Item 1A. Risk Factors.

Much of the information included in this annual report includes or is based upon estimates, projections or other “forward"forward looking statements”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"forward looking statements”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"forward looking statements”statements".

Risks Associated with our Business and Industry

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

            PresentlyFor the twelve month period ending April 30, 2020, our operating cash flows are notwere sufficient to meet operating and capital expenses.  Our business plan calls for continued research and development of our products and expansion of our market share. We willmay require additional financing to fund working capital and pay for operating expenses and capital requirements until we achieve a positive cash flow.

There is no assurance that actual cash requirements will not exceed our estimates. In particular, additional capital may be required in the event that:

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

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

• we incur any significant unanticipated expenses.

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

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

Our auditors have included in their audit report for the fiscal year ended April 30, 2020 a "going concern" explanatory paragraph raising substantial doubt as to our ability to continue as a going concern.

Our ability to meet our current liabilities of $10,499,343 million as of April 30, 2020, and to continue as a going concern, is dependent on our ability to increase revenue, reduce costs, achieve a satisfactory level of profitable operations, obtain additional sources of suitable and adequate financing and further develop and execute on our business plan. We may never reach sustained profitability. As a result of the going concern uncertainty, there is an increased risk that you could lose the entire amount of your investment in our company, which assumes the realization of our assets and the satisfaction of our liabilities and commitments in the normal course of business.

Our revenue, operating results and gross margin can fluctuate significantly and unpredictably from quarter - to - quarter and from year - to - year, and we expect that they will continue to do so, which could have a material adverse effect on our operating results.

The rate at which our customers order our products, and the size of these orders, are highly variable and difficult to predict. In the past, we have experienced significant variability in our customer purchasing practices on a quarterly and annual basis, and we expect that this variability will continue, as a result of a number of factors, many of which are beyond our control, including:

• 13demand for our products and the timing and size of customer orders;

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  •	length of time of deployment of our products by our customers;
  •	customers’ budgetary constraints;
  •	competitive pressures; and
  •	general economic conditions.

• length of sales cycles, which may be extended by selling our products through channel partners;

• length of time of deployment of our products by our customers;

• customers' budgetary constraints;

• competitive pressures;

• health epidemics and other outbreaks, including COVID-19, which could significantly disrupt our operations; and

• general economic conditions.

As a result of this volatility in our customers’customers' purchasing practices, our revenue has historically fluctuated unpredictably on a quarterly and annual basis and we expect this to continue for the foreseeable future.  Our budgeted expense levels depend in part on our expectations of future revenue. Because any substantial adjustment to expenses to account for lower levels of revenue is difficult and takes time, if our revenue declines, our operating expenses and general overhead would likely be high relative to revenue, which could have a material adverse effect on our operating margin and operating results.

We may be unable to predict subscription renewal rates and the impact these rates may have on our future revenue and operating results.

Some of our products and services are sold on a subscription basis that is generally month-to-month or one year in length.  Our customers have no obligation to renew their subscriptions for our services after the expiration of their initial subscription period, and some customers elect not to renew. We cannot provide assurance that our subscriptions will be renewed at the same or higher level of service, for the same number of licenses or for the same duration of time, if at all.  We cannot provide assurance that we will be able to accurately predict future customer renewal rates.  Our customers’customers' renewal rates may decline or fluctuate as a result of a number of factors, including their level of satisfaction with our services, our ability to continue to regularly add features and functionality, the reliability (including uptime) of our subscription services, the prices of our services, the prices of services offered by our competitors, mergers and acquisitions affecting our customer base, reductions in our customers’customers' spending levels or declines in customer activity as a result of economic downturns or uncertainty in financial markets.  If our customers do not renew their subscriptions for our services or if they renew on terms less favorable to us, our revenue may decline.

If we are not able to manage our operating expenses, then our financial condition may be adversely affected.

Operating expenses increaseddecreased to $12,900,893 for the year ended April 30, 2020 from $15,931,665 for the year ended April 30, 2019 from $15,175,511and our revenue increased to $12,101,326 for the year ended April 30, 2018 and our revenue decreased to2020 from $10,764,904 for the year ended April 30, 2019 from $12,381,741 for the year ended April 30, 2018.2019.  Our ability to reach and maintain profitability is conditional upon our ability to manage our operating expenses. There is a risk that we will have to increase our operating expenses in the future. Factors that could cause our operating expenses to increase include our determination to spend more on sales and marketing in order to increase product sales or our determination that more research and development expenditures are required in order to keep our current software products competitive or in order to develop new products for the market. To the extent that our operating expenses increase without a corresponding increase in revenue, our financial condition would be adversely impacted.

Our level of indebtedness and debt service obligations could adversely affect our financial condition and may make it more difficult for us to fund our operations.

On October 10, 2018, as amended on July 10, 2019 and February 1, 2020, our company entered into a loan agreement (the “Loan Agreement”"Loan Agreement") with Wesley Clover International Corporation and KMB Trac Two Holdings Ltd. (collectively, the “Lenders”"Lenders"), pursuant to which the Lenders agreed to loan to our company an aggregate principal amount of up to $5,000,000. As of July 14, 2020, Wesley Clover International Corporation owns approximately 25.3%25.7% of our common shares and is controlled by the Chairman of our company, Terence Matthews and KMB Trac Two Holdings Ltd. is represented by Steven Bruk, a director of our company and Karen Bruk, Mr. Bruk’sBruk's spouse. KMB Trac Two Holdings Ltd., Steven Bruk and Karen Bruk, together, own approximately 20.5%21.3% of the Company’sour common shares. Pursuant to the terms of the Loan Agreement and subsequent amendments, the loan is unsecured and will be made available in multiple advances at the discretion of our company and, will beareffective February 1, 2020, accrues interest at a rate of 8% per year, payable monthly.compounded daily. The outstanding principal and any accrued interest may be prepaid without penalty and is to be fully repaid on the date that is 30 months after the first advance.

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or before April 11, 2021. The loan is intended to be used for general working capital purposes. As of April 30, 2019,2030, the principal balance of the related party loan payable, including interest, was $3,000,000. This$4,079,459. On June 15, 2020, we repaid $2,000,000 of the principal loan balance is to be repaid on or before April 11, 2021.the Lenders.

This indebtedness may create additional financing risk for us, particularly if our business or prevailing financial market conditions are not conducive to paying off or refinancing our outstanding debt obligations at maturity. This indebtedness could also have important negative consequences, including the fact that we will need to repay our indebtedness by making payments of interest and principal, which will reduce the amount of money available to finance our operations, our research and development efforts and other general corporate activities. To the extent additional debt (including without limitation the additional advances) is added to our current debt levels, the risks described above could increase.

We may not have cash available to us in an amount sufficient to enable us to make interest or principal payments on our indebtedness when due.

Failure to satisfy our current and future debt obligations under the Loan Agreement, could result in an event of default and, as a result, the Lenders could accelerate all of the amounts due. In the event of an acceleration of amounts due under the Loan Agreement, as a result of an event of default, we may not have sufficient funds or may be unable to arrange for additional financing to repay our indebtedness.

We face larger and better-financed competitors, which may affect our ability to achieve or maintain 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.  In addition to price competition, increased competition may result in other aggressive business tactics from our competitors, such as:

Such competition may potentially adversely affect our profitability.

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

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

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

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

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

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

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

Our success and ability to compete depends to a significant degree on our proprietary technology incorporated in our software. If any of our competitors’competitors' copy or otherwise gain 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-Lite, and Softphone.com 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 divert resources from intended uses. 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.

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

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

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

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

Our use of open source software could impose limitations on our ability to commercialize our products.

We incorporate open source software into our products. Although we closely monitor our use of open source software, the terms of many open source software licenses have not been interpreted by U.S. courts, and there is a risk that such licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to sell our products. In such event, we could be required to make our proprietary software generally available to third parties, including competitors, at no cost, to seek licenses from third parties to continue offering our products, to re-engineer our products or to discontinue the sale of our products in the event re-engineering cannot be accomplished on a timely basis or at all, any of which could adversely affect our revenues and operating expenses.

We may not be able to obtain necessary licenses of third-party technology on acceptable terms, or at all, which could delay product sales and development and adversely impact product quality.

We have incorporated third-party licensed technology into our current products. We anticipate that we are also likely to need to license additional technology from third-parties to develop new products or product enhancements in the future. Third-party licenses may not be available or continue to be available to us on commercially reasonable terms. The inability to retain any third-party licenses required in our current products or to obtain any new third-party licenses to develop new products and product enhancements could require us to obtain substitute technology of lower quality or performance standards or at greater cost, and delay or prevent us from making these products or enhancements, any of which could seriously harm the competitive position of our products.

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Our products must interoperate with many different networks, software applications and hardware products, and this interoperability will depend on the continued prevalence of open standards.

Our products are designed to interoperate with our customers’customers' existing and planned networks, which have varied and complex specifications, utilize multiple protocol standards, software applications and products from numerous vendors and contain multiple products that have been added over time. As a result, we must attempt to ensure that our products interoperate effectively with these existing and planned networks. To meet these requirements, we have and must continue to undertake development and testing efforts that require significant capital and employee resources. We may not accomplish these development efforts quickly or cost-effectively, or at all. If our products do not interoperate effectively, installations could be delayed or orders for our products could be cancelled, which would harm our revenue, gross margins and our reputation, potentially resulting in the loss of existing and potential customers. The failure of our products to interoperate effectively with our customers’customers' networks may result in significant warranty, support and repair costs, divert the attention of our engineering personnel from our software development efforts and cause significant customer relations problems.

Additionally, the interoperability of our products with multiple different networks is significantly dependent on the continued prevalence of standards for IP multimedia services, such as SIP or Session Initiation Protocol. Some of our existing and potential competitors are network equipment providers who could potentially benefit from the deployment of their own proprietary non-standards-based architectures. If resistance to open standards by network equipment providers becomes prevalent, it could make it more difficult for our products to interoperate with our customers’customers' networks, which would have a material adverse effect on our ability to sell our products to service providers.

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

We are subject to the credit risk of our customers.  Businesses that are good credit risks at the time of sale may become bad credit risks over time.  In times of economic recession, the number of our customers who default on payments owed to us tends to increase. If we fail to adequately assess and monitor our credit risks, we could experience longer payment cycles, increased collection costs and higher bad debt expense.

We are exposed to fluctuations in interest rates and exchange rates associated with foreign currencies.

A majority of our revenue activities are transacted in U.S. dollars. However, we are exposed to foreign currency exchange rate risk inherent in conducting business globally in numerous currencies, of which the most significant to our operations for the year ended April 30, 20192020 is the Canadian dollar. We are primarily exposed to a fluctuating Canadian dollar as our operating expenses are primarily denominated in Canadian dollars while our revenues are primarily denominated in U.S. dollars. We address certain financial exposures through a controlled program of risk management that includes the use of derivative financial instruments.  Our company’scompany's foreign currency risk management program includes foreign currency derivatives with cash flow hedge accounting designation that utilizes foreign currency forward contracts to hedge exposures to the variability in the U.S. dollar equivalent of anticipated non-U.S. dollar-denominated cash flows. These instruments generally have a maturity of less than one year. For these derivatives, our company reports the after-tax gain or loss from the effective portion of the hedge as a component of accumulated other comprehensive income (loss) in stockholders’stockholders' equity and reclassifies it into earnings in the same period in which the hedged transaction affects earnings, and within the same line item on the consolidated statements of operations as the impact of the hedged transaction.  There can be no assurance that our hedging program will not result in a negative impact on our earnings and earnings per share.  During the years ended April 30, 20192020 and 2018,2019, we did not enter into any forward contracts for hedging purposes.

Tax matters, including changes in tax rates, disagreements with taxing authorities and imposition of new taxes could impact our results of operations and financial condition.

We are subject to income taxes as well as non-income-based taxes, such as payroll, sales, use, value added, net worth, property, withholding and franchise taxes in both the U.S. and various foreign jurisdictions. From time to time, we are also subject to reviews, examinations and audits by taxing authorities with respect to such income and non-income-based taxes inside and outside of the U.S. When a taxing authority disagrees with our tax positions, we could face additional tax liabilities, including interest and penalties. Payment of such additional amounts upon final settlement or adjudication of any disputes could have a material impact on our results of operations and financial position.

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In addition, we are directly and indirectly affected by new tax legislation and regulation and the interpretation of tax laws and regulations worldwide. Changes in legislation, regulation or interpretation of existing laws and regulations in the U.S. and other jurisdictions where we are subject to taxation could increase our taxes and have an adverse effect on our operating results and financial condition.

If a security breach or cyberattack of our IT networks and systems, or any of our products, occurs, our operations could be interrupted, our products and services may be perceived as vulnerable, and our brand and reputation could be damaged, which could reduce revenue, increase expenses, and expose us to legal claims or regulatory actions.

Cybersecurity refers to the combination of technologies, processes, and procedures established to protect information technology systems and data from unauthorized access, attack, or damage. We are subject to cybersecurity risks. Information cybersecurity risks have significantly increased in recent years and, while we have not experienced any material losses relating to cyber-attacks or other information security breaches, we could suffer such losses in the future. Our computer systems, software and networks may be vulnerable to unauthorized access, computer viruses or other malicious code and other events that could have a security impact. If one or more of such events occur, this potentially could jeopardize confidential and other information, including nonpublic personal information and sensitive business data, processed and stored in, and transmitted through, our computer systems and networks, or otherwise cause interruptions or malfunctions in our operations or the operations of our customers or counterparties. This could result in significant losses, reputational damage, litigation, regulatory fines or penalties, or otherwise adversely affect our business, financial condition or results of operations. Privacy and information security laws and regulation changes, and compliance with those changes, may result in cost increases due to system changes and the development of new administrative processes. In the future, we may be required to expend significant additional resources to modify our protective measures and to investigate and remediate vulnerabilities or other exposures arising from operational and security risks. In addition, we may be subject to litigation and financial losses that are not fully insured.

Risks Associated with our Common Stock

If we are unable to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock could be delisted, which could affect our common stock's market price and liquidity and reduce our ability to raise capital.

On December 16, 2019, we received a letter from the listing qualifications department staff of the NASDAQ Stock Market notifying us that the stockholders' equity of $1,922,675 as reported in our quarterly report on Form 10-Q for the period ended October 31, 2019 was below the minimum stockholders' equity of $2,500,000. As of January 31, 2020 the stockholders' equity decreased to $1,777,646. The minimum stockholders' equity of $2,500,000 is required for continued listing on the NASDAQ Capital Market as set forth in NASDAQ listing rule 5550(b)(1), and as of April 30, 2020, we did not meet the alternatives of market value of listed securities or net income from continuing operations. We were provided 45 calendar days, or until January 30, 2020, to submit a plan to regain compliance with the minimum stockholders' equity standard. On January 28, 2020, we made application for an extension of up to 165 calendar days from the date of the notification letter to regain compliance with the minimum stockholders' equity standard and the extension was granted for 136 calendar days by NASDAQ on February 10, 2020.

On June 10, 2020, we issued an aggregate of 284,902 shares of common stock under a non-brokered private placement for total gross proceeds of $1,000,006. On June 16, 2020, we received a letter from NASDAQ wherein, based on our current report on Form 8-K dated June 11, 2020 relating to the private placement, NASDAQ has determined that we comply with the NASDAQ listing rule 5550(b)(1). NASDAQ will continue to monitor our ongoing compliance with the minimum stockholders' equity requirement and, if at the time of our next periodic report for the quarter ended July 31, 2020 we do not evidence compliance with the minimum stockholders' equity requirement, we may be subject to delisting. At that time, NASDAQ staff will provide written notification to our company, which we may then appeal NASDAQ staff's determination to a hearings panel. There can be no assurance that we will be able to maintain compliance with the minimum stockholders' equity requirement.

Because our operations have been partially financed through the sale of equity securities, the delisting from NASDAQ for failure to comply with the continued listing requirements of NASDAQ could be especially detrimental to our ability to raise additional financing through public or private sales of equity securities. Any reduction in our ability to raise equity capital in the future could force us to reallocate funds from other planned uses and could have a significant negative effect on our business plans and operations, including our ability to develop new products and continue our current operations. In addition, delisting could significantly affect the ability of investors to trade our securities and could negatively affect the value and liquidity of our common stock. Delisting could also have other negative results, including the potential loss of confidence by employees, the loss of institutional investor interest and fewer business development opportunities.

Our directors control a substantial number of shares of our common stock, decreasing your influence on stockholder decisions.

Based on the 5,950,2466,410,863 shares of common stock that were issued and outstanding as of April 30, 2019,July 14, 2020, our directors owned approximately 50%50.6% of our outstanding common stock. As a result, our directors as a group could have a significant influence in delaying, deferring or preventing any potential change in control of our company; they will be able to strongly influence the actions of our board of directors even if they were to cease being directors of our company and can effectively control the outcome of actions brought to our stockholders for approval.  Such a high level of ownership may adversely affect the exercise of your voting and other stockholder rights.

We do not expect to pay dividends in the foreseeable future.

We do not intend to declare dividends for the foreseeable future, as we anticipate that we will reinvest any future earnings in the development and growth of our business.  Therefore, investors will not receive any funds unless they sell their common stock, and stockholders may be unable to sell their shares on favorable terms.  We cannot assure you of a positive return on investment or that you will not lose the entire amount of your investment in our common stock.

The exercise of all or any number of outstanding stock options or the issuance of other stock-based awards or any issuance of shares to raise funds may dilute your holding of shares of our common stock.

If the holders of outstanding stock options and deferred share units exercise or settle all of their vested stock options and deferred share units as at April 30, 2019,2020, then we would be required to issue an additional 1,249,9401,371,469 shares of our common stock, which would represent approximately 21%18% of our issued and outstanding common stock after such issuances.  The exercise of any or all outstanding stock options that are exercisable below market price will result in dilution to the interests of other holders of our common stock.

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We may in the future grant to certain or all of our directors, officers, insiders and key employees stock options to purchase the shares of our common stock, bonus shares and other stock based compensation as non-cash incentives to such persons.  Subject to applicable stock exchange rules, if any, we may grant these stock options and other stock based compensation at exercise prices equal to or less than market prices, and we may grant them when the market for our securities is depressed.  The issuance of any additional shares of common stock or securities convertible into common stock will cause our existing shareholders to experience dilution of their holding of our common stock.

In addition, shareholders could suffer dilution in their net book value per share depending on the price at which such securities are sold.  Such issuance may cause a reduction in the proportionate ownership and voting power of all other shareholders.  The dilution may result in a decline in the price of our shares of common stock or a change in the control of our company.

We may be considered a “penny"penny stock.”" 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”"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. In addition, since our common stock commenced trading on the NASDAQ Capital Market below the $4.00 minimum bid price per share requirement, our common stock would be considered a penny stock if we fail to satisfy the net tangible assets and revenue tests in Rule 3a51-1 under the Securities Exchange Act of 1934. Our securities may be 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”"accredited investors". The term “accredited investor”"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’scustomer'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’scustomer's confirmation.

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’spurchaser'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’sstockholder's ability to buy and/or sell shares of our common stock.

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’scustomer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, 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.

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Securities analysts may not publish favorable research or reports about our business or may publish no information which could cause our stock price or trading volume to decline.

The trading market for our common stock will be influenced by the research and reports that industry or financial analysts publish about us and our business. We do not control these analyst reports. As a relatively small public company, we may be slow to attract research coverage and the analysts who publish information about our common stock will have had relatively little experience with our company, which could affect their ability to accurately forecast our results and make it more likely that we fail to meet their estimates.  If any of the analysts who cover us issue an adverse opinion regarding our stock price, our stock price may decline.  If one or more of these analysts cease coverage of our company or fail to regularly publish reports covering us, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline.

Item 1B.Unresolved Staff Comments.

Not Applicable.

Item 2.Properties.

We do not own any real property.  Our Canadian operations are conducted in three leased offices respectively located in Vancouver and Victoria, British Columbia and Ottawa, Ontario.  Our U.S. operations are conducted in twoour leased offices respectivelyoffice located in Chicago, Illinois, and Dedham,Hingham, Massachusetts.  Our head office is located at Suite 300, One Bentall Centre, 505 Burrard Street, Vancouver, British Columbia, Canada, V7X 1M3.

Item 3.Legal Proceedings.

None.

Item 4.Mine Safety Disclosures.

Not applicable.

PART II

Item 5.Market for Registrant’sRegistrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock is traded on the NASDAQ Capital Market under the symbol “CPAH”"CPAH" and the Toronto Stock Exchange under the symbol “PATH”"PATH".

Our shares of common stock are issued in registered form. Computershare located at 510 Burrard St., 3^rdrd Floor, Vancouver, BC, Canada V6C 3B9 (Telephone: 604.661.9400; Facsimile: 604.661.9549) is the registrar and transfer agent for our shares of common stock.

Holders

On July 5, 2019,14, 2020, the shareholders' list of our shares of common stock showed 110127 registered shareholders and5,953,380and6,410,863 shares outstanding.

Dividends

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. Our intention is to retain future earnings for use in our operations and the expansion of our business.

Securities Authorized for Issuance under Equity Compensation Plans

The following table provides a summary of the number of options granted, shares purchasable or deferred share units granted under our various compensation plans, the weighted average exercise price and the number of options remaining available for grant, shares purchasable or deferred share units available for grant all as at April 30, 2019.2020.

Equity Compensation Plan Information
Plan Category	Number of Securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-Average exercise price of outstanding options, warrants and rights	Number of Securities remaining available for future issuance under equity compensation plans
Equity compensation plans approved by security holders:
2010 Stock Option Plan	672,286	$1.90	513,714
Employee Share Purchase Plan	−	N/A	134,766
Deferred Share Unit Plan	699,183	N/A	39,097
Equity compensation plans not approved by security holders	N/A	N/A	N/A
Total	1,371,469	$1.90	687,577

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2010 Stock Option Plan

The purpose of the 2010 Stock Option Plan is to retain the services of valued key employees, directors, officers and consultants and to encourage such persons with an increased initiative to make contributions to our company. Under the 2010 Stock Option Plan, eligible employees, consultants and certain other persons who are not eligible employees, may receive awards of “non-qualified"non-qualified stock options”options". Individuals, who, at the time of the option grant, are employees of our company or any related company (as defined in the 2010 Stock Option Plan) who are subject to tax in the United States may receive “incentive"incentive stock options”options" or “non-qualified"non-qualified stock options”options", and stock options granted to non-United States residents may receive awards of “options”"options".

 

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As of April 30, 2019,2020, there were 616,449672,286 stock options outstanding entitling the holders thereof the right to purchase one share of common stock for each option held.

Employee Share Purchase Plan

On October 1, 2008, our shareholders approved the employee share purchase plan (the “ESPP”"ESPP") for employees, directors, officers and consultants of our company and our subsidiaries. The purpose of the plan is to give employees access to an equity participation vehicle in addition to our stock option plans by way of an opportunity to purchase shares of our common stock through payroll deductions and encourage them to use their combined best efforts on behalf of our company to improve its profits through increased sales, reduction of costs and increased efficiency.  Participation in the ESPP is voluntary.  Within the limits of the ESPP, our company matches fifty percent (50%) of the aggregate number of shares purchased by the participants.  We are permitted to issue up to 220,000 shares of our common stock under the ESPP.  As of April 30, 2019,2020, we have 147,802134,766 shares of our common stock available for issuance under the ESPP.

Deferred Share Unit Plan

Under the terms of the deferred share unit plan (the “DSUP”"DSUP") as approved by the shareholders on October 22, 2009, each deferred share unit (each, a “DSU”"DSU") is equivalent to one share of common stock.  The maximum number of shares of common stock that may be reserved for issuance to any one participant pursuant to DSUs granted under the DSUP and any share compensation arrangement is 5% of the number of shares of common stock of our company outstanding at the time of reservation.  A DSU granted to a participant who is a director of our company shall vest immediately on the award date.  A DSU granted to a participant other than a director will generally vest as to one-third (1/3) of the number of DSUs granted on the first, second and third anniversaries of the award date. Fair value of the DSUs, which is based on the closing price of our company’scompany's common stock on the date of grant, is recorded as compensation expense in the period of grant.  We have issued a cumulative total of 726,385860,903 under the DSUP with 633,491699,183 DSUs outstanding as of April 30, 2019.2020.  Of the total DSUs issued, 68,880 units have been cancelled and 24,014161,721 units have been converted to 24,014161,721 shares of common stock.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Issuer Purchases of Equity Securities
	Total number of shares purchased	Average price paid per share (Canadian dollars)(1)	Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs(1)
2/1/2019 – 2/28/2019	−	−	−	284,278
3/1/2019 – 3/31/2019	−	−	−	−
4/1/2019 – 4/30/2019	−	−	−	−
Total	−	−	−	−

(1)	Pursuant to a normal course issuer bid announced on March 27, 2018, which commenced on March 29, 2018 and expired on March 28, 2019 to purchase up to 284,278 shares of our common stock.

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            On March 27, 2018, we announced our intention to purchase, by way of a normal course issuer bid, for cancellation purposes, up to 284,278 shares of our common stock, representing approximately 10% of our then outstanding public float. We believe that our shares trade in a price range that does not adequately reflect their underlying value based on our business prospects.

            Purchases were to be made on the open market through the facilities of the TSX, NASDAQ Capital Market or such other stock exchange or quotation system upon which our shares are then listed or quoted, including other Canadian marketplaces, at market prices prevailing at the time of purchase and would take place over a 12-month period beginning on March 29, 2018 and expiring on March 28, 2019. We were permitted to make block purchases once per calendar week in accordance with the rules of the TSX. The daily purchase restriction was 1,199 shares, subject to certain prescribed exemptions. All shares purchased by our company under the normal course issuer bid were returned to treasury and cancelled.None.

            In connection with the normal course issuer bid, we renewed our automatic share purchase plan with National Bank Financial Inc., in order to facilitate purchases of our shares. Under the purchase plan, National Bank could purchase shares on our behalf at times when we would ordinarily not be permitted to purchase shares due to internal trading blackout periods, insider trading rules or otherwise. The purchase plan was approved by the TSX and was implemented as of March 28, 2018. Purchases made by National Bank on the open market were based upon the parameters prescribed by the TSX, applicable laws and the terms and conditions of the purchase plan.

            To our knowledge, none of our directors, senior officers or other insiders (as defined in the TSX Company Manual) sold any shares under the normal course issuer bid. However, sales by such persons through the facilities of the TSX may occur if the personal circumstances of any such person change or if any such person makes a decision unrelated to these normal course purchases. The benefits to any such person whose shares are purchased would be the same as the benefits available to all other holders whose shares are purchased.

            Stockholders may obtain a copy of the notice submitted to the TSX with respect to the normal course issuer bid, without charge, by contacting our Chief Financial Officer.

Recent Sales of Unregistered Securities

            None.Since the beginning of our fiscal year ended April 30, 2020, we have not sold any equity securities that were not registered under the Securities Act of 1933 that were not previously reported in a quarterly report on Form 10-Q or in a current report on Form 8-K.

Item 6.Selected Financial Data.

Not applicable.

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Item 7. Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes and the other financial information appearing elsewhere in this annual report.

Our consolidated 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”"common shares" refer to our shares of common stock. As used in this annual report, the terms “we”"we", “us”"us" and “our”"our" means CounterPath Corporation, unless otherwise indicated.

Overview

Background

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

On August 2, 2007, we acquired all of the shares of NewHeights Software Corporation through the issuance of 768,017 shares of our common stock and 36,984 preferred shares issued from a subsidiary of our company, which preferred shares were exchangeable into 36,984 shares of common stock.

On February 1, 2008, we acquired all of the shares of FirstHand Technologies Inc. through the issuance of 590,001 shares of our common stock.  On February 1, 2008, we acquired all of the issued and outstanding shares of BridgePort Networks, Inc. (“("BridgePort Networks”Networks") by way of merger in consideration for the assumption of all of the assets and liabilities of BridgePort Networks.

Business of CounterPath

We design, develop and sell software and services that enable enterprises and telecommunication service providers to deliver Unified Communications (UC) services, including voice, & Collaborations (UCC) solutions to their end users. Our offerings include softphones that support HD voice/video calling, messaging, and collaborationpresence from a wide range of call services and VoIP services, as well as hosted services for team voice, messaging, presence, video conferencing and screen sharing functionality, over their Internet Protocol or IP,(IP) based networks. We are capitalizing upon numerousseveral industry trends, including the rapid adoption of mobile technology, the proliferation of bring-your-own-device to workwork-from-home programs, the needgrowth of video conferencing, the increasing requirements for secure business communications, the need for centralized provisioning, the migration towards cloud-based servicesprovisioning, and the migration towards all IP networks. We are also capitalizing on a trend where communication services such as SkypeGoogle Meet, Slack, Zoom, and WhatsApp are becoming more available over-the-top (OTT) of the incumbent operators’operators' networks or enterprise networks (a.k.a. Internet OTT providers). We offerconsolidate Internet OTT application capabilities into a single application that, we believe, provides more value at less than our competitors' cost. Our solutions are offered under perpetual license agreements that generate one-time license revenue and under subscription license agreements that generate recurring license revenue. We sell ourOur solutions are available for sale through our own online store, through third-party online stores, directly using our in-house sales team, and through channel partners. Our channel partners include original equipment manufacturers (OEM) partners, and through traditional value added distributersreseller (VAR) and value added resellers.distributer (VAD) channel partners. Enterprises typically leverage our Enterprise OTT solutions to increase employee productivity and to reduce certain costs.communication costs while leveraging, leading call servers provided by companies such as Cisco, Avaya, Sangoma, and others. Telecommunication service providers typically deploy our Operatorsolutions to supplement and add value to their traditional services that compete directly with the Internet OTT solutions as part of a broad strategy to defend their subscriber base from competitive threats by offering innovative new services.providers.  Our original equipment manufacturersOEM and value added resellersVAR customers typically integrate our solutions into their products and then sell a bundled solution to their end customers, which include both telecommunication service providers and enterprises.

RevenueCOVID-19 Pandemic

On January 30, 2020, the World Health Organization ("WHO") announced a global health emergency because of a new strain of coronavirus, COVID-19 originating in Wuhan, China (and the risks to the international community as the virus spread globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve as of the date of this Annual Report on Form 10-K. As such, it is uncertain as to the full magnitude that the pandemic will have on our financial condition, liquidity, and future results of operations. Management is actively monitoring the global situation and its impact on our financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, we are not able to estimate the effects that the COVID-19 outbreak will have on our results of operations, financial condition, or liquidity for fiscal year 2021. As of the date of this Annual Report on Form 10-K, we have not experienced meaningful delays in securing new customers and related revenues, cancellations of existing contracts, or meaningful delays in payments from existing customers, however, the longer this pandemic continues there may be additional impacts. Although we cannot estimate the length or gravity of the impact of the COVID-19 outbreak at this time, if the pandemic continues, it may have a material adverse effect on our results of future operations, financial position, liquidity, and capital resources, and those of the third parties on which we rely on in fiscal year 2021.

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Revenue

Our total revenue consists of the following:

•	Software
	We generate software revenue primarily on a single fee per perpetual software license basis. We recognize software revenue for perpetual licenses when control has transferred to the customer, which is generally at the time of delivery, provided all revenue recognition criteria have been met. If the revenue recognition criteria have not been met, the revenue is deferred or not recognized. The number of software licenses purchased has a direct impact on the average selling price. Our software revenue may vary significantly from quarter to quarter as a result of long sales and deployment cycles, new product introductions and variations in customer ordering practices.

• Software

25We generate software revenue primarily on a single fee per perpetual software license basis. We recognize software revenue for perpetual licenses when control has transferred to the customer, which is generally at the time of delivery, provided all revenue recognition criteria have been met.  If the revenue recognition criteria have not been met, the revenue is deferred or not recognized.  The number of software licenses purchased has a direct impact on the average selling price. Our software revenue may vary significantly from quarter to quarter as a result of long sales and deployment cycles, new product introductions and variations in customer ordering practices.

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•	Subscription, support and maintenance
	We generate recurring subscription revenue from subscriptions related to our software as a service offering. Recurring support and maintenance revenue is generated from annual software support and maintenance contracts for our perpetual software licenses. Both subscription revenue and support and maintenance revenue are typically billed annually in advance based on the terms of the arrangement.
	Support and maintenance services include e-mail and telephone support, unspecified rights to bug fixes and product updates and upgrades and enhancements available on a when-and-if available basis, and are recognized rateably over the term of the service period, which is generally twelve months.
•	Professional services and other
	We generate professional services and other revenue through services including product configuration and customization, implementation, dedicated engineering and training. The amount of product configuration and customization required by a customer typically increases as the order size increases from a given customer. Services and pricing may vary depending upon a customer’s requirements for customization, implementation and training.

• Subscription, support and maintenance

We generate recurring subscription revenue from subscriptions related to our software as a service offering.  Recurring support and maintenance revenue is generated from annual software support and maintenance contracts for our perpetual software licenses.  Both subscription revenue and support and maintenance revenue are typically billed annually in advance based on the terms of the arrangement.

Support and maintenance services include e-mail and telephone support, access to our technical assistance center, unspecified rights to bug fixes and product updates and upgrades and enhancements available on a when-and-if available basis, and are recognized rateably over the term of the service period, which is generally twelve months.

• Professional services and other

We generate professional services and other revenue through services including product configuration and customization, implementation, dedicated engineering and training.  The amount of product configuration and customization required by a customer typically increases as the order size increases from a given customer.  Services and pricing may vary depending upon a customer's requirements for customization, implementation and training.

Operating Expenses

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

Cost of sales primarily consists of: (a) salaries and benefits related to personnel, (b) related overhead, (c) billable and non-billable travel, lodging, and other out-of-pocket expenses, (d) payments to third party vendors for development and hosted communication services and compression/decompression software known as codecs, (e) amortization of capitalized software that is implemented into our products and (f) warranty expense.

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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 advertising, promotions and trade shows and (e) other related overhead. Commissions are considered incremental and recoverable costs of acquiring customer contracts. These costs are capitalized and amortized on a systematic basis to sales and marketing expense, over the anticipated benefit period of up to 3.5 years depending on the products or services. Sales commissions on contracts with an anticipated benefit period of one year or less are expensed as incurred.  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 contractors 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, tax advisory and regulatory fees and (c) other related overhead.

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 consolidated 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 consolidated 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.

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We believe that of our significant accounting policies, which are described in Note 2 to our annual consolidated 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

On May 1, 2018, we adopted the new accounting standard,ASC 606 “Revenue"Revenue from Contracts with Customers”Customers" and all related amendments to the new accounting standard to contracts using the modified retrospective method. We recognized the cumulative effect of initially applying the new revenue recognition standard to contracts with open performance obligations as of May 1, 2018, as an adjustment to the opening balance of retained earnings. Results of the reporting period beginning May 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC 605.

Revenues from contracts with customers are recognized when control of promised goods and services is transferred to customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

We recognize revenue using the five-step model as prescribed by ASC 606:

	1)	1) Identification of the contract, or contracts, with a customer; 2) Identification of the performance obligations in the contract; 3) Determination of the transaction price; 4) Allocation of the transaction price to the performance obligations in the contract; and 5) Recognition of revenue when or as, we satisfy a performance obligation. 27 Identification of the contract, or contracts, with a customer;
	2)	Identification of the performance obligations in the contract;
	3)	Determination of the transaction price;
	4)	Allocation of the transaction price to the performance obligations in the contract; and
	5)	Recognition of revenue when or as, we satisfy a performance obligation.

When a contract with a customer is signed, we assess whether collection of the fees under the arrangement is probable. We estimate the amount to reserve for uncollectible amounts at the end of each reporting period based on the aging of the contract balance, current and historical customer trends, and communications with its customers. These reserves are recorded against the related accounts receivable.

The transaction price is the consideration that we expect to receive from our customers in exchange for our products and services. In determining the allocation of the transaction price, we identify performance obligations in contracts with customers, which may include products, subscriptions to software and services, support, professional services and training. We allocate the transaction price to each performance obligation on a relative standalone selling price basis. The standalone selling price (SSP) is the price at which we would sell a promised product or service separately to a customer. We determine the SSP using information that may include market conditions or other observable inputs. In certain cases, we are able to establish a SSP based on observable prices for products or services sold separately. In these instances, we would use a single amount to estimate a SSP. If a SSP is not directly observable, for example when pricing is variable, we will use a range of SSP.

In certain circumstances, we may estimate SSP for a product or service by applying the residual approach. This approach has been most commonly used when certain perpetual software licenses are only sold bundled with one year of post-contract support or other services and a price has not been established for the software.

Significant judgement is used to determine SSP and to determine the allocation of the transaction pricewhether there is a variance that needs to be allocated based on the relative SSP of the various products and services. Estimating SSP is a formal process that includes review and approval by management.

27In practice, we do not offer extended payment terms beyond one year to customers. As such, we do not adjust our consideration for financing arrangements.

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We recognize software revenue for perpetual licenses when control has transferred to the customer, which is generally at the time of delivery when the customer has the ability to deploy the licenses, provided all revenue recognition criteria have been met. If the revenue recognition criteria has not been met, the revenue is deferred or not recognized.

We recognize revenue from subscriptions related to our software as a service offering ratably over the contractual subscription term as control of the goods or services is transferred to the customer, beginning on the date that the subscription is made available to the customer. Support and maintenance revenue is generated from recurring annual software support and maintenance contracts for our perpetual software licenses and is recognized ratably over the term of the service period, which is generally twelve months. Support and maintenance 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. Both subscription revenue and support and maintenance revenue are typically billed annually in advance based on the terms of the arrangement.

We recognize revenue from professional services and other revenue when control has transferred to the customer, which is generally at the time of delivery, and all other revenue recognition criteria have been met. For contracts with elements related to customized network solutions and certain network build-outs or software systems that require significant modification or customization, we will recognize revenue using the percentage-of-completion method. In using the percentage-of-completion method, revenues are generally recorded based on 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. Depending on the services to be provided, revenue from professional services and other revenue is generally recognized at the time of delivery when the services have been completed and control has been transferred to the customer.

Unearned Revenue

Unearned revenue representrepresents billings or payments received in advance of revenue recognition and is recognized upon transfer of control. Balances consist primarily of annual support and subscription services and professional and training services not yet provided as of the balance sheet date.

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Costs to Obtain a Customer Contract

Sales commissions and related expenses are considered incremental and recoverable costs of acquiring customer contracts. These costs are capitalized and amortized on a systematic basis to match the timing of revenue recognition over the anticipated benefit period of up to 3.5 years depending on the products and services. The anticipated benefit period was estimated using management judgment after reviewing customer contracts from fiscal years 2004 - 2018, and is based on the average length of applicable customer contracts and includes the contract term and any anticipated renewal periods.  This amortization expense is recorded in sales and marketing expense within our consolidated statement of operations. We have elected to apply a practical expedient that permits our company to expense costs to obtain a contract as incurred, if the anticipated benefit period is one year or less. From time to time, management will revisit the estimates used in recognizing the costs to obtain customer contracts.

Costs to Fulfill a Customer Contract

Certain contract costs incurred to fulfill obligations under a contract are capitalized when such costs generate or enhance resources to be used in satisfying future performance obligations and the costs are deemed recoverable. Judgement is used in determining whether certain contract costs can be capitalized. These costs are capitalized and amortized on a systematic basis to match the timing of revenue recognition over the anticipated benefit period of up to 3.5 years, depending on the products and services. The anticipated benefit period was estimated based on the average length of applicable customer contracts and includes the contract term and any anticipated renewal periods. This amortization expense is recorded in cost of sales in our consolidated statement of operations. From time to time, management will review the capitalized costs for impairment and will also revisit the estimates used in recognizing the costs to fulfill customer contracts.

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Stock-Based Compensation

Stock options granted are accounted for under ASC 718 “Share-Based Payment”"Share-Based Payment" and are recognized at the fair value of the options as determined by an option pricing model as the related services are provided and the options earned. ASC 718 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’scompany's stock. The expected life of options granted after April 30, 2006 has been determined based on analysis of historical data. We have not paid and do not anticipate paying cash dividends on our shares of common stock; therefore, the expected dividend yield is assumed to be zero. In addition, ASC 718 requires companies to utilize an estimated forfeiture rate when calculating the expense for the period. We applied an estimated forfeiture rate of 15.0% in the year ended April 30, 20192020 in determining the expense recorded in our consolidated statement of operations. Cost of sales and operating expenses include stock-based compensation expense, and deferred share unit plan expense. For the year ended April 30, 2019,2020, we recorded an expense of $474,726$382,584 in connection with share-based payment awards. A future expense of non-vested options of $373,324$271,728 is expected to be recognized over a weighted-average period of 2.92.3 years. A future expense of non-vested deferred share units of $178,984$233,058 is expected to be recognized over a weighted-average period of 2.42.1 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’scustomer'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’scustomer's current ability to pay its obligation to us. We write-off accounts receivable when they are identified as uncollectible. All outstanding accounts receivable are periodically reviewed for collectability on an individual basis.

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Goodwill

We have goodwill related to the acquisitions of NewHeights Software Corporation and FirstHand Technologies Inc.  The determination of the net carrying value of goodwill and the extent to which, if any, there is impairment, are dependent on material estimates and judgments on our part, including the estimate of the value of future net cash flows, which are based upon further estimates of future revenues, expenses and operating margins.

Goodwill—ImpairmentGoodwill-Impairment Assessments

We review goodwill for impairment annually and whenever events or changes in circumstances indicate its carrying value may not be recoverable in accordance with FASB ASC 350,Goodwill and Other Intangible Assets(“"ASC 350”350"). The provisions of ASC 350 require that a two-step impairment test be performed on goodwill. In the first step, we compare the fair value of our reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not considered impaired and we are not required to perform further testing.  If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then we must perform the second step of the impairment test in order to determine the implied fair value of the reporting unit’sunit's goodwill.  If the carrying value of our reporting unit’sunit's goodwill exceeds its implied fair value, then we would record an impairment loss equal to the difference.

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In September of 2011, FASB issued Accounting Standards Update 2011-08,“Intangibles—Goodwill"Intangibles-Goodwill and Other (Topic 350)”". Under the amendments of this update, an entity may first assess certain qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we determinesdetermine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary.

Determining the fair value of our reporting unit involves the use of significant estimates and assumptions. These estimates and assumptions include future economic and market conditions and determination of appropriate market comparables. We base our fair value estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates. Our most recent annual goodwill impairment analysis, which was performed at the end of the fourth quarter of fiscal 2019,2020, did not result in an impairment charge for fiscal year 2019,2020, nor did we record any goodwill impairment in fiscal 2018.2019.

Leases

In February 2016, the FASB issued ASU 2016-02, Leases, as amended by subsequent standards updates, which requires lessees to recognize right-of-use (ROU) assets and lease liabilities for all leases, with the exception of short term leases, at the commencement date of each lease. A ROU asset represents our right to use an identified asset for the lease term and lease liability represents our obligation to make payments as set forth in the lease arrangement. We adopted the new standard effective May 1, 2019 using a modified retrospective approach and did not restate comparative periods. As a result, we recorded $1,708,129 of ROU assets and operating lease liabilities on May 1, 2019. There was no cumulative-effect adjustment for the adoption and the adoption did not have a significant impact on our consolidated statements of operations.

Management has elected to apply the practical expedient to not reassess initial direct costs related to leases, whether any expired or existing contracts contained leases and to carryforward historical lease classification. As a result, all leases identified by management will continue to be classified as operating leases. In addition, management elected to not record short-term leases with an initial term of 12 months or less on its consolidated balance sheets. See Note 14-Leases for more information.

We determine if an arrangement is a lease at contract inception by evaluating if the contract conveys the right to control the use of an identified asset during the period of use. A right-of-use (ROU) asset represents our right to use an identified asset for the lease term and lease liability represents our obligation to make payments as set forth in the lease arrangement. ROU assets and lease liabilities are included on our consolidated balance sheets beginning May 1, 2019 and are recognized based on the present value of the future minimum lease payments at lease commencement date. The interest rate used to determine the present value of the future lease payments is our estimated incremental borrowing rate, because the interest rate implicit in the lease is generally not readily determinable. A ROU asset initially equals the lease liability, adjusted for any lease payments made prior to lease commencement and any lease incentives. All leases are recorded on the consolidated balance sheets except for leases with an initial term of less than 12 months. All of the our leases are operating leases.

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We have lease agreements with lease and non-lease components. The lease component is comprised of minimum lease payments which includes base rent and estimated property taxes and insurance. Non-lease components primarily include payments for maintenance and are expensed as incurred.

Derivative Instruments

We periodically enter into foreign currency forward contracts, not designated as hedging instruments, to protect us from fluctuations in exchange rates.  During the year, we had threetwo foreign currency option contracts with an aggregate notional value of $1,500,000,$1,000,000 and three foreign currency forward contracts with an aggregate notional value of $1,300,667, all maturing in the period ending July 31, 2019.2020. We also had two foreign currency forward contracts with an aggregate notional value of $900,000, maturing in the period ending October 31, 2020. Notional amounts do not quantify risk or represent assets or liabilities of our company, but are used in the calculation of cash settlements under the contracts. During the year ended April 30, 2019,2020 we recognized a gainloss of $1,735$132,377 as a result of the change in fair value of derivative instruments.

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, 20192020 consisted primarily of selling our IP telephony software and related services to telecom service providers, enterprises and channel partners serving the telecom and enterprise segments, and the continued development of our IP telephony software products.

We generate our revenue primarily in U.S. dollars and incur a majority of our expenses in Canadian dollars.  As a result of the fluctuation in the Canadian dollar against the U.S. dollar over the twelve months ended April 30, 2019,2020, we recorded a decrease in operating costs on translation of Canadian dollar costs as compared to the twelve months ended April 30, 20182019 of approximately $256,600.$98,300. 

Selected Consolidated Financial Information

The following tables set out selected consolidated audited financial information for the periods indicated. The selected consolidated financial information set out below for the fiscal years ended April 30, 20192020 and 2018,2019, and as at April 30, 20192020 and April 30, 2018,2019, has been derived from the consolidated financial statements and accompanying notes for the fiscal years ended April 30, 20192020 and 2018.2019. Each investor should read the following information in conjunction with those statements and the related notes thereto.

Selected Consolidated Balance Sheet Data		April 30, 2020			April 30, 2019
Cash	$	2,433,266		$	1,862,458
Current assets	$	5,450,228		$	4,126,387
Total assets	$	13,655,953		$	11,124,786
Current liabilities	$	10,499,343		$	4,885,095
Total liabilities	$	11,611,636		$	7,898,889

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		April 30,			April 30,
Selected Consolidated Balance Sheet Data		2019			2018
Cash	$	1,862,458		$	2,348,883
Current assets	$	4,126,387		$	6,049,138
Total assets	$	11,124,786		$	13,334,227
Current liabilities	$	4,885,095		$	5,068,939
Total liabilities	$	7,898,889		$	5,093,041

Selected Consolidated Statements of Operations
Data		Years Ended April 30,
		2019						2018
					Percent						Percent
Selected Consolidated Statements of Operations Data														Years Ended April 30,
					of Total						of Total			2020						2019
		Amount			Revenue			Amount			Revenue			Amount			Percent of Total Revenue			Amount			Percent of Total Revenue
Revenue	$	10,764,904			100%		$	12,381,741			100%		$	12,101,326			100%		$	10,764,904			100%
Operating expenses		15,931,665			148%			15,175,511			123%		$	12,900,893			107%			15,931,665			148%
Loss from operations		($5,166,761	)		(48%	)		($2,793,770	)		(23%	)		($799,567	)		(7%	)		($5,166,761	)		(48%	)
Interest and other income (expense), net		(103,443	)		(1%	)		(361	)		−%			(465,584	)		(4%	)		(103,443	)		(1%	)
Foreign exchange (loss) gain		256,765			2%			(426,539	)		(3%	)
Foreign exchange gain														168,586			2%			256,765			2%
Net loss		($5,013,439	)		(47%	)		($3,220,670	)		(26%	)		($1,096,565	)		(9%	)		($5,013,439	)		(47%	)
Net loss per share
-Basic and diluted(1)		($0.84	)					($0.59	)
-Basic and diluted														($0.18	)					($0.84	)
Weighted average common shares outstanding
-Basic and diluted(1)		5,942,096						5,496,201						6,010,006						5,942,096

(1)	As at April 30, 20192020 and 20182019 common share equivalents of 1,249,9401,371,469 and 1,140,432,1,249,940, respectively, were not included in the computation of diluted weighted average common shares as the effect was anti-dilutive.

Revenue

Revenues for the year ended April 30, 20192020 and 20182019 were as follows:

		Twelve Months Ended April 30,
		2019						2018						Period-to-Period Change
					Percent						Percent						Percent			Twelve Months Ended April 30,
					of Total						of Total						Increase /			2020						2019						Period-to-Period Change
		Amount			Revenue			Amount			Revenue			Amount			(Decrease)			Amount			Percent of Total Revenue			Amount			Percent of Total Revenue			Amount			Percent Increase / (Decrease)
Revenue by Type
Software	$	4,660,660			43%		$	6,338,512			51%			($1,677,852	)		(26%	)	$	5,154,513			42%		$	4,660,660			43%		$	493,853			11%
Subscription, support and maintenance	$	5,366,290			50%		$	4,273,410			35%		$	1,092,880			26%		$	6,257,854			52%		$	5,366,290			50%		$	891,564			17%
Professional services and other	$	737,954			7%		$	1,769,819			14%			($1,031,865	)		(58%	)	$	688,959			6%		$	737,954			7%			($48,995	)		(7%	)
Total revenue	$	10,764,904			100%		$	12,381,741			100%			($1,616,837	)		(13%	)	$	12,101,326			100%		$	10,764,904			100%		$	1,336,422			12%
Revenue by Region
North America	$	6,768,821			63%		$	6,916,556			56%			($147,735	)		(2%	)	$	8,391,465			69%		$	6,768,821			63%		$	1,622,644			24%
International	$	3,996,083			37%		$	5,465,185			44%			($1,469,102	)		(27%	)	$	3,709,861			31%		$	3,996,083			37%			($286,222	)		(7%	)
Total revenue	$	10,764,904			100%		$	12,381,741			100%			($1,616,837	)		(13%	)	$	12,101,326			100%		$	10,764,904			100%		$	1,336,422			12%

For the year ended April 30, 2019,2020, we generated $10,764,904$12,101,326 in revenue compared to $12,381,741$10,764,904 for the year ended April 30, 2018,2019, representing a decreasean increase of $1,616,837$1,336,422 or 13%12%.

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Software revenue decreasedincreased by $1,677,852$493,853 or 26%11% to $5,154,513 for the year ended April 30, 2020 compared to $4,660,660 for the year ended April 30, 2019 compared to $6,338,512 for the year ended April 30, 2018.2019. The decreaseincrease in software revenue was primarily a result of decreasedincreased sales to service providers,enterprises and channel partners, and enterprises.partners.

Subscription, support and maintenance revenue increased by $1,092,880$891,564 or 26%17% to $6,257,854 for the year ended April 30, 2020 compared to $5,366,290 for the year ended April 30, 2019 compared to $4,273,410 for the year ended April 30, 2018.2019. The increase in subscription, support and maintenance revenue was a result of increased sales to channel partners, service providers, and service providers.enterprises.

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Professional services and other revenue decreased by $1,031,865$48,995 or 58%7% to $688,959 for the year ended April 30, 2020 compared to $737,954 for the year ended April 30, 2019 compared to $1,769,819 for the year ended April 30, 2018.2019. The decrease in professional services and other revenue was a result of decreased sales to service providers channel partners, and enterprises.

North American revenue decreasedincreased by $147,735$1,622,644 or 2%24% to $8,391,465 for the year ended April 30, 2020 compared to $6,768,821 for the year ended April 30, 2019, compared to $6,916,556 for the year ended April 30, 2018, as a result of lowerhigher sales of software and services to North American channel partners,enterprises, service providers, and enterprises slightly offset by higher sales of service to channel partners and service providers.partners. International revenue outside of North America decreased by $1,469,102$286,222 or 27%7% to $3,709,861 for the year ended April 30, 2020 compared to $3,996,083 for the year ended April 30, 2019, compared to $5,465,185 for the year ended April 30, 2018, as a result of lower sales of software and services to international service providers, slightly offset by increased sales of software and service to international channel partners and enterprises.

Operating Expenses

Cost of Sales

Cost of sales for the year ended April 30, 20192020 and 20182019 were as follows:

April 30, 2019

April 30, 2018

Period-to-Period Change

Percent

Percent

Percent

of

of

Increase /

Amount

Revenue

Amount

Revenue

Amount

(Decrease)

Year ended

$

2,223,984

21%

$

1,629,814

13%

$

594,170

36%

		April 30, 2020						April 30, 2019						Period-to-Period Change
		Amount			Percent  of Revenue			Amount			Percent  of Revenue			Amount			Percent Increase / (Decrease)
Year ended	$	2,124,948			18%		$	2,223,984			21%			($99,036	)		(4%	)

Cost of sales was $2,124,948 for the year ended April 30, 2020 compared to $2,223,984 for the year ended April 30, 2019 compared to $1,629,814 for the year ended April 30, 2018.2019.  The increasedecrease of $594,170,$99,036, or 36%4%, was primarily due to increasesdecreases of approximately $195,700$153,200 in wages and benefits $257,500and approximately $347,500 in consulting fees, $208,200offset by increases of approximately $204,900 in communication services expenses, $18,200approximately $184,400 in licenses and permits and approximately $56,200$12,300 in other expenses. This increase was offset by a one time reversal of $141,600 in third-party software accruals. Cost of sales expressed as a percent of revenue was 21%18% of revenue for the year ended April 30, 20192020 compared to 13%21% for the year ended April 30, 2018.2019. The decrease in cost of sales as a percentage of revenue is primarily due to the decrease in headcount in our effort to reduce costs.

Sales and Marketing

Sales and marketing expenses for the year ended April 30, 20192020 and 20182019 were as follows:

April 30, 2019

April 30, 2018

Period-to-Period Change

Percent

Percent

Percent

of

of

Increase /

Amount

Revenue

Amount

Revenue

Amount

(Decrease)

Year ended

$

4,061,921

38%

$

4,266,716

34%

($204,795

)

(5%

)

		April 30, 2020						April 30, 2019						Period-to-Period Change
		Amount			Percent  of Revenue			Amount			Percent  of Revenue			Amount			Percent Increase / (Decrease)
Year ended	$	3,831,866			32%		$	4,061,921			38%			($230,055	)		(6%	)

Sales and marketing expenses were $3,831,866 for the year ended April 30, 2020 compared to $4,061,921 for the year ended April 30, 2019 compared to $4,266,716 for the year ended April 30, 2018.2019. The decrease of $204,795,$230,055, or 5%6%, was primarily attributable to decreases of $129,000 in consulting fees and $67,400 in marketing and travel expenses and $57,900approximately $164,500 in wages, benefits and commissions expenses, approximately $77,900 in consulting fees and approximately $6,500 in marketing and travel expenses, offset by an increase of $49,500approximately $18,900 in other expenses.

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Research and Development

Research and development expenses for the year ended April 30, 20192020 and 20182019 were as follows:

		April 30, 2020						April 30, 2019						Period-to-Period Change
		Amount			Percent  of Revenue			Amount			Percent  of Revenue			Amount			Percent Increase / (Decrease)
Year ended	$	4,398,814			36%		$	5,547,587			52%			($1,148,773	)		(21%	)

April 30, 2019

April 30, 2018

Period-to-Period Change

Percent

Percent

Percent

of

of

Increase /

Amount

Revenue

Amount

Revenue

Amount

(Decrease)

Year ended

$

5,547,587

52%

$

5,506,887

44%

$

40,700

1%

33

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Research and development expenses were $4,398,814 for the year ended April 30, 2020 compared to $5,547,587 for the year ended April 30, 2019 compared to $5,506,887 for the year ended April 30, 2018.2019. The increasedecrease of $40,700,$1,148,773, or 1%21%, resulted primarily from increasesdecreases of approximately $648,200 in wages and benefits expenses due to the decrease in headcount in our effort to reduce costs, approximately $454,700 in consulting expenses and consulting fees of approximately $25,900 and$45,800 in other expenses of approximately $14,800.expenses.

General and Administrative

General and administrative expenses for the years ended April 30, 20192020 and 20182019 were as follows:

April 30, 2019

April 30, 2018

Period-to-Period Change

Percent

Percent

Percent

of

of

Increase /

Amount

Revenue

Amount

Revenue

Amount

(Decrease)

Year ended

$

4,098,173

38%

$

3,772,094

30%

$

326,079

9%

		April 30, 2020						April 30, 2019						Period-to-Period Change
		Amount			Percent  of Revenue			Amount			Percent of Revenue			Amount			Percent Increase / (Decrease)
Year ended	$	2,545,265			21%		$	4,098,173			38%			($1,552,908	)		(38%	)

General and administrative expenses for the year ended April 30, 20192020 were $4,098,173$2,545,265 compared to $3,772,094$4,098,173 for the year ended April 30, 2018.2019. The increasedecrease of $326,079,$1,552,908, or 9%38%, in general and administrative expenses was primarily attributable to increasesdecreases of approximately $510,900$933,000 in the allowance for bad debts reserve, $166,900provision as a result of one time provisions recorded for several customer accounts in the prior year. In addition, we recorded a decrease of approximately $396,600 in wages and benefits expenses, primarily related to a one time accrual of $321,000 recorded in the prior year, associated with the departure of our former chief executive officer, a decrease of approximately $226,100 in legal and professional fees, $71,900charges and a decrease of approximately $49,100 in consulting fees and approximately $101,900 in other expenses. This increasedecrease was offset by decreasesan increase of approximately $357,400$51,500 in non-income tax based accrual, $168,100 in wages, benefits and commissionsother expenses.

Interest and Other Income (Expense), Net

Interest and other income (expense), net for the year ended April 30, 20192020 was $147,824($296,998) compared to ($426,900)$153,322 for the year ended April 30, 2018.2019. The increasechange of $574,724($450,320) or (294%) was primarily due to an increase in interest expense related to the related party loan payable of approximately $228,000, a loss resulting from the change in fair value of derivative instruments of approximately $134,100 and an increase in the foreign exchange gainloss in the current year of approximately $256,800, compared to a foreign exchange loss of approximately $426,500 in the prior year$88,200 as result of the weakening of the Canadian dollar against the U.S. dollar during the year ended April 30, 2019. This foreign exchange gain was offset by an increase in interest expense of approximately $107,000 which was largely related to the loan payable.2020.

The foreign exchange gain (loss) represents the gain (loss) on account of translation of the intercompany accounts of our subsidiary which maintains their records in Canadian dollars and transactional gains and losses. This also includes the translation of quarterly intercompany transfer pricing invoices from our Canadian subsidiary to us.

Liquidity and Capital Resources

As at April 30, 2019,2020, we had $1,862,458$2,433,266 in cash compared to $2,348,883$1,862,458 at April 30, 2018,2019, representing a decreasean increase of $486,425.$570,808. As of April 30, 2019,2020, we had a working capital deficit of $758,708$5,049,115 compared to working capital deficit of $980,199$758,708 at April 30, 2018,2019, representing a decrease of $1,738,907.$4,290,407.  Management anticipates that future capital requirements of our company will be funded through cash flows generated from operations and from working capital for the next twelve months and we may seek additional funding to meet ongoing operating expenses.

We have experienced recurring losses and have an accumulated deficit of $68,581,091$69,677,656 as of April 30, 2019. This is2020, as a result of flat to declining revenues due tobeing historically lower than expenses, resulting from a number of factors including an increased focus on building out the Company’s cloud-basedour buildout of a cloud based subscription platform and aconcurrent with the change from the currentof our licensing model to subscription-basedsubscription based licensing which hasand have not reached profitable operations resultingon a consistent basis. However, during the year ended April 30, 2020, revenue has increased by approximately 12% compared to the year ended April 30, 2019. Despite the increase in revenue, we saw an increase in current liabilities primarily related to the reclassification of the related party loan payable of $4,000,000 outstanding as of April 30, 2020, from long-term liabilities, which is due on April 11, 2021. It is uncertain whether we would be able to maintain sufficient cash flows to meet our current obligations. Further, due to the recent and ongoing outbreak of COVID-19, the spread of COVID-19 has severely impacted many economies around the world, including those in which our customers operate. Management has taken steps to help mitigate any potential negative impact on operations including having reduced operating costs through fiscal year ended April 30, 2020 and obtaining financial assistance made available from the US government under the Paycheck Protection Program; however, we are unable to determine the future impact on our financial position and operating results. Together, these factors raise substantial doubt about the Company’sour ability to continue operating as a going concern within one year of the date of issuance of the consolidated financial statements.

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To alleviate this situation, we have plans in place to improve our financial position and liquidity through additional financing, while executing on our growth strategy, and by managing and or reducing costs that are not expected to have an adverse impact on the ability to generate cash flows, as the transition to our software as a service platform and subscription licensing continues. During fiscal 2019,2020, recurring revenue as a percentage of total revenue increased from 35%50% in the prior year to 50%52% of total revenue. We believe that increasing recurring revenue will stabilize the volatility of revenue over time, enablingand enable our company to grow revenue from our extensive customer base. To increase our recurring revenue, we introduced Bria TeamsSolo and Bria Teams Pro which is aare subscription based unified communication service.services.  In addition, we advanced our Channel Partner Program which enables us to leverage our sales force in regions outside of North America. The Channel Partner Program is administered through a partner portal enabling our partners to order and manage their customers and end users in an automated and scalable fashion.  Software sold through the Channel Partner Program is extensively licensed on a subscription basis. In addition, as a result of managements efforts to reduce costs, operating expenses decreased by approximately 19% to $12,900,893 during the year ended April 30, 2020, compared to $15,931,665 in the prior year.

We have historically been able to manage liquidity requirements through cost management and cost reduction measures, supplemented with raising additional financing. In October 2018, we entered into a loan agreement for an aggregate principal amount of up to $3,000,000.$3,000,000, which was subsequently increased to $5,000,000 on July 10, 2019. As of April 30, 2019,2020, the principal balance of the related party loan payable was $4,000,000 and interest payable on the loan was $79,459. Subsequent to year end, on June 15, 2020, we repaid $2,000,000 of the outstanding loan balance to our Lenders, increasing the unused portion of the loan principal to $3,000,000. See Notes to the Consolidated Financial Statements - Note 9 - Related Party Loan Payable for more information.

On July 10, 2019,May 1, 2020, through our subsidiary, CounterPath LLC, we entered into an amendment to thisa promissory note with Bank of America for a term loan agreement to increasein the aggregate principal amount of $209,035 (the "Loan"). The Loan is made pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act. (the "CARES Act"). The Loan is forgiveable if used to retain workers and maintain payroll or to make lease payments and utility payments as specified under the Paycheck Protection Rule. The remaining loan balance that is not forgiven will bear interest at a rate of 1% per annum after a six-month deferment period, with a maturity date of two years from the funding date of the loan. We expect the loan thatto be fully forgiven during the fiscal year ended April 30, 2021.

In addition, on June 10, 2020, we can borrow to $5,000,000.issued an aggregate of 284,902 shares of common stock under a non-brokered private placement at a price of $3.51 per share for total gross proceeds of $1,000,006. We do not have any other commitments to raise funds as of the date of this annual report on Form 10-K.

As at April 30, 2019,2020 we had $1,352,995$1,267,712 in cash held outside of the United States, and there is no intent to repatriate at this time. Should we decide to repatriate in the future, taxes would need to be accrued and paid. The 2017 Tax Cuts and Jobs Act incorporated changes to certain international tax provisions, including the implementation of a territorial tax system that imposes a one-time tax on foreign unremitted earnings. We do not anticipate that the foreign provisions would have an impact on our taxes.

Operating Activities

Our operating activities resulted in a net cash outflow of $310,116 for the year ended April 30, 2020, compared to a net cash outflow of $3,443,379 for the year ended April 30, 2019, compared torepresenting a net cash outflowdecrease of $2,427,090 for the year ended April 30, 2018, representing an increase of $1,016,289.$3,113,263. This increasedecrease is primarily due to an increasea decrease in the net loss by approximately $1,792,800,$3,916,900, an increase in the change in unearned revenue of approximately $1,160,800, an increase in operating lease expenses of approximately $514,600 related to the adoption of the new lease accounting standard, an increase in the loss resulting from the change in fair value of derivative instruments of approximately $127,400, an increase to the change in accounts payable and accrued liabilities of approximately $192,700, a decrease in non-cash foreign exchange losses of approximately $824,100$72,000 and a decrease in addition to decreasesthe change in deferred sales commissions costs of approximately $44,400. This is offset by an increase in the change in accounts payable and accruedreceivable of approximately $1,376,000, a decrease in non-cash bad debts expense of approximately $933,000, the adoption of the new lease accounting standard resulting in operating lease liabilities byof approximately $722,300,$498,700, a decrease in non-cash stock-based compensation expense of approximately $129,800, deferred sales commissions costs of approximately $61,700, prepaid expenses of approximately $54,700$92,100 and warranty payable of approximately $19,900. The increase in next cash outflow was primarily offset by the changes in accounts receivable of approximately $1,925,210 as a result of decreased revenue experienced during the year and write-off of certain amounts deemed uncollectible, non-cash bad debts expense of $504,400 and unearned revenue of $174,900.

            For the year ended April 30, 2018, the change in net cash outflow was primarily due to an increase in accounts receivable of $2,451,400 and an increase in the net loss of approximately $762,200, offset by a decrease in non-cash foreign exchangedepreciation and amortization of approximately $1,030,500 and$32,500. 

35

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Investing Activities

Investing activities resulted in a decrease in accounts payable and accrued liabilities of $508,100. The net cash flow outflow from operating activitiesof $125,842 for the year ended April 30, 2018 was primarily the result of a net loss of $3,220,700 and an increase in accounts receivable of $1,375,600. The net cash outflow was primarily offset by stock-based compensation of $604,600, unearned revenue of $430,900, non-cash foreign exchange loss of $468,400, increase in accounts payable of $561,700 and depreciation and amortization of $113,800.

Investing Activities

            Investing activities resulted in2020, compared to a net cash outflow of $49,732 for the year ended April 30, 2019, compared to a net cash outflowrepresenting an increase of $125,113 for the year ended April 30, 2018, representing a decrease of $75,381.$76,110. This decrease is primarily due to a decreasean increase of approximately $60,200$80,300 in purchases of equipment, and $15,200offset by a decrease of $4,200 in costs related to our trademarks. At April 30, 2019,2020, we did not have any material commitments for future capital expenditures.

34

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Financing Activities

Financing activities resulted in a net cash inflow of $1,016,967 for the year ended April 30, 2020 compared to a net cash inflow of $3,022,645 for the year ended April 30, 2019, compared torepresenting a net cash inflowdecrease of $2,869,871 for the year ended April 30, 2018, representing an increase of $152,774.$2,005,678. The net cash inflow for the year ended April 30, 2019decrease was primarily due to proceeds of $3,000,000 received under athe loan agreement in additionduring the year ended April 30, 2019 compared to proceeds of $22,6451,000,000 in the current year. In addition, proceeds received related to shares issued pursuant to our employee stock purchase plan. The net cash inflow for the year ended April 30, 2018 was primarily a result of two non-brokered private placements. On January 24, 2018, we issued an aggregate of 427,500 shares of common stock under a non-brokered private placement at a price of $4.01 per share for total gross proceeds of $1,714,275 less issuance costs of $48,325. On July 20, 2017, we issued an aggregate of 539,240 shares of common stock under a non-brokered private placement at a price of $2.20 per share for total gross proceeds of $1,186,328 less issuance costs of $19,832. In addition, we received $69,325 for shares issued under the employee stock purchase plan in the prior year.

            During the year ended April 30, 2018, we also repurchased 13,600 shares of common stock at an average price ofdecreased by approximately $2.49 (CDN$3.18), for a total of approximately $33,119 (CDN$43,218) pursuant to a normal course issuer bid effective during the period March 29, 2017 to March 28, 2018. On March 29, 2018, we filed another normal course issuer bid commencing on March 29, 2018 and expired on March 28, 2019. Under this normal course issuer bid, we were authorized to purchase up to 284,278 shares of our common stock through the facilities of the TSX and other Canadian marketplaces or U.S. marketplaces. As of April 30, 2019, a total of 153,988 shares have been repurchased and cancelled since the normal issuer bid plan was initiated.$5,700.

Off-Balance Sheet Arrangements

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

Recently Issued Accounting Pronouncements

In August 2017,2018, the FASB issued ASU 2017-12, Targeted Improvements2018-13 Disclosure Framework - Changes to Accountingthe Disclosure Requirements for Hedging Activities,Fair Value Measurement, which amends the presentationeliminates, adds, and modifies certain disclosure requirements for fair value measurements under ASC 820. This ASU is to be applied on a prospective basis for certain modified or new disclosure requirements, and changes how companies assess effectiveness.all other amendments in the standard are to be applied on a retrospective basis. The amendments are intended to more closely align hedge accounting with companies’ risk management strategies, simplify the application of hedge accounting, and increase transparency as to the scope and results of hedging programs. This amendmentnew standard is effective for interim and annual periods beginning after December 15, 2018, including interim periods within those periods. Early application is2019, with early adoption permitted. We are currently assessingevaluating the future impact of this updateadoption on our consolidated financial statements and related disclosures.statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles –- Goodwill and Other: Simplifying the Test for Goodwill Impairment, which amends the guidance to eliminate Step 2 from the goodwill impairment test. Instead, under the amendments in the new guidance, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’sunit's fair value. The amendments will be effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. We are evaluating thedo not expect a significant impact of this amendment on our consolidated financial statements and related disclosures.disclosures resulting from the pending adoption of this amendment.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments: Measurement of Credit Losses on Financial Instruments, which amends the guidance on measuring credit losses on financial assets held at amortized cost. The amendment is intended to address the issue that the previous “incurred loss”"incurred loss" methodology was restrictive for Company’sCompany's ability to record credit losses based on not yet meeting the “probable”"probable" threshold. The new language will require these assets to be valued at amortized cost presented at the net amount expected to be collected will a valuation provision. The amendments will be effective for fiscal years beginning after December 15, 2019.2022. We are evaluating thedo not expect a significant impact of this amendment on our consolidated financial statements and related disclosures.

            In February 2016, FASB issued ASU 2016-02, Leases. The guidance would require lessees to recognize most leases on their balance sheets as lease liabilities with corresponding right-of-use assets. The guidance is effective for annual and interim reporting periods beginning on or after December 15, 2018. We are currently evaluatingdisclosures resulting from the impact of its pending adoption of ASU 2016-02 on our consolidated financial statements.this amendment.

3536

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            In May 2014, FASB issued ASU 2014-09,Revenue From Contracts With Customers (“Topic 606”) which supersedes the revenue recognition requirements in Topic 605 “Revenue Recognition” (“Topic 605”) and requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods and services. We adopted ASU 2014-09 as of May 1, 2018 using the modified retrospective transition method. SeeNote 3 – Revenue Recognitionunder ASC 606 in our notes to consolidated financial statements for further details.

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

 Not applicable.

Item 8.Financial Statements and Supplementary Data.

3637

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COUNTERPATH CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 20192020

	Page
Report of Independent Registered Public Accounting Firm	3839
Consolidated Balance Sheets	3941
Consolidated Statements of Operations	4042
Consolidated Statements of Comprehensive Loss	4042
Consolidated Statements of Cash Flows	4143
Consolidated Statements of Changes in Stockholders' Equity	4244
Notes to the Consolidated Financial Statements	43-6645-68

3738

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Tel: 604  688 5421 Fax: 604  688 5132 www.bdo.ca

BDO Canada LLP 600 Cathedral Place 925 West Georgia Street Vancouver BC  V6C 3L2  Canada

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

CounterPath Corporation

Las Vegas, Nevada

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of CounterPath Corporation and its subsidiaries (the “Company”"Company") as of April 30, 20192020 and 2018,2019, the related consolidated statements of operations and comprehensive loss, changes in stockholders’stockholders' equity, and cash flows for each of the two years in the period ended April 30, 2019,2020, and the related notes (collectively referred to as the “consolidated"consolidated financial statements”statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at April 30, 20192020 and 2018,2019, and the results of its operations and its cash flows for each of the two years in the period ended April 30, 20192020, in conformity with accounting principles generally accepted in the United States of America.

Going Concern Uncertainty

The accompanying consolidated 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 has incurred losses and has an accumulated deficit of $68,581,091$69,677,656 as of April 30, 2019.2020. As stated in Note 2, these events orand conditions, along with other matters as set forth in Note 2, indicate that a material uncertainty exists that may castraise substantial doubt about its ability to continue as a going concern. Management’sManagement's plans in regardregards to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Change in Accounting Method related to Leases

As discussed in Notes 2 and 14 to the consolidated financial statements, the Company has changed its method of accounting for leases during the year ended April 30, 2020 due to the adoption of the Accounting Standards Codification ("ASC") - Leases ("ASC 842").

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’sCompany's management. Our responsibility is to express an opinion on the Company’sCompany's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’sCompany's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

39

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/s/ “BDO CANADA LLP”BDO Canada LLP

Chartered Professional Accountants

We have served as the Group’sCompany's auditor since 2006.

Vancouver, British Columbia

July 10, 201916, 2020

3840

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COUNTERPATH CORPORATION

CONSOLIDATED BALANCE SHEETS
(Stated in U.S. Dollars)
dollars, except number of shares)

		April 30,			April 30,			April 30,			April 30,
		2019			2018			2020			2019
Assets
Current assets:
Cash	$	1,862,458		$	2,348,883		$	2,433,266		$	1,862,458
Accounts receivable (net of allowance for doubtful accounts of $619,514 (2018 - $322,638))		1,876,896			3,509,010
Deferred sales commission costs – current – Note 3		122,777			–
Accounts receivable (net of allowance for doubtful accounts of $317,230 (2019 - $619,514))								2,553,714			1,876,896
Deferred sales commission costs - current - Note 3								129,946			122,777
Derivative assets		1,178			–			6,381			1,178
Prepaid expenses and other current assets		263,078			191,245			326,921			263,078
Total current assets		4,126,387			6,049,138			5,450,228			4,126,387
Deposits		94,829			98,633			82,039			94,829
Deferred sales commission costs – non-current – Note 3		77,571			–
Equipment		59,914			121,819
Deferred sales commission costs - non-current - Note 3								92,644			77,571
Equipment, net - Note 4								111,672			59,914
Operating lease right-of-use assets - Note 14								1,370,035			-
Goodwill		6,541,290			6,843,575			6,323,390			6,541,290
Intangibles and other assets		224,795			221,062			225,945			224,795
Total Assets	$	11,124,786		$	13,334,227		$	13,655,953		$	11,124,786
Liabilities and Stockholders’ Equity
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities	$	2,233,875		$	2,437,733		$	2,231,777		$	2,233,875
Related party loan payable - current - Note 9								4,000,000			-
Derivative liability		4,512			–			140,299			4,512
Unearned revenue		2,593,726			2,565,876			3,782,400			2,593,726
Operating lease liabilities - current - Note 14								293,322			-
Customer deposits		947			2,200			-			947
Accrued warranty		52,035			63,130			51,545			52,035
Total current liabilities		4,885,095			5,068,939			10,499,343			4,885,095
Deferred lease inducements		4,031			14,339			-			4,031
Loan payable – Note 9		3,000,000			–
Related party loan payable - non-current - Note 9								-			3,000,000
Operating lease liabilities - non-current - Note 14								1,102,530			-
Unrecognized tax liability		9,763			9,763			9,763			9,763
Total liabilities		7,898,889			5,093,041			11,611,636			7,898,889
Stockholders’ equity:
Preferred stock, $0.001 par value Authorized: 100,000,000 Issued and outstanding: April 30, 2019 – nil; April 30, 2018 – nil		–			–
Common stock, $0.001 par value – Note 10 Authorized: 100,000,000 Issued: April 30, 2019 – 5,950,246; April 30, 2018 – 5,930,468		5,950			5,931
Stockholders' equity:											��
Preferred stock, $0.001 par value
Authorized: 100,000,000
Issued and outstanding: April 30, 2020 - nil; April 30, 2019 - nil								-			-
Common stock, $0.001 par value - Note 10
Authorized: 10,000,000
Issued:
April 30, 2020 - 6,103,612; April 30, 2019 - 5,950,246								6,104			5,950
Additional paid-in capital		75,667,533			75,170,181			76,066,930			75,667,533
Accumulated deficit – Note 3		(68,581,091	)		(63,701,685	)
Accumulated other comprehensive loss – currency translation adjustment		(3,866,495	)		(3,233,241	)
Total stockholders’ equity		3,225,897			8,241,186
Liabilities and Stockholders’ Equity	$	11,124,786		$	13,334,227
Accumulated deficit - Note 2								(69,677,656	)		(68,581,091	)
Accumulated other comprehensive loss - currency translation adjustment								(4,351,061	)		(3,866,495	)
Total stockholders' equity								2,044,317			3,225,897
Liabilities and Stockholders' Equity							$	13,655,953		$	11,124,786
Commitments – Note 14
Contingencies – Note 15
Going concern – Note 2
Commitments - Note 15
Contingencies - Note 16

See accompanying notes to the consolidated financial statements

3941

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COUNTERPATH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in U.S. Dollars)
dollars, except number of shares)

		Years Ended						Years Ended April 30,
		April 30,						2020			2019
		2019			2018
Revenue – Note 13:
Revenue - Note 13:
Software	$	4,660,660		$	6,338,512		$	5,154,513		$	4,660,660
Subscription, support and maintenance		5,366,290			4,273,410			6,257,854			5,366,290
Professional services and other		737,954			1,769,819			688,959			737,954
Total revenue		10,764,904			12,381,741			12,101,326			10,764,904
Operating expenses:
Cost of sales (includes depreciation of $529 (2018 - $6,337))		2,223,984			1,629,814
Cost of sales (includes depreciation of $nil (2019 - $529))								2,124,948			2,223,984
Sales and marketing		4,061,921			4,266,716			3,831,866			4,061,921
Research and development		5,547,587			5,506,887			4,398,814			5,547,587
General and administrative		4,098,173			3,772,094			2,545,265			4,098,173
Total operating expenses		15,931,665			15,175,511			12,900,893			15,931,665
Loss from operations		(5,166,761	)		(2,793,770	)		(799,567	)		(5,166,761	)
Interest and other (expense) income, net
Interest and other income		2,145			3			10,890			2,145
Interest expense		(107,323	)		(364	)		(335,351	)		(107,323	)
Foreign exchange (loss) gain		256,765			(426,539	)
Foreign exchange gain								168,586			256,765
Change in fair value of derivative instruments		1,735			–			(132,377	)		1,735
Loss on lease termination								(8,746	)		-
Total interest and other (expense) income, net		153,322			(426,900	)		(296,998	)		153,322
Net loss for the year	$	(5,013,439	)	$	(3,220,670	)	$	(1,096,565	)	$	(5,013,439	)
Net loss per share:
Basic and diluted – Note 16	$	(0.84	)	$	(0.59	)
Basic and diluted - Note 17							$	(0.18	)	$	(0.84	)
Weighted average common shares outstanding:
Basic and diluted – Note 16		5,942,096			5,496,201
Basic and diluted - Note 17								6,010,006			5,942,096

See accompanying notes to the consolidated financial statements

COUNTERPATH CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Stated in U.S. Dollars)
dollars, except number of shares)

Net loss for the year	$	(5,013,439	)	$	(3,220,670	)	$	(1,096,565	)	$	(5,013,439	)
Other comprehensive loss:
Foreign currency translation adjustments		(633,254	)		791,955			(484,566	)		(633,254	)
Comprehensive loss	$	(5,646,693	)	$	(2,428,715	)	$	(1,581,131	)	$	(5,646,693	)

See accompanying notes to the consolidated financial statements

4042

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COUNTERPATH CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in U.S. Dollars)
dollars, except number of shares)

		Years Ended						Years Ended
		April 30,						April 30,
		2019			2018			2020			2019
Cash flows from operating activities:
Net loss for the year	$	(5,013,439	)	$	(3,220,670	)	$	(1,096,565	)	$	(5,013,439	)
Adjustments to reconcile net loss to net cash used in operating activities:
Bad debt expense		1,082,440			578,024			149,481			1,082,440
Deferred lease inducements		(9,675	)		(10,175	)		(3,897	)		(9,675	)
Depreciation and amortization		105,464			113,805			72,947			105,464
Unrealized foreign exchange (gain) loss		(355,739	)		468,354
Stock-based compensation – Note 10		474,726			604,566
Issuance of common stock for services		–			16,156
Operating lease expense - Note 14								514,556			-
Unrealized foreign exchange gain								(283,761	)		(355,739	)
Stock-based compensation - Note 10								382,584			474,726
Change in fair value of derivative instruments		3,334			–			130,774			3,334
Changes in assets and liabilities:
Accounts payable and accrued liabilities		(160,586	)		561,703			32,162			(160,586	)
Accounts receivable		549,658			(1,375,552	)		(826,299	)		549,658
Deferred sales commission costs – Note 3		(61,705	)		–
Deferred sales commission costs - Note 3								(17,275	)		(61,705	)
Prepaid expenses and other current assets								(63,387	)		(73,359	)
Accrued warranty		(11,095	)		8,765			(490	)		(11,095	)
Customer deposits		(1,253	)		(6,325	)
Prepaid expenses and other current assets		(73,359	)		(18,645	)
Unearned revenue – Note 3		27,850			(147,096	)
Operating lease liabilities - Note 14								(498,721	)		-
Operating lease deposits								10,048			-
Unearned revenue - Note 3								1,188,674			27,850
Other current liabilities								(947	)		(1,253	)
Net cash used in operating activities		(3,443,379	)		(2,427,090	)		(310,116	)		(3,443,379	)
Cash flows from investing activities:
Purchases of equipment		(40,094	)		(100,300	)		(120,384	)		(40,094	)
Purchases of intangibles		(9,638	)		(24,813	)		(5,458	)		(9,638	)
Net cash used in investing activities		(49,732	)		(125,113	)		(125,842	)		(49,732	)
Cash flows from financing activities:
Net proceeds from issuance of common stock		22,645			2,902,990			16,967			22,645
Repurchases of common stock		–			(33,119	)
Proceeds received from loan payable – Note 9		3,000,000			–
Proceeds received from related party loan payable - Note 9								1,000,000			3,000,000
Net cash provided by financing activities		3,022,645			2,869,871			1,016,967			3,022,645
Foreign exchange effect on cash		(15,959	)		(39,804	)		(10,201	)		(15,959	)
(Decrease) increase in cash		(486,425	)		277,864
Increase (decrease) in cash								570,808			(486,425	)
Cash, beginning of the period		2,348,883			2,071,019
Cash, end of the period	$	1,862,458		$	2,348,883
Cash, beginning of the year								1,862,458			2,348,883
Cash, end of the year							$	2,433,266		$	1,862,458
Supplemental disclosure of cash flow information
Cash paid for:
Interest	$	52,603		$	364		$	229,480		$	52,603
Taxes	$	–		$	–		$	-		$	-
Non cash transactions – Note 10

See accompanying notes to the consolidated financial statements

4143

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COUNTERPATH CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’STOCKHOLDERS' EQUITY
for the Years Ended April 30, 20192020 and 20182019
(Stated in U.S. Dollars)
dollars, except number of shares)

		Common shares						Treasury Shares
																				Accumulated
		Number						Number						Additional						Other
		of						of						Paid-in			Accumulated			Comprehensive
		Shares			Par Value			Shares			Par Value			Capital			Deficit			Income (Loss)			Total
Balance, April 30, 2017		5,005,245		$	5,005			(59,900	)	$	(60	)	$	71,680,575		$	(60,481,015	)	$	(4,025,196	)	$	7,179,309
Shares issued – Note 10
Private placement, net of share issuance costs		966,740			967			–			–			2,831,479			–			–			2,832,446
Issuance of common stock for services		6,789			7			–			–			16,149			–			–			16,156
Share repurchase plan		–			–			(13,600	)		(14	)		(33,829	)		–			–			(33,843	)
Cancellation of shares		(73,500	)		(74	)		73,500			74			724			–			–			724
								–
Stock-based compensation		–			–						–			604,566			–			–			604,566
								–
								–
Employee share purchase program		24,699			25						–			69,300			–			–			69,325
								–
Exercise of stock options		495			1			–			–			1,217			–			–			1,218
Net loss for the period		–			–			–			–			–			(3,220,670	)		–			(3,220,670	)
Foreign currency translation adjustment		–			–			–			–			–			–			791,955			791,955
Balance, April 30, 2018		5,930,468		$	5,931			–		$	–		$	75,170,181		$	(63,701,685	)	$	(3,233,241	)	$	8,241,186
Adoption of ASC 606 – Note 3		–			–			–			–			–			134,033			–			134,033
Stock-based compensation – Note 10		–			–			–			–			474,726			–			–			474,726
Employee share purchase program – Note 10		12,820			12			–			–			25,012			–			–			25,024
Exercise of stock options– Note 10		6,958			7			–			–			(2,386	)		–			–			(2,379	)
Net loss for the period		–			–			–			–			–			(5,013,439	)		–			(5,013,439	)
Foreign currency translation adjustment		–			–			–			–			–			–			(633,254	)		(633,254	)
Balance, April 30, 2019		5,950,246		$	5,950			–		$	–		$	75,667,533		$	(68,581,091	)	$	(3,866,495	)	$	3,225,897

		Common shares						Treasury Shares
		Number of Shares			Par Value			Number of Shares			Par Value			Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total
Balance, April 30, 2018		5,930,468		$	5,931			-		$	-		$	75,170,181		$	(63,701,685	)	$	(3,233,241	)	$	8,241,186
Adoption of ASC 606 - Note 3		-			-			-			-			-			134,033			-			134,033
Stock-based compensation - Note 10		-			-			-			-			474,726			-			-			474,726
Employee share purchase program - Note 10		12,820			12			-			-			25,012			-			-			25,024
Exercise of stock options- Note 10		6,958			7			-			-			(2,386	)		-			-			(2,379	)
Net loss for the year		-			-			-			-			-			(5,013,439	)		-			(5,013,439	)
Foreign currency translation adjustment		-			-			-			-			-			-			(633,254	)		(633,254	)
Balance, April 30, 2019		5,950,246		$	5,950			-		$	-		$	75,667,533		$	(68,581,091	)	$	(3,866,495	)	$	3,225,897
Stock-based compensation - Note 10		-			-			-			-			382,584			-			-			382,584
Employee share purchase program - Note 10		13,949			14			-			-			20,001			-			-			20,015
Exercise of stock options- Note 10		1,710			2			-			-			(3,050	)		-			-			(3,048	)
Conversion of deferred share units - Note 10		137,707			138			-			-			(138	)		-			-			-
Net loss for the year		-			-			-			-			-			(1,096,565	)		-			(1,096,565	)
Foreign currency translation adjustment		-			-			-			-			-			-			(484,566	)		(484,566	)
Balance, April 30, 2020		6,103,612		$	6,104			-		$	-		$	76,066,930		$	(69,677,656	)	$	(4,351,061	)	$	2,044,317

See accompanying notes to the consolidated financial statements

4244

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COUNTERPATH CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Stated in U.S. Dollars)dollars, except number of shares)

Note 1	Nature of Operations
	CounterPath Corporation (the “Company”"Company") was incorporated in the State of Nevada on April 18, 2003. The Company focuses on the design, development, marketing and sales of software applications and related services, such as pre and post sales technical support and customization services, that enable enterprises and telecommunication service providers to deliver Unified Communications (UC) services, including voice, video, messaging and collaboration functionality, over their Internet Protocol, or IP, based networks. The Company’sCompany's products are sold either directly or through channel partners, to small, medium and large businesses (“enterprises”("enterprises") and telecom service providers in North America, and in Europe, Middle East, Africa (“("collectively EMEA”EMEA"), Asia Pacific and Latin America. COVID-19 Pandemic On January 30, 2020, the World Health Organization ("WHO") announced a global health emergency because of a new strain of coronavirus, COVID-19 originating in Wuhan, China (and the risks to the international community as the virus spread globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve as of the date of this Annual Report on Form 10-K. As such, it is uncertain as to the full magnitude that the pandemic will have on the Company's financial condition, liquidity, and future results of operations. Management is actively monitoring the global situation and its impact on the Company's financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects that the COVID-19 outbreak will have on its results of operations, financial condition, or liquidity for fiscal year 2021. As of the date of this Annual Report on Form 10-K the Company has not experienced meaningful delays in securing new customers and related revenues, significant cancellations of existing contracts, or meaningful delays in payments from existing customers, however, the longer this pandemic continues there may be additional impacts. Although the Company cannot estimate the length or gravity of the impact of the COVID-19 outbreak at this time, if the pandemic continues, it may have a material adverse effect on the Company's results of future operations, financial position, liquidity, and capital resources, and those of the third parties on which Company's relies in fiscal year 2021.
Note 2	Summary of Significant Accounting Policies
	Basis of Presentation and Principles of Consolidation
	The accompanying consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (“("U.S. GAAP”GAAP") and are stated in U.S. dollars, except where otherwise disclosed.
	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, and BridgePort Networks, Inc. (“BridgePort”("BridgePort"), a company incorporated under the laws of the state of Delaware and CounterPath LLC, a company formed on August 27, 2018, under the laws of the state of Delaware. The results of NewHeights Software Corporation (“NewHeights”("NewHeights"), which subsequently was amalgamated with another subsidiary to become CounterPath Technologies Inc., are included from August 2, 2007, the date of acquisition. The results of FirstHand Technologies Inc. (“FirstHand”("FirstHand"), which subsequently was amalgamated with CounterPath Technologies Inc., and BridgePort are included from February 1, 2008, the date of acquisition. All inter-company transactions and balances have been eliminated.
	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.

45

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COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. dollars, except number of shares)

	Going Concern
	The Company has experienced recurring losses and has an accumulated deficit of $68,581,091$69,677,656 as of April 30, 2019. This is2020, as a result of flat to declining revenues due tobeing historically lower than expenses, resulting from a number of factors including an increased focus on building out the Company’s cloud-basedits buildout of a cloud based subscription platform and aconcurrent with the change from the currentof its licensing model to subscription-subscription based licensing whichand has not reached profitable operations resultingon a consistent basis. However, during the year ended April 30, 2020, revenue has increased by approximately 12%, compared to the year ended April 30, 2019. Despite the increase in revenue, the Company saw an increase in current liabilities primarily related to the reclassification of the related party loan payable of $4,000,000 outstanding as of April 30, 2020, from long-term liabilities, which is due on April 11, 2021. It is uncertain whether the Company would have sufficient cash flows to meet its current obligations. Further, due to the recent and ongoing outbreak of COVID-19, the spread of COVID-19 has severely impacted many economies around the world, including those in which the Company's customers operate. Management has taken steps to help mitigate any potential negative impact on operations including having reduced operating costs through fiscal year ended April 30, 2020 and obtaining financial assistance made available through the U.S. government through the Paycheck Protection Program. However, the Company is unable to determine the future impact on its financial position and operating results. Together, these factors raise substantial doubt about the Company’sCompany's ability to continue operating as a going concern.concern within one year of the date of issuance of the consolidated financial statements.

	Under the existing loan agreement, as of April 30, 2020, the unused portion of the loan principal was $1,000,000. On June 15, 2020, the Company repaid $2,000,000 of the outstanding loan balance to the lenders, increasing the unused portion of the loan principal to $3,000,000. See Note 9 - Related Party Loan Payable for more information. To alleviate this situation, the Company has plans in place to improve its financial position and liquidity, through additional financing, while executing on its growth strategy, and by managing and or reducing costs that are not expected to have an adverse impact on the ability to generate cash flows, as the transition to its software as a service platform and subscription licensing continues.
	During the year ended April 30, 2020, as a result of managements efforts to reduce costs, operating expenses decreased by approximately 19% to $12,900,893 compared to $15,931,665 in the prior year. The Company has historically been able to manage liquidity requirements through cost management and cost reduction measures, supplemented with raising additional financing. On October 10, 2018,If the Company is unable to maintain sufficient cash flows, the Company will not be able to meet its present obligations. The Company has taken steps to obtain financial assistance made available from the U.S. government to help mitigate the impact of COVID-19 on its operations. On May 1, 2020, the Company, through its subsidiary, CounterPath LLC, entered into a promissory note with Bank of America for a term loan agreement for an aggregate principalin the amount of up$209,035 (the "Loan"). The Loan is made pursuant to $3,000,000the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act. (the "CARES Act"). See Note 18 - Subsequent Events for more information.
	Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions, which was fully drawn asaffect the amounts reported in these consolidated financial statements, the notes thereto, and the disclosure of April 30, 2019. SeeNote 9 – Loan Payablefor further detail. On July 10, 2019,contingent assets and liabilities at the Company entered into an amended loan agreement to increase the maximum amountdate of the loan to $5,000,000. See Note 17 – Subsequent Events for further detail. The Company does not have any other commitments to raise funds.consolidated financial statements.  Actual results could differ from those estimates.

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COUNTERPATH CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Stated in U.S. Dollars)

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires 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.

Reclassification

Certain prior period balances have been reclassified to conform to the current period presentation in the Company’s consolidated financial statements and the accompanying notes.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable. The Company has exposure to credit risk to the extent cash balances exceed amounts covered by federal deposit insurance; however, the Company believes that its credit risk on cash balances is immaterial. The Company is also subject to concentrations of credit risk in its accounts receivable. The Company monitors and actively manages its receivables, and from time to time will insure certain receivables with higher credit risk and may require collateral or other securities to support its accounts receivable.

46

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COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. dollars, except number of shares)

The table below presents significant customers who accounted for greater than 10% of total accounts receivable as of April 30, 20192020 and 2018:2019:

			April 30,			April 30,
			2019			2018
	Customer A		13%			2%
	Customer B		7%			13%
	Customer C		–%			18%

		April 30, 2020			April 30, 2019
Customer A		10%			10%
Customer B		3%			13%

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are presented net of an allowance for doubtful accounts.

			Years Ended April30,
			2019			2018
	Balance of allowance for doubtful accounts, beginning of year	$	322,638		$	80,232
	Bad debt provision		1,082,440			578,024
	Write-off of receivables		(785,564	)		(335,618	)
	Balance of allowance for doubtful accounts, end of year	$	619,514		$	322,638

The Company determines the allowance for doubtful accounts by considering a number of factors, including the length of time the accounts receivable are beyond the contractual payment terms, previous loss history, and the customer’s current ability to pay its obligation. When the Company becomes aware of a specific customer’s inability to meet its financial obligations to the Company, the Company records a charge to the allowance to reduce the customer’s related accounts.

Stock-Based Compensation

The Company adopted ASC 718 “Compensation – Stock Compensation”, using the modified prospective method on May 1, 2006. Under this application, the Company is required to record compensation expense, based on the fair value of the awards, for all awards granted after the date of adoption and for the unvested portion of previously granted awards that remain outstanding as at the date of adoption. In accordance with ASC 718, the compensation expense is amortized on a straight-line basis over the requisite service period which approximates the vesting period.

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		Years Ended April 30,
		2020			2019
Balance of allowance for doubtful accounts, beginning of year	$	619,514		$	322,638
Bad debt provision		266,043			1,082,440
Recoveries		(115,997	)		–
Write-off of receivables		(452,330	)		(785,564	)
Balance of allowance for doubtful accounts, end of year	$	317,230		$	619,514

COUNTERPATH CORPORATION	The Company determines the allowance for doubtful accounts by considering a number of factors, including the length of time the accounts receivable are beyond the contractual payment terms, previous loss history, and the customer's current ability to pay its obligation. When the Company becomes aware of a specific customer's inability to meet its financial obligations to the Company, the Company records a charge to the allowance to reduce the customer's related accounts. The Company records an allowance for doubtful accounts at the end of each reporting period based on 2% of amounts invoiced or the aggregate specified customer accounts, whichever is higher.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Stated	Stock-Based Compensation The Company adopted ASC 718 "Compensation - Stock Compensation", using the modified prospective method on May 1, 2006.  Under this application, the Company is required to record compensation expense, based on the fair value of the awards, for all awards granted after the date of adoption and for the unvested portion of previously granted awards that remain outstanding as at the date of adoption. In accordance with ASC 718, the compensation expense is amortized on a straight-line basis over the requisite service period, which approximates the vesting period. Stock options granted to non-employees were accounted for in U.S. Dollars)

Stock options granted to non-employees were accounted for in accordance with ASC 718 and ASC 505-50 “Equity based payments to non-employees”accordance with ASC 718 and ASC 505-50 "Equity based payments to non-employees" 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.  With the adoption of ASC 718, the Company has elected to use the Black-Scholes option pricing model to determine the fair value of stock options granted. The Company has estimated the fair value of option awards to employees and non-employees for the years ended April 30, 2020 and April 30, 2019 and April 30, 2018 using the assumptions more fully described in Note 10.

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

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COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. dollars, except number of shares)

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.
	Office furniture	Five years
	Website	Three years Development Costs The Company recognizes the costs associated with developing a website in accordance with ASC Topic 350-40 "Intangibles - Internal Use Software". Internal and external costs incurred during the preliminary project stage are expensed as they are incurred. 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 Long-lived assets are evaluated for impairment periodically whenever events or changes in circumstances indicate that their related carrying amounts may not be recoverable in accordance with FASB ASC 360, "Property, Plant and Equipment".  In evaluating long-lived assets for recoverability, the Company uses its best estimate of future cash flows expected to result from the use of the asset and eventual disposition in accordance with FASB ASC 360-10-15. To the extent that estimated future, undiscounted cash inflows attributable to the asset, less estimated future, undiscounted cash outflows, are less than the carrying amount, an impairment loss is recognized in an amount equal to the difference between the carrying value of such asset and its fair value. Assets to be disposed of and for which there is a committed plan of disposal, whether through sale or abandonment, are reported at the lower of carrying value or fair value less costs to sell. There was no impairment loss recognized for the year ended April 30, 2020 and 2019. Goodwill Goodwill represents the excess purchase price over the estimated fair value of net assets acquired and liabilities assumed as of the acquisition date. ASC Topic 350 "Intangibles - Goodwill" requires goodwill to be tested for impairment annually or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of the Company's business enterprise below its carrying value. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit. Recoverability of goodwill is measured at the reporting unit level by comparing the reporting unit's carrying amount, including goodwill, to the fair value of the reporting unit, which is measured based upon, among other factors, market multiples for comparable companies as well as a discounted cash flow analysis. Management has determined that the Company operates as a single operating segment and consequently a single reporting unit due to the similar economic characteristics of its components and the nature of the products and services offered by those components. If the recorded value of the Company's assets, including goodwill, and liabilities ("net book value") of the reporting unit exceeds its fair value, an impairment loss may be required.

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.48

Website Development Costs

The Company recognizes the costs associated with developing a website in accordance with ASC Topic 350-40 “Intangibles – Internal Use Software”.

Internal and external costs incurred during the preliminary project stage are expensed as they are incurred. 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.

Goodwill

Goodwill represents the excess purchase price over the estimated fair value of net assets acquired and liabilities assumed as of the acquisition date. ASC Topic 350 “Intangibles – Goodwill” requires goodwill to be tested for impairment annually or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of the Company's business enterprise below its carrying value. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit. Recoverability of goodwill is measured at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit, which is measured based upon, among other factors, market multiples for comparable companies as well as a discounted cash flow analysis.

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COUNTERPATH CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Stated in U.S. Dollars)dollars, except number of shares)

Management has determined that the Company operates as a single operating segment and consequently a single reporting unit due to the similar economic characteristics of its components and the nature of the products and services offered by those components. If the recorded value of the Company’s assets, including goodwill, and liabilities (“net book value”) of the reporting unit exceeds its fair value, an impairment loss may be required.

The Company reviews goodwill for impairment annually and whenever events or changes in circumstances indicate its carrying value may not be recoverable in accordance with FASB ASC 350,Goodwill and Other Intangible Assets. The provisions of ASC 350 require that a two-step impairment test be performed on goodwill. In the first step, the Company compares the fair value of its reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not considered impaired and the Company is not required to perform further testing. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then the Company must perform the second step of the impairment test in order to determine the implied fair value of the reporting unit’s goodwill. If the carrying value of our reporting unit’s goodwill exceeds its implied fair value, then the Company would record an impairment loss equal to the difference.

In September of 2011, FASB issued Accounting Standards Update 2011-08,“Intangibles—Goodwill and Other (Topic 350)”

The Company reviews goodwill for impairment annually and whenever events or changes in circumstances indicate its carrying value may not be recoverable in accordance with FASB ASC 350, Goodwill and Other Intangible Assets. The provisions of ASC 350 require that a two-step impairment test be performed on goodwill. In the first step, the Company compares the fair value of its reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not considered impaired and the Company is not required to perform further testing.  If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then the Company must perform the second step of the impairment test in order to determine the implied fair value of the reporting unit's goodwill.  If the carrying value of our reporting unit's goodwill exceeds its implied fair value, then the Company would record an impairment loss equal to the difference. In September of 2011, FASB issued Accounting Standards Update 2011-08, "Intangibles-Goodwill and Other (Topic 350)". Under the amendments of this update, an entity may first assess certain qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. Determining the fair value of the reporting unit involves the use of significant estimates and assumptions. These estimates and assumptions include future economic and market conditions and determination of appropriate market comparables. The Company bases its fair value estimates on assumptions management believes to be reasonable but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates. Goodwill was initially recorded upon the acquisition of NewHeights on August 2, 2007 and FirstHand on February 1, 2008. At the time of each acquisition and as of the date of the consolidated financial statements, the Company recognized the following:

									April30,
			Acquisition Date						2019			2018
	NewHeights	$	6,339,717		CDN$	6,704,947		$	4,990,578		$	5,221,202
	FirstHand		2,083,960			2,083,752			1,550,712			1,622,373
		$	8,423,677		CDN$	8,788,699		$	6,541,290		$	6,843,575

		Acquisition Date						April 30,
								2020			2019
NewHeights	$	6,339,717			CDN$6,704,947		$	4,824,335		$	4,990,578
FirstHand		2,083,960			2,083,752			1,499,055			1,550,712
	$	8,423,677			CDN$8,788,699		$	6,323,390		$	6,541,290

The Company performed its annual impairment test during the fourth quarter for the years ended April 30, 20192020 and 20182019 and concluded that there has been no impairment to the carrying amount.

Intangible Assets

The Company’sCompany's intangible assets consists of patents and trademarks. Costs related to granted patents are capitalized and amortized over the expected life of the patent which ranges from 16 to 20 years. Costs related to patent applications are expensed as incurred. Costs related to trademarks are capitalized and are not amortized as the Company expects such trademarks to be used indefinitely.

46Leases

In February 2016, the FASB issued ASU 2016-02, Leases, as amended by subsequent standards updates, which requires lessees to recognize right-if-use (ROU) assets and lease liabilities for all leases, with the exception of short term leases, at the commencement date of each lease. The Company adopted the new standard effective May 1, 2019 using a modified retrospective approach and did not restate comparative periods. As a result, the Company recorded $1,708,129 of ROU assets and operating lease liabilities on May 1, 2019. There was no cumulative-effect adjustment for the adoption and the adoption did not have a significant impact on the Company's consolidated statements of operations.

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COUNTERPATH CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Stated in U.S. Dollars)dollars, except number of shares)

The Company has elected to apply the practical expedient package to not reassess initial direct costs related to leases, whether any expired or existing contracts contained leases and to carryforward historical lease classification. As a result, all leases identified by the Company will continue to be classified as operating leases. In addition, the Company elected to not record short-term leases with an initial term of 12 months or less on its consolidated balance sheets. See Note 14-Leases for more information. The Company determines if an arrangement is a lease at contract inception by evaluating if the contract conveys the right to control the use of an identified asset during the period of use. A ROU asset represents the Company's right to use an identified asset for the lease term and lease liability represents the Company's obligation to make payments as set forth in the lease arrangement. ROU assets and lease liabilities are included on the Company's consolidated balance sheets beginning May 1, 2019 and are recognized based on the present value of the future minimum lease payments at lease commencement date. The interest rate used to determine the present value of the future lease payments is the Company's estimated incremental borrowing rate, because the interest rate implicit in the lease is generally not readily determinable. A ROU asset initially equals the lease liability, adjusted for any lease payments made prior to lease commencement and any lease incentives. All leases are recorded on the consolidated balance sheets except for leases with an initial term of less than 12 months. All of the Company's leases are operating leases. The Company has lease agreements with lease and non-lease components. The lease component is comprised of minimum lease payments which includes base rent and estimated property taxes and insurance. Non-lease components primarily include payments for maintenance and are expensed as incurred. Foreign Currency Translation The Company's functional currency is the U.S. dollar. The Company's wholly-owned subsidiaries with a functional currency other than the U.S. dollar are translated into amounts in the reporting currency, U.S. dollars, in accordance with ASC Topic 830 "Foreign Currency Matters".  Revenues and expenses are translated at the average exchange rate prevailing during the periods. 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 (2020 - $nil; 2019 - $nil). Revenues and expenses are translated at the rate approximating the rate of exchange on the transaction date.  Exchange gains and losses are included in the determination of net income (loss) for the year. Accrued Warranty The Company provides assurance type warranties for its products. A warranty is considered an assurance type warranty if it provides the customer with assurance that the product will function as intended. 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.

Foreign Currency Translation50

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COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. dollars, except number of shares)

The Company’s functional currency is the U.S. dollar. The Company’s wholly-owned subsidiaries with a functional currency other than the U.S. dollar are translated into amounts in the reporting currency, U.S. dollars, in accordance with ASC Topic 830 “Foreign Currency Matters”. Revenues and expenses are translated at the average exchange rate prevailing during the periods. At each balance sheet date, assets and liabilities that are denominated in a currency other than U.S. dollars are adjusted to reflect the current exchange rate which may give rise to a foreign currency translation adjustment accounted for as a separate component of stockholders’ equity and included in comprehensive loss.

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

Accrued Warranty

The Company’s warranty policy generally provides for one year of warranty for its products. The Company records a liability for estimated warranty obligations at the date products are sold. The estimated cost of warranty coverage is based on the Company’s actual historical experience with its current products or similar products. For new products, the required reserve is based on historical experience of similar products until such time as sufficient historical data has been collected on the new product. Estimated liabilities for warranty exposures, which relate to normal product warranties and a one-year obligation to provide for potential future liabilities for product sales for the years ended April 30, 20192020 and 20182019 were as follows:

			Years Ended April 30,
			2019			2018
	Balance, beginning of year	$	63,130		$	54,365
	Usage during the year		–			–
	Additions (reductions) during the year		(11,095	)		8,765
	Balance, end of year	$	52,035		$	63,130

Fair Value of Financial Instruments

ASC 820, Fair Value Measurements, defines fair value as the price at which an asset could be exchanged or a liability transferred in an orderly transaction between knowledgeable, willing parties in the principal or most advantageous market for the asset or liability. Where available, fair value is based on observable market prices or derived from such prices. Where observable prices or inputs are not available, valuation models are applied which may involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments’ complexity.

Derivative Instruments

The Company accounts for derivative instruments, consisting of foreign currency forward contracts, pursuant to the provisions of ASC 815, Derivatives and Hedging (“ASC 815”). ASC 815 requires the Company to measure derivative instruments at fair value and record them in the balance sheet as either an asset or liability and expands financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, results of operations and cash flows.  The Company does not use derivative instruments for trading purposes. ASC 815 also requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements.

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		Years Ended April 30,
		2020			2019
Balance, beginning of year	$	52,035		$	63,130
Usage during the year		–			–
Additions (reductions) during the year		(490	)		(11,095	)
Balance, end of year	$	51,545		$	52,035

COUNTERPATH CORPORATION
	Fair Value of Financial Instruments ASC 820, Fair Value Measurements, defines fair value as the price at which an asset could be exchanged or a liability transferred in an orderly transaction between knowledgeable, willing parties in the principal or most advantageous market for the asset or liability. Where available, fair value is based on observable market prices or derived from such prices. Where observable prices or inputs are not available, valuation models are applied which may involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments' complexity.
	Derivative Instruments The Company accounts for derivative instruments, consisting of foreign currency forward contracts, pursuant to the provisions of ASC 815, Derivatives and Hedging ("ASC 815"). ASC 815 requires the Company to measure derivative instruments at fair value and record them in the balance sheet as either an asset or liability and expands financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, results of operations and cash flows. The Company does not use derivative instruments for trading purposes. ASC 815 also requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. The Company also routinely enters into foreign currency forward contracts, not designated as hedging instruments, to protect the Company from fluctuations in exchange rates. Gains or losses arising out of marked to market fair value valuation of non-designated forward contracts are recognized in net income. The Company records foreign currency option and forward contracts on its Consolidated Balance Sheets as derivative assets or liabilities depending on whether the fair value of such contracts is a net asset or net liability, respectively. See Note 7 - Derivative Instruments for further detail. The Company did not enter any foreign currency derivatives designated as cash flow hedges during the years ended April 30, 2020 and 2019.
	Income Taxes The Company accounts for income taxes by the asset and liability method in accordance with ASC Topic 740 "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.
	Under ASC 740, the Company also adopted a two-step approach to recognizing and measuring uncertain tax positions taken or expected to be taken in a tax return. The first step is to determine if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained in an audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. The Company recognizes interest and penalties accrued on unrecognized tax benefits within general and administrative expense. To the extent that accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction in general and administrative expenses in the period that such determination is made.

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COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Stated in U.S. Dollars)dollars, except number of shares)

The Company also routinely enters into foreign currency forward contracts, not designated as hedging instruments, to protect the Company from fluctuations in exchange rates. Gains or losses arising out of marked to market fair value valuation of non-designated forward contracts are recognized in net income.

The Company records foreign currency option and forward contracts on its Consolidated Balance Sheets as derivative assets or liabilities depending on whether the fair value of such contracts is a net asset or net liability, respectively.See Note 7 - Derivative Instrumentsfor further detail. The Company did not enter any foreign currency derivatives designated as cash flow hedges during the years ended April 30, 2019 and 2018.

Income Taxes

The Company accounts for income taxes by the asset and liability method in accordance with ASC Topic 740 “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.

Under ASC 740, the Company also adopted a two-step approach to recognizing and measuring uncertain tax positions taken or expected to be taken in a tax return. The first step is to determine if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained in an audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. The Company recognizes interest and penalties accrued on unrecognized tax benefits within general and administrative expense. To the extent that accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction in general and administrative expenses in the period that such determination is made.

Comprehensive Loss

Comprehensive loss is comprised of net profit or loss, and foreign currency translation adjustments.

Loss per Share

ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the year. Diluted EPS gives effect to all dilutive potential common shares outstanding during the year including stock options and warrants using the treasury stock method. In computing diluted EPS, the average stock price for the year is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. For the year ended April 30, 2019, income per share excludes 1,249,940 (April 30, 2018 – 1,140,432)

	Comprehensive Loss Comprehensive loss is comprised of net profit or loss, and foreign currency translation adjustments.
	Segments and Related Information Operating segments are defined as components of a company about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company's chief operating decision maker, the chief executive officer, reviews financial information presented on a consolidated basis, accompanied by disaggregated information about revenues by geographic region for purposes of making operating decisions and assessing financial performance. Accordingly, the Company has concluded that it has one reportable operating segment.

Loss per Share ASC 260 requires presentation of both basic and diluted earnings per share ("EPS") on the face of the income statement.  Basic EPS is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the year.  Diluted EPS gives effect to all dilutive potential common shares outstanding during the year including stock options and warrants using the treasury stock method. In computing diluted EPS, the average stock price for the year is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants.  For the year ended April 30, 2020, income per share excludes 1,371,469 (April 30, 2019 - 1,249,940) potentially dilutive common shares (related to stock options, deferred share units and warrants) as their effect was anti-dilutive. 48 COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. Dollars) 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.

Recently Issued Accounting Pronouncements In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities, which amends the presentation and disclosure requirements and changes how companies assess effectiveness. The amendments are intended to more closely align hedge accounting with companies’ risk management strategies, simplify the application of hedge accounting, and increase transparency as to the scope and results of hedging programs. This amendment is effective for annual periods beginning after December 15, 2018, including interim periods within those periods. Early application is permitted. The Company is currently assessing the future impact of this update on its consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other: Simplifying the Test for Goodwill Impairment, which amends the guidance to eliminate Step 2 from the goodwill impairment test. Instead, under the amendments in the new guidance, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The amendments will be effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company is evaluating the impact of this amendment on its consolidated financial statements and related disclosures. In June 2016, the FASB issued ASU 2016-13, Financial Instruments: Measurement of Credit Losses on Financial Instruments, which amends the guidance on measuring credit losses on financial assets held at amortized cost. The amendment is intended to address the issue that the previous “incurred loss” methodology was restrictive for Company’s ability to record credit losses based on not yet meeting the “probable” threshold. The new language will require these assets to be valued at amortized cost presented at the net amount expected to be collected will a valuation provision. The amendments will be effective for fiscal years beginning after December 15, 2019. The Company is evaluating the impact of this amendment on our consolidated financial statements and related disclosures. In February 2016, FASB issued ASU 2016-02,Leases. The guidance would require lessees to recognize most leases on their balance sheets as lease liabilities with corresponding right-of-use assets. The guidance is effective for annual and interim reporting periods beginning on or after December 15, 2018. The Company is currently evaluating the impact of its pending adoption of ASU 2016-02 on its consolidated financial statements. 49 COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. Dollars) Note 3 Revenue Recognition under ASC 606     In August 2018, the FASB issued ASU 2018-13 Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates, adds, and modifies certain disclosure requirements for fair value measurements under ASC 820. This ASU is to be applied on a prospective basis for certain modified or new disclosure requirements, and all other amendments in the standard are to be applied on a retrospective basis. The new standard is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the impact of adoption on the Consolidated Financial Statements. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment, which amends the guidance to eliminate Step 2 from the goodwill impairment test. Instead, under the amendments in the new guidance, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. The amendments will be effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company does not expect a significant impact on our consolidated financial statements and related disclosures resulting from the pending adoption of this amendment. 52 COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. dollars, except number of shares) In June 2016, the FASB issued ASU 2016-13, Financial Instruments: Measurement of Credit Losses on Financial Instruments, which amends the guidance on measuring credit losses on financial assets held at amortized cost. The amendment is intended to address the issue that the previous "incurred loss" methodology was restrictive for Company's ability to record credit losses based on not yet meeting the "probable" threshold. The new language will require these assets to be valued at amortized cost presented at the net amount expected to be collected will a valuation provision. The amendments will be effective for fiscal years beginning after December 15, 2022. The Company does not expect a significant impact on our consolidated financial statements and related disclosures resulting from the pending adoption of this amendment. Note 3 Revenue Recognition under ASC 606 On May 1, 2018, the Company adopted the new accounting standard,ASC 606 “Revenue"Revenue from Contracts with Customers"Customers”and all related amendments to the new accounting standard to contracts using the modified retrospective method. The Company recognized the cumulative effect of initially applying the new revenue recognition standard to contracts with open performance obligations as of May 1, 2018, as an adjustment to the opening balance of retained earnings. Results of the reporting period beginning May 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with the Company's historic accounting under ASC 605. Revenues from contracts with customers are recognized when control of promised goods and services is transferred to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.       The Company recognizes revenue using the five-step model as prescribed by ASC 606: 1) Identification of the contract, or contracts, with a customer; 2) Identification of the performance obligations in the contract; 3) Determination of the transaction price; 4) Allocation of the transaction price to the performance obligations in the contract; and 5) Recognition of revenue when or as, the Company satisfies a performance obligation. When a contract with a customer is signed, the Company assesses whether collection of the fees under the arrangement is probable. The Company estimates the amount to reserve for uncollectible amounts at the end of each reporting period based on the aging of the contract balance, current and historical customer trends, and communications with its customers. These reserves are recorded against the related accounts receivable. The transaction price is the consideration that the Company expects to receive from its customers in exchange for its products or services. In determining the allocation of the transaction price, the Company identifies performance obligations in contracts with customers, which may include products, subscriptions to software and services, support, professional services and training. The Company allocates the transaction price to each performance obligation on a relative standalone selling price basis. The standalone selling price ("SSP") is the price at which the Company would sell a promised product or service separately to a customer. The Company determines the SSP using information that may include market conditions or other observable inputs. In certain cases, the Company is able to establish a SSP based on observable prices for products or services sold separately. In these instances, the Company would use a single amount to estimate a SSP. If a SSP is not directly observable, for example when pricing is variable, the Company will use a range of SSP. In certain circumstances, the Company may estimate SSP for a product or service by applying the residual approach. This approach has been most commonly used when certain perpetual software licenses are only sold bundled with one year of post-contract support or other services, and a price has not been established for the software. When a contract with a customer is signed, the Company assesses whether collection of the fees under the arrangement is probable. The Company estimates the amount to reserve for uncollectible amounts at the end of each reporting period based on the aging of the contract balance, current and historical customer trends, and communications with its customers. These reserves are recorded against the related accounts receivable.53 The transaction price is the consideration that the Company expects to receive from its customers in exchange for its products or services. In determining the allocation of the transaction price, the Company identifies performance obligations in contracts with customers, which may include products, subscriptions to software and services, support, professional services and training. The Company allocates the transaction price to each performance obligation on a relative standalone selling price basis. The standalone selling price (“SSP”) is the price at which the Company would sell a promised product or service separately to a customer. The Company determines the SSP using information that may include market conditions or other observable inputs. In certain cases, the Company is able to establish a SSP based on observable prices for products or services sold separately. In these instances, the Company would use a single amount to estimate a SSP. If a SSP is not directly observable, for example when pricing is variable, the Company will use a range of SSP. In certain circumstances, the Company may estimate SSP for a product or service by applying the residual approach. This approach has been most commonly used when certain perpetual software licenses are only sold bundled with one year of post-contract support or other services, and a price has not been established for the software. Significant judgement is used to determine SSP and to determine the allocation of the transaction price based on the relative SSP of the various products and services. Estimating SSP is a formal process that includes review and approval by the Company’s management. Software Revenue The Company generates software revenue on a single fee per perpetual software license basis. The Company recognizes software revenue for perpetual licenses when control has transferred to the customer, which is generally at the time of delivery when the customer has the ability to deploy the licenses, provided all revenue recognition criteria have been met. If the revenue recognition criteria has not been met, the revenue is deferred or not recognized. 50 COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. Dollars)dollars, except number of shares) Significant judgement is used to determine SSP and to determine whether there is a variance that needs to be allocated based on the relative SSP of the various products and services. Estimating SSP is a formal process that includes review and approval by the Company's management. In practice, the Company does not offer extended payment terms beyond one year to customers. As such, the Company does not adjust our consideration for financing arrangements. Software Revenue The Company generates software revenue primarily on a single fee per perpetual software license basis. The Company recognizes software revenue for perpetual licenses when control has transferred to the customer, which is generally at the time of delivery when the customer has the ability to deploy the licenses, provided all revenue recognition criteria have been met. If the revenue recognition criteria have not been met, the revenue is deferred or not recognized. Subscription, support and maintenance Revenue from the Company's recurring subscription revenue from subscriptions related to our software as a service offering is recognized ratably over the contractual subscription term as control of the goods or services is transferred to the customer, beginning on the date that the subscription is made available to the customer. Support and maintenance revenue is generated from recurring annual software support and maintenance contracts for our perpetual software licenses and is recognized ratably over the term of the service period, which is generally twelve months. Support and maintenance services include e-mail and telephone support, access to the Company's technical assistance center, unspecified rights to bug fixes and product updates and upgrades and enhancements available on a when-and-if available basis. Both subscription revenue and support and maintenance revenue are typically billed annually in advance based on the terms of the arrangement. Professional services and other Professional services and other revenue is generated through services including product configuration and customization, implementation, dedicated engineering and training. The amount of product configuration and customization required by a customer typically increases as the order size increases from a given customer. Services and pricing may vary depending upon a customer's requirements for customization, implementation and training. Depending on the services to be provided, revenue from professional services and other is generally recognized at the time of delivery when the services have been completed and control has been transferred. For contracts with elements related to customized network solutions and certain network build-outs or software systems that require significant modification or customization, the Company will recognize revenue using the percentage-of-completion method. In using the percentage-of-completion method, revenues are generally recorded based on 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. Unearned Revenue Unearned revenue represent billings or payments received in advance of revenue recognition and is recognized upon transfer of control. Balances consist primarily of annual support and subscription services and professional services not yet provided as of the balance sheet date. During the year ended April 30, 2020 and 2019, the Company recognized $2,483,332 and $2,364,378, respectively, in revenue in its consolidated statements of operations that was previously recognized as unearned revenue in the consolidated balance sheets at May 1, 2019 and 2018, respectively. Subscription, support and maintenance Revenue from the Company’s recurring subscription revenue from subscriptions related to our software as a service offering is recognized ratably over the contractual subscription term as control of the goods or services is transferred to the customer, beginning on the date that the subscription is made available to the customer. Support and maintenance revenue is generated from recurring annual software support and maintenance contracts for our perpetual software licenses and is recognized ratably over the term of the service period, which is generally twelve months. Support and maintenance 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. Both subscription revenue and support and maintenance revenue are typically billed annually in advance based on the terms of the arrangement.54 Professional services and other Professional services and other revenue is generated through services including product configuration and customization, implementation, dedicated engineering and training. The amount of product configuration and customization required by a customer typically increases as the order size increases from a given customer. Services and pricing may vary depending upon a customer’s requirements for customization, implementation and training. Depending on the services to be provided, revenue from professional services and other is generally recognized at the time of delivery when the services have been completed and control has been transferred. For contracts with elements related to customized network solutions and certain network build-outs or software systems that require significant modification or customization, the Company will recognize revenue using the percentage-of-completion method. In using the percentage-of-completion method, revenues are generally recorded based on 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. Unearned Revenue Unearned revenue represent billings or payments received in advance of revenue recognition and is recognized upon transfer of control. Balances consist primarily of annual support and subscription services and professional services not yet provided as of the balance sheet date. During the year ended April 30, 2019, the Company recognized $2,364,378 in revenue in its consolidated statements of operations that was previously recognized as unearned revenue in the consolidated balance sheets at May 1, 2018. Costs to Obtain a Customer Contract Sales commissions and related expenses are considered incremental and recoverable costs of acquiring customer contracts. These costs are capitalized and amortized on a systematic basis, consistent with the timing of revenue recognition over the anticipated benefit period of up to 3.5 years, depending on the products and services. The anticipated benefit period was estimated based on the average length of applicable customer contracts and includes the contract term and any anticipated renewal periods. This amortization expense is recorded in sales and marketing expense within the Company's consolidated statement of operations. The Company has elected to apply a practical expedient that permits the Company to expense costs to obtain a contract as incurred, if the anticipated benefit period is one year or less. From time to time, management will revisit the estimates used in recognizing the costs to obtain customer contracts. 51 COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. Dollars)dollars, except number of shares) During the year ended April 30, 2019, the Company capitalized approximately $607,166 of costs to obtain revenue contracts of which $134,033 was recorded as an adjustment to opening retained earnings at the adoption of ASC 606 and amortized approximately $272,785 of commissions to sales and marketing expense. Capitalized costs to obtain a revenue contract on the Company's condensed consolidated balance sheets totaled approximately $200,348 at April 30, 2019. Costs to Fulfill a Customer Contract Certain contract costs incurred to fulfill obligations under a contract are capitalized when such costs generate or enhance resources to be used in satisfying future performance obligations and the costs are deemed recoverable. Judgement is used in determining whether certain contract costs can be capitalized. These costs are capitalized and amortized on a systematic basis to match the timing of revenue recognition over the anticipated benefit period of up to 3.5 years, depending on the products and services. The anticipated benefit period was estimated based on the average length of applicable customer contracts and includes the contract term and any anticipated renewal periods. This amortization expense is recorded in cost of sales in the Company’s consolidated statement of operations. From time to time, management will review the capitalized costs for impairment and will also revisit the estimates used in recognizing the costs to fulfill customer contracts. Transaction Price Allocated to the Remaining Performance Obligations The Company expects to recognize approximately $2,966,102 and $156,528 Costs to Obtain a Customer Contract Sales commissions and related expenses are considered incremental and recoverable costs of acquiring customer contracts. These costs are capitalized and amortized on a systematic basis, consistent with the timing of revenue recognition over the anticipated benefit period of up to 3.5 years, depending on the products and services. The anticipated benefit period was estimated using management judgment after reviewing customer contracts from fiscal years 2004 - 2018, and is based on the average length of applicable customer contracts and includes the contract term and any anticipated renewal periods. This amortization expense is recorded in sales and marketing expense within the Company's consolidated statement of operations. The Company has elected to apply a practical expedient that permits the Company to expense costs to obtain a contract as incurred, if the anticipated benefit period is one year or less. From time to time, management will revisit the estimates used in recognizing the costs to obtain customer contracts. During the year ended April 30, 2020 and 2019, the Company capitalized approximately $347,421 and $607,166, respectively, of costs to obtain revenue contracts and amortized approximately $336,662 and $272,785, respectively, of commissions to sales and marketing expense. Capitalized costs to obtain a revenue contract on the Company's consolidated balance sheets totaled approximately $222,590 and $200,348 at April 30, 2020 and 2019, respectively. Costs to Fulfill a Customer Contract Certain contract costs incurred to fulfill obligations under a contract are capitalized when such costs generate or enhance resources to be used in satisfying future performance obligations and the costs are deemed recoverable. Judgement is used in determining whether certain contract costs can be capitalized. These costs are capitalized and amortized on a systematic basis to match the timing of revenue recognition over the anticipated benefit period of up to 3.5 years, depending on the products and services. The anticipated benefit period was estimated based on the average length of applicable customer contracts and includes the contract term and any anticipated renewal periods. This amortization expense is recorded in cost of sales in the Company's consolidated statement of operations. From time to time, management will review the capitalized costs for impairment and will also revisit the estimates used in recognizing the costs to fulfill customer contracts (2020 - $nil; 2019 - $nil). Transaction Price Allocated to the Remaining Performance Obligations The Company expects to recognize approximately $3,824,573, $32,277, $17,777 and $7,773 in revenue during the years ended April 30, 2020 and April 30, 2021, 2022, 2023 and 2024, respectively, under its customer contracts relating to fixed consideration associated with remaining performance obligations. Adoption Impact of ASC 606 The Company recognized the cumulative effect of initially applying ASC 606 as an adjustment to retained earnings in the consolidated balance sheet as of May 1, 2018:       Balance at     ASC 606     Balance at         April 30, 2018     Adjustments     May 1, 2018     Current assets:                          Deferred sales commissions costs $  –   $  70,248   $  70,248     Non-current assets:                          Deferred sales commissions costs $  –   $  63,785   $  63,785     Stockholders’ equity:                          Accumulated deficit $  (63,701,685 ) $  134,033   $  (63,567,652 ) The following tables summarize the adoption impact of ASC 606 on the Company's consolidated financial statements for the year ended April 30, 2019. Selected Consolidated Income Statement Line Items:       Year ended April 30, 2019               ASC 606     (As Reported)         ASC 605     Adjustments     ASC 606     Revenue:                     Software $  4,696,266   $  (35,606 ) $  4,660,660     Subscription, support and maintenance   5,371,408     (5,118 )   5,366,290     Professional services and other   690,274     47,680     737,954     Total revenue $  10,757,948   $  6,956   $  10,764,904   52 COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. Dollars)   Operating expenses:                     Sales and marketing $  4,128,113   $  (66,192 ) $  4,061,921     Loss from operations $  (5,239,909 ) $  73,148   $  (5,166,761 )                         Net loss per share:                     Basic and diluted $  (0.85 ) $  0.01   $  (0.84 ) Selected Consolidated Balance Line Items:       April 30, 2019               ASC 606     (As Reported)         ASC 605     Adjustments     ASC 606     Current assets:                     Deferred sales commissions costs $  –   $  122,777   $  122,777     Current liabilities:                     Unearned revenue $  2,600,682   $  (6,956 ) $  2,593,726     Non-current assets:                     Deferred sales commissions costs $  –   $  77,571   $  77,571     Stockholders’ equity:                     Accumulated deficit $  (68,774,483 ) $  193,392   $  (68,581,091 ) Selected Consolidated Statement of Cash Flows Line Items:       Year ended April 30, 2019               ASC 606     (As Reported)         ASC 605     Adjustments     ASC 606     Net loss $  (5,086,587 ) $  73,148   $  (5,013,439 )   Deferred sales commissions costs $  –   $  (61,705 ) $  (61,705 )   Unearned revenue $  34,806   $  (6,956 ) $  27,850     Net cash provided by operating activities $  (3,447,866 ) $  4,487   $  (3,443,379 ) Disaggregation of Revenue The Company disaggregates its revenue by geographic region. SeeNote 13 – Segmented Information for more information. 53 COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. Dollars) Note 4 Equipment     Disaggregation of Revenue The Company disaggregates its revenue by geographic region. See Note 13 - Segmented Information for more information. Note 4 Equipment The following presents the categories within equipment:       April 30, 2019               Accumulated               Cost     Depreciation     Net     Computer hardware $  1,233,621   $  (1,186,210 ) $  47,411     Computer software   1,013,277     (1,013,277 )   –     Leasehold improvements   263,774     (256,911 )   6,863     Office furniture   194,702     (189,062 )   5,640     Websites   120,339     (120,339 )   –       $  2,825,713   $  (2,765,799 ) $  59,914             April 30, 2020                   Accumulated             Cost     Depreciation     Net   Computer hardware $ 1,326,162   $ (1,245,936 ) $ 80,226   Computer software   1,013,277     (1,013,277 )   –   Leasehold improvements   263,774     (262,747 )   1,027   Office furniture   222,545     (192,126 )   30,419   Websites   120,339     (120,339 )   –     $ 2,946,097   $ (2,834,425 ) $ 111,672         April 30, 2018               Accumulated               Cost     Depreciation     Net     Computer hardware $  1,193,527   $  1,109,268   $  84,259     Computer software   1,013,277     1,012,749     528     Leasehold improvements   263,774     236,112     27,662     Office furniture   194,702     185,332     9,370     Websites   120,339     120,339     –       $  2,785,619   $  2,663,800   $  121,819   55 COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. dollars, except number of shares)             April 30, 2019                   Accumulated             Cost     Depreciation     Net   Computer hardware $ 1,233,621   $ (1,186,210)   $ 47,411   Computer software   1,013,277     (1,013,277)     –   Leasehold improvements   263,774     (256,911)     6,863   Office furniture   194,702     (189,062)     5,640   Websites   120,339     (120,339)     –     $ 2,825,713   $ (2,765,799)   $ 59,914 Note 5 Intangibles and Other Assets The following tables presents the major components within intangibles and other assets for the years ended April 30, 20192020 and 2018:2019:       April 30, 2019               Accumulated               Cost     Amortization     Net     Patents $  461,637   $  (417,609 ) $  44,028     Trademarks   175,100     –     175,100     Other assets   5,667     –     5,667       $  642,404   $  (417,609 ) $  224,795         April 30, 2018               Accumulated               Cost     Amortization     Net     Patents $  461,637   $  (411,788 ) $  49,849     Trademarks   165,462     –     165,462     Other assets   5,751     –     5,751       $  632,850   $  (411,788 ) $  221,062   54             April 30, 2020                     Accumulated               Cost     Amortization     Net     Patents $ 461,636   $ (421,856 ) $ 39,780     Trademarks   180,558     –     180,558     Other assets   5,607     –     5,607       $ 647,801   $ (421,856 ) $ 225,945                                     April 30, 2019                     Accumulated               Cost     Amortization     Net     Patents $ 461,637   $ (417,609 ) $ 44,028     Trademarks   175,100     –     175,100     Other assets   5,667     –     5,667       $ 642,404   $ (417,609 ) $ 224,795   COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. Dollars) During the years ended April 30, 2020 and 2019, the Company recorded amortization expense related to patents of $4,247 and $5,821, respectively. The weighted average remaining amortization period for patents was 11.0 years and 11.9 years for the years ended April 30, 2020 and 2019, respectively. During the years ended April 30, 2019 and 2018, the Company recorded amortization expense related to patents of $5,821 and $3,500, respectively. The weighted average remaining amortization period for patents was 11.9 years and 13.2 years for the years ended April 30, 2019 and 2018, respectively. The following table presents estimated future patent amortization for the next five years: Years ended April 30,   Years ended April 30,         2020 $  4,248     2021   4,248     2022   4,248     2023   4,248     2024   4,248     Thereafter   22,788       $  44,028   2021 $ 4,248   2022   4,248   2023   4,248   2024   4,248   2025   4,248   Thereafter   18,540     $ 39,780   56 COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. dollars, except number of shares) Note 6 Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities at April 30, 20192020 and 20182019 are comprised of the following:       April30,         2019     2018     Accounts payable – trade $  739,051   $  678,760     Accrued commissions   180,200     215,172     Accrued vacation   590,328     744,108     Third party software royalties   59,723     207,531     Other accrued liabilities   664,573     592,162       $  2,233,875   $  2,437,733       April 30,       2020     2019   Accounts payable - trade $ 706,435   $ 739,051   Accrued commissions   285,915     180,200   Accrued vacation   546,965     590,328   Interest on related party loan payable   79,459     16,219   Third party software royalties   59,723     59,723   Other accrued liabilities   553,280     648,354     $ 2,231,777   $ 2,233,875   Note 7 Derivative Instruments In the normal course of business, the Company is exposed to fluctuations in the exchange rates associated with foreign currencies. The Company’sCompany's primary objective for holding derivative financial instruments is to manage foreign currency exchange rate risk. Foreign Currency Exchange Rate Risk A majority of the Company’sCompany's revenue activities are transacted in U.S. dollars. However, the Company is exposed to foreign currency exchange rate risk, inherent in conducting business globally in multiple currencies, primarily from its business operations in Canada. The Company’sCompany's foreign currency risk management program includes entering into foreign currency derivatives at various times to mitigate the currency exchange rate risk on Canadian dollar denominated cash flows. These foreign currency forward and option contracts are considered non-designated derivative instruments and are not used for trading or speculative purposes. As these foreign currency derivative contracts are considered economic hedges, we do not elect hedge accounting. The changes in fair value and settlements are recorded in change in fair value of derivative instruments, net in the consolidated statement of operations. During years ended April 30, 20192020 and 2018,2019, the Company did not enter into any designated cash flow hedge contracts. The following table summarizes the notional amounts of the Company's outstanding derivative instruments: 55 COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. Dollars) Fair value of Undesignated Derivatives     April 30, 2020     April 30, 2019   Foreign currency option contracts   $ 1,000,000   $ 1,500,000   Foreign currency forward contracts   $ 2,200,667   $ –   The following table summarizes the notional amounts of the Company’s outstanding derivative instruments:         April 30,     April 30,     Fair value of Undesignated Derivatives     2019     2018     Foreign currency option contracts   $  1,500,000   $  –   The following table presentstables present the fair values of the Company’sCompany's derivative instruments on a gross basis as reflected on the Company’sCompany's consolidated balance sheets. The Company did not have any outstanding derivative contracts as       April 30, 2020   Fair value of Undesignated Derivatives     Derivative Assets     Derivative Liabilities   Foreign currency option contracts   $ –   $ 76,617   Foreign currency forward contracts     6,381     63,682       $ 6,381   $ 140,299   57 COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. dollars, except number of shares)       April 30, 2019   Fair value of Undesignated Derivatives     Derivative Assets     Derivative Liabilities   Foreign currency option contracts   $ 1,178   $ 4,512   During the year ended April 30, 2018.2020 and 2019, the Company recorded a (loss)/gain of ($132,377) and $1,735, respectively, resulting from the change in fair value of derivative instruments.         April 30, 2019           Derivative     Derivative     Fair value of Undesignated Derivatives     Assets     Liabilities     Foreign currency option contracts   $  1,178   $  4,512   Note 8 During the year ended April 30, 2019, the Company recorded a gain of $3,334 resulting from the change in fair value of derivative instruments. No such gains or losses were recorded in the prior year as the Company did not enter into any forward and option contracts.Fair Value Measurements Note 8 Fair Value Measurements Assets and liabilities recorded at fair value in the consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels directly related to the amount of subjectivity associated with the inputs to valuation of these assets or liabilities are set forth below. Transfers between levels are recognized at the end of each quarter. The Company did not recognize any transfers between levels during the periods presented. Level 1—Inputs1-Inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2—Inputs2-Inputs (other than quoted prices included in Level 1) are observable for the asset or liability, either directly or indirectly such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3—3- unobservable inputs for the asset or liability which are typically based on an entity’sentity's own assumptions, as there is little, if any, related market activity. Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company’sCompany's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The carrying values of financial instruments classified as current assets and current liabilities approximates their fair values, based on the nature and short maturity of these instruments, and are presented in the Company’sCompany's consolidated financial statements at carrying cost.       Carrying           Fair Value           As at April 30, 2019   Amount     Fair Value     Levels     Reference     Assets                           Cash $  1,862,458   $  1,862,458     1     N/A     Foreign currency option contracts   1,178     1,178     2     Note 7       $  1,863,636   $  1,863,636                                             Liabilities                           Foreign currency option contracts $  4,512   $  4,512     2     Note 7   As at April 30, 2020     Carrying Amount       Fair Value     Fair Value Levels       Reference   Assets                           Cash   $ 2,433,266   $ 2,433,266     1     N/A   Foreign currency derivative contracts     6,381     6,381     2     Note 7       $ 2,439,647   $ 2,439,647                                           Liabilities                           Foreign currency derivative contracts   $ 140,299   $ 140,299     2     Note 7   As at April 30, 2019     Carrying Amount       Fair Value     Fair Value Levels       Reference   Assets                           Cash   $ 1,862,458   $ 1,862,458     1     N/A   Foreign currency option contracts     1,178     1,178     2     Note 7       $ 1,863,636   $ 1,863,636                                           Liabilities                           Foreign currency option contracts   $ 4,512   $ 4,512     2     Note 7   5658 COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. Dollars)dollars, except number of shares) Financial Instruments Not Measured at Fair Value The following table presents the Company's liability that is not measured at fair value as of April 30, 2020, but for which fair value is available:       Carrying           Fair Value           As at April 30, 2018   Amount     Fair Value     Levels     Reference     Cash $  2,348,883   $  2,348,883     1     N/A   As at April 30, 2020     Carrying Amount       Fair Value     Fair Value Levels       Reference   Related party loan payable   $ 4,000,000   $ 3,780,370     2     Note 9   Financial Instruments Not Measured at Fair Value The following table presents the Company’s liability that is not measured at fair value as of April 30, 2019, but for which fair value is available:       Carrying           Fair Value           As at April 30, 2019   Amount     Fair Value     Levels     Reference     Loan payable $  3,000,000   $  2,934,538     2     Note 9   LoanRelated party loan payable is presented on the consolidated balance sheets at carrying cost. The fair value of the fixed interest rate loan is estimated based on observable market prices or inputs. Where observable prices or inputs are not available, valuation models are applied using the net present value of cash flow streams over the term, using estimated market rates for similar instruments and remaining terms. Note 9 Related Party Loan Payable On October 10, 2018, the Company entered into a loan agreement (the “Loan Agreement”"Loan Agreement") with Wesley Clover International Corporation and KMB Trac Two Holdings Ltd (collectively referred to as the "Lenders") for an aggregate principal amount of up to $3,000,000. Pursuant to the terms of the Loan Agreement, the loan is unsecured and will be made available in multiple advances at the discretion of the Company and will bear interest at a rate of 8% per year, payable monthly. The outstanding principal and any accrued interest may be prepaid without penalty and is to be fully repaid on the second anniversary of the first advance.  There are no financial covenants for this loan. On July 10, 2019, the Company entered into an amended loan agreement (the "Amendment Agreement") with the Lenders, pursuant to which to Lenders have agreed to amend the Loan Agreement, together with the Amendment Agreement, to increase the maximum amount of the loan from $3,000,000 to $5,000,000 and to extend the term of the loan such that all outstanding principal and accrued interest is due on April 11, 2021. On January 25, 2020, the Company entered into an amended loan agreement (the "Second Amendment Agreement") with the Lenders such that the interest on the principal amount of the Loan will accrue and be paid at the time of repayment of the outstanding principal. Accrued interest will be calculated at a rate of 8%, compounded daily. The Second Amendment Agreement is effective February 1, 2020. As of April 30, 2019,2020, the principal balance of the related party loan payable was $3,000,000.$4,000,000. This balance is to be repaid on or before OctoberApril 11, 2020.2021. During the year ended April 30, 2020 and 2019, the Company recognized interest expense of $292,719 and $68,822, respectively, in the consolidated statement of operations. On June 15, 2020, the Company repaid $2,000,000 of the principle balance of the related party loan payable to the two lenders. SeeNote 11 – - Related Party Transactions and Note 17 –18 - Subsequent EventEvents s for further detail. Note 10 Common Stock     Note 10 Common Stock Options The Company has a stock option plan (the "2010 Stock Option Plan") under which options to purchase common shares of the Company may be granted to employees, directors and consultants.  The 2010 Stock Option Plan is effectively a merging of the Company's 2004 and 2005 stock option plans.  Stock options entitle the holder to purchase common stock at a subscription price determined by the Board of Directors of the Company at the time of the grant.  The options generally vest in the amount of 12.5% on the date which is six months from the date of grant and then beginning in the seventh month at 1/42 per month for 42 months, at which time the options are fully vested.       Private Placements On January 24, 2018, the Company issued an aggregateThe maximum number of 427,500 shares of common stock authorized by the stockholders and reserved for issuance by the Board under a non-brokered private placement at a price of $4.01 per share for total gross proceeds of $1,714,275 less issuance costs of $48,325. On July 20, 2017, the Company issued an aggregate of 539,240 shares of common stock under a non-brokered private placement at a price of $2.20 per share for total gross proceeds of $1,186,328 less issuance costs of $19,832. Shares Issued Pursuant to a Consulting Agreement On October 16, 2017, the Company entered into an agreement to issue 14,000 shares of the Company’s common stock in exchange for investor relation services. The agreement was terminated on April 8, 2018 as the services were no longer required. Pursuant to the terms of the agreement, upon termination, 7,211 shares of common stock were returned to the Company. 2010 Stock Option Plan is 1,186,000. 5759 COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. Dollars)dollars, except number of shares) Normal Course Issuer Bid Plan During the year ended April 30, 2018, the Company repurchased 13,600 shares of common stock at an average price of approximately $2.49 (CDN$3.18), for a total of approximately $33,119 (CDN$43,218) pursuant to a normal course issuer bid effective during the period. On March 27, 2018, the Company filed a normal course issuer bid commencing on March 29, 2018 which expired on March 28, 2019. Under this normal course issuer bid, the Company was authorized to purchase up to 284,278 shares of its common stock through the facilities of the TSX and other Canadian marketplaces or U.S. marketplaces. As of April 30, 2019, a total of 153,988 shares have been cancelled. Stock Options The Company has a stock option plan (the “2010 Stock Option Plan”) under which options to purchase common shares of the Company may be granted to employees, directors and consultants. The 2010 Stock Option Plan is effectively a merging of the Company’s 2004 and 2005 stock option plans. Stock options entitle the holder to purchase common stock at a subscription price determined by the Board of Directors of the Company at the time of the grant. The options generally vest in the amount of 12.5% on the date which is six months from the date of grant and then beginning in the seventh month at 1/42 per month for 42 months, at which time the options are fully vested. The maximum number of shares of common stock authorized by the stockholders and reserved for issuance by the Board under 2010 Stock Option Plan is 1,186,000. The Company uses the Black-Scholes option pricing model to determine the fair value of stock options granted. In accordance with ASC 718 “Share-Based Payment” 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 re-measured on each balance sheet date using the Black-Scholes option pricing model. The expected volatility of options granted has been determined using the method described under ASC 718 using the historical stock price. The expected term of options granted to employees in the current fiscal period has been determined utilizing historic data as prescribed by ASC 718. For non-employees, based on the Company’s history, the expected term of the options approximates the full term of the options. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options. The Company has not paid and does not anticipate paying dividends on its common stock; therefore, the expected dividend yield is assumed to be zero. In addition, ASC 718 requires companies to utilize an estimated forfeiture rate when calculating the expense for the period, whereas prior to the adoption of ASC 718 the Company recorded forfeitures based on actual forfeitures and recorded a compensation expense recovery in the period when the awards were forfeited. As a result, based on the Company’s experience, the Company applied an estimated forfeiture rate of 15% for year ended April 30, 2019 and 2018 in determining the expense recorded in the accompanying consolidated statement of operations. For the majority of the stock options granted, the number of shares issued on the date the stock options are exercised is net of the minimum statutory withholding requirements that the Company pays in cash to the appropriate taxing authorities on behalf of its employees. These withheld shares are not issued or considered common stock repurchases under the Company’s authorized plan and are not included in the common stock repurchase totals. In the consolidated financial statements, these withheld shares are netted against the number of shares that would have been issued upon vesting. 58 COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated The Company uses the Black-Scholes option pricing model to determine the fair value of stock options granted.  In accordance with ASC 718 "Share-Based Payment" 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. Stock options granted to non-employees are measured at fair value on the date of grant, using the Black-Scholes option pricing model, similar to employee share-based payment equity awards. The expected volatility of options granted has been determined using the method described under ASC 718 using the historical stock price. The expected term of options granted to employees in U.S. Dollars)the current fiscal period has been determined utilizing historic data as prescribed by ASC 718. For non-employees, based on the Company's history, the expected term of the options approximates the full term of the options. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options. The Company has not paid and does not anticipate paying dividends on its common stock; therefore, the expected dividend yield is assumed to be zero. In addition, ASC 718 allows companies to utilize an estimated forfeiture rate when calculating the expense for the period, whereas prior to the adoption of ASC 718 the Company recorded forfeitures based on actual forfeitures and recorded a compensation expense recovery in the period when the awards were forfeited.  As a result, based on the Company's experience, the Company applied an estimated forfeiture rate of 15% for year ended April 30, 2020 and 2019 in determining the expense recorded in the accompanying consolidated statement of operations. For the majority of the stock options granted, the number of shares issued on the date the stock options are exercised is net of the minimum statutory withholding requirements that the Company pays in cash to the appropriate taxing authorities on behalf of its employees. These withheld shares are not issued or considered common stock repurchases under the Company's authorized plan and are not included in the common stock repurchase totals.  In the consolidated financial statements, these withheld shares are netted against the number of shares that would have been issued upon vesting. The weighted-average fair values of options granted during the years ended April 30, 2020 and 2019 were $0.47 and $0.82, respectively. The weighted-average assumptions utilized to determine such values are presented in the following table: The weighted-average fair values of options granted during the years ended April 30, 2019 and 2018 were $0.82 and $1.90, respectively. The weighted-average assumptions utilized to determine such values are presented in the following table:     Year Ended   Year Ended     April 30, 2019   April 30, 2018   Risk-free interest rate 2.7%   2.14%   Expected volatility 77.2%   95.55%   Expected term 3.7 years   3.7 years   Dividend yield 0%   0%   Year Ended   Year Ended   April 30, 2020   April  30, 2019 Risk-free interest rate 1.7%   2.7% Expected volatility 66.0%   77.2% Expected term 3.7 years   3.7 years Dividend yield 0%   0% The following is a summary of the status of the Company’sCompany's stock options as of April 30, 20192020 and the stock option activity during the years ended April 30, 20192020 and 2018:2019:       Number of     Weighted-Average         Options     Exercise Price     Outstanding at April 30, 2017   396,922   $  2.46     Granted   324,000   $  2.89     Exercised   (495 ) $  2.46     Forfeited / Cancelled   (15,385 ) $  2.53     Expired   (30,000 ) $  2.50     Outstanding at April 30, 2018   675,042   $  2.66     Granted   221,000   $  1.45     Exercised   (35,500 ) $  2.50     Forfeited / Cancelled   (173,093 ) $  2.62     Expired   (71,000 ) $  2.50     Outstanding at April 30, 2019   616,449   $  2.27                     Exercisable at April 30, 2019   239,551   $  $2.58     Exercisable at April 30, 2018   256,555   $  $2.47       Number of Options     Weighted-Average Exercise Price   Outstanding at April 30, 2018   675,042   $ 2.66   Granted   221,000   $ 1.45   Exercised   (35,500 ) $ 2.50   Forfeited / Cancelled   (173,093 ) $ 2.62   Expired   (71,000 ) $ 2.50   Outstanding at April 30, 2019   616,449   $ 2.27   Granted   199,500   $ 0.96   Exercised   (9,688 ) $ 2.46   Forfeited / Cancelled   (83,593 ) $ 1.92   Expired   (50,382 ) $ 2.50   Outstanding at April 30, 2020   672,286   $ 1.90                 Exercisable at April 30, 2020   282,358   $ 2.43   Exercisable at April 30, 2019   239,551   $ 2.58   60 COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. dollars, except number of shares) The following table summarizes information regarding stock options outstanding as of April 30, 2019:2020:     Number of     Aggregate           Number of     Aggregate   Exercise   Options     Intrinsic           Options     Intrinsic   Price   Outstanding     Value     Expiry Date     Exercisable     Value   $1.41 – $1.42   197,500     88,795     12/14/2023 – 1/22/2024     –   $  –   $2.03 – $2.41   74,272     –     12/14/2020 – 12/15/2021     56,947   $  –   $2.46 – $2.50   123,582     –     7/17/2020 – 3/14/2022     108,932   $  –   $2.51 – $2.89   221,095     –     12/14/2022 – 7/26/2023     73,672   $  –   April 30, 2019   616,449     88,795           239,551   $  –                                   April 30, 2018   675,042   $  51,302           256,555   $  32,636     Number of   Aggregate   Number of   Aggregate Exercise   Options   Intrinsic   Options   Intrinsic Price Outstanding   Value Expiry Date Exercisable   Value $0.96 - $0.96 195,500 $ 379,270 12/12/2024 - $ - $1.41 - $1.42 154,105 $ 229,596 12/14/2023 - 1/22/2024 51,603 $ 76,882 $2.03 - $2.41 66,500 $ 36,585 12/14/2020 - 12/15/2021 63,583 $ 34,980 $2.46 - $2.50 50,400 $ 20,560 7/17/2020 - 3/14/2022 48,108 $ 19,625 $2.51 - $2.89 205,781 $ 4,908 12/14/2022 - 7/26/2023 119,064 $ 2,840 April 30, 2020 672,286 $ 670,919   282,358 $ 134,327             April 30, 2019 616,449 $ 88,795   239,551 $ - The aggregate intrinsic value in the preceding table represents the total intrinsic value, based on the Company’s closing stock price of $1.86 per share as of April 30, 2019 (April 30, 2018 – $2.60), 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, 2019 was zero (April 30, 2018 – 256,555). The total intrinsic value of options exercised during the year ended April 30, 2019 was $24,765 (2018 – $1,742). The grant date fair value of options vested during the year ended April 30, 2019 was $276,391 (April 30, 2018 – $269,423). 59 COUNTERPATH CORPORATION The aggregate intrinsic value in the preceding table represents the total intrinsic value, based on the Company's closing stock price of $2.90 per share as of April 30, 2020 (April 30, 2019 - $1.86), 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, 2020 was $134,327 (April 30, 2019 - zero).  The total intrinsic value of options exercised during the year ended April 30, 2020 was $8,816 (2019 - $24,765). The grant date fair value of options vested during the year ended April 30, 2020 was $183,716 (April 30, 2019 - $276,391). The following table summarizes information regarding the non-vested stock purchase options outstanding as of April 30, 2020:     Number of Options     Weighted Average Grant-Date Fair Value   Non-vested options at April 30, 2018   418,487   $ 1.91   Granted   221,000   $ 0.82   Vested   (136,323 ) $ 2.03   Forfeited   (126,266 ) $ 1.72   Non-vested options at April 30, 2019   376,898   $ 1.30   Granted   199,500   $ 0.47   Vested   (133,103 ) $ 1.38   Forfeited   (53,367 ) $ 1.02   Non-vested options at April 30, 2020   389,928   $ 0.88   As of April 30, 2020, there was $271,728 of total unrecognized compensation cost related to unvested stock options. This unrecognized compensation cost is expected to be recognized over a weighted average period of 2.3 years. Employee and non-employee stock-based compensation amounts classified in the Company's consolidated statements of operations for the year ended April 30, 2020 and 2019 were as follows:      Years Ended       April 30,       2020     2019   Cost of sales $ 39,826   $ 48,608   Sales and marketing   59,343     71,811   Research and development   41,341     48,405   General and administrative   44,474     65,755   Total stock-based compensation $ 184,984   $ 234,579   61 COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. Dollars)dollars, except number of shares) Employee Stock Purchase Plan Under the terms of the Employee Stock Purchase Plan (the "ESPP") all regular salaried (non-probationary) employees can purchase up to 6% of their base salary in common shares of the Company at market price. The Company will match 50% of the shares purchased by issuing or purchasing in the market up to 3% of the respective employee's base salary in shares.  During the year ended April 30, 2020, the Company matched $20,001 (2019 - $25,012) in shares purchased by employees under the ESPP.  During the year ended April 30, 2020, 28,283 shares (2019 - 26,945) were purchased on the open market and 13,949 shares (2019 - 12,820) were issued from treasury under the ESPP.  A total of 220,000 shares have been reserved for issuance under the ESPP.  As of April 30, 2020, a total of 134,766 shares were available for issuance under the ESPP. Deferred Share Unit Plan Under the terms of the DSUP which is effective as at October 22, 2009, each deferred share unit (each, a "DSU") is equivalent to one share of common stock.  The maximum number of shares of common stock that may be reserved for issuance to any one participant pursuant to DSUs granted under the DSUP and any share compensation arrangement is 5% of the number of shares of common stock of the Company outstanding at the time of reservation.  A DSU granted to a participant who is a director of the Company shall vest immediately on the award date.  A DSU granted to a participant other than a director will generally vest as to one-third (1/3) of the number of DSUs granted on the first, second and third anniversaries of the award date. Fair value of the DSUs, which is based on the closing price of the Company's common stock on the date of grant, is recorded as compensation expense over the vesting period. On September 19, 2019, the maximum number of shares of common stock authorized by the Company's stockholders reserved for issuance under the DSUP was increased from 700,000 shares to 900,000 shares. During the year ended April 30, 2020, 203,399 (2019 - 236,981) DSUs were issued under the DSUP, of which 115,000 were granted to officers or employees and 88,399 were granted to non-employee directors. As of April 30, 2020, a total of 39,097 shares were available for issuance under the DSUP. The following table summarizes the Company's outstanding DSU awards as of April 30, 2020 and 2019, and changes during the period then ended:       Number of DSUs     Weighted Average Grant Date Fair Value   DSUs at April 30, 2018   465,390   $ 6.40   Granted   236,981   $ 2.05   Forfeited   (68,880 ) $ 2.42   Outstanding at April 30, 2019   633,491   $ 5.20   Granted   203,399   $ 1.24   Converted   (137,707 ) $ 7.28   Outstanding at April 30, 2020   699,183   $ 2.21   As of April 30, 2020, there was $233,058 (2019 - $178,984) of total unrecognized compensation cost related to unvested DSU awards. This unrecognized compensation cost is expected to be recognized over a weighted average period of 2.1 years (2019 - 2.4 years). The total fair value of DSUs that vested during the year was $183,146 (2019 - $262,165). The total intrinsic value of DSUs that converted during the year ended April 30, 2020 was $136,330 (2019 - $nil). The following table summarizes information regarding the non-vested stock purchase options outstanding as of April 30, 2019:62       Number of     Grant-Date         Options     Fair Value     Non-vested options at April 30, 2017   175,183   $  3.49     Granted   324,000   $  1.90     Vested   (73,965 ) $  3.64     Forfeited   (6,731 ) $  1.98     Non-vested options at April 30, 2018   418,487   $  1.91     Granted   221,000   $  0.82     Vested   (136,323 ) $  2.03     Forfeited   (126,266 ) $  1.72     Non-vested options at April 30, 2019   376,898   $  1.30   As of April 30, 2019, there was $373,324 of total unrecognized compensation cost related to unvested stock options. This unrecognized compensation cost is expected to be recognized over a weighted average period of 2.9 years. COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. dollars, except number of shares) Employee and non-employee stock-basedDSU based compensation amounts classified in the Company’sCompany's consolidated statements of operations for the year ended April 30, 20192020 and 2018 were as follows:       Years Ended         April 30,         2019     2018     Cost of sales $  48,608   $  55,444     Sales and marketing   71,811     84,685     Research and development   48,405     60,964     General and administrative   65,755     129,227     Total stock-based compensation $  234,579   $  330,320   Warrants On September 4, 2015, the Company completed a non-brokered private placement (the “Private Placement”) of 293,000 units, at a price of $5.00 per unit, for gross aggregate proceeds of $1,465,000 less stock issuance costs of $23,161. Each unit consists of one share of common stock and one-half of one non-transferable common share purchase warrant. Each whole warrant entitled the holder to purchase one additional share of the Company’s common stock at an exercise price of $7.50 per share until September 4, 2017. The following tables summarize information regarding the warrants outstanding as of April 30, 2019 and April 30, 2018.             Weighted               Number of     Average               Warrants     Exercise Price     Expiry Dates     Warrants at April 30, 2017   146,500   $  7.50     September 4, 2017     Granted   –   $  –     –     Exercised   –   $  –     –     Expired   (146,500 ) $  7.50     September 4, 2017     Warrants at April 30, 2018   –   $  –     –     Granted   –   $  –     –     Exercised   –   $  –     –     Expired   –   $  –     –     Warrants at April 30, 2019   –   $  –     –   60 COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. Dollars) Employee Stock Purchase Plan Under the terms of the Employee Stock Purchase Plan (the “ESPP”) all regular salaried (non-probationary) employees can purchase up to 6% of their base salary in common shares of the Company at market price. The Company will match 50% of the shares purchased by issuing or purchasing in the market up to 3% of the respective employee’s base salary in shares. During the year ended April 30, 2019, the Company matched $25,012 (2018 - $43,614) in shares purchased by employees under the ESPP. During the year ended April 30, 2019, 26,945 shares (2018 – 16,696) were purchased on the open market and 12,820 shares (2018 – 24,699) were issued from treasury under the ESPP. A total of 220,000 shares have been reserved for issuance under the ESPP. As of April 30, 2019, a total of 147,802 shares were available for issuance under the ESPP. Deferred Share Unit Plan Under the terms of the DSUP which is effective as at October 22, 2009, each deferred share unit (each, a “DSU”) is equivalent to one share of common stock. The maximum number of shares of common stock that may be reserved for issuance to any one participant pursuant to DSUs granted under the DSUP and any share compensation arrangement is 5% of the number of shares of common stock of the Company outstanding at the time of reservation. A DSU granted to a participant who is a director of the Company shall vest immediately on the award date. A DSU granted to a participant other than a director will generally vest as to one-third (1/3) of the number of DSUs granted on the first, second and third anniversaries of the award date. Fair value of the DSUs, which is based on the closing price of the Company’s common stock on the date of grant, is recorded as compensation expense over the vesting period. On September 12, 2017, the maximum number of shares of common stock authorized by the Company’s stockholders reserved for issuance under the DSUP was increased from 500,000 shares to 700,000 shares. During the year ended April 30, 2019, 236,981 (2018 — 119,998) DSUs were issued under the DSUP, of which 168,491 were granted to officers or employees and 68,490 were granted to non-employee directors. Of the 236,981 granted to officers and employees, 45,661 was forfeited during the year. As of April 30, 2019, a total of 42,495 shares were available for issuance under the DSUP. The following table summarizes the Company’s outstanding DSU awards as of April 30, 2019 and 2018, and changes during the period then ended:             Weighted Average               Grant Date Fair         Number of DSUs     Value     DSUs at April 30, 2017   345,392   $  7.85     Granted   119,998   $  2.21     Conversions   –   $  –     Outstanding at April 30, 2018   465,390   $  6.40     Granted   236,981   $  2.05     Forfeited   (68,880 ) $  2.42     Outstanding at April 30, 2019   633,491   $  5.20   As of April 30, 2019, there was $178,984 (2018 – $73,615) of total unrecognized compensation cost related to unvested DSU awards. This unrecognized compensation cost is expected to be recognized over a weighted average period of 2.42 years (2018 – 1.98 years). The total fair value of DSUs that vested during the year was $262,165 (2018 – $308,163). 61 COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. Dollars) Employee and non-employee DSU based compensation amounts classified in the Company’s consolidated statements of operations for the year ended April 30, 2019 and 2018 are as follows:       Year Ended         April 30,         2019     2018     General and administrative $  240,147   $  274,246       Year Ended       April 30,       2020     2019   Cost of sales $ 159,333   $ -   Sales and marketing   24,005     -   Research and development   7,131     -   General and administrative   7,131     240,147     $ 197,600   $ 240,147   The following table summarizes information regarding the non-vested DSUs outstanding as of April 30, 2019:2020:             Weighted Average         Number of     Grant Date Fair         DSUs     Value per Unit     Non-vested DSUs at April 30, 2017   46,217   $  4.58     Granted   119,998   $  2.21     Vested   (101,963 ) $  3.02     Non-vested DSUs at April 30, 2018   64,252   $  2.62     Granted   236,981   $  2.05     Vested   (97,913 ) $  2.68     Forfeited   (68,880 ) $  2.41     Non-vested DSUs at April 30, 2019   134,440   $  1.67             Weighted Average       Number of DSUs     Grant Date Fair Value per Unit   Non-vested DSUs at April 30, 2018   64,252   $ 2.62   Granted   236,981   $ 2.05   Vested   (97,913 ) $ 2.68   Forfeited   (68,880 ) $ 2.41   Non-vested DSUs at April 30, 2019   134,440   $ 1.67   Granted   203,399   $ 1.24   Vested   (136,493 ) $ 1.34   Non-vested DSUs at April 30, 2020   201,346   $ 1.45   Note 11 Related Party Transactions On October 10, 2018, the Company entered into a loan agreement (the “Loan Agreement”"Loan Agreement") with Wesley Clover International Corporation (“("Wesley Clover”Clover"), a company controlled by the Chairman of the Company, and KMB Trac Two Holdings Ltd. (“("KMB Trac Two Holdings”Holdings"), a company owned by the spouse of a director of the Company. As of April 30, 2019,2020, the principal balance of the related party loan payable due to Wesley Clover and KMB Trac Two Holdings was $2,000,000 and $2,000,000 (2019 - $1,500,000 and $1,500,000,$1,500,000), respectively. During the year ended April 30, 2019,2020, the Company paid $26,301$114,740 (2019 - $26,301) in interest to each of Wesley Clover and KMB Trac Two Holdings. As of April 30, 2019,2020, the Company owed $8,110$39,729 (2019 - $8,110) in interest payable to each party. During the year ended April 30, 2019,2020, the Company through its wholly owned subsidiary, CounterPath Technologies Inc., paid $83,551 (2018$60,314 (2019 - $83,957)$83,551) to Kanata Research Park Corporation (“KRP”("KRP") for leased office space. KRP is controlled by the Chairman of the Company.     On November 21, 2013, the Company, through its wholly owned subsidiary, CounterPath Technologies, entered into an agreement with 8007004 (Canada) Inc. (“8007004”("8007004") to lease office space. 8007004 was controlled by a member of the board of directors of the Company. CounterPath Technologies, paid $30,846 (2018 - $31,686) forOn May 1, 2019, the office space was sold to a third party. For the year ended April 30, 2019. On January 24, 2018,2019, CounterPath Technologies, paid $30,846 to 8007004 for leased office space. During the year ended April 30, 2020, the Company issued an aggregate of 427,500 shares of common stock under a non-brokered private placement (“Private Placement”) at a price of $4.01 per share for total gross proceeds of $1,714,275 less issuance costs of $48,325. In connection with the Private Placement,sold $105,262 (2019 - $41,600) in subscription services to Wesley Clover purchased 125,000 shares and KMB Trac Two Holdings purchased 125,000 shares. On July 20, 2017, our Company issued an aggregate of 539,240 shares of common stock underSystems Europe ("WCS Europe"), a non-brokered private placement at a price of $2.20 per share for total gross proceeds of $1,186,328 less issuance costs of $19,832. In connection with this private placement, Wesley Clover purchased 144,357 shares, KMB Trac Two Holdings purchased 180,446 shares,company controlled by the former chief executive officer and a directorChairman of the Company, purchased 11,368 shares, the chief financial officer of the Company, purchased 4,511 shares, and the executive vice president, sales and marketing of the Company, purchased 4,545 shares.Company. 6263 COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. Dollars)dollars, except number of shares) On November 8, 2019, the Company entered into an agreement with WCS Europe to hire a dedicated resource to assist with business development in the EMEA region. The initial term of the agreement is for six months, invoiced quarterly in advance at 3,500 euros per month. The services shall renew for another six months subject to mutual agreement with 30 day notice. For the year ended April 30, 2020, the Company paid $23,300 to WCS Europe. On November 26, 2019, the Company, through its wholly owned subsidiary, CounterPath Technologies Inc., entered into an agreement with ThinkRF Corp. ("ThinkRF") to lease office space beginning January 1, 2020. During the year ended April 30, 2020, CounterPath Technologies Inc. paid $9,932 to ThinkRF. ThinkRF is a company controlled by the Chairman of the Company. The above transactions are in the normal course of operations and are recorded at amounts established and agreed to between the related parties.     Note 12 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’sCompany's deferred tax assets and liabilities, after applying enacted corporate income tax rates, are as follows:       Years Ended         April 30,         2019     2018     Tax loss carry forwards $  14,805,000   $  13,606,000     Capital losses carried forward   240,000     242,000     Equipment   142,000     133,000     Other   7,000     12,000     Bad debt   227,000     109,000     Nondeductible research and development expenses   2,971,000     2,993,000     Investment tax credits   436,000     439,000     Other intangibles   428,000     431,000     Acquired technology   (383,000 )   (183,000 )   Valuation allowance established by management   (18,874,000 )   (17,782,000 )   Net deferred tax assets $  –   $  –       Years Ended       April 30,       2020     2019   Tax loss carry forwards $ 15,285,000   $ 14,806,000   Capital losses carried forward   232,000     240,000   Equipment   552,000     570,000   Other   3,000     7,000   Bad debt   67,000     227,000   Nondeductible research and development expenses   2,872,000     2,971,000   Investment tax credits   422,000     436,000   Acquired technology   (577,000 )   (383,000 ) Valuation allowance established by management   (18,856,000 )   (18,874,000 ) Net deferred tax assets $ -   $ -   The provision for income taxes differ from the amount calculated using the U.S. federal and state statutory income tax rates as follows:       Years Ended         April 30,         2019     2018     Tax (recovery) based on U.S. rates $  (1,053,000 ) $  (957,000 )   Foreign tax rate differential   32,000     (20,000 )   Non-deductible stock option compensation   101,000     182,000     Effect of reduction (increase) in statutory rates   (203,000 )   6,648,000     Foreign exchange losses on revaluation of deferred tax balances   411,000     (464,000 )   Under provision relating to prior year   (380,000 )   (72,000 )   Expiry of non-operating losses   –     706,000     Increase in valuation allowance   1,092,000     (6,023,000 )   Income tax expense for year $  –   $  –   On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted, which significantly revised the ongoing U.S. corporate income tax law by lowering the U.S. federal corporate income tax rate from 35% to 21%. The Tax Act also incorporated changes to certain international tax provisions, including the implementation of a territorial tax system that imposed a one-time tax on foreign unremitted earnings. The Company did not anticipate that the foreign provisions would have an impact to the Company’s taxes. However, guidance on how provisions of the U.S. Tax Act will be applied or otherwise administered are still being issued by the U.S. Treasury Department, the IRS, and other standard-setting bodies. Adjustments to amounts that we have previously recorded that may materially impact our provision for income taxes may be made as future guidance is issued. 63     Years Ended       April 30,       2020     2019   Tax (recovery) based on U.S. rates $ (230,000 ) $ (1,053,000 ) Foreign tax rate differential   30,000     32,000   Non-deductible stock option compensation   118,000     101,000   Effect of reduction (increase) in statutory rates   -     (203,000 ) Foreign exchange losses on revaluation of deferred tax balances   223,000     411,000   Under provision relating to prior year   (123,000 )   (380,000 ) Expiry of non-operating losses   -     -   Increase in valuation allowance   (18,000 )   1,092,000   Income tax expense for year $ -   $ -   On March 27, 2020, President Trump signed into law the CARES Act, which provides relief to taxpayers affected by the COVID-19. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property. The Company continues to examine the provisions of the CARES Act and similar laws enacted internationally but does not anticipate that it will have a material impact on its business. On May 1, 2020, the Company, entered into a promissory note with Bank of America for a term loan in the amount of $209,035, pursuant to the Paycheck Protection Program under the CARES Act. See Note 18 - Subsequent Events for further detail. 64 COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. Dollars)dollars, except number of shares) As at April 30, 2019, On December 22, 2017, the Tax Cuts and Jobs Act (the "Tax Act") was enacted, which significantly revised the ongoing U.S. corporate income tax law by lowering the U.S. federal corporate income tax rate from 35% to 21%. The Tax Act also incorporated changes to certain international tax provisions, including the implementation of a territorial tax system that imposed a one-time tax on foreign unremitted earnings. The Company did not anticipate that the foreign provisions would have an impact to the Company's taxes. However, guidance on how provisions of the U.S. Tax Act will be applied or otherwise administered are still being issued by the U.S. Treasury Department, the IRS, and other standard-setting bodies. Adjustments to amounts that we have previously recorded that may materially impact our provision for income taxes may be made as future guidance is issued. As at April 30, 2020, the Company had net operating loss carry-forwards available to reduce taxable income in future years as follows: Country Amount Expiration Dates United States – US$ $  51,886,000 2027 – 2039 United States – US$ $  5,757,000 (1) Indefinite Canada – CDN$ $  13,437,000 (2) 2023 – 2039 (1)Net operating losses arising in tax year beginning after December 31, 2017 can be carried forward indefinitely instead of 20 years and carrybacks are no longer permitted. However, the net operating loss carryforward is limited and can only offset 80% of taxable income. (2)These losses are subject to tax legislation that limits the use of the losses against future income of the Company’s Canadian subsidiaries. The Company is subject to taxation in the U.S. and Canada. 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, 2019 and April 30, 2018 were as follows:       Years Ended         April 30,         2019     2018     Balance at beginning of year $  9,763   $  9,763     Increases related to prior year tax positions (interest and penalties)   –     –     Increases related to current year tax positions (interest and penalties)   –     –     Settlements   –     –     Lapses in statute of limitations   –     –     Balance at end of year $  9,763   $  9,763   Country      Amount     Expiration Dates United States - US$   $ 51,885,000         2025 - 2037 United States - US$   $ 9,302,000 (1)   Indefinite Canada - CDN$   $ 12,546,000 (2)   2024 - 2040 (1) Net operating losses arising in tax year beginning after December 31, 2017 can be carried forward indefinitely instead of 20 years and carrybacks are no longer permitted. However, the net operating loss carryforward is limited and can only offset 80% of taxable income. (2) These losses are subject to tax legislation that limits the use of the losses against future income of the Company's Canadian subsidiaries. The Company is subject to taxation in the U.S. and Canada.  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, 2020 and April 30, 2019 were as follows:     Years Ended       April 30,       2020     2019   Balance at beginning of year $ 9,763   $ 9,763   Increases related to prior year tax positions (interest and penalties)                        -     -   Increases related to current year tax positions (interest and penalties)                     -     -   Settlements   -     -   Lapses in statute of limitations   -     -   Balance at end of year $ 9,763   $ 9,763   Note 13 Segmented Information     The Company’sCompany's chief operating decision maker reviews financial information presented on a consolidated basis, accompanied by disaggregated information about revenues by geographic region for purposes of making operating decisions and assessing financial performance. Accordingly, the Company has concluded that it has one reportable operating segment. 6465 COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. Dollars)dollars, except number of shares) Revenues are categorized 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, 2019 and 2018:       Years Ended         April 30,         2019     2018     North America $  6,768,821   $  6,916,556     EMEA   2,505,828     3,961,595     Asia Pacific   1,042,197     950,131     Latin America   448,058     553,459       $  10,764,904   $  12,381,741   Revenues are categorized 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, 2020 and 2019:     Years Ended       April 30,       2020     2019   North America $ 8,391,465   $ 6,768,821 �� EMEA   2,395,778     2,505,828   Asia Pacific   819,027     1,042,197   Latin America   495,056     448,058     $ 12,101,326   $ 10,764,904   All of the Company’sCompany's long-lived assets, which includes equipment, goodwill and intangibles and other assets are located in Canada and the United States as follows:       As at April 30,         2019     2018     Canada $  6,798,083   $  7,150,537     United States   27,916     35,919       $  6,825,999   $  7,186,456       As at April 30,       2020     2019   Canada $ 7,785,682   $ 6,798,083   United States   106,704     27,916     $ 7,892,386   $ 6,825,999   Note 14 CommitmentsLeases The Company has operating leases for its corporate offices located in Canada and the United States. The leases have remaining terms of approximately one month to 4.4 years, some of which may include the option to extend the lease for one to five years. For leases with a term greater than 12 months, the Company recognizes a right-of-use asset and a lease liability based on the present value of the minimum lease payments over the lease term. If the Company is reasonably certain that it will exercise the extension option, the extended period will be included in the calculation of the right-of-use asset and lease liability. In the initial calculation of the right-of-use asset and lease liability, the Company included a five-year extension on one of its operating leases, as it was reasonably certain to exercise the extension option. The lease agreements do not contain any variable payments, residual value guarantees or restrictive covenants. As the Company's leases do not provide a readily determinable implicit rate, the Company uses the incremental borrowing rate at lease commencement, which was determined using a portfolio approach, based on the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. The Company uses the implicit rate when a rate is readily determinable. Operating lease expense is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recognized on the balance sheet and payments are expensed as incurred over the lease term. Common area maintenance fees and other charges associated with these leases are expensed as incurred. Property tax and insurance payments paid to the lessors are included in the calculation of minimum lease payments. During the year ended April 30, 2020, operating lease expense was approximately $514,556 and the cash paid for amounts included in the measurement of the operating lease liabilities was $498,721. The following table presents the Company's operating lease right-of-use assets and liabilities as of April 30, 2020: 66 COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. dollars, except number of shares)     April 30, 2020   Assets         Operating lease right-of-use assets $ 1,370,035           Liabilities         Operating lease liabilities - current $ 293,322     Operating lease liabilities - non-current   1,102,530         Total operating lease liabilities $ 1,395,852   As of April 30, 2020, total right-of-use assets and lease liabilities recognized on the consolidated balance sheets attributable to related parties was $44,382. The following table presents supplemental information for the year ended April 30, 2020: Weighted average remaining lease term 4.22 years   Weighted average discount rate 9.8% Operating cash flow from operating leases ($498,721 ) As of April 30, 2020, estimated undiscounted cash flows related to operating leases were as follows:  2021 $ 410,739   2022   394,476   2023   361,966   2024   373,471   2025   157,932   Thereafter   −   Less: imputed interest   (302,732 ) Operating lease liabilities $ 1,395,852   Note 15 Commitments Total payable over the term of the leaseservice agreements for the years ended April 30, are as follows:       Office     Office           Voice               Leases –     Leases –     Total     Platform               Related     Unrelated     Office     Service               Party     Party     Leases     Contract     Total     2020 $  83,791   $  622,513   $  706,304   $  240,000   $  946,304     2021   83,791     550,035     633,826     220,000     853,826     2022   83,791     533,693     617,484     –     617,484     Thereafter   167,582     1,256,923     1,424,505     –     1,424,505       $  418,955   $  2,963,164   $  3,382,119   $  460,000   $  3,842,119       Voice Platform Service Contract     Marketing Service Contract     Total   2021 $ 220,000   $ 44,402   $ 264,402   2022   −     44,928     44,928   2023   −     33,696     33,696   Thereafter   −     −     −     $ 220,000   $ 123,026   $ 343,026   Note 1516 Contingencies The Company is party to legal claims from time to time, which arise in the normal course of business. These claims are not expected to have a material adverse effect on the financial position, results of operations or cash flows of the Company. 65 COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. Dollars) Note 1617 Loss per share The following table shows the computation of basic and diluted loss per share:       Year endedApril 30,         2019     2018     Numerator                    Income available to common stockholders $  (5,013,439 ) $  (3,220,670 )                   Denominator                    Weighted average shares outstanding   5,942,096     5,496,201          Effect of dilutive securities(1)(2)   −     −         5,942,096     5,496,201                     Basic and diluted loss per share $  (0.84 ) $  (0.59 ) (1)For the years ended April 30, 2019 and 2018, potentially dilutive securities including stock options and deferred share units totalling 1,249,940 and 1,140,432, respectively, were excluded from the computation of diluted loss per share because their effect was anti-dilutive.67 (2) COUNTERPATH CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Stated in U.S. dollars, except number of shares)     Year ended April 30,       2020     2019   Numerator                 Income available to common stockholders $ (1,096,565 ) $ (5,013,439 )               Denominator                 Weighted average shares outstanding   6,010,006     5,942,096       Effect of dilutive securities (1) (2)   −     −       6,010,006     5,942,096                 Basic and diluted loss per share $ (0.18 ) $ (0.84 ) (1) For the years ended April 30, 2020 and 2019, potentially dilutive securities including stock options and deferred share units totalling 1,371,469 and 1,249,940, respectively, were excluded from the computation of diluted loss per share because their effect was anti-dilutive. (2)Diluted by assumed exercise of outstanding common share equivalents using the treasury stock method. Note 1718 Subsequent Events On July 10, 2019,June 15, 2020, the Company entered into an amendedrepaid $2,000,000 of the principle balance of the related party loan agreement (the “Amendment Agreement”) withpayable to Wesley Clover International Corporation and KMB Trac Two Holdings, Ltd. (collectively,increasing the “Lenders”), pursuant to which to Lenders have agreed to amend the existing loan agreement (the “Loan Agreement”), together with the Amendment Agreement, to increase the maximum amountunused portion of the loan principle to $3,000,000. On June 10, 2020, the Company issued an aggregate of 284,902 shares of common stock under a non-brokered private placement at a price of $3.51 per share for total gross proceeds of $1,000,006. In connection with the private placement, Wesley Clover purchased 142,451 shares and KMB Trac Two Holdings purchased 142,451 shares. On May 1, 2020, the Company, through its subsidiary, CounterPath LLC, entered into a promissory note with Bank of America for a term loan in the amount of $209,035 (the "Loan"). The Loan is made pursuant to the Paycheck Protection Program under the CARES Act. The Loan is forgiveable if used to retain workers and maintain payroll or to make lease payments and utility payments as specified under the Paycheck Protection Rule. The remaining loan balance that is not forgiven will bear interest at a rate of 1% per annum after a six-month deferment period, with a maturity date of two years from $3,000,000 to $5,000,000 and to extend the termfunding date of the loan such that all outstanding principal and accrued interest is due on April 11, 2021.loan. 6668 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. Item 9A.Controls and Procedures. Disclosure Controls and Procedures Disclosure controls and procedures, as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e), means controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period specified in the SEC’sSEC'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 Securities Exchange Act of 1934 is accumulated and communicated to management including our Interim Chief Executive Officer and Chief Financial Officerour Vice President of Finance, 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’scompany's disclosure controls and procedures.  This evaluation was carried out under the supervision and with the participation of our company’scompany's management, including our Interim Chief Executive Officer and Chief Financial Officer.our Vice President of Finance.  Based upon that evaluation, our Interim Chief Executive Officer and Chief Financial Officerour Vice President of Finance concluded that as of April 30, 2019,2020, our disclosure controls and procedures arewere effective as at the end of the period covered by this report. Management’sManagement's Annual 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, as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f), is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated 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. We maintain internal controls over financial reporting that are designed to provide reasonable assurance regarding the reliability of financial reporting, and the preparation of financial statements. Our internal control over financial reporting includes those policies and procedures that 1) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles; 2) ensure the maintenance of records that accurately and fairly reflect our transactions; 3) ensure that our receipts, expenditures and asset dispositions are made in accordance with director and management authorizations; and 4) provide reasonable assurance that our assets are properly safeguarded. Under the supervision and with the participation of our management, including our Interim Chief Executive Officer and Chief Financial Officer,our Vice President of Finance, we conducted an assessment of the effectiveness of our internal control over financial reporting based on certain criteria established in Internal Control - Integrated Framework (2013 edition)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 iswas effective as of April 30, 2019.2020. Changes in Internal Control Over Financial Reporting There have been no changes in our internal control over financial reporting that occurred during the fourth fiscal quarter of the year ended April 30, 20192020 that have materially affected, or is reasonably likely to materially affect our internal control over financial reporting. 69 Item 9B.Other Information. None. 6770 PART III Item 10.Directors, Executive Officers and Corporate Governance. The information required by this Item is incorporated herein by reference from our Proxy Statement for the Annual Meeting of Shareholders, to be filed with the SEC no later than 120 days after April 30, 2019.2020. Item 11.Executive Compensation. The information required by this Item, is incorporated herein by reference from our Proxy Statement for the Annual Meeting of Shareholders, to be filed with the SEC no later than 120 days after April 30, 2019.2020. Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required by this Item is incorporated herein by reference from our Proxy Statement for the Annual Meeting of Shareholders, to be filed with the SEC no later than 120 days after April 30, 2019.2020. Item 13.Certain Relationships and Related Transactions, and Director Independence. The information required by this Item is incorporated herein by reference from our Proxy Statement for the Annual Meeting of Shareholders, to be filed with the SEC no later than 120 days after April 30, 2019.2020. Item 14.Principal Accountant Fees and Services. The information required by this Item is incorporated herein by reference from our Proxy Statement for the Annual Meeting of Shareholders, to be filed with the SEC no later than 120 days after April 30, 2019.2020. PART IV Item 15.Exhibits and Financial Statement Schedules. List of documents filed as part of the report The following documents are filed as part of this report: (a)(1) Financial Statements: 1. (a)(1)Financial Statements: 1. Report of Independent Registered Public Accounting Firm; 2. Consolidated Balance Sheets; 3. Consolidated Statements of Operations; 4. Consolidated Statements of Comprehensive Loss; 5. Consolidated Statements of Cash Flows; 6. Consolidated Statements of Changes in Stockholders' Equity; and 7. Notes to the Consolidated Financial Statements. 71 (a)(2)Financial Statement Schedules:  None. (a)(3)Exhibits: (3) Articles of Incorporation and By-laws     3.1 2. Consolidated Balance Sheets; 3. Consolidated Statements of Operations; 4. Consolidated Statements of Comprehensive Loss; 5. Consolidated Statements of Cash Flows; 6. Consolidated Statements of Changes in Stockholders’ Equity; and 7. Notes to the Consolidated Financial Statements. 68 (a)(2) Financial Statement Schedules: None. (a)(3) Exhibits: (3) Articles of Incorporation and By-laws 3.1 Articles of Incorporation (incorporated by reference from our Registration Statement on Form SB-2 filed on July 16, 2003)   3.2 Certificate of Designation (incorporated by reference from our Registration Statement on Form S-8 filed on January 31, 2017)   3.3 Articles of Merger (incorporated by reference from our Current Report on Form 8-K filed on September 15, 2005)   3.4 Articles of Merger (incorporated by reference from our Registration Statement on Form S-8 filed on January 31, 2017)   3.5 Certificate of Amendment (incorporated by reference from our Quarterly Report in the Form 10-Q filed on December 12, 2013)   3.6 Certificate of Change (incorporated by reference from our Registration Statement on Form S-8 filed on January 31, 2017)   3.7 Amended Bylaws (incorporated by reference from our Current Report on Form 8-K filed on July 2, 2012)   (4) Instruments defining the rights of security holders, including indentures   4.1 Employee Share Purchase Plan (incorporated by reference from our Registration Statement on Form S-8 filed on January 31, 2019)   4.2 Amended 2010 Stock Option Plan (incorporated by reference from our Registration Statement on Form S-8 filed on January 31, 2019)   4.3 Deferred Share Unit Plan (incorporated by reference from our Quarterly Report on Form 10-Q filed on March 13, 2017)   (10) Material Contracts   10.1 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)   10.2 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)   10.3 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) 69 10.4 Form of Subscription Agreement between our company and various investors in connection with the non-brokered private placement completed on September 4, 2015 (incorporated by reference from our Current Report on Form 8-K filed on September 8, 2015) 72 10.4 10.5 Form of Warrant Certificate issued to various investors in connection with the non-brokered private placement completed on September 4, 2015 (incorporated by reference from our Current Report on Form 8-K filed on September 8, 2015)     10.610.5 Amended Employment Agreement between Donovan Jones and CounterPath Corporation and its wholly owned subsidiary, CounterPath Technologies Inc., dated February 17, 2016 (incorporated by reference from our Quarterly Report on Form 10-Q filed on March 15, 2016) 10.7 Form of Subscription Agreement between our company and various investors in connection with the non-brokered private placement completed on December 15, 2016 (incorporated by reference from our Current Report on Form 8-K filed on December 19, 2016)     10.810.6 Form of Subscription Agreement between our company and various investors in connection with the non-brokered private placement completed on July 20, 2017 (incorporated by reference from our Current Report on Form 10-Q filed on September 14, 2017)     10.910.7 Form of Subscription Agreement between our company and various investors in connection with the non-brokered private placement completed on January 24, 2018 (incorporated by reference from our Current Report on Form 8-K filed on January 26, 2018)     10.1010.8 Amended Employment Agreement between David Karp and CounterPath Corporation and its wholly owned subsidiary, CounterPath Technologies Inc., dated March 7, 2018 (incorporated by reference from our Quarterly Report on Form 10-Q filed on March 13, 2018)     10.1110.9 Loan Agreement between Wesley Clover International Corporation, KMB Trac Two Holdings Ltd. and CounterPath Corporation dated October 10, 2018 (incorporated by reference from our Current Report on Form 8-K filed on October 12, 2018)     10.1210.10 Separation Agreement between Donovan Jones and CounterPath Corporation and CounterPath Technologies Inc. dated September 17, 2018 (incorporated by reference from our Quarterly Report on Form 10-Q filed on December 12, 2018) 10.13* Amendment Agreement dated July 10, 2019 to the Loan Agreement dated October 10, 2018 between Wesley Clover International Corporation, KMB Trac Two Holdings Ltd. and CounterPath Corporation (incorporated by reference from our Annual Report on Form 10-K filed on July 11, 2019) 10.11 Amendment Agreement dated February 1, 2020 between Wesley Clover International Corporation, KMB Trac Two Holdings Ltd. and CounterPath Corporation (incorporated by reference from our Quarterly Report on Form 10-Q filed on March 11, 2020) 10.12 Form of Subscription Agreement between our company and investors in connection with the non-brokered private placement completed on June 10, 2020 (incorporated by reference from our Current Report on Form 8-K filed on June 11, 2020) 10.13* Employment Agreement between CounterPath Technologies Inc. and Karen Luk dated May 17, 2018 10.14* Amendment to Employment Agreement between CounterPath Technologies Inc. and Karen Luk dated September 23, 2019 10.15* Executive Employment Agreement between David Karp and CounterPath Corporation and CounterPath Technologies Inc. dated April 14, 2020 10.16* Employment Agreement between Todd Carothers and CounterPath, LLC dated January 1, 2019 10.17* Amendment to Employment Agreement between Todd Carothers and CounterPath, LLC dated November 15, 2019 10.18* Amendment to Employment Agreement between Todd Carothers and CounterPath, LLC dated April 14, 2020     (14) Code of Ethics     14.1 Code of Business Conduct and Ethics and Compliance Program (incorporated by reference from our Quarterly Report on Form 10-QSB filed on September 15, 2008) 73 (21) (21) Subsidiaries of CounterPath Corporation       CounterPath Technologies Inc. (incorporated in the Province of British Columbia, Canada)       BridgePort Networks, Inc. (incorporated in the State of Delaware)       CounterPath, LLC (formed in the State of Delaware)     (23) Consent of Experts and Counsel     23.1* Consent of BDO Canada LLP, Independent Registered Public Accounting Firm 70 (31) Section 302 Certifications     31.1* Section 302 Certification of David Karp 31.2* Section 302 Certification of Karen Luk     (32) Section 906 Certifications     32.1* Section 906 Certification of David Karp 32.2* Section 906 Certification of Karen Luk     (101) Interactive Data File     101.INS* XBRL Instance Document     101.SCH* XBRL Taxonomy Extension Schema     101.CAL* XBRL Taxonomy Extension Calculation Linkbase     101.DEF* XBRL Taxonomy Extension Definition Linkbase     101.LAB* XBRL Taxonomy Extension Label Linkbase     101.PRE* XBRL Taxonomy Extension Presentation Linkbase *Filed herewith. Item 16.Form 10-K Summary. None. 7174 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. COUNTERPATH CORPORATION By: /s/ David Karp Karen Luk David Karp Karen Luk Interim Chief Executive Officer, Chief Financial Officer, Vice President of Finance, Treasurer and Secretary (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) Officer Date: July 11, 2019 20, 2020 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/  Terence Matthews Terence Matthews Chairman and Director July 11, 2019 /s/  David Karp Chairman and Director July 20, 2020 David Karp /s/ Karen Luk President Interimand Chief Executive Officer July 11, 2019 and Director (Principal Executive Officer) July 20, 2020 Karen Luk Chief Financial Officer, Vice President of Finance, Treasurer and Secretary (Principal Financial Officer and Principal Accounting Officer) July 20, 2020 /s/  Owen Matthews Owen Matthews /s/  Steven Bruk Vice Chairman and Director July 11, 201920, 2020 /s/ Steven Bruk Steven Bruk Director July 11, 2019 /s/  Bruce Joyce Director July 20, 2020 Bruce Joyce Director July 11, 2019 /s/  Chris Cooper Director July 20, 2020 Chris Cooper Director July 11, 2019 /s/  Larry Timlick Director July 20, 2020 Larry Timlick Director July 11, 201920, 2020 7275