CounterPath Corporation — Capital/Financing Update 2020

Jun 12, 2020

51-102F3 MATERIAL CHANGE REPORT

Item 1 Name and Address of Company

CounterPath Corporation (the “Company”) 300 – 505 Burrard Street Vancouver, BC V78X 1M3

Item 2 Date of Material Change

June 10, 2020

Item 3 News Release

The news release was disseminated through CNW Group on June 11, 2020.

Item 4 Summary of Material Change

On June 10, 2020, the Company closed a non-brokered private placement of 284,902 shares of common stock (each, a “Share”) of the Company at a price of US$3.51 (CDN$4.70) per Share for total gross proceeds of US$1,000,006.02 (CDN$1,339,008.06) (the “Offering”).

Item 5 Full Description of Material Change

5.1 Full Description of Material Change

The material change is fully described in the Issuer’s news release dated June 11, 2020, a copy of which is attached hereto.

Disclosure Required by MI 61-101

Insiders of the Company participated in the private placement and received Shares, which constituted a “related party transaction” within the meaning of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (“MI 61-101”). The issuance to the insiders is exempt from the valuation requirement of MI 61-101, by virtue of the exemption contained in section 5.5(a) and 5.7(a) of MI 61-101 because the fair market value of the consideration of the shares issued to the related parties did not exceed 25% of the Company’s market capitalization.

The following supplementary information is provided in accordance with Section 5.2 of MI 61‐101.

(a) a description of the transaction and its material terms:

The Company entered into a subscription agreement with Wesley Clover International Corporation (“Wesley Clover”), whereby Wesley Clover agreed to purchase 142,451 Shares of the Company at a price of US$3.51 (CDN$4.70) per Share for proceeds of US$500,003.01 (CDN$669,504.03). Dr. Terence H. Matthews, the Chairman and a director of the Company, owns 99.999% of the issued and outstanding voting shares of Wesley Clover.

The Company entered into a subscription agreement with KMB Trac Two Holdings Ltd. (“KMB”), whereby KMB agreed to purchase 142,451 Shares of the Company at a price of US$3.51 (CDN$4.70) per Share for proceeds of US$500,003.01 (CDN$669,504.03). Karen Bruk is the sole shareholder of KMB.

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Karen Bruk also holds 115,800 Shares of the Company. Karen Bruk and Steven Bruk, Karen Bruk’s spouse and a director of the Company, exercise shared investment power over the Shares of the Company held by Karen Bruk and KMB. Steven Bruk is the legal and beneficial owner of 58,647 Shares.

(b) the purpose and business reasons for the transaction:

Proceeds of the Financing will be used to pay down company debt and for general corporate purposes.

(c) the anticipated effect of the transaction on the issuer’s business and affairs:

See item (b).

(d) a description of:

(i) the interest in the transaction of every interested party and of the related parties and associated entities of the interested parties:

See item (a).

(ii) the anticipated effect of the transaction on the percentage of securities of the issuer, or of an affiliated entity of the issuer, beneficially owned or controlled by each person or company referred to in subparagraph (i) for which there would be a material change in that percentage:

The following table sets out the effect of the private placement on the percentage of securities of the Company beneficially owned or controlled by each of Messrs. Mathews and Bruk:

Name and Position	Dollar Amount of Shares Purchased	Number of Shares Purchased	No. of Shares Held prior to Closing of the Offering	Percentage of Issued and Outstanding Shares prior to Closing of the Offering	No. of Shares Held After Closing of the Offering	Percentage of Issued and Outstanding Shares After Closing of the Offering
Steven Bruk Director	US$3.51 (CDN$4.70)	142,451 Shares(1)	Undiluted: 1,220,400(2) Diluted: 1,242,882(3)	Undiluted: 20.0%(4) Diluted: 20.3%(5)	Undiluted: 1,362,851(6) Diluted: 1,385,693(7)	Undiluted: 21.3%(8) Diluted: 21.6%(9)
Terence Matthews Director	US$3.51 (CDN$4.70)	142,451 Shares(10)	Undiluted: 1,506,661(11) Diluted: 1,589,818(12)	Undiluted: 24.7%(4) Diluted: 25.7%(13)	Undiluted: 1,649,112(14) Diluted: 1,732,269(15)	Undiluted: 25.8%(8) Diluted: 26.8%(16)

*Less than one percent

(1) These shares are held by KMB.

• (2) Comprised of: (i) 58,647 Shares held directly, (ii) 1,045,953 Shares held indirectly by KMB and (iii) 115,800 Shares held by Karen Bruk.

(3) Comprised of: (i) 58,647 Shares held directly; (ii) 920,953 Shares held indirectly by KMB; (iii) 115,800 Shares held by Karen Bruk and (iv) 22,842 Shares underlying deferred share units held directly, each of which is convertible into one Share at no additional cost with no expiry date, all of which may be exercised or converted within the next 60 days.

(4) Based on 6,104,582 Shares outstanding prior to the completion of the private placement of Shares on June 10, 2020.

• (5) Based on 6,127,424 Shares comprised of: (i) 6,104,582 Shares outstanding prior to the completion of the private placement of Shares on June 10, 2020 and (ii) 22,842 Shares that may be issuable on conversion of deferred share units held by Mr. Bruk, all exercisable within 60 days.

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• (6) Comprised of: (i) 1,188,404 Shares held indirectly by KMB; (ii) 58,647 Shares held directly and (iii) 115,800 Shares held by Karen Bruk.

• (7) Comprised of: (i) 1,188,404 Shares held indirectly by KMB; (ii) 58,647 Shares held directly; (iii) 115,800 Shares held by Karen Bruk and (iv) all of the convertible securities of the Company set out in footnote (2) above.

• (8) Based on 6,389,484 Shares outstanding after the completion of the private placement of Shares on June 10, 2020.

• (9) Based on 6,412,326 Shares comprised of: (i) 6,389,484 Shares outstanding after the completion of the private placement of Shares on June 10, 2020 and (ii) 22,842 Shares that may be issuable on conversion of deferred units of the Company held by Mr. Bruk, all exercisable within 60 days.

• (10) These shares are held by Wesley Clover.

• (11) Comprised of 1,506,661 Shares held by Wesley Clover.

• (12) Comprised of: (i) 1,506,661 Shares held by Wesley Clover and (ii) 83,157 Shares underlying deferred share units held directly, each of which is convertible into one Share at no additional cost with no expiry date, all of which may be exercised or converted within the next 60 days.

• (13) Based on 6,187,739 Shares comprised of: (i) 6,104,582 Shares outstanding prior to the completion of the private placement of Shares on June 10, 2020 and (ii) 83,157 Shares that may be issuable on conversion of deferred share units held directly, all exercisable within 60 days.

• (14) Comprised of 1,649,112 Shares held by Wesley Clover.

• (15) Comprised of: (i) 1,649,112 Shares held by Wesley Clover and (ii) all of the convertible securities of the Company set out in footnote (12) above.

• (16) Based on 6,472,641 Shares comprised of: (i) 6,389,484 Shares outstanding after the completion of the private placement of Shares on June 10, 2020 and (ii) 83,157 Shares that may be issuable on conversion of deferred share units, all exercisable within 60 days.

(e) unless this information will be included in another disclosure document for the transaction, a discussion of the review and approval process adopted by the board of directors and the special committee, if any, of the issuer for the transaction, including a discussion of any materially contrary view or abstention by a director and any material disagreement between the board and the special committee:

Each of Messrs. Matthews and Bruk abstained on the resolution of the board of directors approving the Offering with respect to Share subscriptions by Wesley Clover and KMB, respectively. A special committee was not established in connection with the approval of the Offering, and no materially contrary view or abstention was expressed or made by any director.

‐ (f) a summary in accordance with section 6.5 of MI 61 101, of the formal valuation, if any, obtained for the transaction, unless the formal valuation is included in its entirety in the material change report or will be included in its entirety in another disclosure document for the transaction:

Not applicable.

‐ (g) disclosure, in accordance with section 6.8 of MI 61 101, of every prior valuation in respect of the issuer that related to the subject matter of or is otherwise relevant to the transaction:

(i) that has been made in the 24 months before the date of the material change report:

Not applicable.

(ii) the existence of which is known, after reasonable enquiry, to the issuer or to any director or officer of the issuer:

Not applicable.

(h) the general nature and material terms of any agreement entered into by the issuer, or a related party of the issuer, with an interested party or a joint actor with an interested party, in connection with the transaction:

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See item (a).

(i) disclosure of the formal valuation and minority approval exemptions, if any, on which the issuer is relying under ‐ sections 5.5 and 5.7 of MI 61 101 respectively, and the facts supporting reliance on the exemptions:

The Offering is exempt from the valuation and minority shareholder approval requirements of MI 61-101 by virtue of the exemptions contained in section 5.5(a) and 5.7(1)(a) of MI 61-101, since neither the fair market value of the subject matter of, nor the fair market value of the consideration for, the Offering, insofar as it involves interested parties, exceeds 25% of the Company’s market capitalization.

As this material change report is being filed less than 21 days before the closing of the Offering, there is a ‐ requirement under MI 61 101 to explain why the shorter period was reasonable or necessary in the circumstances. In the view of the Company it was necessary to immediately close the Offering and therefore, such shorter period was reasonable and necessary in the circumstances to maintain its listing on the NASDAQ Capital Market.

5.2 Disclosure for Restructuring Transactions

N/A

Item 6 Reliance on subsection 7.1(2) or (3) of National Instrument 51-102

N/A

Item 7 Omitted Information

None

Item 8 Executive Officer

David Karp, Chief Financial Officer, (604) 320-3344 ext 1110

Item 9 Date of Report

June 11, 2020

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Not for distribution to United States newswire services or for dissemination in the United States

CounterPath Announces Closing of Private Placement

VANCOUVER, BC, Canada — June 11, 2020 — CounterPath Corporation (NASDAQ: CPAH) (TSX: PATH) (the “Company” or “CounterPath”), a global provider of award-winning Unified Communications and Collaboration (UCC) solutions for enterprises and service providers, today announced the closing of a non-brokered private placement of 284,902 shares of common stock (each, a “Share”) of the Company at a price of US$3.51 for gross proceeds of US$1,000,006 (the “Offering”).

The net proceeds from the Offering will be used to pay down Company debt and for general corporate purposes.

Wesley Clover International Corporation (“Wesley Clover”), the Company’s largest shareholder, and KMB Trac Two Holdings Ltd. (“KMB”), the Company’s second largest shareholder, each subscribed for an aggregate of 142,451 Shares. The Offering constituted a related party transaction under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”). The issuance to each of the insiders is exempt from the formal valuation and minority shareholder approval requirements of MI 61-101 because neither the fair market value of the subject matter of the transaction nor the consideration paid exceeded 25% of the Company's market capitalization. As the Offering is a related party transaction and was announced less than 21 days before its closing, MI 61-101 requires the Company to explain why the shorter period was reasonable or necessary in the circumstances. In the view of the Company it was necessary to immediately close the Offering and therefore, such shorter period was reasonable and necessary in the circumstances to maintain its listing on the NASDAQ Capital Market.

All of the securities issued by the Company in connection with the Offering will be subject to a hold period expiring on October 11, 2020 under Canadian securities laws and a hold period under United States securities laws. None of the securities to be issued will be registered under the United States Securities Act of 1933, as amended (the “1933 Act”), and none of them may be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the 1933 Act. This press release shall not constitute an offer to sell or a solicitation of an offer to buy nor shall there be any sale of the securities in any state where such offer, solicitation, or sale would be unlawful.

NASDAQ Compliance

As previously disclosed, on December 16, 2019, the Company received a letter from the listing qualifications department staff of the NASDAQ Stock Market (“NASDAQ”) notifying the Company that the stockholders' equity of $1,922,675, as reported in its Quarterly Report on Form 10-Q for the period ended October 31, 2019, was below the minimum stockholders' equity of $2,500,000. The minimum

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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 December 13, 2019, the Company did not meet the alternatives of market value of listed securities or net income from continuing operations.

As of June 11, 2020, the Company believes that it has regained compliance with the minimum stockholders’ equity requirement as a result of the closing of the Offering. NASDAQ will continue to monitor the Company’s ongoing compliance with the minimum stockholders’ equity requirement and, if at the time of its next periodic report the Company does not evidence compliance with the minimum stockholders’ equity requirement, the Company may be subject to delisting. There can be no assurance that the Company will be able to maintain compliance with the minimum stockholders’ equity requirement.

Early Warning Disclosure

Wesley Clover, located at 390 March Road, Suite 110, Kanata, Ontario, Canada K2K 0G7, purchased 142,451 Shares issued pursuant to the Offering for aggregate consideration of US$500,003 in reliance on the prospectus exemption contained in section 2.10 of National Instrument 45-106 Prospectus Exemptions . Dr. Terence H. Matthews, with a business address of 390 March Road, Suite 110, Kanata, Ontario, Canada K2K 0G7, owns 99.9999% of the issued and outstanding voting shares of Wesley Clover.

The Shares acquired by Wesley Clover pursuant to the Offering represent 2.3% of the Shares of the Company outstanding as of June 10, 2020 before completion of the Offering.

Following the acquisition by Wesley Clover, Wesley Clover owns 1,732,269 Shares on a fully diluted basis, including 83,157 Shares that may be acquired on the conversion of deferred share units (each, a “DSU”) of the Company (which DSU’s are held directly by Dr. Matthews).

The 1,732,269 Shares represent 26.8% of the Shares outstanding as of June 10, 2020 following completion of the Offering on a fully diluted basis, which includes 83,157 Shares that may be acquired on the conversion of DSUs.

Wesley Clover acquired the Shares of the Company for investment purposes. Wesley Clover intends to monitor the business and affairs of the Company, including its financial performance, and depending upon these factors, market conditions and other factors, Wesley Clover may acquire additional securities of the Company as it deems appropriate. Alternatively, Wesley Clover may dispose of some or all of the Shares in privately negotiated transactions or otherwise.

KMB, located at 3540 Morgan Creek Way, Surrey, British Columbia, Canada V3Z 0J7, purchased 142,451 Shares issued pursuant to the Offering for aggregate consideration of US$500,003 in reliance on the prospectus exemption contained in section 2.10 of National Instrument 45-106 Prospectus Exemptions . Karen Bruk is the sole shareholder of KMB. Karen Bruk also holds 115,800 Shares of the Company. Karen Bruk and Steven Bruk, Karen Bruk’s spouse, exercise shared investment power over the Shares of the Company held by Karen Bruk and KMB. Steven Bruk is the legal and beneficial owner of 58,647 Shares.

The Shares acquired by KMB pursuant to the Offering represent 2.3% of the Shares of the Company outstanding as of June 10, 2020 before completion of the Offering. Following the acquisition by KMB, KMB owns 1,304,204 Shares, including 115,800 Shares held directly by Karen Bruk. The 1,304,204 Shares represent 20.4% of the Shares outstanding as of June 10, 2020 following completion of the Offering. Including the 58,647 Shares held by Steven Bruk and 22,842 Shares that may be acquired on

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the conversion of DSUs held by Steven Bruk, the 1,385,693 Shares represent 21.6% of the Shares outstanding as of June 10, 2020 following completion of the Offering on a fully diluted basis.

KMB acquired the Shares of the Company for investment purposes. KMB intends to monitor the business and affairs of the Company, including its financial performance, and depending upon these factors, market conditions and other factors, KMB may acquire additional securities of the Company as it deems appropriate. Alternatively, KMB may dispose of some or all of the Shares in privately negotiated transactions or otherwise.

An early warning report in respect of the purchases by each of Wesley Clover and KMB will be filed with the relevant Canadian securities regulatory authorities. A copy of such reports may be obtained from SEDAR at www.sedar.com or by contacting David Karp at 604-628-9364.

About CounterPath

CounterPath Corporation (NASDAQ: CPAH) is revolutionizing how people communicate in today’s modern mobile workforce. Its award-winning Bria solutions for desktop and mobile devices enable organizations to leverage their existing PBX or hosted VoIP service to extend seamless and secure unified communications and collaboration to users regardless of their location and network. CounterPath technology meets the unique requirements of several industries, including contact center, retail, warehouse, hospitality, and healthcare verticals. Its solutions are deployed world-wide by 8x8, Airbnb, AmeriSave, BT, Citibank, Comcast, Fusion, Fuze, Liberty Global, Uber, Windstream and others. Learn more at counterpath.com and follow on Twitter @counterpath.

Contacts: David Karp Chief Executive Officer Email: dkarp@counterpath.com Tel: (604) 628-9364

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