | 25,921      |  
|Additional paid-in capital                                                     |   | 48,718,444  |   |   | 43,398,849  |  
|Accumulated deficit                                                            |   | (34,318,195 | ) |   | (18,479,483 | )
|Accumulated other comprehensive income (loss)
       currency translation     |   |             |   |   |             |  
|adjustment                                                                     |   | (3,086,783  | ) |   | 731,589     |  
|Total stockholders equity                                                     |   | 11,342,297  |   |   | 25,676,876  |  
|Liabilities and Stockholders Equity                                           | $ | 15,839,165  |   | $ | 31,568,359  |  
|                                                                               |   |             |   |   |             |  
|Going concern  Note 2                                                         |   |             |   |   |             |  
|Commitments and contingent liability  Notes 11 and 12                         |   |             |   |   |             |  

See accompanying notes to the consolidated financial
statements

36

---

COUNTERPATH CORPORATIONCONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS(Stated in U.S. Dollars)

|                                                                            |   | Years Ended |  
|--------------------------------------------------------------------------- | - | ----------- | -
|                                                                            |   | April 30,   |  
|                                                                            |   | 2009****    |  
|Revenue  Note 10:                                                          |   |             |  
|Software                                                                    | $ | 6,868,980   |  
|Service                                                                     |   | 2,964,121   |  
|Total revenue                                                               |   | 9,833,101   |  
|Operating expenses:                                                         |   |             |  
|Cost of sales (includes depreciation of $50,743 (2008
      - $136,274) and |   |             |  
|amortization of intangible assets
      of $2,010,830 (2008 - $1,364,365)  |   |             |  
|Note 2(b))                                                                  |   | 4,183,626   |  
|Sales and marketing                                                         |   | 4,147,626   |  
|Research and development                                                    |   | 7,075,640   |  
|General and administrative                                                  |   | 6,507,332   |  
|Impairment of intangible assets  Note 2(b)                                 |   | 2,755,333   |  
|Restructuring costs  Note 13                                               |   | 1,565,347   |  
|Total operating expenses                                                    |   | 26,234,904  |  
|Loss from operations                                                        |   | (16,401,803 | )
|Interest and other income (expense), net                                    |   |             |  
|Interest income                                                             |   | 107,931     |  
|Interest expense                                                            |   | (11,676     | )
|Foreign exchange gain (loss)                                                |   | 466,836     |  
|Net loss for the year                                                       |   | (15,838,712 | )
|Other comprehensive income (loss):                                          |   |             |  
|Foreign currency translation adjustments                                    |   | (3,818,372  | )
|Comprehensive loss                                                          | $ | (19,657,084 | )
|Net loss per share:                                                         |   |             |  
|Basic and diluted                                                           | $ | (0.57       | )
|                                                                            |   |             |  
|Weighted average common shares outstanding:                                 |   | 27,886,194  |  

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,   |  
|                                                                   |   | 2009        |  
|Cash flows from operating activities:                              |   |             |  
|Net loss for the year                                              | $ | (15,838,712 | )
|Adjustments to reconcile net loss to
      net cash used in        |   |             |  
|operating activities:                                              |   |             |  
|Depreciation
      and amortization                                |   | 590,349     |  
|Amortization of intangible
      assets                            |   | 2,010,830   |  
|Impairment
      of intangible assets                              |   | 2,755,333   |  
|Severance paid by issuance
      of common stock  Note 8          |   | 125,806     |  
|Stock-based
      compensation  Note 8                            |   | 1,443,864   |  
|Accretion of convertible
      debenture discount  Note 14        |   |            |  
|Loss on conversion
      of convertible debentures  Note 14       |   |            |  
|Foreign exchange (gain) loss                                       |   | (466,836    | )
|Changes in assets and liabilities:                                 |   |             |  
|Accounts receivable                                                |   | 3,463,001   |  
|Prepaid expenses
      and deposits                                |   | 306,706     |  
|Accounts payable and accrued
      liabilities                     |   | (636,562    | )
|Decrease
      (increase) in other assets                          |   | 35,648      |  
|Unearned revenue                                                   |   | (242,141    | )
|Customer
      deposits                                            |   | (75,840     | )
|Warranty payable                                                   |   | (6,969      | )
|Net cash used in operating activities                              |   | (6,535,523  | )
|                                                                   |   |             |  
|Cash flows from investing activities:                              |   |             |  
|Cash acquired on acquisitions, net of transaction costs            |   |            |  
|Purchase of equipment                                              |   | (71,145     | )
|Deposits                                                           |   | (28,280     | )
|Net cash provided by (used in) investing activities                |   | (99,425     | )
|                                                                   |   |             |  
|Cash flows from financing activities:                              |   |             |  
|Common stock issued                                                |   | 3,752,835   |  
|Decrease in due to related parties                                 |   |            |  
|Net cash provided by financing activities                          |   | 3,752,835   |  
|                                                                   |   |             |  
|Foreign exchange effect on cash                                    |   | (409,568    | )
|                                                                   |   |             |  
|Increase (decrease) in cash                                        |   | (3,291,681  | )
|                                                                   |   |             |  
|Cash, beginning of the year                                        |   | 6,223,613   |  
|Cash, end of the year                                              | $ | 2,931,932   |  
|                                                                   |   |             |  
|Supplemental disclosure of cash flow information                   |   |             |  
|Cash paid for:                                                     |   |             |  
|Interest                                                           | $ | 11,676      |  
|Taxes                                                              | $ |            |  
|Common stock and stock options issued
      in connection with the |   |             |  
|acquisition of NewHeights Software Corporation                     | $ |            |  
|Common stock and stock options issued
      in connection with the |   |             |  
|acquisition of FirstHand Technologies Inc.                         | $ |            |  
|Common stock issued for severance                                  | $ | 125,806     |  
|Convertible debentures converted into common stock                 | $ |            |  

*See* *accompanying notes to the consolidated
financial statements*

38

---

COUNTERPATHCORPORATIONCONSOLIDATEDSTATEMENTSOFCHANGESINSTOCKHOLDERSEQUITYfor the Years
Ended April 30, 2009 and 2008 (Stated in U.S. Dollars)

|                                             |  | Common shares |  |   | Preferred Shares |  |  |        |  |   |           |  |   |            |   |   |             |  
|-------------------------------------------- |  | ------------- |  | - | ---------------- |  |  | ------ |  | - | --------- |  | - | ---------- | - | - | ----------- | -
|                                             |  |               |  |   |                  |  |  |        |  |   |           |  |   |            |   |   |             |  
|                                             |  | Number        |  |   |                  |  |  | Number |  |   |           |  |   | Additional |   |   |             |  
|                                             |  | of            |  |   |                  |  |  | of     |  |   |           |  |   | Paid-in    |   |   | Accumulated |  
|                                             |  | Shares        |  |   | Par Value        |  |  | Shares |  |   | Par Value |  |   | Capital    |   |   | Deficit     |  
|Balance May 1, 2007                          |  | 7,588,197     |  | $ | 7,588            |  |  |       |  | $ |          |  | $ | 4,850,422  |   | $ | (5,872,151  | )
|                                             |  |               |  |   |                  |  |  |        |  |   |           |  |   |            |   |   |             |  
|Shares issued:                               |  |               |  |   |                  |  |  |        |  |   |           |  |   |            |   |   |             |  
|Acquisition of NewHeights  Note 3           |  | 7,680,168     |  |   | 7,680            |  |  |       |  |   |          |  |   | 15,169,181 |   |   |            |  
|Acquisition of FirstHand  Note 3            |  | 5,900,014     |  |   | 5,900            |  |  |       |  |   |          |  |   | 11,881,661 |   |   |            |  
|Conversion of debentures  Note 14           |  | 2,000,000     |  |   | 2,000            |  |  |       |  |   |          |  |   | 3,998,000  |   |   |            |  
|Private placements  Note 3                  |  | 2,750,000     |  |   | 2,750            |  |  |       |  |   |          |  |   | 5,497,250  |   |   |            |  
|Exercise of stock options                    |  | 3,418         |  |   | 3                |  |  |       |  |   |          |  |   | 6,829      |   |   |            |  
|Fair value of vested stock options exchanged |  |               |  |   |                  |  |  |        |  |   |           |  |   |            |   |   |             |  
| Note 3                                     |  |              |  |   |                 |  |  |       |  |   |          |  |   | 394,072    |   |   |            |  
|Shares issued: Preferred                     |  |              |  |   |                 |  |  | 1      |  |   |          |  |   |           |   |   |            |  
|Stock-based compensation  Note 8            |  |               |  |   |                  |  |  |        |  |   |           |  |   | 1,601,434  |   |   |            |  
|Net loss for the year                        |  |              |  |   |                 |  |  |       |  |   |          |  |   |           |   |   | (12,534,919 | )
|Foreign currency translation adjustment      |  |               |  |   |                  |  |  |        |  |   |           |  |   |            |   |   |             |  
|Cumulative-effect adjustment  Note 2(b)     |  |              |  |   |                 |  |  |       |  |   |          |  |   |           |   |   | (72,413     | )
|Balance, April 30, 2008                      |  | 25,921,797    |  |   | 25,921           |  |  | 1      |  |   |          |  |   | 43,398,849 |   |   | (18,479,483 | )
|                                             |  |               |  |   |                  |  |  |        |  |   |           |  |   |            |   |   |             |  
|Shares issued:                               |  |               |  |   |                  |  |  |        |  |   |           |  |   |            |   |   |             |  
|Private placements  Note 8                  |  | 2,530,841     |  |   | 2,531            |  |  |       |  |   |          |  |   | 3,750,304  |   |   |            |  
|Issued for severance  Note 8                |  | 279,412       |  |   | 279              |  |  |       |  |   |          |  |   | 125,527    |   |   |            |  
|Exchange of subsidiary preferred shares     |  |               |  |   |                  |  |  |        |  |   |           |  |   |            |   |   |             |  
|Note 7                                       |  | 100,000       |  |   | 100              |  |  |       |  |   |          |  |   | (100       | ) |   |            |  
|Stock-based compensation - Note 8            |  |              |  |   |                 |  |  |       |  |   |          |  |   | 1,443,864  |   |   |            |  
|Net loss for the year                        |  |              |  |   |                 |  |  |       |  |   |          |  |   |           |   |   | (15,838,712 | )
|Foreign currency translation adjustment      |  |              |  |   |                 |  |  |       |  |   |          |  |   |           |   |   |            |  
|Balance, April 30, 2009                      |  | 28,832,050    |  | $ | 28,831           |  |  | 1      |  | $ |          |  | $ | 48,718,444 |   | $ | (34,318,195 | )

Seeaccompanyingnotes to theconsolidatedfinancialstatements

39

---

COUNTERPATH CORPORATIONNOTES 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, 2009, the Company has not yet achieved profitable operations and
      had an accumulated deficit of $34,318,195 since incorporation and incurred
      a net loss for the year ended April 30, 2009 totalling $15,838,712. These
      factors raise substantial doubt regarding the Companys ability to
      continue as a going concern.

40

---

COUNTERPATH CORPORATIONNOTES 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, 2010. Management is implementing a
      plan to address these uncertainties to enable the Company to continue as a
      going concern through the end of fiscal 2010 and beyond. This plan
      includes new equity financing in amounts sufficient to sustain operations,
      such as the private placement discussed in Note 8, 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
      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 CORPORATIONNOTES 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 Emerging Issues
      Task Force Issue No. 00-21, "Revenue Arrangements with Multiple
      Deliverables" and revenues are recognized under SOP 81-1, "Accounting for
      Performance of Construction-Type and Certain Production-Type Contracts",
      generally using the percentage-of-completion method.                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | In using the percentage-of-completion method, revenues
      are generally recorded based on a completion of milestones as described in
      the agreement. Profit estimates on long-term contracts are revised
      periodically based on changes in circumstances and any losses on contracts
      are recognized in the period that such losses become known.                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | 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 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 SFAS No.
      123R for employees, the compensation expense is amortized on a
      straight-line basis over the requisite service period which approximates
      the vesting period.                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | Stock options granted to non-employees were accounted for
      in accordance with SFAS No. 123 "Accounting for Stock- Based Compensation"
      and 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 SFAS No. 123R, 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, 2009 and April 30, 2008 using the assumptions more fully
      described in Note 8.                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | Use of Estimates:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | The preparation of financial statements in conformity
      with generally accepted accounting principles in the United States
      requires the Companys management to make estimates and assumptions which
      affect the amounts reported in these consolidated financial statements,
      the notes thereto, and the disclosure of contingent assets and liabilities
      at the date of the financial statements. Actual results could differ from
      those estimates.                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | Equipment and Amortization:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | Equipment is recorded at cost. Depreciation is provided
      for using the straight-line method over the estimated useful lives as
      follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

Computer hardware
    Two yearsComputer software
    Two yearsLeasehold improvements
    Shorter of lease term or
      estimated economic lifeOffice furniture
    Five yearsWebsite
    Three years


42

---

COUNTERPATH CORPORATIONNOTES 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 Statement of Financial Accounting Standards No. 146,
      Accounting for Costs Associated with Exit or Disposal Activities.The Companys restructuring costs for its post acquisition activities
      are more fully described in Note 13.                                                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | Website Development Costs:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | The Company recognizes the costs associated with
      developing a website in accordance with 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 the 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 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 (Note 3).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | The intangible assets of NewHeights are reported at
      acquisition cost and include amounts initially allocated to acquired
      technologies of $3,454,839 (CDN$3,678,100) and customer asset of
      $2,283,908 (CDN$2,431,500). The acquired technologies are amortized based
      on their estimated useful life of four years and the customer asset is
      amortized on the basis of Managements estimate of the future cash flows
      from this asset over approximately five years, which is Managements
      estimate of the useful life of the customer asset.                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | The intangible assets of FirstHand are reported at
      acquisition cost and include amounts initially allocated to acquired
      technologies of $2,804,700 (CDN$2,804,700) and customer asset of $587,000
      (CDN$587,000). The acquired technologies are amortized based on their
      estimated useful life of four years and the customer asset is amortized on
      the basis of Managements estimate of the future cash flows from this
      asset over approximately five years, which is Managements estimate of the
      useful life of the customer asset.                                                                                                                                                           

43

---

COUNTERPATH CORPORATIONNOTES 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 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, 2009 to 2013 of the acquired technologies and customer asset is
      as follows:                                                                                                                                                                                                                                                                                                                                                                                                        

| |      |   | NewHeights |  |   | FirstHand |  |   | BridgePort |  |   | Total   | 
| | ---- | - | ---------- |  | - | --------- |  | - | ---------- |  | - | ------- | 
| |      |   |            |  |   |           |  |   |            |  |   |         | 
| | 2010 | $ | 433,588    |  | $ | 268,595   |  | $ | 75,055     |  | $ | 777,238 | 
| | 2011 |   | 358,061    |  |   | 268,595   |  |   | 93,776     |  |   | 720,432 | 
| | 2012 |   | 170,421    |  |   | 429,863   |  |   | 70,528     |  |   | 670,812 | 
| | 2013 | $ | 33,412     |  | $ |          |  | $ |           |  | $ | 33,412  | 

In accordance with SFAS 144, the
Company performed an assessment as of April 30, 2009, and determined that the
significant adverse change in the business climate in the last six months has
affected the value of the Companys intangible assets acquired through the
acquisitions of FirstHand and NewHeights. In addition the cash flow losses have
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 asset group 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 of $2,755,333 related to the intangible assets (2008 - $nil).

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

| |                                   |   |           |  |   | Accumulated  |  |   | Impairment |  |   | Net Carrying | 
| | --------------------------------- | - | --------- |  | - | ------------ |  | - | ---------- |  | - | ------------ | 
| |                                   |   | Cost      |  |   | Amortization |  |   | Charge     |  |   | Amount       | 
| | Acquired technologies             | $ | 5,796,494 |  | $ | 2,751,326    |  | $ | 1,636,114  |  | $ | 1,409,054    | 
| | Customer assets                   |   | 2,535,928 |  |   | 623,869      |  |   | 1,119,219  |  |   | 792,840      | 
| | Intangible assets, April 30, 2009 | $ | 8,332,422 |  | $ | 3,375,195    |  | $ | 2,755,333  |  | $ | 2,201,894    | 

A summary of the Companys intangible
assets, net at April 30, 2008 is as follows:

| |                                   |   |           |  |   | Accumulated  |  |   | Impairment |  |   | Net Carrying | 
| | --------------------------------- | - | --------- |  | - | ------------ |  | - | ---------- |  | - | ------------ | 
| |                                   |   | Cost      |  |   | Amortization |  |   | Charge     |  |   | Amount       | 
| | Acquired technologies             | $ | 6,875,876 |  | $ | 1,153,484    |  | $ |           |  | $ | 5,722,392    | 
| | Customer assets                   |   | 3,023,155 |  |   | 210,881      |  |   |           |  |   | 2,812,274    | 
| | Intangible assets, April 30, 2008 | $ | 9,899,031 |  | $ | 1,364,365    |  | $ |           |  | $ | 8,534,666    | 

Accounts Receivable and Allowance
for Doubtful Accounts:

Accounts receivable are presented net
of an allowance for doubtful accounts. The allowance was $755,114 at April 30,
2009 (2008 - $407,050). Bad debt expense for the year ended April 30, 2009 was
$594,589 (2008 - $350,234).

The Company evaluates, on a periodic
basis, the collectibility 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.

44

---

COUNTERPATH CORPORATIONNOTES 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)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | 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 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.                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | 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, 2009 and 2008 were as
  follows:

| |                            |   | Years Ended April 30, |  
| | -------------------------- | - | --------------------- | -
| |                            |   | 2009                  |  
| |                            |   |                       |  
| | Balance, beginning of year | $ | 144,347               |  
| | Provision                  |   | (6,969                | )
| | Balance, end of year       | $ | 137,378               |  

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.

Financial Instruments:

The carrying values of cash, accounts
receivable, accounts payable and accrued liabilities, customer deposits and
accrued warranty approximate fair value due to the short maturity of these
instruments. Unless otherwise noted, it is managements opinion that the Company
is not exposed to significant interest, currency or credit risks arising from
these financial instruments.

Income Taxes:

The Company accounts for income taxes
by the asset and liability method in accordance with 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.

45

---

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

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

| | b) | Significant Accounting Policies
  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | The Company 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, Accounting for
      Uncertainty in Income Taxes-an Interpretation of FASB Statement No. 109
      (FAS No. 109). 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 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 SFAS No. 128, "Earnings Per Share", and EITF No. 03-06,
      Participating Securities and the Two-Class Method under FASB Statement
      No. 128. 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | SFAS No. 128 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, 2009, loss per share excludes 6,916,189
      (April 30, 2008  4,794,263) potentially dilutive common shares (related
      to stock options and warrants) as their effect was anti-
  dilutive.                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | Investment tax credits:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | Investment tax credits are accounted for under the cost
      reduction method whereby they are netted against the expense or property
      and equipment to which they relate. Investment tax credits are recorded
      when the qualifying expenditures have been incurred and if it is more
      likely not that the tax credits will be realized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | Goodwill:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | Goodwill represents the excess purchase price over the
      estimated fair value of net assets acquired as of the acquisition date.
      Statement of Financial Accounting Standards No. 142, Goodwill and Other
      Intangible Assets (SFAS No. 142). SFAS No. 142 requires goodwill to be
      tested for impairment annually or more frequently if an event occurs or
      circumstances change that would more likely than not reduce the fair value
      of the Company's business enterprise below its carrying value. 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.                                                        

46

---

COUNTERPATH CORPORATIONNOTES 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)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | 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 (Note 3). Translated to U.S. dollars
      using the period end rate, the goodwill balance at April 30, 2009 (April
      30, 2008) was $5,540,968 (CDN$6,704,947) and $1,721,733 (CDN$2,083,752),
      respectively. During the fourth quarter of its fiscal year ended April 30,
      2009, 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, 2009. 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, 2009 (2008 - $nil).                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 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 Statement of Financial
      Accounting Standards No. 141 (revised 2007), Business Combinations(SFAS No. 141R). This standard replaces SFAS141 and establishes
      principles and requirements for how an acquirer recognizes and measures in
      its financial statement the identifiable assets acquired and liabilities
      assumed, any non-controlling interest in the acquiree, and the goodwill
      acquired.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | This standard also establishes disclosure requirements
      which will enable users to evaluate the nature and financial effects of
      the business combination. This standard is effective for financial
      statements issued for fiscal years beginning after December 15, 2008. The
      Company is currently evaluating the impact of this statement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | In December 2007, the FASB issued Statement of Financial
      Accounting Standards No. 160, Non controlling Interests In Consolidated
      Financial Statements  an amendment to ARB No.51(SFAS No. 160).
      This standard Amends ARB 51 to establish accounting and reporting
      standards for a non-controlling interest in a subsidiary and for
      deconsolidation of a subsidiary. This standard applies prospectively to
      business combinations for which the acquisition date is on or after the
      beginning of the first annual reporting period beginning on or after
      December 15, 2008. This standard may not be applied before that date. The
      Company is currently evaluating the impact of this statement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | In March 2008, the Financial Accounting Standards Board
      (FASB) issued Statement of Financial Accounting Standards No. 161,
      Disclosures about Derivative Instruments and Hedging Activities  an
      amendment of FASB Statement No. 133 (FAS 161). FAS 161 modifies
      existing requirements to include qualitative disclosures regarding the
      objectives and strategies for using derivatives, fair value amounts of
      gains and losses on derivative instruments and disclosures about
      credit-risk-related contingent features in derivative agreements. The
      pronouncement also requires the cross-referencing of derivative
      disclosures within the financial statements and notes thereto. This
      statement is effective for financial statements issued for years beginning
      after November 15, 2008 and interim periods within those years. The
      Company is currently evaluating the impact of this statement.                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | In June 2009, the FASB issued SFAS No. 168, The
        FASB Accounting Standards Codificationand
        the Hierarchy of Generally Accepting Accounting PrinciplesA Replacement
        of FASB Statement No. 162(FAS 168) which established
        the FASB Accounting Standards Codification (Codification)
        as the single source of authoritative nongovernmental U.S. GAAP which
        was launched on July 1, 2009. The Codification does not change current
        U.S. GAAP, but is intended to simplify user access to all authoritative
        U.S. GAAP by providing all the authoritative literature related to a particular
        topic in one place. All existing accounting standard documents will be
        superseded and all other accounting literature not included in the Codification
        will be considered nonauthoritative. The Codification is effective for
        interim and annual periods ending after September 15, 2009 and will not
        have an impact on the Companys financial condition or results of
        operations. The Company is currently evaluating the impact to its financial
        reporting process of providing Codification references in its public filings.

47

---

COUNTERPATH CORPORATIONNOTES 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)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | FASB Staff Position (FSP) EITF 03-06-1,
        Participating securities and instruments granted in share-based
        payment transactionsaddresses whether instruments granted in
        share-based payment transactions are participating securities prior to
        vesting that should be included in the earnings allocation in computing
        earnings per share under the two-class method described FAS 128, Earnings
        per Share.This FSP is effective for years beginning after December
        15, 2008, and interim periods within those years. The Company is currently
        evaluating the impact of this FASB staff position.

|Note 3 | Business Combinations
|------ | ---------------------

| | a) | NewHeights Software Corporation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | On August 2, 2007, the Company acquired 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 6789722 Canada Inc., a subsidiary of the Company, that
      are exchangeable into 369,836 shares of common stock of the Company. Upon
      closing, the Companys convertible debenture holders converted their
      existing debentures in the amount of $4 million into 2 million shares of
      common stock pursuant to the terms of the convertible debenture agreement
      (Note 14). In addition, the Company completed private placements of $1.3
      million, $0.5 million and $1.7 million on August 2, 2007, September 30,
      2007 and November 2, 2007, respectively, issuing a total of 1.75 million
      shares of common stock at $2.00. The Company also entered into
      subscription agreements with investors to raise an additional $2.0 million
      through the issuance of one million shares of common stock at $2.00 per
      share, which private placements were completed on February 2, 2008 and
      March 2, 2008, respectively.                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | Concurrent with the transaction, the Company issued
      857,701 replacement employee options to former optionees of NewHeights.
      Included in the year ended April 30, 2008 statement of operations is a
      $388,786 compensation charge (being the incremental fair value of the
      vested options) recorded in association with the issuance of these
      options, with $17,428, $50,171, $108,574 and $212,613 being allocated to
      cost of sales, sales and marketing, research and development and general
      and administration, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | The Company acquired NewHeights to gain access to
      NewHeights technology and customer base. NewHeights has a portfolio of
      standards based software applications aimed at simplifying and enhancing
      real-time communications over the Internet. The Company accounted for the
      acquisition using the purchase method of accounting in accordance with
      Statement of Financial Accounting Standards No. 141, Business
      Combinations. Accordingly, the purchase price has been allocated to the
      tangible and intangible assets acquired and the liabilities assumed on the
      basis of their respective fair values on the acquisition date. Purchase
      price in excess of fair value of the net tangible and identifiable
      intangible assets acquired has been allocated to goodwill. Any goodwill
      allocated on the acquisition is not be deductible for tax purposes. The
      Companys consolidated statements of operations and comprehensive loss
      include the operating results of NewHeights from August 2, 2007, the date
      of acquisition. The functional currency of NewHeights is the Canadian
      dollar, hence, the values of the assets and liabilities of NewHeights
      including goodwill will fluctuate with changes in exchange
rates.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | The following table summarizes the allocation of the
      purchase price and related transaction costs to the fair value of the
      assets acquired and liabilities assumed at the date of
  acquisition:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

| | Cash                                                | $ | 2,634,910  |  
| | --------------------------------------------------- | - | ---------- | -
| | Other current assets                                |   | 1,563,127  |  
| | Accounts payable and accrued liabilities            |   | (944,981   | )
| | Equipment                                           |   | 261,092    |  
| | Acquired technologies                               |   | 3,454,839  |  
| | Customer asset                                      |   | 2,283,908  |  
| | Goodwill                                            |   | 6,339,717  |  
| | Other assets                                        |   | 2,276      |  
| | Total net assets acquired                           | $ | 15,594,888 |  
| | Consideration:                                      |   |            |  
| | Purchase price - fair value of shares
      issued  | $ | 15,176,861 |  
| | Fair value of the surrendered options of NewHeights |   | 300,482    |  
| | Transaction costs                                   |   | 117,545    |  
| | Total                                               | $ | 15,594,888 |  

48

---

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

|Note 3 | Business Combination'(contd)
|------ | -----------------------------

| | a) | NewHeights Software Corporation
  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | The fair value of common shares issued is based on the
      weighted average closing common share price for the five trading days
      prior to, and the five trading days after the announcement of acquisition.
      The Black-Scholes option pricing model has been used to determine the fair
      value of the surrendered options of NewHeights granted to former optionees
      of NewHeights as of the transaction date of August 2, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | The equipment acquired in the acquisition of NewHeights
        primarily consists of computer equipment, furniture and fixtures and have
        been recorded at fair value, which approximates net book value. These
        assets are amortized on the basis of declining balances. The acquired
        technologies and customer asset represent finite life intangible assets.
        The customer asset represents a relationship with an existing customer
        of NewHeights. The acquired technologies will be amortized based on their
        estimated useful life of four years and the customer asset will be 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.                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | b) | FirstHand Technologies Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | On February 1, 2008, the Company acquired all of the
      shares of FirstHand Technologies Inc. (FirstHand) through the issuance
      of 5,900,014 shares of the Companys common stock. Concurrent with the
      transaction, the Company issued 279,126 replacement employee options to
      former optionees of FirstHand. Included in the year ended April 30, 2008
      statement of operations is a $71,142 compensation charge (being the
      incremental fair value of the vested options) recorded in association with
      the issuance of these options $4,754, $9,273, $21,571 and $35,544 being
      allocated to cost of sales, sales and marketing, research and development
      and general and administration, respectively.                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | The Company acquired FirstHand to gain access to
      FirstHands technology and customer base. FirstHand develops and markets
      mobile telecommunication software applications aimed at the enterprise
      market.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | The Company accounted for the acquisition using the
      purchase method of accounting in accordance with Statement of Financial
      Accounting Standards No. 141, Business Combinations. Accordingly, the
      purchase price has been allocated to the tangible and intangible assets
      acquired and the liabilities assumed on the basis of their respective fair
      values on the acquisition date. Purchase price in excess of fair value of
      the net tangible and identifiable intangible assets acquired has been
      allocated to goodwill. Any goodwill allocated on the acquisition is not be
      deductible for tax purposes. The Companys consolidated statements of
      operations and comprehensive loss include the operating results of
      FirstHand from February 1, 2008, the date of acquisition. The functional
      currency of FirstHand is the Canadian dollar, hence, the values of the
      assets and liabilities of FirstHand including goodwill will fluctuate with
      changes in exchange rates.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | The following table summarizes the allocation of the
      purchase price and related transaction costs to the fair value of the
      assets acquired and liabilities assumed at the date of
  acquisition:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

| | Cash                                               | $ | 6,452,287  |  
| | -------------------------------------------------- | - | ---------- | -
| | Other current assets                               |   | 1,646,631  |  
| | Accounts payable and accrued liabilities           |   | (1,754,733 | )
| | Equipment                                          |   | 340,450    |  
| | Long term debt                                     |   | (97,281    | )
| | Acquired technologies                              |   | 2,804,700  |  
| | Customer asset                                     |   | 587,000    |  
| | Goodwill                                           |   | 2,083,960  |  
| | Total net assets acquired                          | $ | 12,063,014 |  
| | Consideration:                                     |   |            |  
| | Purchase price - fair value of shares
      issued | $ | 11,887,561 |  
| | Fair value of the surrendered options of FirstHand |   | 93,590     |  
| | Transaction costs                                  |   | 81,863     |  
| | Total                                              | $ | 12,063,014 |  

49

---

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

|Note 3 | Business Combinations
      (contd)
|------ | -------------------------------------

| | b) | FirstHand Technologies Inc. (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | The fair value of common shares issued is based on the
      weighted average closing common share price for the five trading days
      prior to, and the five trading days after the announcement of acquisition.
      The Black-Scholes option pricing model has been used to determine the fair
      value of the surrendered options of FirstHand granted to former optionees
      of FirstHand as of the transaction date of February 1, 2008.                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | The equipment acquired in the acquisition of FirstHand
        primarily consists of computer equipment, furniture and fixtures and have
        been recorded at fair value, which approximates net book value. These
        assets are amortized on the basis of declining balances. The acquired
        technologies and customer asset represent finite life intangible assets.
        The customer asset represents a relationship with an existing customer
        of FirstHand. The acquired technologies and customer asset are amortized
        based on their estimated useful life of four years.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | c) | BridgePort Networks, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | On February 1, 2008, the Company acquired all of the
      shares of BridgePort Networks, Inc. (BridgePort) by way of a merger in
      consideration for the assumption of all of the assets and liabilities of
      BridgePort. BridgePort develops and markets fixed mobile convergence
      software applications aimed at the telecom service provider
  market.                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | The Company acquired BridgePort to gain access to
      BridgePorts technology. BridgePort develops and markets mobile
      telecommunication software applications aimed at the telecom service
      provider market.                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | The Company accounted for the acquisition using the
      purchase method of accounting in accordance with Statement of Financial
      Accounting Standards No. 141, Business Combinations. Accordingly, the
      purchase price has been allocated to the tangible and intangible assets
      acquired and the liabilities assumed on the basis of their respective fair
      values on the acquisition date. The Companys consolidated statements of
      operations and comprehensive loss include the operating results of
      BridgePort from February 1, 2008, the date of acquisition.            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | The following table summarizes the allocation of the
      purchase price and related transaction costs to the fair value of the
      assets acquired and liabilities assumed at the date of
  acquisition.                                                                                                                                                                                                                                                                                                                                                                                                     

| | Cash                                                | $ | 241,708    |  
| | --------------------------------------------------- | - | ---------- | -
| | Other current assets                                |   | 228,138    |  
| | Accounts payable and accrued liabilities            |   | (1,263,629 | )
| | Equipment                                           |   | 189,027    |  
| | Other assets                                        |   | 136,176    |  
| | Acquired technologies                               |   | 476,703    |  
| | Customer asset                                      |   | 43,594     |  
| | Total net assets acquired                           | $ | 51,717     |  
| | Consideration:                                      |   |            |  
| | Purchase price being the transaction costs incurred | $ | 51,717     |  

| |    | The equipment acquired in the acquisition of BridgePort
      primarily consists of computer equipment, furniture and fixtures and have
      been recorded at fair value, which approximates net book value. These
      assets will be amortized on the basis of declining balances. The acquired
      technologies and customer asset represent finite life intangible assets.
      The customer asset represents a relationship with an existing customer of
      BridgePort. The acquired technologies and customer asset are amortized
      based on their estimated useful life of four years.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | d) | The following table presents unaudited pro forma results
      of operations for the year ended April 30, 2008, as if the acquisitions of
      NewHeights, FirstHand and BridgePort had occurred on May 1,
  2007:                                                                                                                                                                                                                                                                                                                                                                                      

| |                       |   | Year Ended     |  
| | --------------------- | - | -------------- | -
| |                       |   | April 30, 2008 |  
| |                       |   |                |  
| | Revenue               | $ | 11,539,566     |  
| | Net loss for the year | $ | (21,007,272    | )
| | Net loss per share:   |   |                |  
| | Basic and diluted     | $ | (0.84          | )

50

---

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

|Note 4 | Equipment
|------ | ---------

| |                        |   |           |  |   | April, 30 2009 |  |   |         | 
| | ---------------------- | - | --------- |  | - | -------------- |  | - | ------- | 
| |                        |   |           |  |   | Accumulated    |  |   |         | 
| |                        |   | Cost      |  |   | Depreciation   |  |   | Net     | 
| |                        |   |           |  |   |                |  |   |         | 
| | Computer hardware      | $ | 636,993   |  | $ | 623,735        |  | $ | 13,258  | 
| | Computer software      |   | 726,908   |  |   | 696,252        |  |   | 30,656  | 
| | Leasehold improvements |   | 183,498   |  |   | 108,824        |  |   | 74,674  | 
| | Office furniture       |   | 230,459   |  |   | 107,554        |  |   | 122,905 | 
| | Websites               |   | 49,915    |  |   | 32,966         |  |   | 16,949  | 
| |                        | $ | 1,827,773 |  | $ | 1,569,331      |  | $ | 258,442 | 

| |                        |   |           |  |   | April, 30 2008 |  |   |         | 
| | ---------------------- | - | --------- |  | - | -------------- |  | - | ------- | 
| |                        |   |           |  |   | Accumulated    |  |   |         | 
| |                        |   | Cost      |  |   | Depreciation   |  |   | Net     | 
| |                        |   |           |  |   |                |  |   |         | 
| | Computer hardware      | $ | 623,571   |  | $ | 347,955        |  | $ | 275,616 | 
| | Computer software      |   | 724,631   |  |   | 558,949        |  |   | 165,682 | 
| | Leasehold improvements |   | 167,007   |  |   | 52,467         |  |   | 114,540 | 
| | Office furniture       |   | 225,713   |  |   | 45,403         |  |   | 180,310 | 
| | Websites               |   | 24,915    |  |   | 24,209         |  |   | 706     | 
| |                        | $ | 1,765,837 |  | $ | 1,028,983      |  | $ | 736,854 | 

|Note 5 | Accounts Payable and Accrued
      Liabilities                                                           
|------ | ---------------------------------------------------------------------------------------------------------
|       |                                                                                                          
|       | Accounts Payable and accrued liabilities at April 30,
      2009 and 2008 are comprised of the following:

| |                                |   | April 30, | 
| | ------------------------------ | - | --------- | 
| |                                |   | 2009      | 
| |                                |   |           | 
| | Accounts payable  trade       | $ | 1,024,719 | 
| | Accrued commissions            |   | 38,554    | 
| | Accrued vacation               |   | 377,357   | 
| | Codec royalties                |   | 709,290   | 
| | Research fees                  |   | 626,941   | 
| | Accrued severance  Note 11(c) |   | 395,432   | 
| | Other accrued liabilities      |   | 315,708   | 
| |                                | $ | 3,488,001 | 

|Note 6 | Related Party Transactions                                                                                                                                                                                                                                                         
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                    
|       | During the years ended April 30, 2009 and 2008, the
      Company incurred the following lease expense to a company with a director
      in common with the Company and interest expenses to a company controlled
      by the spouse of a significant shareholder of the Company:

| |                                   |   | Years Ended | 
| | --------------------------------- | - | ----------- | 
| |                                   |   | April 30,   | 
| |                                   |   | 2009        | 
| | Interest on convertible debenture | $ | Nil         | 
| | Lease payment                     | $ | 3,446       | 

51

---

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

|Note 6 | Related Party Transactions
      (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | The Companys Chairman is the Chairman and founding
      shareholder of Mitel Networks Corporation (Mitel). NewHeights Software
      Corporation entered into a distribution agreement with Mitel on June 15,
      2004 and amended such agreement on August 7, 2007. NewHeights was acquired
      by the Company on August 2, 2007 and was amalgamated on February 5, 2008
      with the Companys wholly-owned subsidiary, CounterPath Solutions R&D
      Inc. under the name CounterPath Technologies Inc. The distribution
      agreement with Mitel renews automatically for one-year periods and
      contains termination rights of both parties. Under the terms of the
      distribution agreement, the Company earns a specified fee from Mitel based
      on the number of product licenses sold to Mitel.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | On July 31, 2008 the Company entered into a source code
      license agreement whereby the Company licensed to Mitel the source code
      for the Your Assistant product in consideration of a payment of $650,000.
      Associated with the agreement are ongoing license fees to be paid by Mitel
      of $12.00 per copy deployed, declining to $7.50 per copy deployed after
      two years and declining from $7.50 to nil after four years. In addition,
      the agreement provides Mitel with a first right to match any third party
      offer to purchase the source code software and related intellectual
      property.                                                                                                                                                                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | The Companys software license revenue for the year ended
      April 30, 2009, pursuant to the terms of these agreements, was $1,225,757
      (2008 - $2,026,557).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | As at April 30, 2009, the Company has an accounts
      receivable balance from Mitel of $155,208 (April 30, 2008 - $1,177,000).
      During the year ended April 30, 2009, the Company through its wholly owned
      subsidiary, FirstHand Technologies Inc., paid $277,451 (2008 - $71,500) to
      Kanata Research Park Corporation (KRP) for leased office space. KRP is
      controlled by the Companys Chairman. As at April 30, 2009, the Company
      had an accounts payable balance to KRP of $13,210 (April 30, 2008 -
      $2,656).                                                                                                                                                                                                                                                                         
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | The above transactions are in the normal course of
      operations and are recorded at amounts established and agreed to between
      the related parties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Note 7 | Exchangeable Shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | On August 2, 2007, the Company entered into a voting and
      exchange trust agreement among its subsidiary, 6789722 Canada Inc., and
      Valiant Trust Company whereby the Company issued and deposited with
      Valiant Trust a special preferred voting share of the Company in order to
      enable Valiant Trust to execute certain voting and exchange rights as
      trustee from time to time for and on behalf of the registered holders of
      the preferred shares of 6789722 Canada Inc. Each preferred share of
      6789722 Canada Inc. is exchangeable into one share of common stock of the
      Company at the election of the shareholder, or, in certain circumstances,
      of the Company.                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | On October 9, 2008, and November 19, 2008, the Company
      issued 50,000 shares each totaling to 100,000 shares of common stock
      pursuant to a holder of 100,000 shares of exchangeable preferred shares of
      its subsidiary 6789722 Canada Inc. exercising their exchange rights. There
      were 269,841 outstanding exchangeable shares as of April 30, 2009 (April
      30, 2008 - 369,841). As the exchangeable shares have already been
      recognized in connection with the acquisition of NewHeights, the value
      ascribed to these shares on exchange is $nil.                                                                                                                                                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Note 8 | Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | On March 19, 2008, the Companys Board of Directors
      approved a five for one common stock consolidation. As a result, the
      Company's authorized capital decreased from 415,384,500 shares of common
      stock to 83,076,900 shares of common stock. All per share amounts and
      outstanding shares, including all common stock equivalents (stock options
      and warrants) have been retroactively adjusted in the Consolidated
      Financial Statements and in the Notes to the Consolidated Financial
      Statements for all periods presented to reflect the stock consolidation.                                                                                                                                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | On 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 are released as to 25% upon entering in to the agreement and
      25% on each date that is 6, 12 and 18 months from the date of the escrow
      agreement. As of April 30, 2009, 8,611,226 shares of common stock had been
      released from escrow.                                                                                                                                                                          

52

---

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

|Note 8 | Common Stock (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       | Stock Options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       | The Company has a stock option plan under which options
      to purchase common shares of the Company may be granted to employees,
      directors and consultants. Stock options entitle the holder to purchase
      common stock at a subscription price determined by the Board of Directors
      of the Company at the time of the grant. The options generally vest in the
      amount of 12.5% on the date which is six months from the date of grant and
      then beginning in the seventh month at 1/42 per month for 42 months, at
      which time the options are fully vested.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       | The maximum number of shares of common stock authorized
      by the stockholders and reserved for issuance by the Board of Directors of
      the Company under the stock option plans are 800,000 under the 2004 Stock
      option plan and 4,260,000 under the 2005 Stock option plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       | The Company uses the Black-Scholes option pricing model
      to determine the fair value of stock options granted. In accordance with
      SFAS No. 123R for employees, the compensation expense is amortized on a
      straight-line basis over the requisite service period which approximates
      the vesting period. Compensation expense for stock options granted to
      non-employees is amortized over the vesting period or, if none exists,
      over the service period. Compensation associated with unvested options
      granted to non-employees is remeasured on each balance sheet date using
      the Black-Scholes option pricing model. The expected volatility of options
      granted has been determined using the method described under SFAS No. 123R
      using the historical stock price. The expected term of options granted to
      employees in the current fiscal 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, SFAS No. 123R requires
      companies to utilize an estimated forfeiture rate when calculating the
      expense for the period, whereas prior to the adoption of SFAS No. 123R the
      Company recorded forfeitures based on actual forfeitures and recorded a
      compensation expense recovery in the period when the awards were
      forfeited. As a result, based on the Companys experience, the Company
      applied an estimated forfeiture rate of 15% in fiscal 2009 and 2008 in
      determining the expense recorded in the accompanying consolidated
      statement of operations.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       | On August 2, 2007, the Company issued 857,701 stock
      options to former optionees of NewHeights Software Corporation
      (NewHeights) to replace their existing options. The replacement options
      were granted at $2.00 per share and generally vest in the amount of 33.3%
      after each of three years from the original date of grant at which time
      the options are fully vested. The fair value of the surrendered NewHeights
      options of $300,482 was included in the purchase price of NewHeights and a
      compensation charge of $388,786 (being the incremental fair value of the
      options which have vested) was recorded in the statement of operations in
      association with the issuance of these options. On February 2, 2008, the
      Company issued 279,126 stock options to former optionees of FirstHand
      Technologies Inc. (FirstHand) to replace their existing options. The
      replacement options were granted at $1.90 per share and generally vest in
      the amount of 33.3% after each of three years from the original date of
      grant at which time the options are fully vested. The fair value of the
      surrendered FirstHand options of $93,590 was included in the purchase
      price of FirstHand and a compensation charge of $71,142 (being the
      incremental fair value of the options which have vested) was recorded in
      the statement of operations in association with the issuance of these
      options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

53

---

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

|Note 8 | Common Stock (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       | 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
      SFAS No. 123R 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.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       | The weighted-average fair value of options granted during
      the year ended April 30, 2009 and 2008 were $0.44 and $0.94 respectively.
      The weighted-average assumptions utilized to determine such values are
      presented in the following table:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

| |                             |   | Year Ended     |  |   | Year Ended     | 
| | --------------------------- | - | -------------- |  | - | -------------- | 
| |                             |   | April 30, 2009 |  |   | April 30, 2008 | 
| | Risk-free interest rate     |   | 2.12%          |  |   | 3.62%          | 
| | Expected volatility         |   | 71.9%          |  |   | 67.0%          | 
| | Expected term               |   | 3.7 yrs        |  |   | 3.6 yrs        | 
| | Dividend yield              |   | 0%             |  |   | 0%             | 
| | Weighted average fair value | $ | 0.44           |  | $ | 0.94           | 

The following is a summary of the
status of the Companys stock options as of April 30, 2009 and the stock option
activity during the year ended April 30, 2009:

| |                                        |  |            |   |  | Weighted-      | 
| | -------------------------------------- |  | ---------- | - |  | -------------- | 
| |                                        |  |            |   |  | Average        | 
| |                                        |  | Number of  |   |  | Exercise Price | 
| |                                        |  | Options    |   |  | per Share      | 
| |                                        |  |            |   |  |                | 
| | Outstanding at April 30, 2007          |  | 2,693,620  |   |  | $2.30          | 
| | Granted                                |  | 410,645    |   |  | $1.87          | 
| | Issued to NewHeights former optionees |  | 857,701    |   |  | $2.00          | 
| | Issued to FirstHands former optionees |  | 279,126    |   |  | $1.90          | 
| | Exercised                              |  | (3,418     | ) |  | $2.00          | 
| | Forfeited / Cancelled                  |  | (406,691   | ) |  | $1.90          | 
| | Expired                                |  | (36,720    | ) |  | $2.00          | 
| | Outstanding at April 30, 2008          |  | 3,794,263  |   |  | $2.20          | 
| | Granted                                |  | 2,146,000  |   |  | $0.85          | 
| | Forfeited / Cancelled                  |  | (1,116,440 | ) |  | $1.84          | 
| | Expired                                |  | (173,055   | ) |  | $2.00          | 
| | Outstanding at April 30, 2009          |  | 4,650,768  |   |  | $1.13          | 
| |                                        |  |            |   |  |                | 
| | Exercisable at April 30, 2009          |  | 2,474,207  |   |  | $1.41          | 
| | Exercisable at April 30, 2008          |  | 2,360,979  |   |  | $2.30          | 

54

---

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

|Note 8 | Common Stock (contd)                                                                                             
|------ | -------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                    
|       | The following table summarizes information regarding
      stock purchase options outstanding as of April 30, 2009:

Number of
    Aggregate
      
    Number of
    AggregateExercise
    Options
    Intrinsic
      
    Options
    IntrinsicPrice
    Outstanding
    Value
      Expiry Date
    Exercisable
    Value$0.44
    615,000
    $153,750
      December 15, 2013
    
    $$0.47
    1,279,611
    281,514
      July 21, 2009 to September 26, 2016
    972,936
    214,046$0.62
    850,000
    59,500
      April 17, 2014
    
    $1.75
    250,000
    
      May 14, 2013
    57,291
    $1.85
    4,873
    
      February 2, 2013
    4,873
    $1.90
    79,218
    
      March 8, 2015 to January 25, 2017
    79,218
    $1.95
    812,100
    
      September 7, 2010 to January 10,
        2016
    721,651
    $2.00
    355,549
    
      August 20,2009 to March 18, 2015
    355,549
    $2.15
    240,000
    
      September 7, 2016
    155,000
    $3.05
    164,417
    
      May 23, 2016
    127,689
    April 30, 2009
    4,650,768
    $494,764
      
    2,474,207
    $214,046April 30, 2008
    3,794,263
    $17,333
      
    2,360,979
    $7,635


The aggregate intrinsic value in the
preceding table represents the total intrinsic value, based on the Companys
closing stock price of $0.69 per share as of April 30, 2009 (April 30, 2008 
$1.80), which would have been received by the option holders had all option
holders exercised their options as of that date. The total number of
in-the-money options vested and exercisable as of April 30, 2009 was 972,936
(April 30, 2008  43,021). The total intrinsic value of options exercised during
the year ended April 30, 2009 was $nil (2008  $nil). The grant date fair value
of options vested during the year ended April 30, 2009 was $3,511,509 (April 30,
2008  $1,817,972).

The following table summarizes
information regarding the non-vested stock purchase options outstanding as of
April 30, 2009:

| |                                            |  |                   |   |  | Weighted Average      | 
| | ------------------------------------------ |  | ----------------- | - |  | --------------------- | 
| |                                            |  | Number of Options |   |  | Grant-Date Fair Value | 
| |                                            |  |                   |   |  |                       | 
| | Non-vested options at April
      30, 2007 |  | 1,760,733         |   |  | $1.60                 | 
| | Granted                                    |  | 1,547,472         |   |  | $0.94                 | 
| | Vested                                     |  | (1,563,364        | ) |  | $1.16                 | 
| | Forfeited                                  |  | (311,423          | ) |  | $1.21                 | 
| | Expired                                    |  | (134              | ) |  | $0.44                 | 
| | 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                 | 

As of April 30, 2009 there was
$1,248,757 of total unrecognized compensation cost related to unvested
share-based compensation awards. This unrecognized compensation cost is expected
to be recognized over a weighted average period of 1.15 years.

55

---

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

|Note 8 | Common Stock (contd)                                                                                                                                                                             
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                    
|       | Employee and non-employee stock-based compensation
      amounts classified in the Companys consolidated statements of operations
      for the year ended April 30, 2009 and 2008 are as follows:

| |                                |   | Years Ended | 
| | ------------------------------ | - | ----------- | 
| |                                |   | April 30,   | 
| |                                |   | 2009        | 
| |                                |   |             | 
| | Cost of sales                  | $ | 84,586      | 
| | Sales and marketing            |   | 143,693     | 
| | Research and development       |   | 273,441     | 
| | General and administrative     |   | 942,144     | 
| | Total stock-based compensation | $ | 1,443,864   | 

Warrants

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

The following table summarizes
information regarding the warrants outstanding as of 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            |  |  |                                   | 

Employee Stock Purchase Plan

As of February 1, 2009 the Company
offers the Employee Stock Purchase Plan (ESPP) to all regular salaried
(non-probationary) employees. Shares issued to employees as a result of
purchases or exercises under these plans will generally be issued from shares
held in treasury.

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 1,500,000 shares have been
reserved for issuance under the ESPP. As of April 30, 2009, a total of 1,500,000
shares were available for issuance under the ESPP. During the years ended April
30, 2009 and 2008, no shares were sold to employees under the ESPP.

56

---

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

|Note 9 | Income Taxes                                                                                                                                                                                                                                                                                                                        
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                     
|       | Deferred tax assets and liabilities are recognized for
      temporary differences between the carrying amount of the balance sheet
      items and their corresponding tax values as well as for the benefit of
      losses available to be carried forward to future years for tax purposes
      that are likely to be realized.
|       |                                                                                                                                                                                                                                                                                                                                     
|       | Significant components of the Companys deferred tax
      assets and liabilities, after applying enacted corporate income tax rates,
      are as follows:                                                                                                                                                                         

| |                                               |   | Years Ended |  
| | --------------------------------------------- | - | ----------- | -
| |                                               |   | April 30,   |  
| |                                               |   | 2009        |  
| | Tax loss carry forwards                       | $ | 10,975,000  |  
| | Equipment                                     |   | 871,000     |  
| | Undeducted research and development expenses  |   | 2,199,000   |  
| | Investment tax credits                        |   | 951,000     |  
| | Undeducted financing costs                    |   | 24,000      |  
| | Cumulative unrealized foreign exchange gain   |   | (251,000    | )
| | Acquired technology and other intangibles     |   | (487,000    | )
| | Valuation allowance established by management |   | (14,282,000 | )
| | 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,   |  
| |                                                                 |   | 2009        |  
| | Benefit from net loss, at US rates                              | $ | (5,385,000  | )
| | Foreign loss at other than US rates                             |   | 205,000     |  
| | Non-deductible expenses                                         |   | 17,000      |  
| | Non-deductible stock option compensation                        |   | 491,000     |  
| | Non-deductible loss on extinguishment of debt                   |   |            |  
| | Adjustment of valuation allowance                               |   |            |  
| | Effect of reduction in foreign statutory rates                  |   | 832,000     |  
| | Foreign exchange losses on revaluation of deferred tax balances |   | 1,851,000   |  
| | Expiry of non-operating losses                                  |   | 410,000     |  
| | Increase in valuation allowance                                 |   | 1,579,000   |  
| | Income tax expense for year                                     | $ |            |  

The tax benefit of net operating
losses carried forward and the associated valuation allowance was increased by
$nil (2008 -$7,856,000) representing the tax effect of losses which were
acquired with the acquisitions during the year ended April 30, 2008.

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, 2009, 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$ | $ | 12,950,000 |   |  | 2026  2029      | 
| | Canada  CDN$       | $ | 25,000,000 | * |  | 2009  2029      | 

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

57

---

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

|Note 9 | Income Taxes
      (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       | 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 No. 109
      (FAS No. 109). The Company is subject to taxation in the U.S.,
      Canada, the 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, 2009 and April 30, 2008 were as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

| |                                                                              |   | Years Ended | 
| | ---------------------------------------------------------------------------- | - | ----------- | 
| |                                                                              |   | April 30,   | 
| |                                                                              |   | 2009        | 
| | Balance at beginning of year                                                 | $ | 98,575      | 
| | Increases related to prior year tax positions (interest and
      penalties) |   |            | 
| | Balance at end of year                                                       | $ | 98,575      | 

|Note 10 | Segmented
      Information                                                                                                                                                                                                                                                                                                                                          
|------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                                                      
|        | Our chief operating decision maker reviews financial
      information presented on a consolidated basis, accompanied by desegregated
      information about revenues by geographic region for purposes of making
      operating decisions and assessing financial performance. Accordingly, we
      have concluded that we have one reportable operating segment.
|        |                                                                                                                                                                                                                                                                                                                                                                      
|        | 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, 2009 and 2008:                                                                                                                                                                 

| |                           |   | Years Ended | 
| | ------------------------- | - | ----------- | 
| |                           |   | April 30,   | 
| |                           |   | 2009        | 
| | North America             | $ | 5,691,518   | 
| | Europe                    |   | 2,594,871   | 
| | Asia                      |   | 817,987     | 
| | Central and South America |   | 728,725     | 
| | Other                     |   |            | 
| |                           | $ | 9,833,101   | 

Contained within the results of North
America for the year ended April 30, 2009 are revenues from the United States of
$4,373,763 (2008 - $2,916,798) and from Canada of $1,317,755 (2008 -
$2,048,981).

Contained within the results of Europe
for the year ended April 30, 2009 are revenues from Germany of $663,609 (2008 -
$335,282), the United Kingdom of $659,637 (2008 - $882,770), Denmark of $319,124
(2008 - $76,830), and Portugal of $161,954 (2008 - $nil).

Contained within the results of
Central and South America for the year ended April 30, 2009 are revenues from
Mexico of $238,730 (2008 - $916,793), Brazil of $176,168 (2008 - $82,352),
Argentina of $73,124 (2008 - $41,573), and the Dominican Republic of $66,310
(2008 - $137,309).

Contained within the results of Asia
for the year ended April 30, 2009 are revenues from Japan of $249,806 (2008 -
$16,105), China of $206,956 (2008 - $21,254), and India of $121,114 (2008 -
$43,787).

58

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

|Note 10 | Segmented Information
      (contd)                                                                                                                                              
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                    
|        | 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, | 
| |               |   | 2009      | 
| |               |   |           | 
| | Canada        | $ | 9,793,247 | 
| | United States |   | 21,891    | 
| | Total         | $ | 9,815,138 | 

Revenue from significant customers for
the years ended April 30, 2009 and 2008 is summarized as follows:

| |            |  | Years Ended | 
| | ---------- |  | ----------- | 
| |            |  | April 30,   | 
| |            |  | **2009**    | 
| |            |  |             | 
| | Customer A |  | 13%         | 
| | Customer B |  | 12%         | 
| |            |  | 25%         | 

|        | Accounts receivable balances for Customer A were $323,285
      as at April 30, 2009 (April 30, 2008 - $432,019). Accounts receivable
      balances for Customer B were $155,208 as at April 30, 2009 (April 30, 2008
      - $1,177,000).
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                            
|Note 11 | Commitments                                                                                                                                                                                                                                

| | a) | On June 28, 2005, the Company entered into a software
      development consulting agreement extension, which commenced on June 30,
      2006 and expires June 30, 2009. The payment schedule is tied to specific
      milestones as they are completed and requires total payments of $109,000
      in fiscal year 2009 and $109,000 in fiscal year 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | b) | On March 14, 2008 the Company entered into a lease for
      office space which commenced on April 1, 2008 and expired on March 31,
      2009. On February 5, 2009, the Company entered into an extension agreement
      on this lease which commences on April 1, 2009 and expires on September
      30, 2009. The monthly lease payment under the extension agreement is
      $2,576.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | c) | On March 12, 2009, the Company and its wholly-owned
      subsidiary, CounterPath Technologies Inc., entered into a settlement
      agreement with a founder and former officer of the Company. Under the
      settlement agreement, the Company will pay at total of $409,068
      (CDN$495,000) over 45 months at a rate of CDN$11,000 per month and pay for
      health benefits for 21 months.                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | d) | 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 $8,205 was made. The monthly
      lease payment under this agreement is $8,205 plus $6,552 in operating
      costs. Currently, the Company is subleasing a part of these premises for a
      monthly charge of $6,575. The sub lease commenced on August 1, 2007 and
      expires on September 30, 2012.                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | e) | 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
      commences on May 1, 2009 and expires on April 20, 2012. The monthly lease
      payment under this agreement is $5,505. The previous extension of this
      lease was entered into on February 15, 2005. It commenced on April 1, 2005
      and expired on March 31, 2010. The monthly lease payment under this
      agreement was $10,087 plus $17,425 in operating costs. This monthly lease
      increased to $11,348 on April 1, 2009.                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | f) | The Company is subject to a license agreement (the
      "Amended Omnibus Agreement") and a sponsored research agreement (the
      "Amended Research Agreement") with Columbia University pertaining to
      certain technologies acquired in the acquisition of FirstHand Technologies
      Inc. on February 1, 2008. Pursuant to the Amended Omnibus Agreement and
      the Amended Research Agreement, the Company is required to provide
      financial support for SIP (Session Initiation Protocol) research in the
      field of Internet/Ethernet Telephony conducted at Columbias Department of
      Computer Science. Subject to certain limitations, the Company is entitled
      to an exclusive license from Columbia University for all inventions and
      research information directly relating to the field of Internet/Ethernet
      Telephony.

59

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

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

Commencing on the one year anniversary
date of the of the termination or expiration of the Amended Research Agreement,
the Company shall be required to pay a minimum annual royalty of $100,000 to
Columbia University net of any royalties paid to Columbia University under the
Amended Omnibus Agreement.

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
    
    
    SettlementRelated Party
    
    
    Unrelated Party
    
    
    Income
    
    
    Leases
    
    
    Agreement2010
    $
    66,062
    
    $
    711,309
    
    $
    (78,897
    )
    $
    698,474
    
    $
    109,0852011
    
    66,062
    
    
    653,944
    
    
    (78,897
    )
    
    641,109
    
    
    109,0852012
    
    66,062
    
    
    364,277
    
    
    (78,897
    )
    
    351,442
    
    
    109,0852013
    
    
    
    
    73,786
    
    
    (32,874
    )
    
    40,912
    
    
    68,178$
    198,186
    
    $
    1,803,316
    
    $
    (269,565
    )
    $
    1,731,937
    
    $
    395,433


|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 $1,565,347 (2008  $558,394).
      Restructuring costs were related to employee severance arrangements as a
      result of the consolidation of administrative, sales, marketing, and
      research and development departments after the close of acquisitions of
      NewHeights Software Corporation, FirstHand Technologies Inc. and
      BridgePort Networks, Inc. These charges are shown as a separate line item
      in the consolidated statement of operations.

| |                            |   | Years Ended April 30, | 
| | -------------------------- | - | --------------------- | 
| |                            |   | 2009                  | 
| |                            |   |                       | 
| | Balance, beginning of year | $ |                      | 
| | Provision                  |   | 1,565,347             | 
| | Settlement                 |   | 1,169,915             | 
| | Balance, end of year       | $ | 395,432               | 

|Note 14 | Convertible
      Debentures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | On August 2, 2007, in conjunction with the acquisition of
      NewHeights Software Corporation (Note 3) the Companys convertible
      debenture holders converted their existing debentures in the amount of
      $4,000,000 into 2,000,000 shares of common stock at a conversion price of
      $2.00 per share. As a result, the remaining balance of the unaccreted debt
      discount on the date of conversion of $540,200 was recorded in the
      consolidated statement of operations as additional interest expense. The
      convertible debenture and debt discount are summarized as follows:

| |                                                  |   | Face Amount |   |   | Discount |   |   | Carrying Value |  
| | ------------------------------------------------ | - | ----------- | - | - | -------- | - | - | -------------- | -
| | Balance, April 30, 2007                          | $ | 4,000,000   |   | $ | 630,770  |   | $ | 3,369,230      |  
| | Accretion of debt discount to date of conversion |   | -           |   |   | (90,570  | ) |   | 90,570         |  
| | Conversion of debentures on August 2, 2007       |   | (4,000,000  | ) |   | (540,200 | ) |   | (3,459,800     | )
| | Balance, April 30, 2008 and 2009                 | $ | -           |   | $ | -        |   | $ | -              |  

During the years ended April 30, 2009
and 2008, the Company recorded an accretion expense of $nil and $90,570
respectively on this discount.

60

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

|Note 15 | Subsequent Events
|------- | -----------------

| | (a) | 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. As the exchangeable shares have already been recognized
      in connection with the acquisition of NewHeights, the value ascribed to
      these shares on exchange will be $nil.                                                                                                                                                                                                                                                                                                                                                             
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (b) | On June 24, 2009 the Company entered into foreign
      currency forward contracts totaling to $1 million to sell US dollars and
      buy Canadian dollars. The contracts of $500,000 each expire on September
      30, 2009 and March 31, 2010 respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (c) | On July 17, 2009, in connection with a research agreement
      and omnibus agreement under which the Company licensed certain
      technologies from Columbia University (Note 11(f)), the Company entered
      into a debt conversion agreement and an amended omnibus agreement with The
      Trustees of Columbia University (Columbia), whereby as a result of the
      restructuring of certain terms and obligations of the existing research
      and licensing agreements, the Company issued 527,370 shares of common
      stock to Columbia to settle all outstanding amounts due to Columbia under
      such agreements and rights to certain technologies have reverted back to
      Columbia. The common stock was issued at $0.75 (CDN$0.84) per
  share.

61

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

Not applicable

Item 9A(T).  Controls and Procedures.

Disclosure Controls and Procedures

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

In
connection with this annual report, as required by Rule 13a-15 under the
Securities Exchange Act of 1934, we have carried out an evaluation of the
effectiveness of the design and operation of our company's disclosure controls
and procedures. This evaluation was carried out under the supervision and with
the participation of our company's management, including our company's Chief
Executive Officer and Chief Financial Officer. Based upon that evaluation, our
company's Chief Executive Officer and Chief Financial Officer concluded that
subject to the inherent limitations noted in Part II, Item 9A(T) as of April 30,
2009, our disclosure controls and procedures are effective as at the end of the
period covered by this report.

Management's Report on Internal Control over Financial
Reporting

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

Under
the supervision and with the participation of our management, including our
Chief Executive Officer and Chief Financial Officer, we conducted an assessment
of the effectiveness of our internal control over financial reporting based on
certain criteria established in Internal Control - Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission. Based
on this evaluation, management concluded that our internal control over
financial reporting are effective as of April 30, 2009.

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

During
the year ended April 30, 2009, we added additional administrative staff in order
to provide greater segregation of duties within our transaction processing
system. In addition, we determined that greater segregation of duties amongst
our existing administrative staff is feasible and implemented processes to
segregate duties in various administrative functions effecting financial
reporting. Aside from changes resulting from reassigning duties among staff,
there were no other changes in our internal control over financial
reporting.

Item 9B.      Other
Information.

None.

62

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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
    40
    April 24, 2006David Karp British Columbia, Canada
    Chief Financial Officer, Treasurer,
      Secretary
    44
    September 7, 2006Terence Matthews Ontario, Canada
    Chairman of the Board, Director
    66
    August 2, 2007Mark Bruk(2)British Columbia, Canada
    Vice-Chairman of the Board, Director
    50
    April 27, 2004Owen Matthews(3)British Columbia, Canada
    Vice-Chairman of the Board, Director
    37
    August 2, 2007Peter Charbonneau(4)Ontario, Canada
    Director
    55
    October 1, 2008Chris Cooper(3)(4)British Columbia, Canada
    Director
      39
    August 17, 2005William Jin(4)Ontario, Canada
    Director
    40
    October 1, 2008Greg Pelling(5)Ontario, Canada
    Director
    50
    August 2, 2007Larry Timlick(3)(6)British Columbia, Canada
    Director
    52
    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.

63

---

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.

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

Mr.
Matthews is our Chairman of the Board and a director of our company. Mr.
Matthews also serves as Chairman of Wesley Clover Corporation and Chairman of
Mitel Networks Corporation and March Networks Corporation, two companies active
in developing IP systems for enterprise applications. Prior to joining March
Networks, Mr. Matthews served as Chief Executive Officer and Chairman of
Newbridge Networks Corporation, a company he founded in 1986. Providing
leadership and vision for 14 years, Mr. Matthews helped Newbridge become a
leader in the worldwide data networking industry. In 1972, before launching
Newbridge, Mr. Matthews co-founded Mitel Corporation. Under his leadership,
Mitel grew quickly to become a world leader in the design and manufacture of
enterprise voice systems and products. In 1985, British Telecom bought
controlling interest in Mitel. In 2001, Mr. Matthews purchased the worldwide
Communications Systems division of Mitel, and the Mitel name, and is now owner
and non-executive Chairman of Mitel Corporation, a company focused on providing
next generation IP telephony solutions for broadband networks. Mr. Matthews also
serves on the board of directors for a number of high technology companies and
is Chairman or serves on the Board of Directors of Newport Networks Corporation,
Bridgewater Systems Corporation, Dragonwave Inc. and Solace Systems. In addition
Mr. Matthews holds an honours degree in electronics from the University of
Wales, Swansea 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, Glamorgan and Swansea,
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 2, 2007. Mr.
  Bruk has been involved primarily in software development over the past 20 years.
  In May 1998, he founded, and was the Chief Executive Officer, of eduverse.com
  (formerly known as Eduverse Accelerated Learning Systems Inc.) where he had
  overall control of the companys development and direction, and also managed
  operations in Asia. eduverse.com signed agreements with the Ministry of Education,
  China, the Ministry of Education, Malaysia, the Ministry of University Affairs,
  Thailand, AOL, StarTV, Sina, ZapMe, Acer, eHola, The Star (Malaysia), and Proctor
  and Gamble Manufacturing (Thailand) Co., Ltd.

64

---

Prior to founding eduverse.com, Mr. Bruk served as Vice President
  of applications and subsequently Vice President of research & development
  for InMedia Presentations, Inc., a multimedia software company. Under Mr. Bruks
  initiative and management, InMedia developed the worlds first web-based
  100% pure HTML slide show player and also the worlds first 100% pure Java
  slide show player. InMedias software was bundled with digital cameras
  manufactured by Casio, Nikon, Olympus and Kodak.

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 the
Wesley Clover Corporation 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, BreconRidge 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 ten years of experience
  in management and finance in the oil and gas industry. Over the past nine 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 producer. 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 in a joint
  venture with the Fishing Lake Métis Settlement in northern Alberta that
  was more recently 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.

65

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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 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.

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,
business development, product innovation, market gains and profitability
commitments. Prior to joining NewHeights, Mr. Pelling was Global Managing
Director, Advanced IT Services of Cisco Systems, Inc. where he was responsible
for delivering new business and 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. As
the Managing Director Asia Pacific and Japan for Cisco Systems Internet Business
Solutions Group, he was 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. Before
joining Cisco, he was Executive Director, Partner and Senior Industry Partner at
PwC from 1995 to 2001. Prior to joining PwC, Mr. Pelling held executive
positions in several Canadian companies including Intergraph, SHL Systemhouse,
Wang Labs and Richmond Technologies. Prior to Cisco, he was Asias Senior
Partner for PwCs Technology Consulting Practice. 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 Stage Capital Corp, a publicly traded investment
vehicle.

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.

66

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Involvement in Certain Legal Proceedings.

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

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

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

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,
2009 all filing requirements applicable to its officers, directors and greater
than ten percent beneficial owners were complied with, with the exception of the
following:

Name
    Number of Late Reports
    Number of Transactions Not
      Reported on a Timely Basis
    Failure to File Requested
      FormsTerence Matthews
    1(1)
    3
    Nil


67

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Name
    Number of Late Reports
    Number of Transactions Not
      Reported on a Timely Basis
    Failure to File Requested
      FormsMark Bruk
    1(1)
    2
    NilChris Cooper
    1(1)
    2
    NilDavid Karp
    5(1)
    6
    NilDonovan Jones
    3(1)
    3
    NilGreg Pelling
    2(1)
    6
    NilJason Fischl
    1(1)
    1
    Nil


|(1) | 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.

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.

68

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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,
2009, 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 4200(a)(15) of the Rules of
Nasdaq Marketplace 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 the
section of this proxy statement entitled Nominees for Election.

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

Audit Committee Financial Expert

The
Securities Exchange Act requires the board of directors to determine if a member
of its Audit Committee is an audit committee financial expert. 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.

69

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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, 2009; 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, 2009,

who we will collectively refer to as our named executive
officers, of our company for the years ended April 30, 2009 and 2008, are set
out in the following summary compensation table, except that no disclosure is
provided for any named executive officer, other than our principal executive
officer, whose total compensation does not exceed $100,000 for the respective
fiscal year:

Name and Principal
      Position
    Year
    Salary ($)
    Bonus ($)
    Stock Awards
      ($)
    Option Awards
      ($)(1)
    Other Annual Compen-
      sation ($)(2)
    Total ($)Donovan Jones (3)President,
      Chief Executive Officer and Director
    2009 2008
    223,560 185,634
    92,394 174,512
    Nil Nil
    230,524 153,793
    22,689 19,984
    569,166 533,923Greg Pelling (4)Chief
      Strategy Officer and Director
    2009 2008
    165,534 155,891
    91,596 83,754
    Nil Nil
    97,210 131,113
    279,422 17,914
    633,762 388,672David Karp Chief Financial Officer,
      Treasurer and Secretary
    2009 2008
    160,326 176,328
    33,999 72,771
    Nil Nil
    108,093 96,717
    Nil Nil
    302,418 345,816Jason Fischl(5)Chief
      Technology Officer
    2009 2008
    141,138 176,187
    36,535 27,090
    Nil Nil
    119,714 125,579
    Nil Nil
    297,387 328,856James Lapalme(6)Vice
      President Sales - Channels and Strategic Accounts
    2009 2008
    132,428 37,312
    61,915 Nil
    Nil Nil
    13,474 28,524
    Nil Nil
    207,817 65,836


|(1) | For a description of the methodology and assumptions used
      in valuing the option awards granted to our officers and directors during
      the year ended April 30, 2009, please review Note 8 to the financial
      statements included herein.                                                                                                                                                                                                                                
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(2) | 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.                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(3) | Mr. Jones was appointed as our President and Chief
      Operating Officer on April 24, 2006 and our President and Chief Executive
      Officer onApril 30, 2008.                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(4) | Mr. Pelling was appointed Chief Executive Officer on
      August 2, 2007 and continued serving as such until April 30, 2008, when he
      wasappointed our Chief Strategy Officer. Mr. Pelling resigned on February
      11, 2009. Pursuant to a Settlement Agreement entered into on November 1,
      2008 between Mr. Pelling and our company, we paid Mr. Pelling $125,806
      (CDN$142,500) in shares of common stock of ourcompany by the issuance of
      279,412 shares.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(5) | Mr. Fischl resigned from our company on March 31, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(6) | Mr. Lapalme joined our company on February 1, 2008 and his employment
      with our company was terminated on June 3, 2009.                                                                                                                                                                                                                                                                                                                                                          

70

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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$297,000 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$180,000. 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, 2009: 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.

Option AwardsName
      Number of Securities
        Underlying Options (#) Exercisable
      Number of Securities
        Underlying Options (#) Unexercisable
      Equity Incentive Plan Awards: Number
        of Securities Underlying Unexercised
        Unearned Options (#)
      Option Exercise
        Price ($)
      Option Expiration
        DateDonovan Jones
      157,500(1)
        19,013(2)
        98,875(3)
        57,292(4) 
      22,500(1)
        4,388(2)
        36,725(3)
        192,708(4)
        600,000(5)
            
         
      $1.95 
        $1.95 
        $3.05 
        $1.75 
        $0.62
      October 10, 2015 
        January 10, 2016 
        May 23, 2016 
        May 14, 2013 
        April 17, 2014Greg Pelling
      200,000(6)
      
      
      $2.00
      December 31, 2014David Karp
      85,000(7)   
      155,000(7)
        75,000(8)
        250,000(9)
          
      $2.15 
        $0.44 
        $0.62
      September 7, 2016 
        December 15,2013 
        April 17, 2014Jason Fischl
      205,000(10)
        24,700(11)
        28,817(12)
      205,000(8)
        24,700(9)
        28,817(10)
          
      $1.95 
        $1.95 
        $3.05
      October 10, 2015 
        January 10,2016 
        May 23,2016


71

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Option AwardsName
      Number of Securities
        Underlying Options (#) Exercisable
      Number of Securities
        Underlying Options (#) Unexercisable
      Equity Incentive Plan Awards: Number
        of Securities Underlying Unexercised
        Unearned Options (#)
      Option Exercise
        Price ($)
      Option Expiration
        DateJames Lapalme
      37,466(13) 
      44,758(13)
        25,000(14)
        
      $0.43 
        $0.44
      February 24, 2016 
        December 15, 2013


|(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 August 2, 2007.                                                 
|(7)  | Granted on September 7, 2006.                                              
|(8)  | Granted on December 15, 2008.                                              
|(9)  | Granted on April 17, 2009.                                                 
|(10) | Granted on October 10, 2005. Employment terminated on
      March 31, 2009.
|(11) | Granted on January 10, 2006. Employment terminated on
      March 31, 2009.
|(12) | Granted on May 23, 2006. Employment terminated on March
      31, 2009.    
|(13) | Granted on February 1, 2008. Employment terminated on
      June 3, 2009.  
|(14) | Granted on December 15, 2008. Employment terminated on
      June 3, 2009. 

Compensation of Directors

During
the fiscal year ended April 30, 2009, there were no standard or other
arrangements pursuant to which any of our directors were compensated for
services provided in their capacity as directors. During the fiscal year ended
April 30, 2009, there were no options granted to our directors except as set
forth below. We plan to compensate directors for their services in fiscal year
2010 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 compensation under an existing equity
compensation plan of our company.

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.

72

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The
following table summarizes compensation paid to all of our non-employee
directors for the fiscal year ended April 30, 2009:

Name
    Fees Earned or Paid in
      Cash ($)
    Stock Awards
      ($)
    Option Awards
      ($)
    Non-Equity Incentive Plan
      Compensation ($)
    Non-Qualified Deferred
      Compensation Earnings ($)
    All Other
      Compensation ($)
    Total ($)Mark
      Bruk(1)
    Nil
    Nil
    Nil
    N/A
    N/A
    N/A
    NilPeter Charbonneau
    Nil
    Nil
    Nil
    N/A
    N/A
    N/A
    NilChris Cooper(2)
    Nil
    Nil
    Nil
    N/A
    N/A
    N/A
    NilWilliam Jin
    Nil
    Nil
    Nil
    N/A
    N/A
    N/A
    NilTerence Matthews(3)
    Nil
    Nil
    Nil
    N/A
    N/A
    N/A
    NilOwen
      Matthews
    Nil
    Nil
    Nil
    N/A
    N/A
    N/A
    NilLarry Timlick(4)
    Nil
    Nil
    Nil
    N/A
    N/A
    N/A
    Nil


| | (1) | At April 30, 2009, Mr. Bruk held an aggregate of 339,000
        stock options.   
| | --- | ----------------------------------------------------------------------------------
| | (2) | At April 30, 2009, Mr. Cooper held an aggregate of 40,000
        stock options.  
| | (3) | At April 30, 2009, Mr. Matthews held an aggregate of
        18,000 stock options.
| | (4) | At April 30, 2009, Mr. Timlick held an aggregate of
        40,000 stock options. 

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 23, 2009, 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 23, 2009,
we had 29,409,420 shares of common stock issued and outstanding. In addition, as
of July 23, 2009, there was one (1) series A special voting share and 219,841
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 23, 2009. 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.

73

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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
      6,125,950 (3)
      20.6%Steven Bruk 3790 Southridge Avenue
      West Vancouver, BC, Canada V7V 3J1
      3,746,468 (4)
      12.4%Owen Matthews 2710 Thorpe Place
      Victoria, BC V8R 2W4
      2,277,467
      7.7%Mark Bruk Suite 302, 738 Broughton Street
      Vancouver, British Columbia Canada V6G 3A7
      1,447,889 (5)
      4.9%Donovan Jones 2266  1384 Street
      White Rock, British Columbia Canada V3C 2G7
      447,868 (6)
      1.5%Greg Pelling Suite 908-360 Bloor Street
      East Toronto, Ontario, M4W 3M3
      400,000 (7)
      1.3%David Karp 3780 Bayridge Ave. West
      Vancouver, British Columbia Canada V7V 3J2
      211,024 (8)
      **Chris Cooper 5630 Olympic Street,
      Vancouver, British Columbia Canada V6N 1Z5
      64,995 (9)
      **Larry Timlick 4750 The Glen West
      Vancouver, British Columbia Canada V7S 3C3
      50,000 (10)
      **Peter Charbonneau Tower B, 830  555
      Legget Drive Ottawa, Ontario Canada K2K 2X3
      Nil (11)
      NilWilliam Jin 200 Front Street West, Suite
      3003 P.O. Box 10 Toronto, Ontario Canada M5V 3K2
      Nil (12)
      NilDirectors and Executive Officers as a Group
      14,771,643
      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 29,409,420 shares of common stock
      outstanding on July 23, 2009, including shares of common stock subject to
      options or warrants currently exercisable or convertible, or exercisable
      or convertible within 60 days of July 23, 2009 which are deemed
      outstanding for                                                                                                                                                          

74

---

| |      | 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 5,468,038 shares of common stock held by Wesley
      Clover Corporation and 306,775 shares of common stock held by Celtic Tech
      Jet Limited. 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.                                                                                                                                                                                                                                                                             
| | (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. Also includes 750,000 warrants held by KMB, each warrant of which
      entitles the holder to purchase one share of common stock at the exercise
      price of $4.00 per share on or before November 30, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (5)  | Includes 310,748 shares of common stock subject to vested
      stock options of a total of 339,000 shares of common stock subject to
      stock options issued on January 10, 2006 and held by Mr. Bruk that will be
      vested within 60 days of July 23, 2009, 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.                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (6)  | Includes 394,035 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 23, 2009, including 176,250 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, 21,453 stock options issued on January 10, 2006 that are
      exercisable at $1.95 per share until January 10, 2016, 113,000 stock
      options issued on May 23, 2006 that are exercisable at $3.05 per share
      until May 23, 2016 and 83,332 stock options issued on May 14, 2008 that
      are exercisable at $1.75 per share until May 14, 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (8)  | Includes 194,063 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 23, 2009, including 180,000 stock options issued on September 7, 2006
      that are exercisable at a price of $2.15 per share, expiring on September
      7, 2016 and 14,063 stock options issued on December 15, 2008 that are
      exercisable at a price of $0.44 per share, expiring on December 15, 2013.
      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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (11) | Mr. Charbonneau is a principal of the general partner of
      Skypoint Telecom Fund II, which holds 1,807,692 shares of common
    stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

Changes in Control

As
of July 23, 2009, 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, 2008, 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, 2009, pursuant to the terms of these agreements, was $1,225,757
  (2008 - $2,026,557). 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.

75

---

Associated with the agreement are ongoing license fees per copy
  deployed to be paid by Mitel over four years and declining from $12.00 to $7.50
  per copy after two years and declining from $7.50 to nil after four years. In
  addition, the agreement provides Mitel with a first right to match any third
  party offer to purchase the source code software and related intellectual property.

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.

During
the year ended April 30, 2009, our wholly owned subsidiary, FirstHand
Technologies Inc., paid $277,451 (2008 - $71,500) 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 4200(a)(15) of the Rules of Nasdaq Marketplace 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 Dunwoody LLP during the years ended April 30, 2009 and 2008, were as
follows:

|                   |   | 2009    |  |   | 2008    | 
|------------------ | - | ------- |  | - | ------- | 
|Audit Fees         | $ | 152,188 |  | $ | 229,798 | 
|Audit Related Fees |   | Nil     |  |   | Nil     | 
|Tax Fees           | $ | 4,017   |  | $ | 42,277  | 
|All Other Fees     |   | Nil     |  |   | Nil     | 
|Total Fees         | $ | 156,205 |  | $ | 272,075 | 

Audit Fees

This
  category includes the fees for the audit of our consolidated financial statements
  and the quarterly reviews of interim financial statements. This category also
  includes advice on audit and accounting matters that arose during or as a result
  of the audit or the review of interim financial statements and services in connection
  with Securities and Exchange filings including the Form S-8 and Form S-8/A in
  respect of registration of common shares of the Company pursuant to the Employee
  Share Purchase Plan and the 2004 Stock Option Plan and Amended and Restated
  2005 Stock Option Plan during the year ended April 30, 2009.

Audit Related Fees

There
were no audited related fees paid to BDO Dunwoody LLP, during our fiscal years
ended April 30, 2009 and April 30, 2008.

Tax Fees

76

---

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 Dunwoody LLP, that are not covered under the headings
set out above during our fiscal years ended April 30, 2009 and April 30,
2008.

We
do not use BDO Dunwoody 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 Dunwoody LLP, to
provide compliance outsourcing services.

Effective
May 6, 2003, the SEC adopted rules that require that before BDO Dunwoody 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
Dunwoody LLP, and believes that the provision of the services for activities
unrelated to the audit is compatible with maintaining the independence of BDO
Dunwoody 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
      (Capital Deficit); and
| |    |                                                                                       
| | 6. | Notes to the Consolidated Financial
  Statements.                                     

(a)(2)        Financial
Statement Schedules:

None.

77

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|(a)(3) | Exhibits:                                                                                                                                                                                                       
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                 
|(3)    | Articles of Incorporation and By-laws                                                                                                                                                                           
|       |                                                                                                                                                                                                                 
|3.1    | Articles of Incorporation (incorporated by reference from
      our Registration Statement on Form SB-2 filed on July 16, 2003).                                                                                
|       |                                                                                                                                                                                                                 
|3.2    | Bylaws (incorporated by reference from our Registration
      Statement on Form SB-2 filed on July 16, 2003).                                                                                                   
|       |                                                                                                                                                                                                                 
|3.3    | Amended Bylaws (incorporated by reference from our
      Registration Statement on Form SB-2/A filed on September 3, 2003).                                                                                     
|       |                                                                                                                                                                                                                 
|3.4    | Articles of Merger (incorporated by reference from our
      Current Report on Form 8-K filed on September 15, 2005).                                                                                           
|       |                                                                                                                                                                                                                 
|3.5    | Amended Bylaws (incorporated by reference from our
      Current Report on Form 8-K filed on April 28, 2006).                                                                                                   
|       |                                                                                                                                                                                                                 
|3.6    | Amended Bylaws (incorporated by reference from our
      Current Report on Form 8-K filed on April 22, 2008).                                                                                                   
|       |                                                                                                                                                                                                                 
|(4)    | Instruments defining the rights of security holders,
      including indentures                                                                                                                                 
|       |                                                                                                                                                                                                                 
|4.1    | 2004 Stock Option Plan effective May 18, 2004
      (incorporated by reference from our Registration Statement on Form S-8
      filed on June 14, 2005).                                                       
|       |                                                                                                                                                                                                                 
|4.2    | Form of Stock Option Agreement for 2004 Stock Option Plan
      (incorporated by reference from our Registration Statement on Form S-8
      filed on June 14, 2005).                                           
|       |                                                                                                                                                                                                                 
|4.3    | 2005 Stock Option Plan effective March 4, 2005
      (incorporated by reference from our Registration Statement on Form S-8
      filed on June 14, 2005).                                                      
|       |                                                                                                                                                                                                                 
|4.4    | Form of Stock Option Agreement for 2005 Stock Option Plan
      (incorporated by reference from our Registration Statement on Form S-8
      filed on June 14, 2005).                                           
|       |                                                                                                                                                                                                                 
|4.5    | Form of Amended & Restated Stock Option and
      Subscription Agreement (Canadian) (incorporated by reference from our
      Current Report on Form 8-K filed On October 14, 2005).                            
|       |                                                                                                                                                                                                                 
|4.6    | Form of Amended & Restated Stock Option and
      Subscription Agreement (US) (incorporated by reference from our Current
      Report on Form 8-K filed On October 14, 2005).                                  
|       |                                                                                                                                                                                                                 
|(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).

78

---

|10.6  | Form of Convertible Note dated November 30, 2006
      (incorporated by reference from our Current Report on Form 8-K filed on
      December 7, 2006).                                                                                                                                                                   
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                           
|10.7  | Form of Warrant Certificate dated November 30, 2006
      (incorporated by reference from our Current Report on Form 8-K filed on
      December 7, 2006).                                                                                                                                                                
|      |                                                                                                                                                                                                                                                                                                                           
|10.8  | Amended Employment Agreement between Donovan Jones and
      CounterPath Solutions R&D Inc., a wholly owned subsidiary of
      CounterPath Solutions, Inc. dated February 1, 2007 (incorporated by
      reference from our Quarterly Report on Form 10QSB filed on March 9,
      2007).                                
|      |                                                                                                                                                                                                                                                                                                                           
|10.9  | Employment Agreement between Mark Bruk and CounterPath
      Solutions R&D Inc., a wholly owned subsidiary of CounterPath
      Solutions, Inc. dated March 8, 2007 (incorporated by reference from our
      Quarterly Report on Form 10QSB filed on March 9, 2007).                                                     
|      |                                                                                                                                                                                                                                                                                                                           
|10.10 | Arrangement Agreement among CounterPath Solutions, Inc.,
      6789722 CANADA INC., a wholly owned subsidiary of CounterPath Solutions,
      Inc. and NewHeights Software Corporation dated as of June 15, 2007
      (incorporated by reference from our Current Report on Form 8-K filed on
      June 18, 2007).      
|      |                                                                                                                                                                                                                                                                                                                           
|10.11 | Support and Lock-Up Agreements between CounterPath
      Solutions, Inc and each of Owen Matthews and Wesley Clover dated as of
      June 15, 2007 (incorporated by reference from our Current Report on Form
      8-K filed on June 18, 2007).                                                                         
|      |                                                                                                                                                                                                                                                                                                                           
|10.12 | Subscription Agreement between CounterPath Solutions, Inc
      and Wesley Clover dated as of June 15, 2007 (incorporated by reference
      from our Current Report on Form 8-K filed on June 18, 2007).                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                           
|10.13 | Amended Employment Agreement between Mark Bruk and
      CounterPath Solutions R&D Inc., a wholly owned subsidiary of
      CounterPath Solutions, Inc. dated July 24, 2007 (incorporated by reference
      from our Annual Report on Form 10-KSB/A filed on July 30, 2007).                                             
|      |                                                                                                                                                                                                                                                                                                                           
|10.14 | Exchangeable Share Support Agreement between CounterPath
      Solutions, Inc. and 6789722 Canada Inc., a wholly owned subsidiary of
      CounterPath Solutions, Inc. dated as of August 2, 2007 (incorporated by
      reference from our Current Report on Form 8-K filed on August 8,
    2007).                      
|      |                                                                                                                                                                                                                                                                                                                           
|10.15 | Voting and Exchange Trust Agreement among CounterPath
      Solutions, Inc., 6789722 Canada Inc., a wholly owned subsidiary of
      CounterPath Solutions, Inc. and Valiant Trust Company dated as of August
      2, 2007 (incorporated by reference from our Current Report on Form 8-K
      filed on August 8, 2007).
|      |                                                                                                                                                                                                                                                                                                                           
|10.16 | Piggyback Registrations Rights Agreement among our
      company and various shareholders, dated as of August 2, 2007 (incorporated
      by reference from our Current Report on Form 8-K filed on August 8,
      2007).                                                                                                
|      |                                                                                                                                                                                                                                                                                                                           
|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).                                                                                                 

79

---

|10.22 | Employment Agreement between
        Greg Pelling and CounterPath Solutions R&D Inc., a wholly owned subsidiary
        of CounterPath Solutions, Inc. dated September 13, 2007 (incorporated
        by reference from our Quarterly Report on Form 10-QSB filed on September
        14, 2007).                                 
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                   
|10.23 | Amended Employment Agreement
        between Donovan Jones and CounterPath Solutions R&D Inc., a wholly
        owned subsidiary of CounterPath Solutions, Inc. dated September 13, 2007
        (incorporated by reference from our Quarterly Report on Form 10-QSB filed
        on September 14, 2007).                        
|      |                                                                                                                                                                                                                                                                                                                                   
|10.24 | Employment Agreement between
        Mark Bruk and CounterPath Corporation dated December 13, 2007 (incorporated
        by reference from our Quarterly Report on Form 10-QSB filed on December
        17, 2007).                                                                                                               
|      |                                                                                                                                                                                                                                                                                                                                   
|10.25 | Share Exchange Agreement dated
        January 28, 2008 among CounterPath Corporation, FirstHand Technologies
        Inc. and certain shareholders of FirstHand Technologies Inc. (incorporated
        by reference from our Current Report on Form 8-K filed on January 29,
        2008).                                     
|      |                                                                                                                                                                                                                                                                                                                                   
|10.26 | Escrow Agreement dated February
        1, 2008 among CounterPath Corporation, FirstHand Technologies Inc. and
        certain shareholders of FirstHand Technologies Inc. (incorporated by reference
        from our Current Report on Form 8-K filed on February 5, 2008).                                                     
|      |                                                                                                                                                                                                                                                                                                                                   
|10.27 | Agreement of Merger and Plan
        of Reorganization dated February 1, 2008 among our company, CounterPath
        Acquisition Corp., BridgePort Networks, Inc. and certain shareholders
        of BridgePort Networks, Inc. (incorporated by reference from our Current
        Report on Form 8-K filed on February 5, 2008).
|      |                                                                                                                                                                                                                                                                                                                                   
|10.28 | Form of Subscription Agreement
        dated July 31, 2008 between our company and various investors (incorporated
        by reference from our Quarterly Report on Form 10-Q filed on September
        15, 2008).                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                                   
|10.29 | Form of Subscription Agreement
        dated October 28, 2008 between our company and an investor (filed herewith).                                                                                                                                                                                                               
|      |                                                                                                                                                                                                                                                                                                                                   
|10.30 | Settlement Agreement amongst
        Greg Pelling, CounterPath Corporation and CounterPath Technologies Inc.
        dated October 31, 2008 (incorporated by reference from our Quarterly Report
        on Form 10-Q filed on December 15, 2008).                                                                                
|      |                                                                                                                                                                                                                                                                                                                                   
|10.31 | Settlement Agreement amongst
        Mark Bruk, CounterPath Corporation, and CounterPath Technologies Inc.
        dated March 12, 2009 (incorporated by reference from our Quarterly Report
        on Form 10-Q filed on March 12, 2009).                                                                                       
|      |                                                                                                                                                                                                                                                                                                                                   
|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).                                                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                                                   
|(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)                                                                                                                                                                                                                                                    

80

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|         | BridgePort
      Networks K.K. (incorporated in Japan)            
|-------- | ------------------------------------------------------------------
|         |                                                                   
|(23)     | **Consent of Experts and
      Counsel**                          
|         |                                                                   
|23.1     | Consent
      of Independent Registered Public Accounting Firm    
|         |                                                                   
|**(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).   

81

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SIGNATURES

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

COUNTERPATH CORPORATION



|By: | /s/ Donovan Jones                                  
|--- | ---------------------------------------------------
|    | Donovan Jones                                      
|    | President, Chief Executive Officer &
      Director
|    | Date: July 27, 2009                                

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

|Signature                   | Title                                  | Date         
|--------------------------- | -------------------------------------- | -------------
|                            |                                        |              
|/s/ Terence
      Matthews  |                                        |              
|Terence Matthews            | Chairman and Director                  | July 27, 2009
|                            |                                        |              
|/s/ Donovan Jones           |                                        |              
|Donovan Jones               | President, Chief Executive Officer and | July 27, 2009
|                            | Director                               |              
|/s/ David Karp              |                                        |              
|David Karp                  | Chief Financial Officer, Treasurer and | July 27, 2009
|                            | Secretary                              |              
|/s/ Owen Matthews           |                                        |              
|Owen Matthews               | Vice Chairman and Director             | July 27, 2009
|                            |                                        |              
|/s/ Mark Bruk               |                                        |              
|Mark Bruk                   | Vice Chairman and Director             | July 27, 2009
|                            |                                        |              
|/s/ Peter
      Charbonneau |                                        |              
|Peter Charbonneau           | Director                               | July 27, 2009
|                            |                                        |              
|/s/ Chris Cooper            |                                        |              
|Chris Cooper                | Director                               | July 27, 2009
|                            |                                        |              
|/s/ William Jin             |                                        |              
|William Jin                 | Director                               | July 27, 2009
|                            |                                        |              
|/s/ Greg Pelling            |                                        |              
|Greg Pelling                | Director                               | July 27, 2009
|                            |                                        |              
|/s/ Larry Timlick           |                                        |              
|Larry Timlick               | Director                               | July 27, 2009

82

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