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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-KSB/A

(Mark One)

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

For the year ended April 30, 2008

[   ] TRANSITION REPORT UNDER 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(Name of small business issuer as 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(Issuers telephone number)
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

Check whether the issuer is not required to file reports
pursuant to Section 13 or 15(d) of the Exchange Act.[   ]

Note: Checking the box above will not relieve any registrant
required to file reports pursuant to Section 13 or 15(d) of the Exchange Act
from their obligations under those Sections.

Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 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 [   ]

Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this form, and no disclosure will
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-KSB or any amendment to this Form 10-KSB. [   ]

---

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

State issuer's revenues for its most recent fiscal year.
$9,086,900

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 a specified date within 60 days:

Approximately $20,726,535, based on a price of $1.45 per share,
being the average of bid and ask prices on July 21, 2008 as quoted on
stockwatch.com.

State the number of shares outstanding of each of the issuer's
classes of equity stock, as of the latest practicable date.

As of July 24, 2008, there were 25,921,797 shares of the
issuer's common stock issued and outstanding, par value $0.001.

DOCUMENTS INCORPORATED BY REFERENCE

Transitional Small Business Disclosure Format (Check one): Yes
[   ]   No [X]

2

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COUNTERPATH CORPORATION (Formerly CounterPath
Solutions, Inc.)APRIL 30, 2008 ANNUAL REPORT ON FORM 10-KSB

INDEX

|            |                                                                                                                                                   | Page
|----------- | ------------------------------------------------------------------------------------------------------------------------------------------------- | ----
|            |                                                                                                                                                   |     
|Item 1.     | Description of Business                                                                                                                           | 4   
|            |                                                                                                                                                   |     
|Item 2.     | Description of Property                                                                                                                           | 17  
|            |                                                                                                                                                   |     
|Item 3.     | Legal Proceedings                                                                                                                                 | 17  
|            |                                                                                                                                                   |     
|Item 4.     | Submissions of Matters to a Vote of Security Holders                                                                                              | 18  
|            |                                                                                                                                                   |     
|Item 5.     | Market for Common Equity and Related Stockholder Matters
      and Small Business Issuer Purchases of Equity Securities                           | 18  
|            |                                                                                                                                                   |     
|Item 6.     | Management's Discussion and Analysis or Plan of Operation                                                                                         | 20  
|            |                                                                                                                                                   |     
|Item 7.     | Financial Statements                                                                                                                              | 30  
|            |                                                                                                                                                   |     
|Item 8.     | Changes in and Disagreements with Accountants on Accounting
      and Financial Disclosure                                                        | 61  
|            |                                                                                                                                                   |     
|Item 8A(T). | Controls and Procedures                                                                                                                           | 61  
|            |                                                                                                                                                   |     
|Item 8B.    | Other Information                                                                                                                                 | 62  
|            |                                                                                                                                                   |     
|Item 9.     | Directors, Executive Officers, Promoters, Control Persons
      and Corporate Governance; Compliance with Section 16(a) of the Exchange
      Act | 62  
|            |                                                                                                                                                   |     
|Item 10.    | Executive Compensation                                                                                                                            | 67  
|            |                                                                                                                                                   |     
|Item 11.    | Security Ownership of Certain Beneficial Owners and Management
      and Related Stockholder Matters                                              | 71  
|            |                                                                                                                                                   |     
|Item 12.    | Certain Relationships and Related Transactions, and Director
      Independence                                                                   | 73  
|            |                                                                                                                                                   |     
|Item 13.    | Exhibits                                                                                                                                          | 74  
|            |                                                                                                                                                   |     
|Item 14.    | Principal Accountant Fees and Services                                                                                                            | 77  

3

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PART I

**Item
1.**     **Description of 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.

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.

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). 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. Original
equipment manufacturers combine our applications with additional software and/or
services as part of their solution offerings for their customers. End users
purchase certain of our desktop applications through our website and are then
responsible for selecting an 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. Certain of our desktop
applications can operate on personal computers running Windows 2000, Windows XP,
Windows Vista, Mac OS X and Linux as well as Symbian, RIM and Windows Mobile,
mobile devices.

We
began selling our desktop applications in 2003 and our mobile applications and
gateway software in 2008. Since that time, approximately 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 empower 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
include 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 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.

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-KSB, Quarterly Reports on Form 10-QSB, Current Reports on Form 8-K, 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.

Our Software Applications

CounterPath Multi-Media Communications Product Suite

The
CounterPath Multimedia Communicator product suite includes four softphone
applications and one audio conferencing application: (1) Bria; (2) eyeBeam; (3)
Bria Add-infor Microsoft Outlook®;(4) X-Lite; and (5) Quick
Conference. Bria, eyeBeam, Bria Add-infor Microsoft Outlook,and
Quick Conference are commercial products which we sell on a per seat, per-device
or per-port 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.

5

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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 on the Internet network do not interfere with the quality of the voice or video transmissions.
Our softphone applications also enable our customers to monitor audio quality in
real-time. Our softphone applications also include security features such as
server authentication, signalling encryption enabling confidentiality and
integrity protection, as well as confidentiality and integrity protection of
media streams through secure real-time transport protocol (SRTP). Secure
real-time transport can be used to prevent unwanted monitoring of voice and
video communications.

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

| | • | Bria
| | - | ----

Bria has a number of usability and
customization features designed to enable customers to present a flexible,
user-friendly 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 Add-in for Microsoft
      Outlook®
| | - | ----------------------------------------

In May 2008, we launched an enterprise
oriented softphone add-in for Microsoft Outlook and Microsoft Exchange. Bria
Add-in for Microsoft Outlook offers a standards-based softphone
application with audio which is fully integrated into Outlook. The 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 and Outlook desktop.

| | • | 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.

6

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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 protocal
compliant devices such as Internet protocol phones, public switched telephone
network gateways, softphones, video phones, multipoint conference units, and
conference servers, improves our interoperability with these products.

| | • | Quick Conference (QC)
| | - | ---------------------

Quick Conference (QC) is a flexible
and scalable audio conferencing solution for small, medium and large sized
businesses. We acquired QC through the acquisition of NewHeights in August 2007.
QC is distributed by Mitel Networks Corporation to its global network of
partners. On June 9, 2008, we made QC generally available to all of our
customers under the CounterPath brand.

QC offers a cost effective alternative
to hosted conferencing services, and can also be deployed as a managed or hosted
service. The product offers a wide range of audio conferencing capabilities
normally associated with premium audio conferencing solutions and hosted
services. Some of the features of QC include: a moderator and administrator web
dashboard for conference control and bridge creation, customizable music on
hold, bridge security features, loud speaker display, dial-out capability,
high-definition recording, and scheduling and reporting.

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 cellular 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.

The
  Mobility Suite is comprised of: (1) a carrier targeted offering called the Network
  Convergence Gateway (NCG); and (2) 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; and the EMG was the flagship product of FirstHand Technologies which we
  acquired in February 2008.

| | • | Network Convergence Gateway
      (NCG)
| | - | ---------------------------------------

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

7

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PC Desktop Mobile
Communications

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

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

Voice Call
Continuity

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

| | • | 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.

Our Bria Mobile Client is a mobile
client application for mobile devices including BlackBerry, Nokia, Windows
Mobile Smartphones and personal digital assistants, providing a mobile interface
for accessing enterprise VoIP, unified communications and corporate directory
services. Bria Mobile is available in two editions: Single-mode (GSM and CDMA
mobile) and Dual-mode (mobile/Wi-Fi). (VoIP and Voice Call Continuity
functionality is pre-release and will be generally available soon for Dual-mode
devices.)

Our Enterprise Mobility Gateway runs
on standard server hardware serving as the federation point between back-office
servers and Bria Mobile Clients running in a mobile network. Enterprise Mobility
Gateway 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 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.

8

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| | • | 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 through our sales team, our
website and through our partners and value added resellers who distribute our
products through their independent distribution channels. We typically license
our software on a one-time fee per user basis, or on a yearly subscription fee
per user basis.

We
focus on selling our software products to companies which provide Internet
protocol telephony or mobile services to end users and enterprises. Our
customers include: (1) large incumbent telecommunications service providers,
Internet telephony service providers and content providers; (2) small, medium
and large sized businesses; (3) original equipment manufacturers serving the
telecommunication market; and (4) end users. We currently have sold software and
related services to approximately 200 customers in more than 50 countries where
the value of the sale has exceeded $10,000.

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

*Significant
Customers*

Our
largest customer during the year ended April 30, 2008 was Mitel Networks
Corporation, from whom we generated approximately 23% 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;

9

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- 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, 2008, we have 16 U.S. patent applications pending, as well as
counterparts pending in other jurisdictions around the world, and we have 2 U.S.
patent applications which are published. We also hold a number of registered
trademarks in the United States.

In
addition to the protections described above, we generally control access to and
use of our proprietary software and other confidential information through the
use of internal and external controls, including contractual protections with
employees, contractors, customers and partners, and our software is protected by
U.S. and 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 the exclusive right
to certain technologies developed at Columbia University for which we pay a
license fee of 5%. 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.
It is possible that literature we may be advised of by third parties in the
future could negatively affect the scope or enforceability of either our present
or future patents. 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Claims by other
parties that we infringe their proprietary technology could force us to redesign
our products or to incur significant costs."

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.

10

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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. 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, 2008 were $6,863,235
(2007: $2,727,914).

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 Standard Time, telephone support and email support
during the one-year period following the date of sale. Bug-fixes are software
updates which fix a known deficiency in the software product. Our extended
support includes basic support and product upgrades and our premium support
includes extended support and twenty-four hour, seven days per week telephone
support. Product upgrades are separate from bug-fixes and include new or
enhanced product features. For additional fees, we provide professional
services, which include assisting our customers in designing, deploying and
implementing their solutions. We currently maintain a support forum on the
Internet at www.support.counterpath.net 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(a)(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 Vanguard Software Solutions Inc. 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.

11

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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
    Broadsoft, Inc.
    EnterpriseSoftphones
    eyeP Media SA
    Service provider, mobileSoftphones
    SJ Labs Inc.
    Service provider, mobileSoftphones
    Clique Communications LLC
    Service providerSoftphones
    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 providersEMG & NCG
    Newstep Networks Inc.
    Enterprise mobile unified communications providersEMG & NCG
    Tango Networks, Inc.
    Enterprise mobile unified communications providersNCG
    Outsmart, Ltd.
    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, 2008, we employed 164 people full-time, 29 of whom are engaged in
marketing and sales, 93 in research, development, services and support, 23 in
general and administration, and 19 contractors. We are not subject to any
collective bargaining agreements and we consider relations with our employees to
be excellent.

We
hire full-time employees and consultants 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.

12

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Corporate History

We
were incorporated under the laws of the State of Nevada on April 18, 2003.
Following incorporation, we commenced the business of operating an entertainment
advertising website.

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

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

On
August 2, 2007, we completed the acquisition of all of the shares of NewHeights
Software Corporation through the issuance of 7,680,168 shares of common stock
and 369,836 preferred shares issued from a subsidiary of our company, which
preferred shares are exchangeable into 369,836 shares of our common stock. On
February 5, 2008, NewHeights and CounterPath Solutions R&D Inc. were
amalgamated under the name CounterPath Technologies Inc.

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

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.

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".

13

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Risks Associated with our Business and Industry

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

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

-
we incur delays and additional expenses as a result of technology failure;

-
we are unable to create a substantial market for our products; or

-
we incur any significant unanticipated expenses.

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

We
depend on a mix of revenues and outside capital to pay for the continued
development of our technology and the marketing of our products. Such outside
capital may include the sale of additional stock and/or commercial borrowing.
There can be no assurance that capital will continue to be available if
necessary to meet these continuing development costs or, if the capital is
available, that it will be on terms acceptable to us. 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 10KSB, raise substantial
doubt on our ability to continue as a going concern. Our financial statements
included in this Form 10KSB 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.

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.

14

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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 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.

15

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

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

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

During
  the year ended April 30, 2008, 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.

16

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

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

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

Item 2.      Description of Property.

We
do not own any property. Our Canadian operations are conducted in three leased
offices located in Vancouver, Victoria and Kanata, Ontario. Our U.S. operations
are conducted in two leased offices located in Chicago 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.

Except
as set out below, we know of no material, active, or pending legal proceeding
against our company, nor are we involved as a plaintiff in any material
proceeding or pending litigation where such claims or action involves damages
for a value of more than 10% of our assets as of April 30, 2008, or any
proceeding in which any of our company's directors, officers, or affiliates, or
any registered or beneficial shareholders, is an adverse party or has a material
interest advance to our company's interest.

On
February 17, 2006, Eyeball Networks Inc. filed a statement of claim in the
Supreme Court of British Columbia (Action No. S-061080, Vancouver Registry)
against our company, Mark Bruk, and two of our employees, alleging breach of (i)
confidentiality, and (ii) previous employment agreements between the two
employees (Dr. Jozsef Vass and Mark Klagenberg) and Eyeball Networks Inc.
Eyeball Networks Inc. is seeking an injunction requiring our company, Mr. Bruk,
and the two employees, to deliver to Eyeball any confidential information they
have in their possession, power or control relating to Eyeball and its business,
restraining our company from developing, manufacturing or marketing power
meters, although we do not currently develop, manufacture or market power
meters. Among other things, Eyeball is claiming general, punitive and aggravated
damages of unspecified amounts. Management of our company has filed a Statement
of Defence denying all allegations, and strongly believes that any allegations
made by Eyeball in connection with our company's current business operations are
without foundation or merit. We intend to continue to vigorously defend these
proceedings.

17

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

None.

PART II

Item 5.      Market for Common Equity
  and Related Stockholder Matters and Small Business Issuer Purchases of Equity
  Securities.

Our
common stock is quoted on the OTC Bulletin Board and approved for listing on the
TSX Venture Exchange. Trading of our shares of common stock on the TSX Venture
Exchange is expected to commence on or about August 22, 2008. Our shares of
common stock began quotation on the OTC Bulletin Board on March 2, 2004. The
following table sets forth, for the periods indicated, the high and low bids for
our common stock on the OTC Bulletin Board based on inter-dealer prices, without
retail mark-up, mark-down or commission and may not represent actual
transactions as reported by Yahoo! Finance.

Quarter Ended
    High
    LowJuly 31, 2006(1)
    $3.35
    $2.70October 31, 2006(1)(2)
    $2.45
    $1.50January 31, 2007(2)
    $2.25
    $1.60April 30, 2007(2)
    $2.05
    $1.55July 31, 2007(2)
    $2.20
    $1.70October 31, 2007(2)(3)
    $2.65
    $1.80January 31, 2008(3)
    $2.65
    $1.60April 30, 2008(3)(4)
    $2.15
    $1.60


| | (1) | From May 7, 2004 to September 15, 2006, our stock was
      quoted under the trading symbol "XNWK".     
| | --- | --------------------------------------------------------------------------------------------------------
| |     |                                                                                                         
| | (2) | From September 16, 2006 to October 16, 2007, our stock
      was quoted under the trading symbol "CTPS".
| |     |                                                                                                         
| | (3) | From October 17, 2007 to March 18, 2008, our stock was
      quoted under the trading symbol "COPA".    
| |     |                                                                                                         
| | (4) | Since March 19, 2008, our stock has been quoted under the
      trading symbol "CPAH".                  

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 21, 2008, the shareholders' list of our shares of common stock showed 82
registered shareholders and 25,921,797 shares outstanding.

Dividend Policy

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

18

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Equity Compensation Plan Information

The
following table provides a summary of the number of options granted under our
compensation plans, as well as options granted outside of our compensation
plans, the weighted average exercise price and the number of options remaining
available for issuance all as at April 30, 2008.

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
    3,794,263 (1)
    $2.20
    1,265,737 (2)Total
    3,794,263
    $2.20
    1,265,737


|(1) | As of April 30, 2008, we had issued stock options to
      purchase 800,000 shares of our common stock pursuant to our 2004 Stock
      Option Plan and stock options to purchase 2,994,263 shares or our common
      stock pursuant to our 2005 Stock Option Plan.                          
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                               
|(2) | As of April 30, 2008, there were no underlying shares of
      our common stock remaining and available to be issued under our 2004 Stock
      Option Plan and 1,265,737 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
subsidiary. 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
subsidiary. 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-US residents may receive awards of options. The purpose
of the plan is to retain the services of valued key employees, directors,
officers and consultants and to encourage such persons with an increased
incentive to make contributions to our company. Our board of directors increased
the number of shares of our common stock that are issuable under the 2005 stock
option plan on the dates and in the amounts as follows:

19    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


Purchases of Equity Securities by the Issuer and
Affiliated Purchasers

None.

Recent Sales of Unregistered Securities

None.

**Item
6.**     **Management Discussion and
Analysis or Plan of Operation.**

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

In some cases, you can identify forward-looking statements by
terminology such as "may", "will", "should", "expects", "plans", "anticipates",
"believes", "estimates", "predicts", "potential" or "continue" or the negative
of these terms or other comparable terminology. Our actual results could differ
materially from those anticipated in the forward-looking statements as a result
of many factors, including those identified below, in "Risk Factors" and
elsewhere in this annual report. Except as required by applicable law, including
the securities laws of the United States, we do not intend to update any of the
forward-looking statements to conform these statements to actual results.

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

Overview

Background

We
were incorporated under the laws of the State of Nevada on April 18, 2003.
Following incorporation, we commenced the business of operating an entertainment
advertising website.

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

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.

20

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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 large incumbent telecom
providers, telecom original equipment manufacturers, large equipment providers
and Internet telephony service providers. 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 recent acquisitions of FirstHand
Technologies Inc. and BridgePort Networks, Inc. expand the product portfolio of
our company to include fixed-mobile-convergence applications for the enterprise
and telecom service provider markets.

Revenue

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

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

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

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

21

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

Operating Expenses

Operating
expenses consist of cost of sales, sales and marketing, research and
development, and general and administrative expenses, and restructuring costs.
Personnel-related costs are the most significant component of each of these
expense categories. We expect to continue to hire a number of new employees to
support our growth.

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

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

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

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

Restructuring
costs are post acquisition activities related to the acquisition of NewHeights
Software Corporation, FirstHand Technologies Inc. and BridgePort Networks, Inc.
We incurred restructuring costs related to employee severance agreements as a
result of post acquisition consolidation of administration, sales and marketing
and research and development departments. At April 30, 2008 we have a
restructuring accrual for severance of $nil.

Application of Critical Accounting Policies and Use of
Estimates

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

22

---

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.

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.

23

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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, 2008 was 67.0% . 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, 2008 was 3.6 years. For the year ended April 30, 2008, the weighted-average
risk free interest rate used was 3.62% . 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, 2008 in
determining the expense recorded in our consolidated statement of
operations.

Cost
of sales and operating expenses include stock-based compensation expense. For
the year ended April, 2008, we recorded an expense of $1,601,434 in connection
with share-based payment awards. A future expense of non-vested options of
$1,924,082 is expected to be recognized over a weighted-average period of 1.0
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.

24

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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. In applying SFAS No. 142, "Goodwill and Other
Intangible Assets,"we review our goodwill annually for impairment or more
frequently when indicators of impairment are present.

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, 2008 consisted primarily of
selling our IP telephony software to service providers and original equipment
manufacturers serving the telecom industry, and the continued development of our
IP telephony software products.

Revenue

Year Ended April 30,2008
      
      
      2007
      
      
      Period-to-Period
        ChangePercent
      
      
      
      
      
      Percent
      
      
      
      
      
      Percentof Total
      
      
      
      
      
      of Total
      
      
      
      
      
      Increase /Amount
      
      
      Revenue
      
      
      Amount
      
      
      Revenue
      
      
      Amount
      
      
      (Decrease)Revenue by TypeSoftware
      $
      6,437,192
      
      
      71%
      
      $
      4,099,369
      
      
      72%
      
      $
      2,337,823
      
      
      57%Service
      
      2,649,708
      
      
      29%
      
      
      1,625,572
      
      
      28%
      
      
      1,024,136
      
      
      63%Total revenue
      $
      9,086,900
      
      
      100%
      
      $
      5,724,941
      
      
      100%
      
      $
      3,361,959
      
      
      59%Revenue by RegionInternational
      $
      4,121,121
      
      
      45%
      
      $
      3,333,676
      
      
      58%
      
      $
      787,445
      
      
      24%North America
      
      4,965,779
      
      
      55%
      
      
      2,391,265
      
      
      42%
      
      
      2,574,514
      
      
      108%Total revenue
      $
      9,086,900
      
      
      100%
      
      $
      5,724,941
      
      
      100%
      
      $
      3,361,959
      
      
      59%


For
the year ended April 30, 2008, we generated $9,086,900 in revenue compared to
$5,724,941 for the year ended April 30, 2007. This represents an increase of
$3,361,959 or 59% from the same period last year. The revenue increase due to
the acquisitions of NewHeights, FirstHand and BridgePort was $2,456,264 during
the year ended 2008. We generated $6,437,192 in software revenue for the year
ended April 30, 2008 compared to $4,099,369 for the year ended April 30, 2007,
representing an increase of

25

---

$2,337,823 or 57%. 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 enterprise oriented softphone and conferencing software as a
result of the acquisition of NewHeights in August 2007. For the year ended April
30, 2008, service revenue was $2,649,708 compared to $1,625,572 for the year
ended April 30, 2007. The increase of $1,024,136 in service revenue reflects the
increase in software revenue as service revenue involves customizing and
supporting deployed software. International revenue outside of North America
grew by 24% during the year ended April 30, 2008 compared to the year ended
April 30, 2007, driven by Latin American and European software sales. North
American revenue increased 108%, compared to the year ended April 30, 2007,
driven primarily by the North American oriented sales of products acquired in
the NewHeights acquisition.

Operating Expenses

Cost of Sales

Cost
of sales for the year ended April 30, 2008 and 2007 were as follows:

April
        30, 2008
      
      
      April
        30, 2007
      
      
      Period-to-Period
        ChangePercent
      
      
      
      
      
      Percent
      
      
      
      
      
      Percentof
      
      
      
      
      
      of
      
      
      
      
      
      Increase /Amount
      
      
      Revenue
      
      
      Amount
      
      
      Revenue
      
      
      Amount
      
      
      (Decrease)Year ended
      $
      3,089,073
      
      
      34%
      
      $
      1,594,571
      
      
      28%
      
      $
      1,494,502
      
      
      94%


Cost
of sales was $3,089,073 for the year ended April 30, 2008 compared to $1,594,571
recorded for the year ended April 30, 2007. The increase of $1,494,502 was
primarily attributable to amortization of intangibles amounting to $1,364,365
(April 30, 2007 - nil) and arising from the acquisitions of NewHeights,
FirstHand and BridgePort.

Sales and Marketing

Sales
and marketing expenses for the year ended April 30, 2008 and 2007 were as
follows:

April
        30, 2008
      
      
      April
        30, 2007
      
      
      Period-to-Period
        ChangePercent
      
      
      
      
      
      Percent
      
      
      
      
      
      Percentof
      
      
      
      
      
      of
      
      
      
      
      
      Increase /Amount
      
      
      Revenue
      
      
      Amount
      
      
      Revenue
      
      
      Amount
      
      
      (Decrease)Year ended
      $
      3,945,290
      
      
      43%
      
      $
      1,682,685
      
      
      29%
      
      $
      2,262,605
      
      
      134%


Sales
and marketing expenses were $3,945,290 for the year ended April 30, 2008
compared to $1,682,685 recorded for the year ended April 30, 2007. The increase
of $2,262,605 was primarily attributable to increases in sales and marketing
personnel and associated wages and commissions, consulting fees relating to
hiring and retention and non-cash stock based compensation. The sales and
marketing expense increase due to the acquisitions of NewHeights, FirstHand and
BridgePort was $934,164 during the year ended 2008.

26

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Research and Development

Research
and development expenses for the year ended April 30, 2008 and 2007 were as
follows:

April
        30, 2008
      
      
      April
        30, 2007
      
      
      Period-to-Period
        ChangePercent
      
      
      
      
      
      Percent
      
      
      
      
      
      Percentof
      
      
      
      
      
      of
      
      
      
      
      
      Increase /Amount
      
      
      Revenue
      
      
      Amount
      
      
      Revenue
      
      
      Amount
      
      
      (Decrease)Year ended
      $
      6,863,235
      
      
      76%
      
      $
      2,727,914
      
      
      48%
      
      $
      4,135,321
      
      
      152%


Research
and development expenses were $6,863,235 for the year ended April 30, 2008
compared to $2,727,914 for the year ended April 30, 2007. The increase of
$4,135,321 was primarily attributable to increases in research and development
personnel and associated wages and non-cash stock based compensation. Research
and development personal were both hired and acquired through the acquisitions
of NewHeights, FirstHand and BridgePort. The research and development expense
increase due to the acquisitions of NewHeights, FirstHand and BridgePort was
$3,316,738 during the year ended 2008.

General and Administrative

General
and administrative expenses for the years ended April 30, 2008 and 2007 were as
follows:

April
        30, 2008
      
      
      April
        30, 2007
      
      
      Period-to-Period
        ChangePercent
      
      
      
      
      
      Percent
      
      
      
      
      
      Percentof
      
      
      
      
      
      of
      
      
      
      
      
      Increase /Amount
      
      
      Revenue
      
      
      Amount
      
      
      Revenue
      
      
      Amount
      
      
      (Decrease)Year ended
      $
      6,440,493
      
      
      71%
      
      $
      2,514,766
      
      
      44%
      
      $
      3,925,727
      
      
      156%


General
and administrative expenses for the year ended April 30, 2008 were $6,440,493
compared to $2,514,766 for the year ended April 30, 2007. The increase of
$3,925,727 in general and administrative expenses year over year was primarily
attributable to increases in personnel related costs and professional fees
incurred as a result of the acquisitions of NewHeights, FirstHand and
BridgePort. The general and administrative expense increase due to the
acquisitions of NewHeights, FirstHand and BridgePort was $2,231,433 during the
year ended 2008.

Restructuring Charges

Restructuring
charges for the years ended April 30, 2008 and 2007 were as follows:

April
        30, 2008
      
      
      April
        30, 2007
      
      
      Period-to-Period
        ChangePercent
      
      
      
      
      
      Percent
      
      
      
      
      
      Percentof
      
      
      
      
      
      of
      
      
      
      
      
      Increase/Amount
      
      
      Revenue
      
      
      Amount
      
      
      Revenue
      
      
      Amount
      
      
      (Decrease)Year ended
      $
      558,394
      
      
      6%
      
      $
      0
      
      
      0%
      
      $
      558,394
      
      
      n/a


Restructuring
charges for the year ended April 30, 2008 were $558,394. These costs were
related to employee severance arrangements as a result of the consolidation of
administrative, sales, marketing, and research and development departments after
the close of acquisitions of NewHeights, FirstHand and BridgePort. There were no
restructuring charges for the year ended April 30, 2007.

Interest and Other Income

Interest
income for the year ended April 30, 2008 was $125,970 compared to $55,083 for
the same respective period in 2007. The increase relates to higher average cash
balances and higher rates of interest earned on cash deposits. Interest expense
for the year ended April 30, 2008 was $695,961 compared to $615,530 for the same
respective period in 2007. Interest expense during fiscal 2008 includes both a
cash interest component of $52,222 and a non-cash component 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

27

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unaccreted debt discount on conversion of the convertible
debenture. Interest expense during fiscal 2007 includes both a cash interest
component of $144,255 and non-cash components of $182,023 relating to the
accretion of the discount on the convertible debenture, as well as a non-cash
loss of $289,252 related to extinguishment of the $2 million debenture and the
issuance of the $4 million debenture. On August 2, 2007, in conjunction with the
acquisition of NewHeights, our 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.

**Liquidity
and Capital Resources**

As
of April 30, 2008, we had $6,223,613 in cash compared to $1,680,220 at April 30,
2007, representing an increase of $4,543,393. Our working capital was $7,645,909
at April 30, 2008 compared to $1,897,581 at April 30, 2007, representing an
increase of $5,748,328.

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, 2008,
we had cash of approximately $6.2 million and working capital of $7.6 million;
however, as our management projects that under our current operating plan we
will require approximately $22-24 million to fund our ongoing operating expenses
and working capital requirements through April 30, 2009. We anticipate that this
will be funded through cash flow generated from operations, working capital,
potential rationalization and external financing.

Operating Activities

Our
operating activities resulted in a net cash outflow of $10,081,249 for the year
ended April 30, 2008. This compares with a net cash outflow of $2,331,891 for
the same period last year and represents a $7,749,358 increase in cash outflows
from operations compared to the same period last year. The net cash outflow from
operating activities for the year ended April 30, 2008 was primarily a result of
a net loss of $12,534,919 compared to a net loss of $3,364,651 in the prior
year, an increase in accounts receivable of $1,362,335 and a decrease in
accounts payable of $713,956. The increase in accounts receivable is
attributable to growing sales and the use of extended payment terms with certain
of our customers. The net cash outflow was offset by an adjustment for non-cash
expenses including $1,601,434 for stock-based compensation, $454,916 for
unearned revenue, $540,200 for the write-off of the remaining balance of
unaccreted debt discount on conversion of convertible debenture, $90,570 for
accretion of convertible debenture discount, $1,364,365 for amortization of
intangible assets and $440,312 for depreciation and amortization.

The
net cash outflow from operating activities for the year ended April 30, 2007 of
$2,331,891 was primarily a result of a net loss of $3,364,651, an increase in
accounts receivable of $1,447,085, partially offset by an increase in accounts
payable and accrued liabilities of $559,494 and adjustments for non-cash
expenses including $880,109 for stock-based compensation, $292,274 for unearned
revenue, $289,252 for loss on extinguishment of convertible debenture, $182,023
for accretion of convertible debenture discount, and $273,156 for depreciation
and amortization.

Investing Activities

Investing
activities resulted in a net cash inflow of $8,994,058 for the year ended April
30, 2008 primarily from cash acquired as a result of the acquisitions of
NewHeights and FirstHand during the year. This compares with a net cash outflow
from investing activities of $331,070 for the same period last year which was
primarily for purchases of equipment and deposits. At April 30, 2008, we did not
have any material commitments for future capital expenditures.

28

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Financing Activities

Financing
activities resulted in a net cash inflow of $5,481,415 for the year ended April
30, 2008 compared to a net cash inflow of $2,000,442 for the same period last
year. During the year ended April 30, 2008, we issued 3,418 common shares at
$2.00 per share for cash proceeds of $6,832 pursuant to the exercise of stock
purchase options.

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, 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.

We
intend to seek additional funding through public or private financings to fund
our operations through fiscal 2009 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
September 2006, FASB issued Statement of Financial Accounting Standards No. 157,
Fair Value Measurements ("SFAS No. 157"). This standard clarifies the
principle that fair value should be based on the assumptions that market
participants would use when pricing an asset or liability. Additionally, it
establishes a fair value hierarchy that prioritizes the information used to
develop those assumptions. This standard is effective for financial statements
issued for fiscal years beginning after November 15, 2007. We
are currently evaluating the impact of this statement.

In
February 2007, the FASB issued Statement of Financial Accounting Standards No.
159, The Fair Value Option for Financial Assets and Financial Liabilities 
Including an Amendment of FASB Statement No. 115. ("SFAS No. 159"). This
standard permits an entity to choose to measure many financial instruments and
certain other items at fair value. This standard is effective for financial
statements issued for fiscal years beginning after November 15, 2007. We are
currently evaluating the impact of this statement.

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 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. We are
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. We are
currently evaluating the impact of this statement.

29

---

Item 7. Financial Statements.

30

---



COUNTERPATH CORPORATION(Formerly CounterPath
Solutions, Inc.)INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2008



|                                                                                   | Page 
|---------------------------------------------------------------------------------- | -----
|                                                                                   |      
|Report of Independent
      Registered Public Accounting Firm                      | 32   
|                                                                                   |      
|Consolidated Balance
      Sheets                                                  | 33   
|                                                                                   |      
|Consolidated Statements
      of Operations and Comprehensive Loss                 | 34   
|                                                                                   |      
|Consolidated Statements
      of Cash Flows                                        | 35   
|                                                                                   |      
|Consolidated Statements
      of Changes in Stockholders' Equity (Capital Deficit) | 36   
|                                                                                   |      
|Notes to the
      Consolidated Financial Statements                               | 37-60

31

---

|                      | 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 (formerly CounterPath Solutions, Inc., the Company) as
of April 30, 2008 and 2007, and the related consolidated statements of
operations and comprehensive loss, cash flows and changes in stockholders
equity (capital deficit) 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, 2008 and 2007, 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 $18,479,483 at April 30, 2008 and incurred a net loss for the year
then ended of $12,534,919.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.

As discussed in Note 2(c) to the consolidated financial
statements, the Company adopted the provisions of Financial Accounting Standards
Board (FASB) Interpretation No. 48 (FIN 48) Accounting for Uncertainty in
Income Taxes, an interpretation of FASB statement No. 109 effective May 1,
2007.

/s/ BDO Dunwoody LLP

Chartered Accountants

Vancouver, Canada July 24, 2008

32

---

COUNTERPATH CORPORATION(Formerly CounterPath
Solutions, Inc.)CONSOLIDATED BALANCE SHEETS(Stated in U.S.
Dollars)

|                                                                           |   | April 30,   |   |   | April 30,  |  
|-------------------------------------------------------------------------- | - | ----------- | - | - | ---------- | -
|                                                                           |   | 2008        |   |   | 2007       |  
|Assets                                                                     |   |             |   |   |            |  
|Current assets:                                                            |   |             |   |   |            |  
|Cash                                                                       | $ | 6,223,613   |   | $ | 1,680,220  |  
|Accounts receivable (net of allowance
      for doubtful accounts of       |   |             |   |   |            |  
|$407,050 and $56,817,
      respectively)                                  |   | 5,409,658   |   |   | 1,924,899  |  
|Investment tax credits recoverable                                         |   | 1,061,133   |   |   |           |  
|Prepaid expenses and
      deposits                                        |   | 646,679     |   |   | 129,534    |  
|Total current assets                                                       |   | 13,341,083  |   |   | 3,734,653  |  
|                                                                           |   |             |   |   |            |  
|Deposits  Note 11                                                         |   | 103,017     |   |   | 74,613     |  
|Equipment  Note 4                                                         |   | 736,854     |   |   | 276,599    |  
|Intangible assets (net of accumulated amortization of
      $1,364,365     |   |             |   |   |            |  
|and $nil)  Notes 2(c) and 3                                               |   | 8,534,666   |   |   |           |  
|Goodwill  Note 2(c)                                                       |   | 8,674,990   |   |   |           |  
|Other assets                                                               |   | 177,749     |   |   | 25,716     |  
|Total Assets                                                               | $ | 31,568,359  |   | $ | 4,111,581  |  
|                                                                           |   |             |   |   |            |  
|Liabilities and Stockholders Equity (Capital
      Deficit)               |   |             |   |   |            |  
|Current liabilities:                                                       |   |             |   |   |            |  
|Accounts payable and accrued
      liabilities Note 5(a)                  | $ | 4,529,201   |   | $ | 1,314,083  |  
|Due to related parties                                                     |   |            |   |   | 25,417     |  
|Unearned revenue                                                           |   | 936,343     |   |   | 408,188    |  
|Customer deposits                                                          |   | 85,283      |   |   | 5,615      |  
|Warranty accrual  Note 2(b)                                               |   | 144,347     |   |   | 83,769     |  
|Total
      current liabilities                                            |   | 5,695,174   |   |   | 1,837,072  |  
|                                                                           |   |             |   |   |            |  
|Deferred Lease Inducements                                                 |   | 97,734      |   |   |           |  
|Convertible debentures  Note 6                                            |   |            |   |   | 3,369,230  |  
|Unrecognized tax benefit 
      Note 2(c)                                 |   | 98,575      |   |   |           |  
|Total liabilities                                                          |   | 5,891,483   |   |   | 5,206,302  |  
|                                                                           |   |             |   |   |            |  
|Stockholders equity (capital deficit):                                    |   |             |   |   |            |  
|Preferred stock, $0.001 par value 
      Note 7                           |   |             |   |   |            |  
|Authorized: 100,000,000                                                    |   |             |   |   |            |  
|Issued and outstanding:
      April 30, 2008  1; April 30, 2007  Nil     |   |            |   |   |           |  
|Common stock, $0.001 par value  Note 8                                    |   |             |   |   |            |  
|Authorized:
      83,076,900                                               |   |             |   |   |            |  
|Issued and outstanding:                                                    |   |             |   |   |            |  
|April 30, 2008 
      25,921,797; April 30, 2007  7,588,197              |   | 25,921      |   |   | 7,588      |  
|Additional paid-in capital                                                 |   | 43,398,849  |   |   | 4,850,422  |  
|Accumulated deficit                                                        |   | (18,479,483 | ) |   | (5,872,151 | )
|Accumulated other comprehensive income (loss)
       currency translation |   |             |   |   |            |  
|adjustment                                                                 |   | 731,589     |   |   | (80,580    | )
|Total stockholders
      equity (capital deficit)                         |   | 25,676,876  |   |   | (1,094,721 | )
|Liabilities and Stockholders Equity                                       | $ | 31,568,359  |   | $ | 4,111,581  |  
|                                                                           |   |             |   |   |            |  
|Going concern  Note 2                                                     |   |             |   |   |            |  
|Commitments and contingent liability  Notes 11 and 13                     |   |             |   |   |            |  

See accompanying notes to the consolidated financial
statements

33

---

COUNTERPATH CORPORATION(Formerly CounterPath
Solutions, Inc.) CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
LOSS(Stated in U.S. Dollars)

|                                                                            |   | Years Ended |  
|--------------------------------------------------------------------------- | - | ----------- | -
|                                                                            |   | April 30,   |  
|                                                                            |   | 2008        |  
|Revenue  Note 10:                                                          |   |             |  
|Software                                                                    | $ | 6,437,192   |  
|Service                                                                     |   | 2,649,708   |  
|Total revenue                                                               |   | 9,086,900   |  
|Operating expenses:                                                         |   |             |  
|Cost of sales (includes depreciation of $136,274 and
      $137,321 and     |   |             |  
|amortization of intangible assets
      of $1,364,365 and $nil  Note 2(c)) |   | 3,089,073   |  
|Sales and marketing                                                         |   | 3,945,290   |  
|Research and development                                                    |   | 6,863,235   |  
|General and administrative                                                  |   | 6,440,493   |  
|Restructuring costs  Note 14                                               |   | 558,394     |  
|Total operating
      expenses                                              |   | 20,896,485  |  
|Loss from operations                                                        |   | (11,809,585 | )
|Interest and other income (expense), net                                    |   |             |  
|Interest income                                                             |   | 125,970     |  
|Interest expense  Note 6                                                   |   | (695,961    | )
|Loss on sale of assets                                                      |   |            |  
|Foreign exchange loss                                                       |   | (155,343    | )
|Net loss for the year                                                       |   | (12,534,919 | )
|Other comprehensive income (loss):                                          |   |             |  
|Foreign currency translation adjustments                                    |   | 812,169     |  
|Comprehensive loss                                                          | $ | (11,722,750 | )
|Net loss per share:                                                         |   |             |  
|Basic and diluted                                                           | $ | (0.70       | )
|                                                                            |   |             |  
|Weighted average common shares outstanding:                                 |   | 17,808,027  |  

See accompanying notes to the consolidated financial
statements

34

---

COUNTERPATH CORPORATION(Formerly CounterPath
Solutions, Inc.)CONSOLIDATED STATEMENTS OF CASH FLOWS(Stated in
U.S. Dollars)

|                                                                   |   | Years Ended     |  
|------------------------------------------------------------------ | - | --------------- | -
|                                                                   |   | April
      30, |  
|                                                                   |   | 2008            |  
|Cash flows from operating activities:                              |   |                 |  
|Net loss for the year                                              | $ | (12,534,919     | )
|Adjustments to reconcile net loss to net
      cash used in        |   |                 |  
|operating activities:                                              |   |                 |  
|Depreciation and amortization                                      |   | 440,312         |  
|Amortization
      of intangible assets                            |   | 1,364,365       |  
|Stock-based compensation
       Note 8                            |   | 1,601,434       |  
|Accretion
      of convertible debenture discount  Note 6         |   | 90,570          |  
|Loss on conversion of convertible
      debentures                 |   | 540,200         |  
|Loss on sale
      of assets                                       |   |                |  
|Foreign exchange loss                                              |   | 155,343         |  
|Changes in assets and liabilities:                                 |   |                 |  
|Accounts receivable                                                |   | (1,362,335      | )
|Prepaid expenses
      and deposits                                |   | (257,425        | )
|Accounts payable and accrued
      liabilities                     |   | (713,956        | )
|Unearned
      revenue                                             |   | 454,916         |  
|Customer deposits                                                  |   | 79,668          |  
|Warranty
      payable                                             |   | 60,578          |  
|Net cash used in operating activities                              |   | (10,081,249     | )
|                                                                   |   |                 |  
|Cash flows from investing activities:                              |   |                 |  
|Cash acquired on acquisitions, net of
      transaction costs      |   | 9,077,780       |  
|Purchase of equipment                                              |   | (51,953         | )
|Disposal of equipment                                              |   |                |  
|Deposits                                                           |   | (7,774          | )
|Increase in other assets                                           |   | (23,995         | )
|Net cash provided by (used in) investing activities                |   | 8,994,058       |  
|                                                                   |   |                 |  
|Cash flows from financing activities:                              |   |                 |  
|Common stock issued                                                |   | 5,506,832       |  
|Convertible debenture issued                                       |   |                |  
|Decrease in due to related parties                                 |   | (25,417         | )
|Net cash provided by financing activities                          |   | 5,481,415       |  
|                                                                   |   |                 |  
|Foreign exchange effect on cash                                    |   | 149,169         |  
|                                                                   |   |                 |  
|Increase (decrease) in cash                                        |   | 4,543,393       |  
|                                                                   |   |                 |  
|Cash, beginning of the year                                        |   | 1,680,220       |  
|Cash, end of the year                                              | $ | 6,223,613       |  
|                                                                   |   |                 |  
|Supplemental disclosure of cash flow information                   |   |                 |  
|Cash paid for:                                                     |   |                 |  
|Interest                                                           | $ | 52,222          |  
|Taxes                                                              | $ |                |  
|Common stock and stock options issued
      in connection with the |   |                 |  
|acquisition of NewHeights Software Corporation                     | $ | 15,477,343      |  
|Common stock and stock options issued
      in connection with the |   |                 |  
|acquisition of FirstHand Technologies Inc.                         | $ | 11,981,151      |  
|Convertible debentures converted into
      common stock           | $ | 4,000,000       |  

See accompanying notes to the consolidated financial
statements

35

---

COUNTERPATHCORPORATION(Formerly CounterPath Solutions, Inc.)CONSOLIDATEDSTATEMENTSOFCHANGESINSTOCKHOLDERSEQUITY(CAPITALDEFICIT)for the
Years Ended April 30, 2008 and 2007 (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, 2006                          |  | 7,583,093           |  | $ | 7,583                  |  |  |       |  | $ |          |  | $ | 2,970,737  |  | $ | (2,507,500  | )
|                                             |  |                     |  |   |                        |  |  |        |  |   |           |  |   |            |  |   |             |  
|Shares issued for cash:                      |  |                     |  |   |                        |  |  |        |  |   |           |  |   |            |  |   |             |  
|Exercise of stock options  at $1.95         |  | 5,104               |  |   | 5                      |  |  |       |  |   |          |  |   | 9,949      |  |   |            |  
|Stock-based compensation  Note 8            |  |                     |  |   |                        |  |  |        |  |   |           |  |   | 880,109    |  |   |            |  
|Discount on convertible debenture  share    |  |                     |  |   |                        |  |  |        |  |   |           |  |   |            |  |   |            |  
|purchase warrants  Note 6                   |  |                    |  |   |                       |  |  |       |  |   |          |  |   | 553,421    |  |   |             |  
|Discount on convertible debenture           |  |                     |  |   |                        |  |  |        |  |   |           |  |   |            |  |   |             |  
|beneficial conversion feature  Note
      6 |  |                    |  |   |                       |  |  |       |  |   |          |  |   | 436,206    |  |   |            |  
|Net loss for the year                        |  |                    |  |   |                       |  |  |       |  |   |          |  |   |           |  |   | (3,364,651  | )
|Foreign currency translation adjustment      |  |                    |  |   |                       |  |  |       |  |   |          |  |   |           |  |   |            |  
|Balance, April 30, 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 6      |  | 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(c)     |  |                    |  |   |                       |  |  |       |  |   |          |  |   |           |  |   | (72,413     | )
|Balance, April 30, 2008                      |  | 25,921,797          |  | $ | 25,921                 |  |  | 1      |  | $ |          |  | $ | 43,398,849 |  | $ | (18,479,483 | )

Seeaccompanyingnotes to theconsolidatedfinancialstatements

36

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Stated in U.S. Dollars)

|Note 1 | Nature of
      Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | CounterPath Corporation (formerly CounterPath Solutions,
      Inc.) (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 approved for trading on the TSX Venture
      Exchange in Canada.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | On August 2, 2007, the Company acquired of all of the
      shares of NewHeights Software Corporation (NewHeights) through the
      issuance of 7,680,168 shares of the Companys common stock and 369,836
      preferred shares issued from a subsidiary of the Company that are
      exchangeable into 369,836 shares of common stock of the Company. For
      accounting purposes, the Company was deemed to be the acquirer of
      NewHeights based on certain factors including the number of common shares
      issued in the transaction as a proportion of the total common shares
      outstanding, and the composition of the board after the transaction (Note
      3).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | 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 (Note
      3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | 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 Networks. 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 (Note
      3).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | On February 5, 2008, the Company's wholly-owned
      subsidiaries, NewHeights Software Corporation 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 remain 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 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 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, 2008,
      the Company has not yet achieved profitable operations and had an
      accumulated deficit of $18,479,483 since incorporation. These factors
      raise substantial doubt regarding the Companys ability to continue as a
      going concern. Management is implementing a plan to address these
      uncertainties to enable the Company to continue as a going concern through
      the end of fiscal 2009 and beyond. This plan includes new equity financing
      in amounts sufficient to sustain operations.

37

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Stated in U.S. Dollars)

|Note 2 | Significant Accounting
      Policies and Going Concern'(contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | 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, in managements opinion, 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. Revenue is allocated to each of the
      undelivered elements based on its respective fair
value.                                                

38

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Stated in U.S. Dollars)

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

| | b) | Significant Accounting Policies
  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | 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, 2008 and April 30, 2007 using the assumptions more fully
      described in Note 8.                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | Use of Estimates:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | The preparation of financial statements in conformity
      with generally accepted accounting principles in the United States
      requires the Companys management to make estimates and assumptions which
      affect the amounts reported in these consolidated financial statements,
      the notes thereto, and the disclosure of contingent assets and liabilities
      at the date of the financial statements. Actual results could differ from
      those estimates.                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | Equipment and Amortization:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | Equipment is recorded at cost. Depreciation is provided
      for using the straight-line method over the estimated useful lives as
      follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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

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.

39

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Stated in U.S. Dollars)

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

| | b) | Significant Accounting Policies
  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | 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 14.                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | 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.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | Accounts Receivable and Allowance for Doubtful
      Accounts:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | Accounts receivable are presented net of an allowance for
      doubtful accounts. The allowance was $407,050 at April 30, 2008 (2007 -
      $56,817). Bad debt expense for the year ended April 30, 2008 was $350,234
      (2007 - $42,637).                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | 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. 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.                                                                                                  

40

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Stated in U.S. Dollars)

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

| | b) | Significant Accounting Policies
  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | Accrued Warranty:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | The Companys warranty policy generally provides for one
      year of warranty for its products. The Company records a liability for
      estimated warranty obligations at the date products are sold. The
      estimated cost of warranty coverage is based on the Companys actual
      historical experience with its current products or similar products. For
      new products, the required reserve is based on historical experience of
      similar products until such time as sufficient historical data has been
      collected on the new product. Estimated liabilities for warranty
      exposures, which relate to normal product warranties and a one-year
      obligation to provide for potential future liabilities for product sales
      for the years ended April 30, 2008 and 2007 were as
  follows:

| |                            |   | Years
      Ended April 30, | 
| | -------------------------- | - | --------------------------- | 
| |                            |   | 2008                        | 
| |                            |   |                             | 
| | Balance, beginning of year | $ | 83,769                      | 
| | Provision                  |   | 60,578                      | 
| | Settlements                |   |                            | 
| | Balance, end of year       | $ | 144,347                     | 

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, amounts due to related
parties, customer deposits and warranty accrual 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.

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) as more fully described in Note 2(c)(i).

41

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Stated in U.S. Dollars)

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

| | b) | Significant Accounting Policies
  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | 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 3) 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, using the
      treasury stock method, and convertible preferred stock, using the
      if-converted 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, 2008, loss per share excludes 4,794,263 (April 30, 2007 
      5,693,620) potentially dilutive common shares (related to stock options,
      warrants and convertible debentures) as their effect was
    antidilutive.                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | 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 than
       not that the tax credits will be realized. Eligible scientific
      research and experimental development (SR&ED) expenditures are filed
  as refundable income tax credits.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | c) | Adoption of New Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | (i) Accounting for Uncertainty in Income
    Taxes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | 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). FIN 48 prescribes a recognition threshold
      and measurement attribute for tax positions taken or expected to be taken
      in a tax return. This interpretation also provides guidance on
      de-recognition, classification, interest and penalties, accounting in
      interim periods, disclosure and transition. The evaluation of a tax
      position in accordance with this interpretation is a two- step process. In
      the first step, recognition, the Company determines whether it is
      more-likely-than-not that a tax position will be sustained upon
      examination, including resolution of any related appeals or litigation
      processes, based on the technical merits of the position. The second step
      addresses measurement of a tax position that meets the more-likely-than-
      not criteria. The tax position is measured at the largest amount of
      benefit that is greater than 50 percent likely of being realized upon
      ultimate settlement.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | Differences between tax positions taken in a tax return
      and amounts recognized in the financial statements will generally result
      in a) an increase in a liability for income taxes payable or a reduction
      of an income tax refund receivable, b) a reduction in a deferred tax asset
      or an increase in a deferred tax liability or c) both a and b. Tax
      positions that previously failed to meet the more-likely-than-not
      recognition threshold should be recognized in the first subsequent
      financial reporting period in which that threshold is met. Previously
      recognized tax positions that no longer meet the more-likely- than-not
      recognition threshold should be de-recognized in the first subsequent
      financial reporting period in which that threshold is no longer met. Use
      of a valuation allowance as described in FAS No. 109 is not an appropriate
      substitute for the de-recognition of a tax position. The requirement to
      assess the need for a valuation allowance for deferred tax assets based on
      sufficiency of future taxable income is unchanged by this
      interpretation.                                                                      

42

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Stated in U.S. Dollars)

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

| | c) | Adoption of New Accounting Policies
    (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | The cumulative effect of adopting FIN 48 of $72,413 was
      recorded as a increase to accumulated deficit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | 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 amount of interest and penalties accrued at May 1, 2007, upon
      the adoption of FIN 48, was $72,413 while the Company had previously
      accrued $26,142 at April 30, 2007.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | The Company is subject to taxation in the U.S., Canada,
      U.K. and Japan. It is subject to tax examinations by tax authorities for
      all taxation years commencing in or after 2002.                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | The Company does not expect any material increase or
      decrease in its income tax expense, in the next twelve months, related to
      examinations or changes in uncertain tax positions.                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | Changes in the Companys uncertain tax positions for the
      year ended April 30, 2008 were as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

| | Balance at May 1, 2007 (date of adoption)                                      | $ | 72,413 | 
| | ------------------------------------------------------------------------------ | - | ------ | 
| | Increases related to prior year tax positions (interest and
      penalties)   |   | 26,162 | 
| | Increases related to current year tax
      positions (interest and penalties) |   |       | 
| | Settlements                                                                    |   |       | 
| | Lapses in statute of limitations                                               |   |       | 
| | Balance at April 30, 2008                                                      | $ | 98,575 | 

(ii) Goodwill and Intangible
Assets:

Goodwill represents the excess
purchase price over the estimated fair value of net assets acquired as of the
acquisition date. The Company adopted the requirements of Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS No.
142). SFAS No. 142 requires goodwill to be tested for impairment annually or
more frequently if an event occurs or circumstances change that would more
likely than not reduce the fair value of the Company's business enterprise below
its carrying value. The impairment test requires management to estimate the fair
value of the Company's overall business enterprise down to the reporting unit,
which is CounterPath Corporation. Goodwill of $6,339,717 (CDN$6,704,947), and
$2,083,960 (CDN$2,083,752) was initially recorded in connection with the
acquisition of NewHeights Software Corporation on August 2, 2007 (Note 3(a)),
and FirstHand Technologies Inc. on February 1, 2008 (Note 3(b)). Translated to
US Dollars using the period end rate, the goodwill balance at April 30, 2008 was
$6,618,453 and $2,056,537, respectively. No impairment charges were recorded
during the year ended April 30, 2008.

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 being carried and 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
being carried and 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 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.

43

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Stated in U.S. Dollars)

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

| | c) | Adoption of New 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     | 
| | ---- | - | ---------- |  | - | --------- |  | - | ---------- |  | - | --------- | 
| |      |   |            |  |   |           |  |   |            |  |   |           | 
| | 2009 | $ | 1,294,026  |  | $ | 692,796   |  | $ | 119,176    |  | $ | 2,105,998 | 
| | 2010 |   | 1,349,062  |  |   | 767,144   |  |   | 122,405    |  |   | 2,238,611 | 
| | 2011 |   | 1,364,320  |  |   | 932,499   |  |   | 142,086    |  |   | 2,438,905 | 
| | 2012 |   | 669,501    |  |   | 782,407   |  |   | 88,399     |  |   | 1,540,307 | 
| | 2013 | $ | 210,845    |  | $ | _         |  | $ | _          |  | $ | 210,845   | 

The Company adopted the requirements
of Statement of Financial Accounting Standard No. 144, The Impairment or
Disposal of Long-Lived Assets (SFAS No. 144), SFAS No. 144 requires us to
review the carrying value of intangibles and other long-lived assets for
impairment at least annually or whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. No
impairment charges were recorded for the year ended April 30, 2008 (2007 -
$nil).

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

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

| | d) | New Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | In September 2006, FASB issued Statement of Financial
      Accounting Standards No. 157, Fair Value Measurements(SFAS No.
      157). This standard clarifies the principle that fair value should be
      based on the assumptions that market participants would use when pricing
      an asset or liability. Additionally, it establishes a fair value hierarchy
      that prioritizes the information used to develop those assumptions. This
      standard is effective for financial statements issued for fiscal years
      beginning after November 15, 2007. The Company is currently evaluating the
      impact of this statement.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | In February 2007, the FASB issued Statement of Financial
      Accounting Standards No. 159, The Fair Value Option for Financial
      Assets and Financial Liabilities  Including an Amendment of FASB
      Statement No. 115.(SFAS No. 159). This standard permits an entity
      to choose to measure many financial instruments and certain other items at
      fair value. This standard is effective for financial statements issued for
      fiscal years beginning after November 15, 2007. The Company is currently
      evaluating the impact of this statement.                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | 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 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.                   

44

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Stated in U.S. Dollars)

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

| | d) | New Accounting Pronouncements (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | 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.

|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 6). 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 will 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.                                                                                                                                                              

45

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Stated in U.S. Dollars)

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

| | a) | NewHeights Software Corporation
  (contd)                                                                                                                                                                 
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                             
| |    | 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 |  

| |    | 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 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
      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 will 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.

46

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Stated in U.S. Dollars)

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

| | b) | FirstHand Technologies Inc. (contd)                                                                                                                                                                       
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                             
| |    | 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 |  

| |    | 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 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
      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.                                                                                                                                                                                                                                                                                                                                                                                           

47

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Stated in U.S. Dollars)

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

| | c) | BridgePort Networks, Inc.
  (contd)
| | -- | -------------------------------------

| | 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 years ended April 30, 2008, as if the acquisitions
      of NewHeights, FirstHand and BridgePort had occurred on May 1, 2006 and
      2007:                                                                                                                                                                                                                                                                                                                                                                        

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

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

| |                        |   | April,
      30 2008 | 
| | ---------------------- | - | -------------------- | 
| |                        |   |                      | 
| |                        |   | Cost                 | 
| |                        |   |                      | 
| | Computer hardware      | $ | 623,571              | 
| | Computer software      |   | 724,631              | 
| | Leasehold improvements |   | 167,007              | 
| | Office furniture       |   | 225,713              | 
| | Websites               |   | 24,915               | 
| |                        | $ | 1,765,837            | 

48

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Stated in U.S. Dollars)

|Note 4 | Equipment
      (contd)
|------ | -------------------------

| |                        |   | April,
      30 2007 | 
| | ---------------------- | - | -------------------- | 
| |                        |   |                      | 
| |                        |   | Cost                 | 
| |                        |   |                      | 
| | Computer hardware      | $ | 257,192              | 
| | Computer software      |   | 522,201              | 
| | Leasehold improvements |   | 47,088               | 
| | Office furniture       |   | 68,134               | 
| | Websites               |   | 28,343               | 
| |                        | $ | 922,958              | 

|Note 5 | Accounts Payable and
      Accrued Liabilities                                                           
|------ | ---------------------------------------------------------------------------------------------------------
|       |                                                                                                          
|       | Accounts Payable and accrued
      liabilities at April 30, 2008 and 2007 are comprised of the following:

| |                           |   | April
      30, | 
| | ------------------------- | - | --------------- | 
| |                           |   | 2008            | 
| |                           |   |                 | 
| | Accounts payable - trade  | $ | 1,094,207       | 
| | Accrued commissions       |   | 278,619         | 
| | Accrued vacation          |   | 633,698         | 
| | Codec royalties           |   | 765,708         | 
| | Research fees             |   | 402,027         | 
| | Other accrued liabilities |   | 1,354,942       | 
| |                           | $ | 4,529,201       | 

|Note 6 | Convertible
      Debentures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | On November 30, 2006, the Company completed the issuance
      of convertible debentures in the principal amount of $4,000,000 to a group
      of investors including a company controlled by the spouse of a significant
      stockholder of the Company. The debentures were unsecured, bore interest
      at 5% per annum with interest payable quarterly and were to mature on
      November 30, 2008. The investors could convert the debentures at any time,
      and from time to time, in whole or in part into common shares of the
      Company at a conversion price of $2.00 per share. Consideration for
      $2,000,000 of the $4,000,000 convertible debentures was the cancellation
      of the $2,000,000 debenture originally issued on December 13, 2005. In
      addition, the outstanding share purchase warrants for the purchase of up
      to 500,000 shares of common stock at a price of $4.00 per share, which
      were issued in connection with the December 2005 debenture were cancelled
      on closing. The new debentures ranked senior to the Companys other
      existing and future indebtedness as long as they remain outstanding. Under
      the terms of the private placement, the investors also received share
      purchase warrants for the purchase of up to 1,000,000 shares of the
      Companys common stock, exercisable for three years at a price of $4.00
      per share.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | Due to the cancellation of the existing convertible
      debenture and share purchase warrants, for accounting purposes, the new
      convertible debenture was accounted for as an extinguishment of the
      original debt with the issuance of new convertible debt in accordance with
      EITF 96-19 "Debtor's Accounting for a Modification or Exchange of Debt
      Instruments: ("EITF 96-19") and EITF Issue No. 06-6 "Debtor's Accounting
      for a Modification (or Exchange) of Convertible Debt Instruments ("EITF
      06-6"). As a result, the difference between the fair value of the new
      convertible debenture and the carrying value of the original debt was
      recorded as a loss on extinguishment of convertible debt (included in
      interest expense) of $72,036 in the Consolidated Statement of Operations
      and a corresponding entry to the debt discount. In consideration for the
      holder's agreement to extend the maturity date of the original convertible
      debt from November 21, 2007 to November 30, 2008, the Company cancelled
      the original 500,000 warrants issued in connection with the December 2005
      convertible debenture and replaced them with 500,000 warrants with a term
      of 3 years.                                                                                                                                                          

49

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Stated in U.S. Dollars)

|Note 6 | Convertible Debentures (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | The difference between the fair value of the new warrants
      and the fair value of the original warrants immediately prior to
      cancellation, in the amount of $217,216, was determined to be part of the
      consideration given for the reacquisition on the debt extinguishment date
      and was recorded as an additional loss on extinguishment and included in
      interest expense. The $4,000,000 convertible debenture was recorded on the
      date of issuance at its fair value which is estimated to approximate its
      face value with the proceeds raised allocated between the convertible
      debenture, and share purchase warrants based on their relative fair values
      and the beneficial conversion feature based on its intrinsic value in
      accordance with EITF 00-27, Application of Issue No. 98-5 to Certain
      Convertible Instruments (EITF 00-27). The Company used the
      Black-Scholes option pricing model to determine the fair value of the
      share purchase warrants using the Companys historical prices and the
      following assumptions (i) risk-free interest rate of 4.52%, (ii) expected
      volatility of 82.02%, (iii) expected life of 3 years, and (iv) a dividend
      yield of nil. At the date of issuance of the $4,000,000 debenture, the
      Company allocated $3,227,590 to the convertible debenture $336,204 to the
      share purchase warrants issued in connection with the convertible
      debenture and $436,206 to the beneficial conversion feature. The amounts
      allocated to the share purchase warrants and beneficial conversion feature
      represents a discount on the debt financing which is accreted to income
      over the term of the debt.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | 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       |   |   |          |   |   | Carrying   |  
| | ------------------------------------------------------ | - | ---------- | - | - | -------- | - | - | ---------- | -
| |                                                        |   | Amount     |   |   | Discount |   |   | Value      |  
| |                                                        |   |            |   |   |          |   |   |            |  
| | Balance, April 30, 2006                                | $ | 2,000,000  |   | $ | 112,418  |   | $ | 1,887,582  |  
| | Accretion of debt discount to November 2006            |   | -          |   |   | (40,382  | ) |   | 40,382     |  
| | Balance before extinguishment                          |   | 2,000,000  |   |   | 72,036   |   |   | 1,927,964  |  
| | Extinguishment of original debenture                   |   | (2,000,000 | ) |   | (72,036  | ) |   | (1,927,964 | )
| | Issuance of convertible
      debenture                |   | 4,000,000  |   |   | 772,410  |   |   | 3,227,590  |  
| | Accretion of debt discount                             |   |           |   |   | (141,640 | ) |   | 141,640    |  
| | 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 debenture on
      August 2, 2007        |   | (4,000,000 | ) |   | (540,200 | ) |   | (3,459,800 | )
| | Balance, April 30, 2008                                | $ |           |   | $ |         |   | $ |           |  

|       | During the years ended April 30, 2008 and 2007, the
      Company recorded an accretion expense of $90,570 and $182,022,
      respectively on this discount.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Note 7 | Preferred Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       | 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 for and on behalf of the registered holders from time to time 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.

50

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Stated in U.S. Dollars)

|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 11,489,635 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | During the year ended April 30, 2008, the Company issued
      3,418 shares of common stock at $2.00 per share for cash proceeds of
      $6,832 pursuant to the exercise of stock purchase options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | 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. 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.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | 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 has elected to use the Black-Scholes option
      pricing model to determine the fair value of stock options granted. In
      accordance with SFAS No. 123R for employees, the compensation expense is
      amortized on a straight-line basis over the requisite service period which
      approximates the vesting period. Compensation expense for stock options
      granted to non- employees is amortized over the vesting period or, if none
      exists, over the service period. Compensation associated with unvested
      options granted to non-employees is remeasured on each balance sheet date
      using the Black-Scholes option pricing model.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

51

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Stated in U.S. Dollars)

|Note 8 | Common Stock
      (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | 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. 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 2008 and 2007 in determining
      the expense recorded in the accompanying consolidated statement of
      operations.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | The weighted-average fair value of options granted during
      the year ended April 30, 2008 and 2007 were $0.94 and $1.75 respectively.
      The weighted-average assumptions utilized to determine such values are
      presented in the following table:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

| |                             |   | Year Ended     |  |   | Year Ended     | 
| | --------------------------- | - | -------------- |  | - | -------------- | 
| |                             |   | April 30, 2008 |  |   | April 30, 2007 | 
| |                             |   |                |  |   |                | 
| | Risk-free interest rate     |   | 3.62%          |  |   | 4.85%          | 
| | Expected volatility         |   | 67.0%          |  |   | 83.2%          | 
| | Expected term               |   | 3.6 yrs        |  |   | 5.8 yrs        | 
| | Dividend yield              |   | 0 %            |  |   | 0 %            | 
| | Weighted average fair value | $ | 0.94           |  | $ | 1.75           | 

The following is a summary of the
status of the Companys stock options as of April 30, 2008 and the stock option
activity during the year ended April 30, 2008:

| |                                        |  |           |   |  | Weighted- | 
| | -------------------------------------- |  | --------- | - |  | --------- | 
| |                                        |  |           |   |  | Average   | 
| |                                        |  |           |   |  | Exercise  | 
| |                                        |  | Number of |   |  | Price     | 
| |                                        |  | Options   |   |  | per Share | 
| |                                        |  |           |   |  |           | 
| | Outstanding at April 30, 2006          |  | 2,229,000 |   |  | $2.25     | 
| | Granted                                |  | 735,620   |   |  | $2.45     | 
| | Forfeited                              |  | (202,000  | ) |  | $1.95     | 
| | Cancelled                              |  | (63,896   | ) |  | $1.95     | 
| | Exercised                              |  | (5,104    | ) |  | $1.95     | 
| | 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     | 
| |                                        |  |           |   |  |           | 
| | Exercisable at April 30, 2008          |  | 2,360,979 |   |  | $2.30     | 
| | Exercisable at April 30, 2007          |  | 932,887   |   |  | $2.70     | 

52

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES 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, 2008:

|               | Number of   |  | Aggregate |  |                         |  | Number of   |  | Aggregate
|-------------- | ----------- |  | --------- |  | ----------------------- |  | ----------- |  | ---------
|Exercise       | Options     |  | Intrinsic |  |                         |  | Options     |  | Intrinsic
|Price          | Outstanding |  | Value     |  | Expiry Date             |  | Exercisable |  | Value    
|               |             |  |           |  |                         |  |             |  |          
|$1.50          | 40,000      |  | $12,000   |  | August 1, 2016          |  | 16,667      |  | $5,000   
|$1.70          | 53,333      |  | 5,333     |  | May 1, 2012             |  | 26,354      |  | 2,635    
|$1.85          | 192,312     |  |          |  | February 2, 2013        |  | 114,100     |  |         
|               |             |  |           |  | October 1, 2011 to      |  |             |  |          
|$1.90          | 297,726     |  |          |  | June 26, 2017           |  | 191,667     |  |         
|$1.94          | 89,400      |  |          |  | January 10 2016         |  | 51,521      |  |         
|$1.95          | 1,559,375   |  |          |  | September 7,
      2010 |  | 978,188     |  |         
|               |             |  |           |  | to Dec. 12, 2015        |  |             |  |          
|               |             |  |           |  | June 5, 2008            |  |             |  |          
|$2.00          | 782,289     |  |          |  | to
    March 18, 2015   |  | 577,227     |  |         
|$2.15          | 240,000     |  |          |  | September 7,
      2016 |  | 95,000      |  |          
|$2.25          | 38,000      |  |          |  | December 13, 2012       |  |            |  |         
|$2.80          | 50,000      |  |          |  | February 20,
      2016 |  | 27,083      |  |         
|$2.95          | 60,000      |  |          |  | July 26, 2016           |  | 26,250      |  |         
|$3.05          | 196,620     |  |          |  | May 23, 2016            |  | 94,214      |  |         
|$3.35          | 55,000      |  |          |  | June 13, 2010           |  | 32,500      |  |         
|               |             |  |           |  | to July 11, 2016        |  |             |  |          
|$3.40          | 20,000      |  |          |  | April 10, 2016          |  | 10,000      |  |         
|$3.75          | 5,208       |  |          |  | March 3, 2016           |  | 5,208       |  |         
|$5.35          | 30,000      |  |          |  | March 29, 2010          |  | 30,000      |  |         
|$5.85          | 35,000      |  |          |  | February 22,
      2010 |  | 35,000      |  |         
|$7.90          | 30,000      |  |          |  | October 24, 2009        |  | 30,000      |  |         
|$9.35          | 20,000      |  |          |  | July 21, 2009           |  | 20,000      |  |         
|April 30, 2008 | 3,794,263   |  | $17,333   |  |                         |  | 2,360,979   |  | $7,635   
|               |             |  |           |  |                         |  |             |  |          
|April 30, 2007 | 2,693,620   |  | $51,000   |  |                         |  | 932,887     |  | $8,500   

The aggregate intrinsic value in the
preceding table represents the total intrinsic value, based on the Companys
closing stock price of $1.80 per share as of April 30, 2008 (April 30, 2007 
$1.70), 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, 2008 was 43,021
(April 30, 2007  8,500). The total intrinsic value of options exercised during
the year ended April 30, 2008 was $nil (2007  $nil). The grant date fair value
of options vested during the year ended April 30, 2008 was $1,817,972 (April
30, 2007  $1,323,055).

53

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Stated in U.S. Dollars)

|Note 8 | Common Stock
      (contd)                                                                                                            
|------ | ----------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                         
|       | The following table summarizes
      information regarding the non-vested stock purchase options outstanding as
      of April 30, 2008.

| |                                            |  |            |   |  | Weighted Average | 
| | ------------------------------------------ |  | ---------- | - |  | ---------------- | 
| |                                            |  | Number of  |   |  | Grant-Date       | 
| |                                            |  | Options    |   |  | Fair Value       | 
| |                                            |  |            |   |  |                  | 
| | Non-vested options at April
      30, 2006 |  | 1,845,028  |   |  | $1.55            | 
| | Granted                                    |  | 735,620    |   |  | $1.75            | 
| | Vested                                     |  | (617,915   | ) |  | $1.60            | 
| | Forfeited                                  |  | (202,000   | ) |  | $1.95            | 
| | 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            | 

As of April 30, 2008 there was
$1,924,082 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 1.0 years.

Employee and non-employee stock-based
compensation amounts classified in the Companys consolidated statements of
operations for the years ended April 30, 2008 and 2007 are as follows:

| |                                |   | Years Ended     | 
| | ------------------------------ | - | --------------- | 
| |                                |   | April
      30, | 
| |                                |   | 2008            | 
| |                                |   |                 | 
| | Cost of sales                  | $ | 107,004         | 
| | Sales and marketing            |   | 208,736         | 
| | Research and development       |   | 485,577         | 
| | General and administrative     |   | 800,117         | 
| | Total stock-based compensation | $ | 1,601,434       | 

Subsequent to year end the Company
granted a total of 364,000 incentive stock options to a director and officer and
certain employees of the Company. The options are exercisable for five years at
a price of $1.75 per common share.

Warrants

No stock purchase warrants were
granted in fiscal 2008. The fair value of stock purchase warrants granted during
the year ended April 30, 2007 was $4.00 per share. The assumptions utilized to
determine such values are presented in the following table:

| |                             |   | Year Ended     | 
| | --------------------------- | - | -------------- | 
| |                             |   | April 30, 2007 | 
| |                             |   |                | 
| | Risk-free interest rate     |   | 4.52%          | 
| | Expected volatility         |   | 82.02%         | 
| | Expected term               |   | 3 yrs          | 
| | Dividend yield              |   | 0%             | 
| | Weighted average fair value | $ | 4.00           | 
| | Total warrants outstanding  |   | 1,000,000      | 

54

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Stated in U.S. Dollars)

|Note 8 | Common Stock
      (contd)                                                                                                                                                                              
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                           
|       | The following is a summary of the status of the Companys
      stock purchase warrants as of April 30, 2008 and the stock purchase
      warrant activity during the years ended April 30, 2008 and 2007:

| |                                                  |  | Number    |   |   | Exercise  | 
| | ------------------------------------------------ |  | --------- | - | - | --------- | 
| |                                                  |  | of        |   |   | Price     | 
| |                                                  |  | Options   |   |   | per Share | 
| |                                                  |  |           |   |   |           | 
| | Outstanding at April 30, 2006                    |  | 500,000   |   | $ | 4.00      | 
| | Granted                                          |  | 1,000,000 |   |   | 4.00      | 
| | Cancelled                                        |  | (500,000  | ) |   | 4.00      | 
| | Outstanding at April 30, 2007 and April 30, 2008 |  | 1,000,000 |   | $ | 4.00      | 

|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, |  
| |                                                 |   | 2008            |  
| |                                                 |   |                 |  
| | Tax loss carry forwards                         | $ | 10,253,000      |  
| | Equipment                                       |   | 1,073,000       |  
| | Undeducted research and development expenses    |   | 2,967,000       |  
| | Investment tax credits                          |   | 1,075,000       |  
| | Undeducted financing costs                      |   | 7,000           |  
| | Convertible debentures                          |   |                |  
| | Cumulative unrealized foreign exchange gain     |   | (272,000        | )
| | Acquired technology
      and other intangibles |   | (2,400,000      | )
| | Valuation allowance established by management   |   | (12,703,000     | )
| | Net deferred assets at April 30, 2008           | $ |                |  

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, |  
| |                                                |   | 2008            |  
| |                                                |   |                 |  
| | Benefit from net loss, at US rates             | $ | (4,262,000      | )
| | Foreign loss at other
      than US rates      |   | (43,000         | )
| | Non-deductible expenses                        |   | 56,000          |  
| | Non-deductible stock
      option compensation |   | 544,000         |  
| | Non-deductible loss on extinguishment of debt  |   | 184,000         |  
| | Adjustment of valuation
      allowance        |   | (129,000        | )
| | Increase (decrease) in valuation allowance     |   | 3,650,000       |  
| | Income tax expense for year                    | $ |                |  

55

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Stated in U.S. Dollars)

|Note 9 | Income Taxes
      (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       | The Companys valuation allowance as at April 30, 2008
      was reduced by $nil (2007 - $214,462). This reduction resulted from the
      reversal of the valuation allowance related to the tax effect of the
      temporary difference created by recognizing the beneficial conversion
      features of the convertible debentures (Note 6). In accordance with EITF
      05-8 Income Tax Consequence of Issuing Convertible Debt with a Beneficial
      Conversion Feature, such temporary difference should be adjusted to
      Additional Paid-in Capital and thus excluded from the rate reconciliation.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       | The tax benefit of net operating losses carried forward
      and the associated valuation allowance was increased by $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, 2008, 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$ |  | $        
      8,650,000 |   | 2026  2027     
| | Canada-CDN$       |  | 27,000,000                | * | 2009  2027     

|        | *These losses are subject to tax legislation that limits
      the use of the losses against future income of the Companys Canadian
      subsidiaries.                                                                                                                                                                                                           
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                                                    
|        | These financial statements do not reflect the potential
      effect on future income taxes of the application of these losses.                                                                                                                                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                                    
|        | On May 1, 2007, the Company adopted Financial Accounting
      Standards Board (FASB) interpretation No. 48, Accounting for
      Uncertainty in Income Taxes-an Interpretation of FASB Statement No. 109
      (FAS No. 109) as more fully described in Note 2(c)(i).                                                                                         
|        |                                                                                                                                                                                                                                                                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                                    
|Note 10 | Segmented Information                                                                                                                                                                                                                                                                                                                                              
|        |                                                                                                                                                                                                                                                                                                                                                                    
|        | Our chief operating decision maker reviews financial
      information presented on a consolidated basis, accompanied by geographic
      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, 2008 and 2007:                                                                                                                                                               

| |               |   | Years Ended     | 
| | ------------- | - | --------------- | 
| |               |   | April
      30, | 
| |               |   | 2008            | 
| |               |   |                 | 
| | North America | $ | 4,965,779       | 
| | Europe        |   | 2,414,002       | 
| | South America |   | 1,280,181       | 
| | Asia          |   | 348,728         | 
| | Other         |   | 78,210          | 
| |               | $ | 9,086,900       | 

56

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Stated in U.S. Dollars)

|Note 10 | Segmented Information (contd)                                                                                                                                                                                                                                                               
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                               
|        | Contained within the results of North America for the
      year ended April 30, 2008 are revenues from the United States of
      $2,916,798 (2007 - $2,007,960) and from Canada of $2,048,981 (2007 -
      $383,305).                                                                      
|        |                                                                                                                                                                                                                                                                                               
|        | Contained within the results of Europe for the year ended
      April 30, 2008 are revenues from the United Kingdom of $882,770 (2007 -
      $1,340,592), from Germany of $335,282 (2007 - $440,700), from Belgium of
      $320,664 (2007 - $nil) and Croatia of $289,787 (2007 - $207,315).
|        |                                                                                                                                                                                                                                                                                               
|        | Contained within the results of South America for the
      year ended April 30, 2008 are revenues from Mexico of $916,793 (2007 -
      $139,348) and from the Dominican Republic of $137,309 (2007 - $nil).                                                                                 
|        |                                                                                                                                                                                                                                                                                               
|        | The Companys long-lived assets, which includes
      equipment, intangible assets, and other assets are located in Canada and
      the United States as follows:                                                                                                                            

| |               |   | As at           | 
| | ------------- | - | --------------- | 
| |               |   | April
      30, | 
| |               |   | 2008            | 
| |               |   |                 | 
| | Canada        | $ | 9,202,208       | 
| | United States |   | 247,061         | 
| | Total         | $ | 9,449,269       | 

Revenue from significant customers for
  the years ended April 30, 2008 and 2007 is summarized as follows:

| |            |  | Years Ended     | 
| | ---------- |  | --------------- | 
| |            |  | April
      30, | 
| |            |  | 2008            | 
| |            |  |                 | 
| | Customer A |  | 23%             | 
| | Customer B |  | 9%              | 
| |            |  | 32%             | 

Accounts receivable balances for
Customer A were $1,177,000 as at April 30, 2008 and $nil as at April 30, 2007.
Accounts receivable balances for Customer B were $400,000 as at April 30, 2008
and $371,485 as at April 30, 2007.

57

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Stated in U.S. Dollars)

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

| | a) | On July 10, 2006, the Company entered into a lease for
      office premises, 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 1, 2009 to $23,037 and
      $21,681, respectively.                                                                                           
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | b) | On April 29, 2005, the Company entered into a lease for
      office premises, which commenced on October 1, 2005 and expires on
      September 30, 2012 for which a deposit of $9,800 was made. The monthly
      lease payment under this agreement is $9,800 plus $7,827 in operating
      costs. Currently, the Company is subleasing a part of these premises for a
      monthly charge of $7,853. The sub lease commenced on August 1, 2007 and
      expires on September 30, 2012.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | c) | On February 15, 2005, the Company entered into a lease
      extension for office premises, which commenced on April 1, 2005 and
      expires on March 31, 2010. The monthly lease payment under this agreement
      is $10,087 plus $17,425 in operating costs. This monthly lease increases
      to $11,348 on April 1, 2009.                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | d) | On February 29, 2008, the Company entered into a lease
      for office premises, which commenced on March 1, 2008 and expires on July
      31, 2008. The monthly lease payment under this agreement is
  $16,440.                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | e) | On June 1, 2008, the Company entered into a lease for
      office premises, which commences on August 1, 2008 and expires on July 31,
      2010 for which a deposit of $27,000 was made. The monthly lease payment
      under this agreement is $9,000. This amount increases to $9,200 on August
      1, 2009.                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | f) | On March 14, 2008, the Company entered into a lease for
      office premises, which commences on April 1, 2008 and expires on March 31,
      2009. The monthly lease payment under this agreement is $3,857.                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | g) | On April 23, 2008, the Company entered into a software
      development consulting agreement, which commenced on May 5, 2008 and
      expires on December 5, 2008 for which a prepayment of $42,400 was made.
      The payment schedule is tied to specific milestones as they are completed
      and requires total payments of $169,600 in fiscal year 2009.                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | h) | 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.                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    | Total payable over the term of the agreements for the
      years ended April 30 are as follows:                                                                                                                                                                                                                                                                                                                                                                                             

| |      |   |               |  |   |               |  |   |           |   |   |              |  |   |             | 
| | ---- | - | ------------- |  | - | ------------- |  | - | --------- | - | - | ------------ |  | - | ----------- | 
| |      |   | Office Leases |  |   | Office Leases |  |   |           |   |   |              |  |   | Software    | 
| |      |   |  Related     |  |   |  Unrelated   |  |   | Sub Lease |   |   | Total Office |  |   | Development | 
| |      |   | Party         |  |   | Party         |  |   | income    |   |   | Leases       |  |   | Contracts   | 
| | 2009 | $ | 331,403       |  | $ | 890,172       |  | $ | (94,239   | ) | $ | 1,127,336    |  | $ | 278,600     | 
| | 2010 |   | 316,500       |  |   | 845,142       |  |   | (94,239   | ) |   | 1,067,403    |  |   | 109,000     | 
| | 2011 |   |              |  |   | 775,741       |  |   | (94,239   | ) |   | 681,502      |  |   |            | 
| | 2012 |   |              |  |   | 435,113       |  |   | (94,239   | ) |   | 340,874      |  |   |            | 
| | 2013 |   |              |  |   | 88,134        |  |   | (39,266   | ) |   | 48,868       |  |   |            | 
| |      | $ | 647,903       |  | $ | 3,034,302     |  | $ | (416,222  | ) | $ | 3,265,983    |  | $ | 387,600     | 

Rent expense for the year ended April
30, 2008 was $829,846 (2007 - $297,453).

58

---

COUNTERPATH CORPORATION(Formerly CounterPath Solutions, Inc.)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Stated in U.S. Dollars)

|Note 12 | Related Party
      Transactions                                                                                                                                                                                                                                                   
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                    
|        | During the years ended April 30, 2008 and 2007, 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 stockholder of the Company:

| |                                   |   | Years Ended April 30, | 
| | --------------------------------- | - | --------------------- | 
| |                                   |   | 2008                  | 
| |                                   |   |                       | 
| | Interest on convertible debenture | $ | 40,000                | 
| | Lease payment                     | $ | 78,719                | 

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

The Companys Chairman is the Chairman
and founding shareholder of Mitel Networks Corporation (Mitel). NewHeights
Software Corporation entered into a distribution agreement with Mitel on June
15, 2004 and amended such agreement on August 7, 2007. NewHeights was acquired
by the Company on August 2, 2007 and was amalgamated on February 5, 2008 with
the Companys wholly-owned subsidiary, CounterPath Solutions R&D Inc. under
the name CounterPath Technologies Inc. The distribution agreement with Mitel
renews automatically for one-year periods and contains termination rights of
both parties. Under the terms of the distribution agreement, the Company earns a
specified fee from Mitel based on the number of product licenses sold to Mitel.
In addition, under an existing agreement with Mitel dated April 1, 2006, the
Company receives royalties of $0.52 (CDN$0.50) for each phone product sold by
Mitel prior April 1, 2011, with session initiation protocol technology up to a
maximum of approximately $1,362,100 (CDN$1,300,000).

The Companys software revenue for the
year ended April 30, 2008, pursuant to the terms of these agreements, was
$2,026,557 (2007 - $nil). Included in this amount was a payment of $400,000 for
royalties earned by the Company for enhancements it had completed to Mitels
session initiation protocol technology. In consideration of payment, the Company
agreed to terminate future payment obligations of Mitel associated with the
session initiation protocol technology.

As at April 30, 2008, the Company has
an accounts receivable balance from Mitel of $1,177,000 (April 30, 2007 - $nil).

During the year ended April 30, 2008,
the Company reimbursed Mitel for certain expenses on behalf of the Company and
another related corporation to Mitel totaling $51,882 (April 30, 2007 - $nil)
and the Company was paid $12,199 by a related corporation to Mitel.

During the year ended April 30, 2008,
the Company through its wholly owned subsidiary, FirstHand Technologies Inc.,
paid $71,500 (April 30, 2007 - $nil) to Kanata Research Park Corporation (KRP)
for leased office space. KRP is controlled by the Companys Chairman. As at
April 30, 2008, the Company had an accounts payable balance to KRP of $2,656
(April 30, 2007 -$nil).

In addition, during the year ended
April 30, 2008, the Company paid a director of the Company $10,339 (April 30,
2007 - $nil) for use of his apartment.

|Note 13 | Contingent
      Liability                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | On February 17, 2006, a competitor filed a statement of
      claim in the Supreme Court of British Columbia claiming among other
      things, general, punitive and aggravated damages of unspecified amounts
      with respect to alleged business ethics matters. Management of the Company
      believes that the claim is without foundation or merit. Any loss as a
      result of this claim will be recorded in the period that the loss is
      probable and measurable.

59

---

COUNTERPATH CORPORATION(Formerly CounterPath
Solutions, Inc.)NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Stated in U.S. Dollars)

|Note 14 | Restructuring                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        | As a result of the Companys post acquisition activities,
      the Company has incurred restructuring costs of $558,394 and $nil during
      the years ended April 30, 2008 and 2007, respectively. Restructuring costs
      of $558,394 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.  At April 30,
    2008 we had a restructuring accrual for severance in the amount of $nil.

60

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**Item 8.**      
  **Changes in and Disagreements with Accountants on Accounting and Financial
  Disclosure.**

During
  our most recent fiscal year, there were no disagreements with our independent
  accounts on any matter of accounting principles or practices, financial statement
  disclosures or auditing scope procedures.

Item 8A(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 8A(T) as of April 30, 2008, our
  disclosure controls and procedures were not effective due to the existence of
  material weaknesses in our internal controls over financial reporting, as discussed
  below.

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 was not effective as of April 30, 2008 due to the following material
  weaknesses:

- Our company does not have in-house personnel with the technical knowledge
      to identify and address some of the reporting issues surrounding certain
      complex or non-routine transactions. Going forward, with material, complex
      and non-routine transactions, management will gain a thorough understanding
      of the transaction and seek guidance from third-party experts or consultants.
      Management corrected any errors prior to the release of our companys
      April 30, 2008 consolidated financial statements.
- Our companys administration is composed of a small number of administrative
      individuals resulting in a situation where limitations on segregation of
      duties exist. In order to remedy this situation we would need to hire additional
      staff to provide greater segregation of duties. Currently, it is not feasible
      to hire additional staff to obtain optimal segregation of duties. Management
      will reassess this matter in the following year to determine whether improvement
      in segregation of duty is feasible.

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.

61

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Changes in Internal Control Over Financial Reporting

There
  have been no changes in our internal control over financial reporting (as such
  term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during
  the quarter ended April 30, 2008 that have materially affected, or are reasonably
  likely to materially affect, our internal control over financial reporting.

**Item 8B.**     **Other
  Information.**

None.

PART III

The
  SEC allows us to include information required in this annual report by referring
  to other documents or reports which we have filed or will soon be filing with
  the SEC. We intend to file a definitive proxy statement relating to our annual
  meeting of shareholders to be held on October 1, 2008, not later than 120 days
  after the end of fiscal year covered by this annual report, and certain information
  therein is incorporated by reference in this annual report.

|**Item 9.** | **Directors, Executive Officers, Promoters, Control Persons and
      Corporate Governance; Compliance with Section 16(a) of the Exchange Act.**
|----------- | ------------------------------------------------------------------------------------------------------------------------------------------------

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
      39
      April 24, 2006Greg Pelling(2)
        Ontario, Canada
      Chief Strategy Officer, 
        Director
      49
      August 2, 2007David Karp 
        British Columbia, Canada
      Chief Financial Officer, 
        Treasurer, Secretary
      43
      September 7, 2006Jason Fischl 
        California, United States
      Chief Technical Officer
      39
      August 29, 2005Terence Matthews 
        Ontario, Canada
      Chairman of the Board, 
        Director
      65
      August 2, 2007Mark Bruk(3)(4)
        British Columbia, Canada
      Vice-Chairman of the Board, 
        Director
      49
      April 27, 2004Owen Matthews(5)
        British Columbia, Canada
      Vice-Chairman of the Board, 
        Director
      36
      August 2, 2007Chris Cooper(4)(5)
        British Columbia, Canada
      Director
      39
      August 17, 2005Larry Timlick(4)(5)
        British Columbia, Canada
      Director
      51
      June 17, 2005


|(1) | Appointed President and Chief Operating Officer on April
        24, 2006, Director on June 1, 2008 and President and Chief Executive Officer
        on April 30, 2008.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Appointed Chief Executive Officer on August 2, 2007
        and Chief Strategy Officer on April 30, 2008.                                                               
|(3) | Chief Executive Officer between April 27, 2004 and August
        2, 2007.                                                                                              
|(4) | Member of our Audit Committee.                                                                                                                                          
|(5) | Member of our Compensation Committee.                                                                                                                                   

62

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Business
  Experience

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

**Donovan
  Jones**

Mr.
  Jones is a director of our company, has been our President and Chief Executive
  Officer since April 30, 2008 and was President and Chief Operating Officer since
  April 2006. Between May 2005 and April 2006, he was our companys Vice
  President of Sales. Prior to this, from February 2005 and June 2006, Mr. Jones
  was with a boutique investment banking firm, where he was responsible for sourcing
  and executing transactions for mid-market private companies. From May 1996 to
  October 2004, with TELUS Communications, Canadas second largest Telecommunications
  company, Mr. Jones held increasingly senior positions in Corporate Development
  and Client Solutions, which had him involved in planning and executing a series
  of merger, acquisition and divestiture activities in the Telecommunications,
  Application Development and Data Network Integration space. Additionally, Mr.
  Jones was involved with the strategic planning process for businesses focused
  on Application and Web Development, Hosting, Human Resources, Supply Operations
  and Sales Efficiency; Mr. Jones efforts with TELUS culminated in his position
  of Director/Chief Operating Officer Marketing with responsibility for a business
  unit focused on the selling, implementing and management of Enterprise voice,
  data and IP infrastructure. Prior to this, Mr. Jones consulted on strategy,
  process improvement, human resource strategy, and funding for several software
  and high technology companies. Mr. Jones holds a Masters in Business Administration
  from the University of Calgary and an Economics degree from the University of
  Alberta.

**Terence
  Matthews**

Mr.
  Matthews is our Chairman of our board of directors 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 our board
  of directors, 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. 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.

63

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**Owen
  Matthews**

Mr.
  Matthews is our Vice-Chairman of our board of directors 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. Matthews'
  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.

**Greg
  Pelling**

Mr.
  Pelling is currently our Chief Strategy Officer and 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. 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.

**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.

**Larry
  Timlick**

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

64

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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.

**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 in raising capital
  includes raising capital for companies in a variety of industries. Mr. Karp
  has also managed a number of merger, acquisition and restructuring assignments
  for 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.

**Jason
  Fischl**

Mr.
  Fischl has been our Chief Technology Officer since September 2005. Mr. Fischl
  leads the expansion of the Issuer’s portfolio of softphones and SDKs;
  drives the strategic direction for product planning and architecture; and has
  the responsibility of providing technical and solution leadership to customers.
  Between February 2005 and September 2005, Mr. Fischl was a founder of the consulting
  firm SIP Edge, which provides SIP/VoIP client/server architecture and implementation
  consulting. Prior to co-founding SIP Edge, he was a founder and the CTO of PurpleComm,
  Inc. between May 2003 and February 2005, which has operations in Taipei, Beijing,
  Shanghai, and Santa Clara. PurpleComm, under the brand TelTel, is a SIP service
  provider offering residential VoIP, presence and Instant Messaging services
  to users around the world, with a primary focus on the Asian marketplace. TelTel
  launched in July 2004 and rapidly grew to over 1 million subscribers, making
  it the largest SIP deployment in the world at the time. Prior to co-founding
  PurpleComm, he was a founder and CTO of Cathay Networks in August 2000, which
  developed a SIP-based IP Centrex system. Mr. Fischl is also one of the founding
  board members of both SIPfoundry and Vovida.org. In 2002, he helped found the
  reSIProcate open source SIP stack project and has been one of its key contributors.

Family
  Relationships

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

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

Involvement
  in Certain Legal Proceedings

Our
  directors, executive officers and control persons have not 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.

Compliance
  with Section 16(A)of the Securities Exchange Act of 1934

Section
  16(a) of the Securities Exchange Act of 1934 requires our officers and directors,
  and persons who own more than ten percent 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,
  2008 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 FormsGreg Pelling
      1(1)
      2
      NilTerence Matthews
      2(1)(2)
      8
      NilOwen Matthews
      1(1)
      1
      NilLarry Timlick
      1(2)
      5
      Nil


|(1) | The named officer, director or greater than 10% shareholder,
        as applicable, filed a late Form 3  Initial Statement of Beneficial
        Ownership of Securities.        
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                   
|(2) | The named officer, director or greater than 10% shareholder,
        as applicable, failure to file a Form 4  Statement of Changes in
        Beneficial Ownership of Securities.

65

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Code
  of Ethics

Effective
  July 20, 2004, our board of directors adopted a Code of Business Conduct and
  Ethics 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 sets forth written standards that are designed to
  deter wrongdoing and to promote:

| | 1. | honest and ethical conduct, including the ethical handling
        of actual or apparent conflicts of interest between personal and professional
        relationships;                              
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                      
| | 2. | 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;         
| |    |                                                                                                                                                                                                      
| | 3. | compliance with applicable governmental laws, rules
        and regulations;                                                                                                                         
| |    |                                                                                                                                                                                                      
| | 4. | the prompt internal reporting of violations of the Code
        of Business Conduct and Ethics to an appropriate person or persons identified
        in the Code of Business Conduct and Ethics; and
| |    |                                                                                                                                                                                                      
| | 5. | accountability for adherence to the Code of Business
        Conduct and Ethics.                                                                                                                     

Our
  Code of Business Conduct and Ethics 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. 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 by our officers.

In
  addition, our Code of Business Conduct and Ethics 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 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 by another.

Our
  Code of Business Conduct and Ethics was filed with the SEC as Exhibit 14.1 to
  our annual report on Form 10-KSB dated April 30, 2004 filed on July 29, 2004.
  Our Code of Business Conduct and Ethics is also posted on our website at www.counterpath.com.
  We will provide a copy of the Code of Business Conduct and Ethics 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 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.

66

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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,
  2008, the Audit Committee held two meetings. The Audit Committee currently consists
  of Chris Cooper, Mark Bruk and Larry Timlick. Chris Cooper acts as the Audit
  Committee Chairman. Mr. Cooper and Mr. Timlick are also non-employee directors
  of our company. Chris Cooper is, and as of August 31, 2008, Larry Timlick will
  be, considered an independent director as defined by Rule 4200(a)(15) of the
  Rules of Nasdaq Marketplace Rules and Multilateral Instrument 52-110, adopted
  by various Canadian securities commissions. Each of the members of the Audit
  Committee are financially literate as defined in Multilateral Instrument 52-110.
  For a description of Messers. Cooper, Bruk and Timlick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 hereto 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 our 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. While our board of directors has confidence in the ability and
  the effectiveness of its Audit Committee, our board of directors has determined
  that no current Audit Committee member qualifies as an Audit Committee financial
  expert. However, our board of directors believes that the current members of
  the Audit Committee are qualified and collectively have sufficiently extensive
  financial training and experience to carry out the duties and responsibilities
  of the Audit Committee.

Item 10.      Executive Compensation.

Summary
  Compensation Table

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, 2008; 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, 2008,

who we will
  collectively refer to as our named executive officers, of our company for the
  years ended April 30, 2008 and 2007, 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:

67

---

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
      2008 
        2007
      185,634 
        158,323
      174,512 
        69,847
      Nil 
        Nil
      153,793 
        126,603
      19,984 
        Nil
      533,923 
        354,773Greg Pelling (4)
        Chief Strategy 
        Officer and Director
      2008 
        2007
      155,891 
        N/a
      83,754 
        N/a
      Nil 
        N/a
      131,113 
        N/a
      17,914 
        N/a
      388,672 
        N/aDavid Karp 
        Chief Financial 
        Officer, Treasurer 
        and Secretary
      2008 
        2007
      176,328 
        102,201
      72,771 
        13,064
      Nil 
        Nil
      96,717 
        62,866
      Nil 
        Nil
      345,816 
        178,131Jason Fischl 
        Chief Technology 
        Officer
      2008 
        2007
      176,187 
        158,340
      27,090 
        Nil
      Nil 
        Nil
      125,579 
        97,403
      Nil 
        Nil
      328,856 
        255,743David Snell (5)
        Vice President of 
        Sales
      2008 
        2007
      152,427 
        N/a
      64,802 
        N/a
      Nil 
        N/a
      20,495 
        N/a
      39,051 
        N/a
      276,775 
        N/a


|(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, 2008, 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 effective April 24, 2006 and our President and Chief Executive
        Officer on April 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 was appointed our Chief Strategy Officer.                                                                    
|(5) | Mr. Snell was appointed our Vice President of Sales
        on April 23, 2007 until April 24, 2008.                                                                                                                                                          

Employment
  Agreements with Our Named Executive Officers

Donovan
  Jones entered into an employment agreement with our company dated September
  13, 2007, whereby we pay to Mr. Jones CDN$198,000 per year. In addition, Mr.
  Jones may earn a bonus of up to 100% of his salary 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.

Greg
  Pelling entered into an employment agreement with our company dated September
  13, 2007 and amended June 25, 2008. Mr. Pelling resigned as Chief Executive
  Officer and was appointed Chief Strategy Officer on April 29, 2008. Under the
  terms of the amended employment agreement, we pay to Mr. Pelling CDN$200,000
  per year. In addition, Mr. Pelling may earn a bonus of up to 90% of his salary
  based upon the achievement of pre-determined objectives. Mr. Pelling is also
  entitled to a bi-monthly expense allowance of CDN$2,000. If Mr. Pellings
  employment agreement is terminated without cause we will pay to Mr. Pelling
  (i) CDN$95,000 and health benefits for three months should Mr. Pelling accept
  a position with a Wesley Clover Corporation company, or a company in which Wesley
  Clover has an investment (a Wesley Clover Company); or (ii)
  CDN$190,000 and health benefit insurance coverage for six months should Mr.
  Pelling accept a position with a company other than a Wesley Clover Company;
  otherwise (iii) CDN$380,000 and health benefit insurance coverage for twelve
  months. However, if there is either a change of control (to the extent of at
  least 40.01% of the equity of our company, Mr. Pelling may, without cause, terminate
  his employment upon one months' written notice to our company. Following such
  notice, our company will pay to Mr. Pelling CDN$380,000 and health

68

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benefit insurance
  coverage for a period of 12 months from termination. In each of the foregoing
  circumstances, all options, which have not vested shall immediately vest and
  become exercisable for a period of twelve months.

David
  Karp entered into an employment agreement with our company dated September 7,
  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.

Jason
  Fischl entered into an employment agreement with our company dated August 29,
  2005, whereby we appointed Mr. Fischl our Chief Technology Officer. Mr. Fischls
  current salary is CDN$180,000 per year. In addition, Mr. Fischl may earn a bonus
  of up to 30% of his salary based upon the achievement of pre-determined objectives.
  If the Employment Agreement is terminated for any reason other than for cause,
  we are required to pay CDN$90,000 and the issuance of 60,000 stock options.

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, 2008.

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
      62,500(1)
        50,000(2)
        13,162(3)
        64,975(4)
      37,500(1)
        30,000(2)
        10,238(3)
        70,625(4)
            
      $1.95 
        $1.95 
        $1.95 
        $3.05
      October 10, 2015 
        October 10, 2015 
        January 10, 2016 
        May 23, 2016Greg Pelling
      66,667(5)
      133,333(5)
      
      $2.00
      December 31, 2014David Karp
      95,000(6)
      145,000(6)
      
      $2.15
      September 7, 2016Jason Fischl
      150,000(7)
        17,550(8)
        19,492(9)
      90,000(7)
        13,650(8)
        21,188(9)
          
      $1.95 
        $1.95 
        $3.05
      October 10, 2015 
        January 10,2016 
        May 23,2016David Snell(12)
      18,333(10)
        3,333(11)
        
        
      $1.70 
        $2.00
      May 1, 2012 
        August 8,2012


|(1)  | Granted on October 10, 2005. 
|---- | -----------------------------
|(2)  | Granted on October 10, 2005. 
|(3)  | Granted on January 10, 2006. 
|(4)  | Granted on May 23, 2006.     
|(5)  | Granted on August 2, 2007.   
|(6)  | Granted on September 7, 2006.
|(7)  | Granted on October 10, 2005. 
|(8)  | Granted on January 10, 2006. 
|(9)  | Granted on May 23, 2006.     
|(10) | Granted on May 1, 2007       
|(11) | Granted on August 8, 2007.   

69

---

|(12) | Employment terminated on April 24, 2008.
|---- | ----------------------------------------

Stock
  Option Grants during the year ended April 30, 2008 to Named Executive Officers

The
  following table provides information as to individual grants of options to the
  named executive officers during the year ended April 30, 2008.

Name
      Securities, UnderOption Granted(#)
      Percent of TotalOptions
        Grantedto Employees inFinancial Year
      Exercise or BasePrice ($/Security)
      Market
        Value ofSecuritiesUnderlyingOptions
        on Dateof Grant($/Security)
      Expiration DateDonovan Jones
      Nil
      Nil
      N/a
      Nil
      N/aGreg Pelling
      200,000
      13%
      $2.00
      Nil
      December 31, 2014David Karp
      Nil
      Nil
      N/a
      Nil
      N/aJason Fischl
      Nil
      Nil
      N/a
      Nil
      N/aDavid Snell
      80,000 
        20,000
      5% 
        1%
      $1.70 
        $2.00
      Nil
      May 1, 2012 
        August 8, 2012


Aggregate
  Option Exercises during the year ended April 30, 2008 by Named Executive Officers

The
  following table provides information as to options exercised, if any, by each
  of the named executive officers during the year ended April 30, 2008 and the
  value of options held by those officers at year-end measured in terms of the
  last reported sale price for the shares of our common stock on April 30, 2008.

Name
      SharesAcquired onExercise (#)
      ValueRealized ($)
      Number of Securities UnderlyingUnexercised Options atApril 30, 2008
      Value
        of Unexercised In-the-Money Options atApril
        30, 2008(1)**($)**Exercisable
      Unexercisable
      Exercisable
      UnexercisableDonovan Jones
      Nil
      Nil
      190,637
      148,363
      Nil
      NilGreg Pelling
      Nil
      Nil
      66,667
      133,333
      Nil
      NilDavid Karp
      Nil
      Nil
      95,000
      145,000
      Nil
      NilJason Fischl
      Nil
      Nil
      187,042
      124,838
      Nil
      NilDavid Snell (2)
      Nil
      Nil
      21,666
      Nil
      $1,833
      Nil


|(1) | The values for in-the-money options are
        calculated by determining the difference between the fair market value
        of the securities underlying the options as of April 30, 2008 ($1.80 per
        share on OTC Bulletin Board) and the exercise price of the individual's
        options.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                           
|(2) | Of the exercisable options, 18,333 options have an exercise
        price of $1.70.                                                                                                                                                                                                                       

Compensation
  of Directors

During
  the fiscal year ended April 30, 2008, 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, 2008,
  there were no options granted to our directors except as set forth below. We
  currently have no formal plan for compensating our directors for their services
  in their capacity as directors, although we may elect to issue stock options
  to such persons in the future. Directors are entitled to reimbursement for reasonable
  travel and other out-of-pocket expenses incurred in connection with attendance
  at meetings of our board of directors. Our board of directors may award special
  remuneration to any director undertaking any special services on our behalf
  other than services ordinarily required of a director.

70

---

The
  following table summarizes compensation paid to all of our non-employee directors:

Name
      FeesEarnedor Paidin Cash($)
      StockAwards($)
      OptionAwards($)
      Non-QualifiedDeferredCompensationEarnings($)
      Non-EquityIncentive PlanCompensation($)
      All OtherCompensation($)
      Total($)Terence Matthews
      Nil
      Nil
      24,708 (1)
      N/A
      N/A
      N/A
      24,708Owen Matthews
      Nil
      Nil
      Nil
      N/A
      N/A
      N/A
      NilChris Cooper
      Nil
      Nil
      Nil
      N/A
      N/A
      N/A
      NilLarry Timlick
      Nil
      Nil
      Nil
      N/A
      N/A
      N/A
      Nil


|(1) | Terence Matthews stock options in NewHeights Software
        Inc. were replaced with an equal number of stock options in our company
        on August 2, 2007, when our company completed the acquisition of NewHeights
        Software.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

**Item 11.**     **Security
  Ownership of Certain Beneficial Owners and Management and Related Stockholder
  Matters.**

We
  have set forth in the following table certain information regarding the shares
  of our common stock beneficially owned on August 5, 2008 for (i) each stockholder
  we know to be the beneficial owner of 5% or more of the shares of our common
  stock, (ii) each of our company's executive officers and directors, (iii) the
  nominees for election to our board of directors and (iv) all executive 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 August 5, 2008, we had 28,355,236 shares of our common
  stock issued and outstanding. Accordingly, 28,355,236 shares are entitled to
  one (1) vote per share at any meeting of shareholders. In addition, as of August
  5, 2008, there was one (1) class A special voting share of our company and 369,841
  exchangeable shares of our subsidiary, 6789722 Canada Inc., outstanding. The
  class A special voting share of our company entitles Valiant Trust Company,
  the trustee under the Voting and Exchange Trust Agreement among our company,
  6789722 Canada Inc. and Valiant Trust Company dated as of August 2, 2007, to
  one (1) vote for each exchangeable share of our subsidiary, 6789722 Canada Inc.,
  outstanding as of August 5, 2008. Each exchangeable share of our subsidiary,
  6789722 Canada Inc., is exchangeable at any time, at the election of the holder
  thereof, or in certain circumstances, our company, into one (1) share of our
  common stock.

Name and Address of Beneficial Owner
      Amount
        and Nature ofBeneficial Ownership(1)
      Percentageof Class(2)Terence Matthews 
        350 Legget Drive, P.O. Box 13089 
        Kanata, Ontario
      6,125,950 (3)
      21.3%Steven Bruk 
        3790 Southridge Avenue 
        West Vancouver, BC, Canada 
        V7V 3J1
      3,746,468 (4)
      12.9%Owen Matthews 
        2710 Thorpe Place 
        Victoria, BC V8R 2W4
      2,277,467
      8.0%Mark Bruk 
        Suite 302, 738 Broughton Street 
        Vancouver, British Columbia 
        Canada V6G 3A7
      1,363,131 (5)
      4.8%Donovan Jones 
        2266  1384 Street 
        White Rock, British Columbia 
        Canada V3C 2G7
      275,921 (6)
      1.0%Greg Pelling 
        Suite 908-360 Bloor Street East 
        Toronto, Ontario, 
        M4W 3M3
      266,667 (7)
      **


71

---

Name and Address of Beneficial Owner
      Amount
        and Nature of Beneficial Ownership(1)
      Percentage
        of Class(2)Jason Fischl 
        415A Lily Street 
        San Francisco, California 
        United States 94102
      221,530 (8)
      **David Karp 
        3780 Bayridge Ave. 
        West Vancouver, British Columbia 
        Canada V7V 3J2
      135,000 (9)
      **Chris Cooper 
        5630 Olympic Street, 
        Vancouver, British Columbia 
        Canada V6N 1Z5
      64,985 (10)
      **Larry Timlick 
        4750 The Glen 
        West Vancouver, British Columbia 
        Canada V7S 3C3
      50,000 (11)
      **Peter Charbonneau 
        Tower B, 830  555 Legget Drive 
        Ottawa, Ontario 
        Canada K2K 2X3
      Nil (12)
      NilWilliam Jin 
        200 Front Street West, Suite 3003 
        P.O. Box 10 
        Toronto, Ontario 
        Canada M5V 3K2
      Nil (13)
      NilDirectors and Executive Officers as a Group
      14,527,120
      47.4%


|**  | 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 28,355,236 shares of common stock outstanding on August 5, 2008,
        including shares of common stock subject to options or warrants currently
        exercisable or convertible, or exercisable or convertible within 60 days
        of August 5, 2008 which are deemed outstanding for computing the percentage
        of the person holding such option or warrant but are not deemed outstanding
        for computing the percentage of any other person.                                                                                                                                                                                                                                                                                                                                                                                   
|(3) | Includes
        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
        226,000 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 August
        5, 2008, and are exercisable at a price of $1.95 per share, expiring on
        January 10, 2011. Also includes 16,657 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
        225,950 shares of common stock subject to vested stock options of a total
        of 589,000 shares of common stock subject to stock options and held by
        Mr. Jones that are exercisable within 60 days of August 5, 2008, including
        131,250 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, 15,600
        stock options issued on January 10, 2006 that are exercisable at $1.95
        per share until January 10, 2016, 79,100 stock options issued on May 23,
        2006 that are exercisable at $3.05 per share until May 23, 2016. Also
        includes 16,657 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
        66,667 shares of common stock subject to vested stock options of a total
        of 200,000 shares of common stock subject to stock options issued on August
        2, 2007 and held by Mr. Pelling that will be vested within 60 days of
        August 5, 2008, and are exercisable at a price of $2.00 per share, expiring
        on December 31, 2014. Also includes 200,000 exchangeable shares, each
        exchangeable share of which entitles Mr. Pelling to exchange one exchangeable
        share for one share of common stock.                                                                                                                                                                                                                                                                                                                    

72

---

|(8)  | Includes 219,530 shares of common stock subject to vested
        stock options of a total of 311,880 shares of common stock subject to
        stock options and held by Mr. Fischl that are exercisable within 60 days
        of August 5, 2008, including 175,000 stock options issued on June 1, 2005
        and repriced on October 10, 2005 that are exercisable at $1.95 per share
        until October 7, 2010, 20,800 stock options issued on January 10, 2006
        that are exercisable at $1.95 per share until January 10, 2016 and 23,730
        stock options issued on May 23, 2006 that are exercisable at $3.05 per
        share until May 23, 2016.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(9)  | Includes 120,000 shares of common stock subject to vested
        stock options of a total of 240,000 shares of common stock subject to
        stock options issued on September 7, 2006 and held by Mr. Karp that will
        be vested within 60 days of August 5, 2008, and are exercisable at a price
        of $2.15 per share, expiring on September 7, 2016. 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.                                                                                                               
|(10) | 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.                                                                                                                                                                                                                               
|(11) | 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.                                                                                                                                                                                                                                                                                                                                                                                                                        
|(12) | Mr. Charbonneau is a principal of the general partner
        of Skypoint Telecom Fund II, which holds 1,807,692 shares of common stock.
        Mr. Charbonneau is a nominee to our board of directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(13) | 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. Mr.
        Jin is a nominee to our board of directors.                                                                                                                                                                                                                           

Changes
  in Control

As
  of the date of this proxy statement, management had no knowledge of any arrangements
  which may at a subsequent date result in a change in control of our company.

Equity
  Compensation Plan Information

We
  adopted our current stock option plans, entitled the 2004 Stock Option plan
  on May 18, 2004 and the Third Amended and Restated 2005 Stock Option Plan on
  February 1, 2008. The following table provides a summary of the number of options
  granted under our stock option plans, the weighted average exercise price and
  the number of options remaining available for issuance all as at April 30, 2008.

Number
        of securities to be issued upon exercise of
        outstanding options
      Weighted-Average
        exercise price of outstanding options, warrants
        and rights
      Number
        of securities remaining available for future issuance
        under equity compensation plans(1)Equity compensation plans approved by 
        security holders
      N/A
      N/A
      N/AEquity compensation plans not approved 
        by security holders
      3,794,263 (1)
      $2.20
      1,265,737 (2)Total
      3,794,263
      $2.20
      1,265,737


|(1) | As of April 30, 2008, we had issued stock options to
        purchase 800,000 shares of our common stock pursuant to our 2004 Stock
        Option Plan and stock options to purchase 2,994,263 shares or our common
        stock pursuant to our 2005 Stock Option Plan, as amended.                                
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                       
|(2) | As of April 30, 2008, there were no underlying shares
        of our common stock remaining and available to be issued under our 2004
        Stock Option Plan and 1,265,737 underlying shares of our common stock
        remaining and available to be issued under our 2005 Stock Option Plan,
        as amended.

**Item 12.**     **Certain
  Relationships and Related Transactions, and Director Independence.**

No
  director, executive officer, principal shareholder holding at least 5% of our
  shares of our common stock, or any family member thereof, had any material interest,
  direct or indirect, in any transaction, or proposed transactions, since May
  1, 2007, 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 three completed
  fiscal years other than the following:

Our
  Chairman of our board of directors 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

73

---

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, we earn a specified fee from Mitel
  based on the number of product licenses sold to Mitel. In addition, under an
  existing agreement with Mitel dated April 1, 2006, we received royalties of
  $0.52 (CDN$0.50) for each phone product sold by Mitel prior April 1, 2011, with
  session initiation protocol technology up to a maximum of approximately $1,362,100
  (CDN$1,300,000). Our software revenue for the year ended April 30, 2008, pursuant
  to the terms of these agreements, was $2,026,557 (2007 - $nil). Included in
  this amount was a payment of $400,000 for royalties earned by our company for
  enhancements we completed to Mitels session initiation protocol technology.
  In consideration of payment, we agreed to terminate future payment obligations
  of Mitel associated with the session initiation protocol technology. On July
  31, 2008 we entered into a source code license agreement whereby we licensed
  to Mitel the source code for our Your Assistant product in consideration of
  a payment of $650,000. Associated with the agreement are ongoing license fees
  per copy deployed to be paid by Mitel over four years and declining from $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 the acquisition of NewHeights, Wesley Clover Corporation, a
  company controlled by Terence Matthews, the Chairman of our board of directors,
  completed private placements in our company of $1.5 million, $1.0 million and
  $1.0 million on November 2, 2007, February 2, 2008 and March 2, 2008, respectively,
  under which we issued an aggregate of 1.75 million shares of common stock at
  $2.00 per share. In connection with a non-brokered private placement of 2,433,439
  units which closed on July 31, 2008, Wesley Clover Corporation, 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, we expect to record a compensatory charge
  in the first quarter of fiscal 2009 of approximately $209,000.

Director
  Independence

We
  currently act with seven directors, consisting of Mark Bruk, Chris Cooper, Donovan
  Jones, Owen Matthews, Terence Matthews, Greg Pelling and Larry Timlick. We have
  determined that Chris Cooper is, and as of August 31, 2008, Larry Timlick will
  be, an independent director as defined by Rule 4200(a)(15) of the Rules of Nasdaq
  Marketplace Rules and Multilateral Instrument 52-110, adopted by various Canadian
  securities commissions.

**Item 13.**     **Exhibits.**

Exhibits required by Item 601 of Regulation S-B

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

74

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|4.2   | Form of Stock
        Option Agreement for 2004 Stock Option Plan (incorporated by reference
        from our Registration Statement on Form S-8 filed on June 14, 2005).                                                                                                                                                   
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                             
|4.3   | 2005 Stock Option
        Plan effective March 4, 2005 (incorporated by reference from our Registration
        Statement on Form S-8 filed on June 14, 2005).                                                                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                             
|4.4   | Form of Stock
        Option Agreement for 2005 Stock Option Plan (incorporated by reference
        from our Registration Statement on Form S-8 filed on June 14, 2005).                                                                                                                                                   
|      |                                                                                                                                                                                                                                                                                                                             
|4.5   | Form of Amended
        & Restated Stock Option and Subscription Agreement (Canadian) (incorporated
        by reference from our Current Report on Form 8-K filed On October 14,
        2005).                                                                                                                            
|      |                                                                                                                                                                                                                                                                                                                             
|4.6   | Form of Amended
        & Restated Stock Option and Subscription Agreement (US) (incorporated
        by reference from our Current Report on Form 8-K filed On October 14,
        2005).                                                                                                                                  
|      |                                                                                                                                                                                                                                                                                                                             
|(10)  | **Material
        Contracts**                                                                                                                                                                                                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                             
|10.1  | Employment Agreement
        between CounterPath Solutions, Inc. and Jason Fischl dated August 29,
        2005 (incorporated by reference from our Annual Report on Form 10-KSB
        filed on July 31, 2006).                                                                                                           
|      |                                                                                                                                                                                                                                                                                                                             
|10.2  | Employment Agreement
        between CounterPath Solutions, Inc. and Donovan Jones dated June 1, 2005
        (incorporated by reference from our Annual Report on Form 10-KSB filed
        on July 31, 2006).                                                                                                             
|      |                                                                                                                                                                                                                                                                                                                             
|10.3  | Employment Agreement
        between CounterPath Solutions, Inc. and David Karp dated September 11,
        2006 (incorporated by reference from our Quarterly Report on Form 10-QSB
        filed on September 14, 2006).                                                                                                  
|      |                                                                                                                                                                                                                                                                                                                             
|10.4  | Form of Subscription
        Agreement dated November 30, 2006, between our company and various investors
        (incorporated by reference from our Current Report on Form 8-K filed on
        December 7, 2006).                                                                                                        
|      |                                                                                                                                                                                                                                                                                                                             
|10.5  | Form of Subscription
        Agreement dated November 30, 2006, between our company and KMB Trac Two
        Holdings Ltd (incorporated by reference from our Current Report on Form
        8-K filed on December 7, 2006).                                                                                                
|      |                                                                                                                                                                                                                                                                                                                             
|10.6  | Form of Convertible
        Note dated November 30, 2006 (incorporated by reference from our Current
        Report on Form 8-K filed on December 7, 2006).                                                                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                             
|10.7  | Form of Warrant
        Certificate dated November 30, 2006 (incorporated by reference from our
        Current Report on Form 8-K filed on December 7, 2006).                                                                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                             
|10.8  | Amended Employment
        Agreement between Donovan Jones and CounterPath Solutions R&D Inc.,
        a wholly owned subsidiary of CounterPath Solutions, Inc. dated February
        1, 2007 (incorporated by reference from our Quarterly Report on Form 10QSB
        filed on March 9, 2007).                          
|      |                                                                                                                                                                                                                                                                                                                             
|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).                                                                                                       

75

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

76

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|(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).
|     |                                                                                                                                          
|(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. (incorporated
      in the Province of Ontario, Canada)                                                      
|     |                                                                                                                                          
|     | BridgePort Networks, Inc. (incorporated
      in the state of Delaware)                                                                  
|     |                                                                                                                                          
|     | BridgePort Networks (Europe) Ltd.
      (incorporated in the United Kingdom)                                                             
|     |                                                                                                                                          
|     | BridgePort Networks K.K. (incorporated
      in Japan)                                                                                   
|     |                                                                                                                                          
|(31) | **Section 302 Certification**                                                                                                            
|     |                                                                                                                                          
|31.1 | Section
      302 Certification of Donovan Jones (filed herewith).                                                                       
|     |                                                                                                                                          
|31.2 | Section
      302 Certification of David Karp (filed herewith).                                                                          
|     |                                                                                                                                          
|(32) | **Section 906 Certification**                                                                                                            
|     |                                                                                                                                          
|32.1 | Section
      906 Certification of Donovan
      Jones and David Karp (filed herewith).                                                  

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, 2008 and 2007, were as follows:

2008
      
      
      2007Audit Fees
      $
      229,798
      
      $
      150,699Audit Related Fees
      
      Nil
      
      
      NilTax Fees
      $
      42,277
      
      
      24,214All Other Fees
      
      Nil
      
      
      NilTotal Fees
      $
      272,075
      
      $
      174,913


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 8-K and Form 8-K/A's
  in respect of acquisitions of NewHeights, FirstHand and BridgePort during the
  year.

Audit Related Fees

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

77

---

Tax Fees

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

All Other Fees

There
  were no fees paid to BDO Dunwoody LLP, that are not covered under the headings
  set out above during our fiscal year ended 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.

78

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SIGNATURES

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

COUNTERPATH CORPORATION

|By: | /s/ Donovan Jones                            
|--- | ---------------------------------------------
|    | Donovan Jones                                
|    | President, Chief Executive Officer & Director
|    | Date: September
      3, 2008                

In
  accordance with the Exchange Act, this annual 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                  | September
      3, 2008
|                     |                                        |                        
|/s/ Donovan Jones    |                                        |                        
|Donovan Jones        | President, Chief Executive Officer and | September
      3, 2008
|                     | Director                               |                        
|/s/ Greg Pelling     |                                        |                        
|Greg Pelling         | Chief Strategy Officer and Director    | September
      3, 2008
|                     |                                        |                        
|/s/ David Karp       |                                        |                        
|David Karp           | Chief Financial Officer, Treasurer and | September
      3, 2008
|                     | Secretary                              |                        
|/s/ Jason Fischl     |                                        |                        
|Jason Fischl         | Chief Technology Officer               | September
      3, 2008
|                     |                                        |                        
|/s/ Owen Matthews    |                                        |                        
|Owen Matthews        | Vice Chairman and Director             | September
      3, 2008
|                     |                                        |                        
|/s/ Mark Bruk        |                                        |                        
|Mark Bruk            | Vice Chairman and Director             | September
      3, 2008
|                     |                                        |                        
|/s/ Larry Timlick    |                                        |                        
|Larry Timlick        | Director                               | September
      3, 2008
|                     |                                        |                        
|/s/ Chris Cooper     |                                        |                        
|Chris Cooper         | Director                               | September
      3, 2008

79

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