UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C.  20549

                                 FORM 10-K
(Mark One)
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES  
     EXCHANGE ACT OF 1934
     For the fiscal year ended January 2, 1999.
     Or

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
     EXCHANGE ACT OF 1934
     For the transition period from _____________ to ____________.

                      Commission File Number 0-22561

                              eFax.com, Inc.

          (Exact name of Registrant as specified in its charter)

                Delaware                           77-0182451 
   (State or other jurisdiction of     (I.R.S. Employer Identification No.)
   incorporation or Organization) 

              1378 Willow Road, Menlo Park, California 94025
          (Address of principal executive offices)   (Zip Code) 

     Registrant's telephone number, including area code: (650) 324-0600

Securities registered pursuant to Section 12(b) of the Act:   None

Securities registered pursuant to Section 12(g) of the Act:   Common Stock,
                                                              $.01 par value

     Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act 
of 1934 during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports), and (2) has been subject to 
such filing requirements for the past 90 days.  Yes [X]   No [  ]

     Indicate by check mark if disclosure of delinquent filers pursuant to 
Item 405 of Regulation S-K is not contained herein, and will not be 
contained, to the best of registrant's knowledge, in definitive proxy or 
information statements incorporated by reference in Part III of this Form 
10-K or any amendment to this Form 10-K.  [  ]

     As of March 31, 1999, the aggregate market value of the voting stock 
held by non-affiliates of the Registrant was approximately $207,530,859 
based upon the closing sales price of the Common Stock as reported on the 
Nasdaq National Market on such date.  Shares of Common Stock held by 
officers, directors and holders of more than ten percent of the outstanding 
Common Stock have been excluded from this calculation because such persons 
may be deemed to be affiliates.  The determination of affiliate status is 
not necessarily a conclusive determination for other purposes.

As of March 31, 1999, the Registrant had outstanding 12,346,796 shares of 
Common Stock.

                        ----------------------------

                    DOCUMENTS INCORPORATED BY REFERENCE:

     Portions of the following documents are incorporated by reference in 
this report: Registrant's Proxy Statement for its 1999 Annual Meeting of 
Stockholders which will be filed with the Securities and Exchange Commission 
no later than 120 days after January 2, 1999. (Part III).



     This Report on Form 10-K includes 102 pages with the Index to Exhibits 
located on pages 52 to 54.

<PAGE>    

<TABLE>
<CAPTION>
                               EFAX.COM, INC.
                                  INDEX TO
                         ANNUAL REPORT ON FORM 10-K
                       FOR YEAR ENDED JANUARY 2, 1999


                                                                      Page
                                                                      ----
                                   PART I
<S>       <C>                                                          <C>

Item 1     Business                                                      3
Item 2     Properties                                                    8
Item 3     Legal Proceedings                                             9
Item 4     Submission of Matters to a Vote of Security Holders           9

                                   PART II

Item 5     Market for the Registrant's Common Equity and Related 
           Stockholder Matters                                          10
Item 6     Selected Financial Data                                      12
Item 7     Management's Discussion and Analysis of Financial
           Condition and Results of Operations                          13
Item 7A    Quantitative and Qualitative Disclosures About Market Risk   28
Item 8     Financial Statements and Supplementary Data                  28
Item 9     Changes in and Disagreements with Accountants on 
           Accounting and Financial Disclosure                          28

                                  PART III

Item 10     Directors and Executive Officers of the Registrant          29
Item 11     Executive Compensation                                      30
Item 12     Security Ownership of Certain Beneficial Owners                 
            and Management                                              30
Item 13     Certain Relationships and Related Transactions              30

                                   PART IV

Item 14     Exhibits, Financial Statement Schedules, and Reports
            on Form 8-K                                                 31
Signatures                                                              51

</TABLE>

                                       2

<PAGE>    2



                                   PART I

ITEM 1.  BUSINESS

Overview

     eFax.com, Inc. together with its wholly-owned subsidiaries (the 
"Company" or "eFax.com") is a leading developer and provider of integrated 
embedded system technology, branded products and desktop software solutions 
for the multifunction product (''MFP'') market, which consists of electronic 
office devices that combine print, fax, copy and scan capabilities in a 
single unit.  Building from this strong technology base, the Company is now 
emphasizing Internet applications for its document transmission and software 
expertise.

     The majority of the Company's revenues have been generated from sales 
of JetFax branded products and consumables through the business equipment 
dealer channel. The Company's embedded system technology provides the 
intelligence of a MFP and coordinates, controls and optimizes a MFP's 
printing, faxing, copying and scanning operations. The Company licenses its 
embedded system for a range of MFP solutions sold under the brand names of 
its OEM customers. The Company also offers software which can be sold on a 
stand-alone basis or bundled with embedded systems to provide a complete, 
integrated hardware and software solution.  These software products include 
JetSuite and PaperMaster.

     The Company is utilizing its digital messaging technology for Internet 
applications, including HotSend  software, introduced in December 1998, and 
the M900e MFP, introduced in January 1999.  On February 8, 1999 the Company 
changed its name from JetFax, Inc. to eFax.com, Inc. and announced its eFax 
Service, the first free fax-to-email service.  It is the Company's intention 
to expand its product offerings to include a variety of Internet-based 
electronic and paper document communication solutions.


Products

     eFax.com offers the following products and solutions to its OEMs and 
other customers:

     JetFax Branded Products and Related Consumables.   eFax.com develops, 
manufactures and markets a high quality MFP under the JetFax brand name, 
integrating its embedded system technology with a printing and scanning 
engine at its Menlo Park facility.  The Company's current branded MFP is the 
Series M900, which the Company began shipping commercially in September 
1997. The Series M900 offers the functionality of a high-volume, full-
featured laser printer fax machine in addition to its multifunction print, 
copy and scan capabilities. The Series M900 is comprised of five models 
which include features such as a two-line capability, which allows 
simultaneous receiving and sending of faxes; a high-speed 33.6 Kbps modem 
for single-line models, which reduces the transmission time; and fax-to-
email capability independent of a network or special software.  The Company 
also sells consumables for its products, including toner cartridges, imaging 
drums and inkjet cartridges, which represented 19%, 17% and 14% of the 
Company's total revenues in the years ended December 31, 1998 and 1997, and 
the nine months ended December 31, 1996, respectively.

     Embedded System Technology.   eFax.com develops and licenses its 
embedded system technology for manufacture and integration by its OEM 
customers into their MFPs. This technology includes a complete embedded 
system design, modified to meet the OEMs' specifications and requirements. 
Such hardware and software modifications are performed by eFax.com and 
typically include changes to the printer and scanner interfaces and to the 
control panel and user interface. The Company generally receives development 
fees in return for such modifications, in addition to prepaid and per unit 
royalties for the license. The Company's embedded system technology has been 
customized and licensed for use in Hewlett-Packard LaserJet 3100 and the 
Samsung manufactured dex 855, as well as the previously sold Minoltafax 
1000, the Xerox 3006, and Xerox WorkCenter 250.

     Software.   eFax.com offers JetSuite and PaperMaster software for 
convenient communication and handling of electronic and paper documents, as 
well as Printer Control Language ("PCL") printer drivers.

                                      3

<PAGE>     3



JetSuite software combines low-level device drivers for printing, faxing, 
copying and scanning with a visual ''desktop'' application that allows a 
user to organize, convert and manage documents created or received using a 
MFP. Users can create a self-viewing, portable version of any document, 
whether ''printed'' electronically, captured from an Internet Web page, 
scanned or faxed. Such a portable document can then be e-mailed and viewed 
without requiring the recipient to have a specific viewer, while maintaining 
all of the document's original formatting, layout, colors and look.  The 
Company offers JetSuite to OEMs for use with the OEMs' embedded system or 
bundled with eFax.com's embedded system technology, as well as an option 
with JetFax branded MFPs.  PaperMaster began shipping in 1994 as user-
friendly personal document management software.  PaperMaster uses a file 
cabinet metaphor as its user interface, allowing one to unlock and open 
various file drawers and folders and insert a variety of document types.  
The software indexes documents, allowing users to search and retrieve 
documents based on text strings.  Also included are search and retrieval 
capabilities and web links to allow users to easily save web-based HTML 
documents.  The Company withdrew PaperMaster from the retail channel during 
the first half of 1998, refocusing on OEM bundles, upgrades, and direct 
sales on the Internet.  In 1998 Hewlett-Packard began bundling PaperMaster 
with its successful CD-Writer Plus storage system, broadening the market for 
PaperMaster to the storage arena.

     Internet.   The Company has begun to utilize its technology for merging 
paper-based document transmission via fax with electronic message 
transmission via email on the Internet.  Late in 1998 the Company introduced 
its HotSend software, a free download from the Internet, which allows the 
user to send any document as an email attachment.  The Company's Series M900 
MFP's now have a fax-to-email option.  The introduction of the free 
Internet-based eFax Service in February 1999 allows a user to obtain a free 
phone number that will automatically forward incoming faxes directly to a 
specified email address.  This service utilizes proprietary, portable 
document transmission technology, digital message compression capabilities, 
and software developed by the Company.  The Company expects to generate 
revenue from the eFax Service by selling premium service packages to the 
expanding eFax user base and by including paid advertisements with eFaxes.


Technology

     Embedded System Technology.     eFax.com's third generation embedded 
system technology is based on the Company's application specific integrated 
circuit (''ASIC'') semiconductor designs integrated with a Motorola  
microprocessor. The specialized ASICs perform most of the heavy 
computational tasks, allowing the single microprocessor to drive the 
embedded system and service all of the functions - printing, faxing, copying 
and scanning - required by a MFP. The ASICs perform a variety of imaging 
functions and provide high-speed data paths for large image data files that 
are quickly moving through the various processes in the system. The ASIC 
imaging functions include error diffusion scanning, edge enhancement, 
background compensation, scaling and print smoothing. A high-speed image bus 
and numerous direct memory access ("DMA") channels are also provided by the 
ASICs to optimize system performance and provide easy access to a 
specialized compression/decompression imaging processor. The firmware in the 
embedded system is centered on the Company's task-swapping, real-time 
operating system. The operating system rotates among the various MFP 
functions such as printing, faxing, copying or scanning, allocating enough 
processing time for each task to prevent any significant performance 
deterioration when swapping among other tasks.

     Portable Document Technology.    Portable document technology 
replicates documents for storage, transmission and viewing. JetSuite 
portable documents use a highly compressed print-imaging format containing a 
combination of text, fonts, color, graphic elements (such as lines and 
circles) and bitmaps. This portable document technology allows a single 
document database to handle both hard copy images from scanned or faxed 
documents and electronically created documents. JetSuite portable documents 
(.JSD files) can easily be shared with others by using a freely 
distributable compact version of the JetSuite viewer that combines with a 
 .JSD file to create a self-viewing document. JetSuite also provides a range 
of imaging functionality for fast viewing, zooming and panning, as well as 
document markup and cleanup functionality. In its fax application, JetSuite 
includes full functionality for both sending and receiving faxes, a phone 
book for managing names, addresses, phone numbers and fax groups, and an 
inbox and outbox for managing faxes. JetSuite also includes integrated third 
party optical character recognition ("OCR") technology, which allows users 
to convert scanned text documents to editable text files in a variety of 
different word processor and


                                       4

<PAGE>    4


 spreadsheet formats.

     Electronic Document Storage. PaperMaster contains a number of key 
technologies that distinguish it from its competition.  As new documents are 
added to its file cabinets, documents are automatically indexed to a very 
efficient and fast search and retrieval system.  Furthermore, documents can 
be automatically placed in the proper file cabinet and folder based on 
certain criteria that are selected for certain files and folders.  
PaperMaster also includes plug-ins and browser links that make it very easy 
to store, print and file documents from the Internet.  With its "publish" 
feature, PaperMaster now allows users to write an entire file cabinet to 
external storage devices while embedding a viewer and search engine for 
locating the documents within the file cabinet.  All of this is achieved 
through an intuitive file cabinet user interface that closely resembles the 
operations that a user would perform with standard hard copy documents.


Customers

     The Company's customers include office equipment dealers and 
distributors who resell the Company's branded MFPs, options and consumables, 
as well as OEMs that license the Company's embedded system technology and 
software in conjunction with the manufacture and distribution of MFPs.

     JetFax Branded Products.   In the United States and Canada, the Company 
distributes JetFax branded products, options and consumables through office 
equipment dealers, primarily through IKON and dealers associated with 
Business Technology Associates ("BTA"). In the years ended December 31, 1998 
and December 31, 1997, and  the nine months ended December 31, 1996 revenues 
recorded by the Company from dealers associated with IKON represented 16%, 
19%, and 18%, respectively, of the Company's total revenues. The Company 
also distributes its products through regional distributors. As of December 
31, 1998, the Company had approximately 200 dealer sales locations in the 
United States and Canada. The Company sells its branded products 
internationally through office equipment dealers. Sales to Messerli, one of 
the Company's office equipment dealers located in Switzerland, accounted for 
4%, 3%, and 3% of the Company's total revenues in the years ended December 
31, 1998 and December 31, 1997, and the nine months ended December 31, 1996, 
respectively.

     OEM Relationships and JetSuite and PaperMaster Software.   The Company 
receives license fees and development fees for the Company's embedded system 
technology and desktop software from a number of manufacturers of MFPs. The 
Company currently licenses embedded system technology or desktop software to 
25 companies and has OEM relationships with Hewlett-Packard, Oki Data, and 
Konica.

     Hewlett-Packard Company.   In 1997, the Company entered into a 
development and license agreement with Hewlett-Packard for the inclusion of 
the Company's embedded system technology and JetSuite software in Hewlett-
Packard product. The development was completed in early 1998 and the HP 
LaserJet 3100 was launched in March 1998.  Effective May 1998, a follow-on 
development effort was undertaken and was in process at December 31, 1998.

     Oki Data Corporation.   In September 1996, the Company entered into a 
license agreement with Oki Data for the inclusion of JetSuite software with 
a number of Oki Data MFPs which are currently in the market.

     eFax Service.   The Company offers its proprietary fax-to-email service 
to individuals currently utilizing email and believes that the initial 
subscriber base will include mobile professionals, small business owners, 
and home-office workers.  The Company also believes that ease of use, the 
ability to retrieve faxes remotely, the confidential nature of receiving 
documents to email, enhanced features under development, and the potential 
for eliminating costs for standard fax machines and phone lines will make it 
attractive to larger corporate clients as well.   


                                       5

<PAGE>    5


Sales and Marketing

     The Company markets and sells its products worldwide to OEMs, dealers 
and distributors. The Company maintains separate sales forces for its 
branded products and OEM/licensing businesses, and its marketing department 
supports all aspects of the Company's worldwide business.  The Company hired 
a Vice President of Marketing in August 1998 with specific responsibility to 
develop and implement marketing plans and partnerships for Internet-based 
products.  Marketing resources have been refocused to emphasize Internet 
activity through reassignment of personnel and utilization of external 
consultants.     

     OEM Relationships.   The Company licenses its embedded system 
technology and software to OEMs. The Company continues to enhance its 
relationships with existing OEMs and seeks to obtain new OEM customers 
through dedicated account management and marketing programs. The Company 
works closely with OEM accounts to define product requirements, create 
development plans and manage development programs. The marketing group 
promotes eFax.com as a leading provider to OEMs of MFP solutions through a 
combination of public relations and press coverage, exhibits and 
presentations at tradeshows, product brochures and other marketing 
promotions.

     JetFax Branded Products.   The Company's branded products are primarily 
sold in the United States through office equipment dealers. The Company's 
sales force provides dealer training programs, sales incentive programs 
which include cash incentives, group trips, volume discounts and market 
development funds. Marketing activities to promote JetFax branded products 
include direct mail, print advertising and an ongoing public relations 
program.

     Software.   The Company's software marketing strategy is to license 
software for bundling with multiple OEM products. In addition, the Company 
promotes software upgrades and add-on software products in a number of ways, 
including software installation and reminder screens, mailings to registered 
users, website advertisements and co-promotions with OEMs.

     Internet.     The Company established separate websites for its HotSend 
software and eFax.com Service in December 1998 and February 1999, 
respectively.  In addition to an active public relations campaign to gain 
press coverage and information sharing by the user community on the 
Internet, eFax.com further intends to promote its Internet product offerings 
through cooperative advertising with Internet partners, paid banner Internet 
advertising, radio advertisements, and assorted other advertising mediums.

     The Company's international sales efforts are focused on Western 
Europe, Australia and New Zealand. The Company's branded products are sold 
internationally through office equipment distributors in Australia, Canada, 
the Netherlands, New Zealand, Scandinavia, Switzerland and the United 
Kingdom. The Company also sells directly to office equipment dealers in the 
United Kingdom and through a subsidiary, JetFax GmbH, in Germany. The 
Company has sales, service or support personnel located in Germany and 
Ireland.  International marketing efforts are focused on providing country 
specific marketing materials, sales incentive programs for dealers and 
participation in trade shows.


Research and Development

     eFax.com's principal research and development activities are located at 
the Company's headquarters in Menlo Park, California and at its software 
applications division located in Santa Barbara, California. Primary 
activities at those locations include new product development, enhancement 
of existing products, product testing and technical documentation.

     The Company's research and development efforts focus on ongoing 
development of the Company's MFP embedded system technology, desktop 
software, and Internet-based document handling services. The Company 
believes that its branded product development efforts provide the Company 
with a competitive advantage for its embedded system technology and software 
by defining the needs for new products, guiding future enhancements and 
testing new implementations. By introducing advanced new features in the 
corporate market, the Company believes that it is able to maintain its 
technology lead while further refining such features before introducing them 
to its OEMs.   Software and communications capabilities developed for

                                      6

<PAGE>    6

MFP products have provided a solid technological base for creating Internet-
based product offerings, which are now receiving direct research and 
development support.


Intellectual Property and Proprietary Rights

     The Company's success is heavily dependent upon its proprietary 
technology. To protect its proprietary rights, the Company relies on a 
combination of copyright, trade secret and trademark laws, patents and 
nondisclosure and other contractual restrictions. As part of its 
confidentiality procedures, the Company generally enters into nondisclosure 
agreements with its employees, consultants, OEMs and strategic partners and 
limits access to and distribution of its designs, software and other 
proprietary information. 


Manufacturing and Operations

     The Company manufactures its JetFax branded products for distribution 
to the corporate segment of the MFP market. The Company generally outsources 
materials from suppliers and performs final assembly and testing at its main 
facility in Menlo Park, California.

     The Series M900 is the Company's current product line of branded MFPs. 
The major components of the Series M900 products are the print engine, the 
scanner, the user interface and the multifunction embedded system technology 
and modem electronics, all of which are outsourced. The JetFax embedded 
system and modem assemblies are built to specification by an external 
printed circuit board assembler. Final product assembly at the Company's 
headquarters consists of integrating the components on a progressive 
assembly line.

     The Company relies on various suppliers of components for its products. 
Many of these components are standard and generally available from multiple 
sources. However, there can be no assurance that alternative sources of such 
components will be available at acceptable prices or in a timely manner. Any 
shortage or interruption in the supply of any of the components used in the 
Company's products, or the inability of the Company to procure these 
components from alternate sources on acceptable terms, would have a material 
adverse effect on the Company's business and financial condition and results 
of operations. The Company generally buys components under purchase orders 
and does not have long-term agreements with its suppliers. Any interruption 
in the supply of such components could have a material adverse effect on the 
Company's business, financial condition and results of operations.

     Certain components used in the Company's products are available only 
from one source. The Company is dependent on Oki America, as the supplier of 
major components, including the printer engine, of the Series M900. Oki 
America is also a competitor of the Company. The Company is also dependent 
on AMI to provide unique ASICs incorporating the Company's imaging and logic 
circuitry, Motorola to provide microprocessors, Pixel, to provide a 
specialized imaging processor and Conexant Systems, Inc. to provide modem 
chips. If Oki America, AMI, Motorola, Pixel or Conexant Systems, Inc. were 
to limit or reduce the sale of such components to the Company, or if such 
suppliers were to experience financial difficulties or other problems which 
prevented them from supplying the Company with the necessary components, it 
would have a material adverse effect on the Company's business, financial 
condition and results of operations. Any disruption in the Company's sources 
of supply could limit or delay production or shipment of products 
incorporating the Company's technology, which could have a material adverse 
effect on the Company's business, financial condition and results of 
operations. 

     Many of the components used in the Company's products are purchased 
from suppliers located outside the United States. Foreign manufacturing 
facilities are subject to risk of changes in governmental policies, 
imposition of tariffs and import restrictions and other factors beyond the 
Company's control. There can be no assurance that United States or foreign 
trading policies will not restrict the availability of components or 
increase their cost. Any significant increase in component prices or 
decrease in component availability could have a material adverse effect on 
the Company's business, financial condition and results of operations.

                                      7

<PAGE>    7


     The Company currently operates its eFax Service through three regional 
locations near San Francisco, Chicago, and Boston, and intends to expand to 
other sites in the near future.  These sites are operated through co-
location agreements with telecommunication companies and/or partners.  
Software integration was developed with a partner at the Chicago location. 
To operate the service the Company requires a large amount of Direct Inward 
Dial lines ("DIDs"), that act as individual phone numbers, and inbound T-1 
lines at each site.  Additional Internet connectivity is used for outgoing 
communications. 


Competition

     The market for MFPs and related technology and software is highly 
competitive and characterized by continuous pressure to enhance performance, 
to introduce new features and to accelerate the release of new products. The 
Company's branded products compete primarily with the dominant vendors in 
the fax market, all of whom have substantially greater resources than the 
Company and include, among others, Canon Inc., Panasonic, a division of 
Matsushita Electrical Industrial Co., Ltd., Pitney Bowes Inc., Ricoh Co. 
Ltd., Sharp Electronics Corporation and Xerox. The Company also competes on 
the basis of vendor name and brand recognition, technology and software 
expertise, product functionality, development time and price.

     The Company's technology, development services and software primarily 
compete with solutions developed internally by the Company's OEM customers, 
who have the substantial resources necessary to enhance existing products 
and to develop future products. With respect to MFP embedded system 
technologies, the Company competes with, among others, Peerless Systems 
Corporation, Personal Computer Products, Inc. and Xionics Document 
Technologies, Inc. With respect to desktop software, the Company competes 
with, among others, Caere Corporation, Simplify Development Corporation, 
Smith Micro Software, Inc., Visioneer Inc., Wordcraft International and 
Xerox.

     The Company anticipates increasing competition for its MFPs, 
technologies and software under development.   The Company expects 
competition against its new Internet product offerings and is working 
aggressively to build a large user base quickly.


Backlog

     The Company had essentially no backlog at December 31, 1998 and 1997, 
respectively, which is in line with the normal practice in the markets in 
which the Company operates.  The office equipment dealer channel for MFPs 
typically requires shipment at time of order placement, and the Company has 
managed operations to fully satisfy customer demand within each fiscal 
quarter.  The software business conventionally does not have backlog, and 
revenues from the Company's development programs are recognized on a 
percentage of completion basis.


Employees

     As of December 31, 1998, the Company had 116 employees and one full-
time equivalent contractor. There is no labor union representation for any 
of the Company's employees. The Company has never experienced a work 
stoppage, and relations with employees are considered good. The Company 
hires contract employees on an as-needed basis to meet temporary or specific 
needs.


ITEM 2.  PROPERTIES

     The Company's headquarters and principal operations are in leased 
facilities totaling approximately 42,000 square feet in Menlo Park, 
California, and the lease for this facility expires in January 2003. 


                                       8

<PAGE>    8


Additionally, the Company leases approximately 2,400 square feet in Santa 
Barbara, California for its software application organization and the one-
year extension on the lease is set to expire June 30, 1999, with an option 
at the discretion of the Company to extend the lease an additional 8 (eight) 
months. The Company leases approximately 2,600 square feet in Beaverton, 
Oregon for additional software application personnel, and this lease expires 
April 2000.

     The Company subleases office space of approximately 10,000 square feet 
in San Jose, California under agreements originally entered into by 
DocuMagix, Inc. ("DocuMagix"), prior to the Company's acquisition of 
DocuMagix. Approximately 4,000 of the 10,000 square feet of office space are 
subleased to Lara Technology, Inc. ("Lara") under an agreement dated June 
25, 1997 between DocuMagix and Lara. This sublease expires November 18, 
1999.      On April 1, 1998, the Company entered into an agreement to 
sublease approximately 6,000 of the 10,000 square feet of office space to 
Silicon Valley Group, Inc. This sublease expires November 18, 1999.


ITEM 3.  LEGAL PROCEEDINGS

     In early March 1999, E-Fax Communications, Inc. ("E-Fax 
Communications"), a California corporation, filed a complaint against 
eFax.com Inc., a Delaware corporation, in the United States District Court, 
Northern District of California.  The Complaint alleged that the Company had 
engaged in trademark and service mark infringement and unfair competition in 
connection with the Company's use of the name "eFax.com."  On April 9, 1999, 
the Company and E-Fax Communications signed a settlement agreement in which 
E-Fax Communications will dismiss all charges against the Company, transfer 
all rights to the mark "E-FAX" to the Company, stop all use of the "E-FAX" 
trademark, and change its corporate name.  The Company has agreed to pay E-
Fax Communications a combination of cash and Common Stock in an amount not 
exceeding $2.5 million based on the average share price of the Common Stock 
just prior to the stock registration becoming effective in the near term.   
The purchased trademark rights will become an asset of the Company and be 
amortized over the period of benefit, estimated to be seven to ten years.  
The parties consider the settlement a compromise of disputed claims and 
preferable to a possible extended legal proceeding with uncertain outcome.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     During the fourth quarter of 1998, no matters were submitted to a vote 
of security holders.


                                       9

<PAGE>    9


                                  PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS

(a)  Market Information and Recent Sales of Unregistered Securities

     The Company's Common Stock is traded on the Nasdaq National Market tier 
of the Nasdaq Stock Market under the trading symbol "EFAX".  Prior to 
February 8, 1999, the symbol for the Company's Common Stock as reported on 
the Nasdaq National Market was "JTFX".  Effective with the close of business 
on February 8, 1999, the Company name was officially changed from "JetFax, 
Inc." to "eFax.com, Inc." pursuant to a Certificate of Ownership and Merger, 
which provided for the merger of JetFax, Inc. with eFax.com, Inc., a 
Delaware corporation and wholly-owned subsidiary of JetFax, Inc., filed with 
the Delaware Department of Corporations and declared effective on February 
8, 1999. 

     The Company completed an initial public offering of 3.5 million shares 
of Common Stock (2.75 million shares offered by the Company and 0.75 million 
shares offered by selling stockholders) in June 1997. The Company's Common 
Stock began trading on June 11, 1997. Prior to the initial public offering, 
the Company's Common Stock was not publicly traded.

     The range of daily closing prices per share for the Company's common 
stock from June 11, 1997 to December 31, 1998 was:

<TABLE>
<CAPTION>
      Year Ended December 31, 1998:               High       Low

         <S>                                  <C>         <C>
          Fourth quarter                       $  2.750    $  1.531
          Third quarter                        $  4.500    $  2.500
          Second quarter                       $  7.188    $  4.438
          First quarter                        $  7.125    $  3.625
</TABLE>


<TABLE>
<CAPTION>
      Year Ended December 31, 1997:               High       Low

         <S>                                  <C>         <C>
          Fourth quarter                       $  9.375    $  5.188
          Third quarter                        $ 11.000    $  8.000
          Second quarter (from June 11, 1997)  $  8.125    $  6.875
</TABLE>


     The reported last sale price of the Company's Common Stock on the 
Nasdaq National Market on April 9, 1999 was $30.13. The approximate number 
of holders of record of the shares of the Company's Common Stock was 236 as 
of March 19, 1999.  This number does not include stockholders whose shares 
are held in trust by other entities. The actual number of stockholders is 
greater than this number of holders of record.  Based on the number of 
annual reports requested by brokers, the Company estimates that it has 
approximately 28,000 beneficial owners of its Common Stock.

     The Company has authorized Common Stock of $0.01 par value and 
Preferred Stock. In connection with the initial public offering, all of the 
convertible preferred stock, except the Series P Redeemable Preferred Stock, 
and related accrued dividends outstanding at the time of the initial public 
offering automatically converted into 6,456,681 shares of Common Stock. 
Approximately $2.8 million of the net proceeds were used for the mandatory 
redemption of the Series P Redeemable Preferred Stock following the closing 
of the Company's initial public offering in June 1997. Subsequent to the 
Company's initial public offering, the Company has not issued any Preferred 
Stock.

     The Company has not paid any cash dividends on its capital stock. The 
Company currently intends to

                                      10

<PAGE>    10


retain its earnings to fund the development and growth of its business and, 
therefore, does not anticipate paying any cash dividends in the foreseeable 
future. In addition, the Company's existing credit facilities prohibit the 
payment of cash or stock dividends on the Company's capital stock without 
the bank's prior written consent. See Item 7 - "Management's Discussion and 
Analysis of Financial Condition and Results of Operations - Liquidity and 
Capital Resources" and Note 6 of Notes to Consolidated Financial Statements 
contained in Item 14.

     During the year ended December 31, 1998, the Company did not sell any 
equity securities that were not registered under the Securities Act of 1933, 
as amended. 

(b)  Report of offering securities and use of proceeds therefrom:

         In connection with its initial public offering in 1997, the Company 
filed a Registration Statement on Form S-1, SEC File No. 333-23763 (the 
"Registration Statement"), which was declared effective by the Commission on 
June 10, 1997. The Company registered 4,025,000 shares of its Common Stock, 
$0.01 par value per share.  The offering commenced on June 11, 1997 and 
3,500,000 shares were sold. The over-allotment option was not exercised and 
the Company deregistered 525,000 shares on July 11, 1997.  The aggregate 
offering price of the registered shares was $28,000,000.  The managing 
underwriters of the offering were Prudential Securities Incorporated and 
Cowen & Company.  The Company incurred the following expenses in connection 
with the offering:

<TABLE>
    <S>                                                     <C>
     Underwriting discounts and commissions:                 $ 1,960,000
     Other expenses:                                             800,000
                                                             -----------
     Total Expenses:                                         $ 2,760,000
                                                             ===========
</TABLE>

     All of such expenses were direct or indirect payments to others.

         The net offering proceeds to the Company after deducting the total 
expenses above and the proceeds to selling shareholders were approximately 
$19,662,000.  From June 11, 1997 to December 31, 1998, the Company used such 
net offering proceeds, in direct or indirect payments to others, as follows: 

<TABLE>
    <S>                                                     <C>
     Purchase and installment of machinery and equipment:    $ 1,072,154 
     Acquisition of other businesses                           1,250,000 
     Working capital                                          12,115,838 
     Investment in short-term, interest-bearing obligations:           -  
     Repayment of indebtedness                                 1,705,342 
     Redemption of Series P Preferred                          2,794,000 
     Investment in Minority Interest                             725,000 
                                                             -----------
     Total                                                   $19,662,334 
                                                             ===========
</TABLE>


     Each of such amounts is a reasonable estimate of the application of the 
net offering proceeds.  This use of proceeds does not represent a material 
change in the use of proceeds described in the prospectus of the 
Registration Statement.


                                       11

<PAGE>   11


ITEM 6.  SELECTED FINANCIAL DATA

     The consolidated statement of operations data set forth below for the 
years ended December 31, 1998 and 1997, and the nine months ended December 
31, 1996, and the consolidated balance sheet data at December 31, 1998 and 
1997 are derived from the consolidated financial statements of the Company 
included elsewhere in this Report on Form 10-K. The selected financial data 
for the fiscal years ended March 31, 1996, and 1995 and the consolidated 
balance sheet data at March 31, 1996 and 1995, have been derived from 
unaudited financial statements that have been prepared on the same basis as 
the audited financial statements and which, in the opinion of management, 
include all adjustments, consisting only of normal recurring adjustments, 
necessary for a fair presentation of the Company's results of operations. 
The following financial data is qualified in its entirety by, and should be 
read in conjunction with, ''Management's Discussion and Analysis of 
Financial Condition and Results of Operations'' and the consolidated 
financial statements and notes thereto included elsewhere in this Report on 
Form 10-K.


<TABLE>
<CAPTION>
                                                                              Nine Months
                                                   Year Ended    Year Ended      Ended         Fiscal Year Ended
                                                  December 31,  December 31,  December 31,          March 31,    
                                                                                              -------------------
                                                      1998          1997        1996(1)         1996       1995  
                                                     ------        ------      ---------       ------     ------
                                                                 (in thousands, except per share data) 
<S>                                                <C>           <C>           <C>           <C>        <C>
Consolidated Statement of Operations Data:
  Revenues:
    Product......................................   $ 23,385      $ 16,281      $ 10,205      $ 11,143   $  6,413 
    Software and technology license fees.........      5,069         4,493         3,200         3,413        484 
    Development fees.............................      1,779         2,246         1,468           720      1,200 
                                                    --------      --------      --------      --------   --------
      Total revenues.............................     30,233        23,020        14,873        15,276      8,097 
                                                    --------      --------      --------      --------   --------
  Costs and expenses:
    Cost of product revenues.....................     16,005        11,886         8,441        11,102      5,249 
    Cost of software and license fees............        710           770           517           587        124 
    Research and development.....................      5,445         5,355         2,554         2,318      1,794 
    Selling and marketing........................      7,267         6,046         5,212         5,216      1,928 
    General and administrative...................      2,592         3,031         1,726         1,652      1,632 
    Acquisition and related expenses.............          -         2,106             -             -          - 
                                                    --------      --------      --------      --------   --------
      Total costs and expenses...................     32,019        29,194        18,450        20,875     10,727 
                                                    --------      --------      --------      --------   --------
  Loss from operations...........................     (1,786)       (6,174)       (3,577)       (5,599)    (2,630)
                                                    --------      --------      --------      --------   --------
  Interest and other income (expense), net.......        365           111             -          (259)      (119)
                                                    --------      --------      --------      --------   --------
  Loss before extraordinary item and income taxes     (1,421)       (6,063)       (3,577)       (5,858)    (2,749)
  Provision for income taxes......................        80            96           107            35          - 
                                                    --------      --------      --------      --------   --------
  Loss before extraordinary item..................    (1,501)       (6,159)       (3,684)       (5,893)    (2,749)
  Extraordinary item (2)..........................         -             -             -             -        349 
                                                    --------      --------      --------      --------   --------
  Net loss........................................    (1,501)       (6,159)       (3,684)       (5,893)    (2,400)
  Series P Redeemable Preferred Stock dividends...         -           (68)         (116)            -          - 
                                                    --------      --------      --------      --------   --------
  Net loss applicable to common stockholders......  $ (1,501)     $ (6,227)     $ (3,800)     $ (5,893)  $ (2,400)
                                                    ========      ========      ========      ========   ========

  Net loss per share (3): 

    Basic.........................................  $  (0.13)     $  (0.84)     $  (2.13)     $  (3.86)  $  (2.31)
                                                    ========      ========      ========      ========   ========
    Diluted.......................................  $  (0.13)     $  (0.84)     $  (2.13)     $  (3.86)  $  (2.31)
                                                    ========      ========      ========      ========   ========
  Shares used in computing per share amounts:
    Basic.........................................    11,784         7,389         1,784         1,526      1,039 
                                                    ========      ========      ========      ========   ========
    Diluted.......................................    11,784         7,389         1,784         1,526      1,039 
                                                    ========      ========      ========      ========   ========
                                                                 December 31,                       March 31,     
                                                    ------------------------------------      -------------------
                                                      1998          1997        1996 (1)        1996       1995   
                                                     ------        ------      ---------       ------     ------  
                                                                            (in thousands) 
Consolidated Balance Sheet Data:
  Working capital.................................  $ 10,928      $ 12,814      $    542      $ 4,978    $ (2,772)
  Total assets....................................    16,215        18,856         7,092       12,031       3,849 
  Long-term note payable, less current portion....         -             -           198            -       2,372 
  Redeemable preferred stock......................         -             -         2,726        2,610           - 
  Total stockholders' equity (deficit)............    13,837        15,271          (861)       2,708      (4,779)
</TABLE>

---------
(1)  Effective December 31, 1996, the Company changed its fiscal year end  
     from March 31 to a 52-53 week reporting year ending on the first   
     Saturday on or after December 31. The 40-week period from April 1, 1996 
     to January 4, 1997 is referred to herein as the nine months ended 
     December 31, 1996. For presentation purposes, the Company refers to its 
     reporting year ended January 2, 1999 as ending on December 31, 1998, 
     its reporting year ended January 3, 1998 as ending on December 31, 1997 
     and its reporting year ended January 4, 1997 as ending on December 31, 
     1996.
(2)  Represents a gain on exchange of stockholder debt and receivables for 
     notes payable. 
(3)  Reflects retroactive application, in 1998, of the requirements of the 
     SEC Staff Accounting Bulletin No. 98. For the determination of the 
     number of shares used in computing net loss per share for periods prior 
     to 1998, see Note 1 of Notes to Consolidated Financial Statements. 

                                      12

<PAGE>    12


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS

Overview

     The statements contained in this Report on Form 10-K that are not 
purely historical are forward-looking statements within the meaning of 
Section 27A of the Securities Act of 1933 (the ''Securities Act'') and 
Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"), 
including statements regarding the Company's expectations, hopes, intentions 
or strategies regarding the future. When used herein, the words ''may,'' 
''will,'' ''expect,'' ''anticipate,'' ''continue,'' ''estimate,'' 
''project,'' ''intend'' and similar expressions are intended to identify 
forward-looking statements within the meaning of the Securities Act and the 
Exchange Act.  Forward-looking statements include: statements regarding 
events, conditions and financial trends that may affect the Company's future 
plans of operations, business strategy, results of operations and financial 
position.  All forward-looking statements included in this document are 
based on information available to the Company on the date hereof, and the 
Company assumes no obligation to update any such forward-looking statements. 
Investors are cautioned that any forward-looking statements are not 
guarantees of future performance and are subject to risks and uncertainties 
and that actual results may differ materially from those included within the 
forward-looking statements as a result of various factors. Factors that 
could cause or contribute to such differences include, but are not limited 
to, those described below, under the heading "Factors That May Affect 
Operating Results" and elsewhere in this Report on Form 10-K. 

     Pursuant to a Certificate of Ownership and Merger, which provided for 
the merger of JetFax, Inc. with eFax.com, Inc., a Delaware corporation and 
wholly owned subsidiary of JetFax, Inc., filed with the Delaware Department 
of Corporations and declared effective on February 8, 1999, the corporate 
name of JetFax, Inc., a Delaware Corporation has been changed to "eFax.com, 
Inc."  All filings and reports made after February 8, 1999 bear the name 
"eFax.com, Inc." 

     eFax.com, Inc. is a leading developer and provider of integrated 
embedded system technology, branded products and desktop software solutions 
for the MFP market, which consists of electronic office devices that combine 
print, fax, copy and scan capabilities in a single unit. The Company was 
incorporated in August 1988 and since that time has engaged in the 
development, manufacture and sale of its branded MFPs.  The Company has also 
entered into agreements with a number of OEMs for the customization and 
integration of the Company's embedded system technology and desktop software 
in OEMs' MFPs.  The desktop software includes JetSuite, which resulted from 
the Company's July 1996 purchase of substantially all of the assets of the 
Crandell Group, Inc., and PaperMaster, which was acquired in a December 1997 
pooling of interests transaction with DocuMagix, Inc. Building from this 
strong technology base, the Company is now emphasizing Internet applications 
for its document transmission and software expertise.

     Effective December 31, 1996, the Company changed its fiscal year end 
from March 31 to a 52-53 week reporting year ending on the first Saturday on 
or following December 31.  For presentation purposes, the Company refers to 
its reporting year ended January 2, 1999 as ending on December 31, 1998, its 
reporting year ended January 3, 1998 as ending on December 31, 1997 and its 
reporting year ended January 4, 1997 as ending on December 31, 1996.  The 
most recent fiscal year discussion and analysis is based on the year ended 
December 31, 1998 compared to the year ended December 31, 1997.

     Revenues increased to $30.2 million for the year ended December 31, 
1998 from $23.0 million for the year ended December 31, 1997 and $20.4 
million for the year ended December 31, 1996. The Company's revenues are 
derived from three sources: (i) product revenues consisting of sales of 
JetFax branded MFPs, consumables and upgrades; (ii) development fees for 
engineering services; and (iii) software and technology license fees related 
to both its embedded system technology for MFPs and its desktop software.  
Historically, product revenues have accounted for the majority of the 
Company's total revenues.  For the year ended December 31, 1998, product 
revenues, development fees, and software and technology license fees, as a 
percentage of total revenues, were 77%, 6% and 17%, respectively. Product 
revenues result from the sale of the Company's branded MFP products into the 
corporate market through business equipment dealers. Revenues from product 
sales to resellers, international distributors, OEMs and end users are 
recognized upon shipment.

                                       13

<PAGE>    13


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (continued) 

     OEMs, end users, and international distributors have no rights of 
return while resellers have limited return rights.  Allowances for potential 
returns and exchanges from resellers are provided at the time of sale based 
on historical returns and exchange experience.  The Company provides a 
ninety day warranty for parts and service on its hardware products as well 
as ongoing technical support to the dealer network. The Company provides a 
limited amount of telephone technical support to its software customers.  
Estimated cost of warranty work and post-contract software customer support 
obligations are accrued when the revenue is recognized. Development fee 
revenues are derived from customizing the Company's embedded system 
technology and software for inclusion in specific applications for its OEMs' 
products.  Development fee revenues are recognized on the percentage of 
completion method over the development period.  See Note 1 of Notes to 
Consolidated Financial Statements.  The Company's development contracts with 
certain OEM customers have enabled eFax.com to accelerate its product 
development efforts.  The Company classifies all development costs related 
to such contracts as research and development expenses because such 
development fees have only partially funded the Company's product 
development activities, and the Company generally retains ownership of the 
technology developed under these agreements.

     Software and technology license fees result from licensing the 
Company's proprietary embedded system technology and desktop software to 
OEMs for integration into their products.  These payments can take the form 
of one-time license fees, non-refundable prepaid royalties, or recurring per 
unit royalties.  One-time license fees and non-refundable prepaid royalties 
are recognized upon the later of delivery of the contracted technology or 
satisfaction of contractual milestones, if any.  Recurring license revenues 
from per unit fees paid by the Company's OEMs are recognized upon the 
manufacture or shipment of products incorporating the Company's technology 
as specified in the related agreements.  The recurring license revenues 
reported by the Company are dependent on the timing and accuracy of product 
manufacturing or sales reports received from the Company's OEM customers.  
These reports are provided on a quarterly basis which may not coincide with 
the Company's quarter end.  However, the Company attempts to get verbal 
estimates more frequently.  The quarterly reports, as well as any verbal 
estimates, are subject to delay and potential revision by the OEM.  
Therefore, the Company may be unable to estimate such revenues accurately 
prior to public announcement of the Company's quarterly results.  In such an 
event, the Company may subsequently be required to revise its previously 
reported revenues when it publishes its financial statements or adjust 
revenues for subsequent periods, which could have a material adverse effect 
on the Company's business, financial condition, and results of operations 
and on the price of the Company's Common Stock.

     A substantial portion of the Company's branded product sales are to 
dealers in the IKON network.  These IKON dealers accounted for 16% of the 
Company's total revenues for the year ended December 31, 1998.  The 
Company's current OEM customers for engineering development and technology 
licenses are Hewlett-Packard, Oki Data, and FaxBack; Hewlett-Packard 
accounted for 18% and 13% of the Company's total revenues for the years 
ended December 31, 1998 and 1997, respectively.  The Company expects that 
the ongoing obligations under existing OEM contracts will generate future 
royalty payments.  The termination of a major dealer relationship or an OEM 
agreement would have a material adverse effect on the Company's business, 
financial condition and results of operations.  See ''Factors That May 
Affect Operating Results - Dependence on Dealers and Distributors and 
Dependence on OEMs.''

     International revenues accounted for 18% and 29% of total revenues for 
the years ended December 31, 1998 and December 31, 1997, respectively.  All 
of the development fees and software and technology license revenues, and 
most of the product revenues, have been denominated and collected in United 
States dollars. The Company has not hedged the foreign currency exposure 
related to product sales denominated in foreign currencies as the impact has 
not been significant.  See '' Factors That May Affect Operating Results  - 
International Activities.''

     The gross margins for the Company's branded MFP products have been and 
are expected to continue to be constrained by the competitive nature of the 
marketplace, pricing pressures and the greater name recognition of the 
larger companies with which eFax.com competes.  The Company believes that 
sales of its branded MFP products provide a substantial revenue base, an 
opportunity to stay in close touch with evolving customer and market needs, 
and a high level of credibility in demonstrating the Company's advanced 
technology.  The margins on consumables, such as toner cartridges and drums, 
and on upgrades, such as the


                                      14

<PAGE>    14



ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (continued) 

two-line upgrade, are typically higher than on the base unit.  In addition, 
the Company's consumables generate recurring revenues which tend to increase 
as the cumulative number of units sold increases.


Results of Operations

     The following table sets forth certain items in the Company's 
statements of operations for the periods indicated (in thousands). For 
comparability purposes, the Company is presenting unaudited information for 
the year ended December 31, 1996 (due to its change in fiscal year - see 
Note 1 of Notes to Consolidated Financial Statements).


<TABLE>
<CAPTION>
                                                    Year Ended
                                                    December 31,       
                                            ----------------------------
                                              1998       1997       1996  
                                            --------   --------   --------
                                                                (unaudited)
<S>                                        <C>        <C>        <C>
Revenues:
  Product                                   $ 23,385   $ 16,281   $ 14,012 
  Software and technology license fees         5,069      4,493      4,623 
  Development fees                             1,779      2,246      1,722 
                                            --------   --------   --------
     Total revenues                           30,233     23,020     20,357 
                                            --------   --------   -------- 
Costs and expenses:
  Cost of product revenues                    16,005     11,886     11,750 
  Cost of software and license revenues          710        770        716 
  Research and development                     5,445      5,355      3,211 
  Selling and marketing                        7,267      6,046      7,115 
  General and administrative                   2,592      3,031      2,284 
  Acquisition and related expenses                 -      2,106          - 
                                            --------   --------   -------- 
     Total costs and expenses                 32,019     29,194     25,076 
                                            --------   --------   -------- 
Loss from operations                          (1,786)    (6,174)    (4,719)
Other income (expense), net                      365        111        (76)
                                            --------   --------   -------- 
Loss before income taxes                      (1,421)    (6,063)    (4,795)
Provision for income taxes                        80         96        107 
                                            --------   --------   -------- 
Net loss                                    $ (1,501)  $ (6,159)  $ (4,902)
                                            ========   ========   ======== 
</TABLE>

     The following table sets forth, as a percentage of total revenues, 
certain items in the Company's statements of operations for the periods 
indicated.


<TABLE>
<CAPTION>
                                                    Year Ended
                                                    December 31,           
                                            ------------------------------
                                              1998       1997       1996   
                                            --------   --------   --------
                                                                 (unaudited)
<S>                                             <C>        <C>        <C>  
Revenues:
  Product                                         77%        71%        69%
  Software and technology license fees            17         19         23
  Development fees                                 6         10          8
                                            --------   --------   --------
     Total revenues                              100        100        100
                                            --------   --------   --------
                                       15

<PAGE>    15


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (continued) 

Costs and expenses:
  Cost of product revenues                        53         52         58
  Cost of software and license revenues            2          3          3
  Research and development                        18         24         16
  Selling and marketing                           24         27         35
  General and administrative                       9         13         11
  Acquisition and related expenses                 -          9          -
                                            --------   --------   -------- 
     Total costs and expenses                    106        127        123
                                            --------   --------   --------
Loss from operations                              (6)       (27)       (23)
Other income (expense), net                        1          -          - 
                                            --------   --------   -------- 
Loss before income taxes                          (5)       (27)       (23)
Provision for income taxes                         -          -          1
                                            --------   --------   --------
Net loss                                          (5)%      (27)%      (24)%
                                            ========   ========   ========
</TABLE>

The results for all periods presented include the consolidation of 
DocuMagix, Inc., which was acquired through a pooling of interests 
transaction that closed December 5, 1997. (See Note 2 of Notes to 
Consolidated Financial Statements.)


Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

     Revenues.   Total revenues increased 31% to $30.2 million for the year 
ended December 31, 1998 from $23.0 million for the year ended December 31, 
1997.  Product revenue from the sale of the Company's MFPs and related 
consumables and accessories was $23.4 million in 1998, a 44% increase from 
$16.3 million during the year ended December 31, 1997.  All product 
categories rose significantly year over year, as MFP's, consumables and 
accessories advanced 45%, 42% and 37%, respectively, for the year ended 
December 31, 1998 from the same period ended December 31, 1997. MFP unit 
sales increased 61% for the year ended December 31, 1998 from the same 
period ended December 31, 1997.  This increase in demand was partially 
offset by average selling price declines driven by competitive pricing in 
the market.  The number of units sold each quarter was relatively flat 
during the first nine months of 1998, dropping by 18% in the final three 
month period ended December 31, 1998.  The decline in unit shipments in the 
last quarter was due primarily to inventory level adjustments at one of the 
Company's marketing channel partners, IKON, that began in September 1998 and 
continued through year-end.

     Development revenue decreased 21% to $1.8 million for the year ended 
December 31, 1998 from $2.2 million for the year ended December 31, 1997.  
Major development milestones on the original Hewlett-Packard contract were 
completed in 1997 and the revenue stream from development fees was converted 
to per unit royalties in the first part of 1998. The follow-on development 
efforts did not commence until May 1998, which resulted in the decrease.

     Software and technology licensing fees rose 13% to $5.1 million for the 
year ended December 31, 1998 from $4.5 million for the year ended December 
31, 1997.   The year ended December 31, 1998 included per unit royalties for 
1) the H-P SureStore CD-Writer, which began shipping in February 1998 and 2) 
H-P LaserJet 3100, which began shipping in March 1998.  Partially offsetting 
these increases in per unit royalties, revenue from acquired DocuMagix 
software products for the year ended December 31, 1998 fell 79% to $.5 
million from $2.1 million for the same period ended December 31, 1997, the 
result of withdrawal of products from the retail distribution channel. 

     International revenues declined to 18% of total revenues from 29% for 
the year ended December 31, 1998 and 1997, respectively. Product revenue 
increases in 1998 were more heavily concentrated in the US as opposed to 
Europe, resulting in the proportionate decline.  The Company does not sell 
its products in any Asian countries, though products are sold in New Zealand 
and Australia. Two customers, Hewlett-Packard and IKON Office Solutions, 
accounted for $5.3 million (18%) and $4.8 million (16%), respectively, of 
total revenues for the year ended December 31, 1998.  The same two customers 
accounted for $3.1 million (13%)


                                      16

<PAGE>    16


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (continued) 

and $4.4 million (19%), respectively, of total revenues for the year ended 
December 31, 1997.

     Cost of Product Revenues    Cost of product revenues consists primarily 
of purchased materials; direct production labor and supervision for assembly 
and test; subcontracted manufacturing, mainly for printed circuit boards; 
indirect labor for inventory management, shipping and receiving, purchasing, 
manufacturing engineering, document control and operations management; and 
related facility and support costs. Cost of product revenues may vary as a 
percentage of total revenues in the future as a result of a number of 
factors including: relative production volumes; the mix of product shipped 
and the varying proportion of MFPs versus consumables and upgrades; changes 
in production yields, especially those associated with the introduction of 
new products; risk of inventory obsolescence and excess inventory; pricing 
pressures in the market; and vendor quality or supply problems.

     Cost of product revenues increased 35% to $16.0 million from $11.9 
million for the years ended December 31, 1998 and 1997, respectively.  In 
1998 the year end review of inventory resulted in an increase in reserves of 
$350,000.  Approximately half of this charge related to reduced MFP demand 
and half to previously inventoried marketing materials.  Despite this 
adjustment, product gross margins expanded to 31.6% from 27.0% for the years 
ended December 31, 1998 and 1997, respectively. The improvements in gross 
margin for JetFax branded products and consumables were due to manufacturing 
efficiencies, higher volumes, and a shift in mix to the newer Series M900 
product lines, the aggregate of which more than offset a decline in average 
selling price of MFPs and the inventory reserve adjustment.

     The Company purchases print engines for its Series M900 product line in 
Yen from Oki Data Corporation and includes exchange gains and losses related 
to Yen-based purchases and hedging activity in cost of goods sold.  In order 
to reduce the potential volatility related to the ongoing Yen liability, the 
Company entered into a Yen hedge in August 1997.  As the Yen weakened during 
the year ended December 31, 1998, the average exchange rate for purchases 
improved to 133 from 122 Yen to the dollar for the year ended December 31, 
1997.  As a result of this rate improvement, cost of goods sold was lowered 
by over $300,000.  Hedging activity generated a loss of  $12,000 for the 
year ended December 31, 1998.  Given the considerable expense associated 
with maintaining the Yen hedge, coupled with the recent strengthening of the 
Yen in relation to the dollar, the Company decided to terminate its Yen 
hedge in September 1998.

     Cost of Software and License Revenues.     Cost of software and license 
revenues consists primarily of royalties paid for licensed technology 
included in the Company's products, amortization of purchased technology, 
and the duplication and packaging expense associated with software sold in 
the retail market.  Cost of software and license revenues decreased 8% to 
$710,000 from $770,000. The increase in per unit royalty revenues generated 
a corresponding increase in per unit royalties payable for certain 
technology licensed from others for the year ended December 31, 1998.  This 
was in turn offset by reduced expenses related to retail software sales as 
the Company withdrew from the retail channel distribution market.

     Research and Development.     Research and development expenses were 
essentially flat at $5.4 million for the years ended December 31, 1998 and 
1997, respectively.  Average engineering headcount increased to 45 from 39 
for the years ended December 31, 1998 and 1997, respectively.  The related 
increase in engineering compensation expense was effectively offset by (1) 
reduced prototype, materials and external consultant charges and (2) the 
non-recurrence of acquisition-related DocuMagix retention bonuses of 
$150,000 from December 1997.   As a percent of revenue, research and 
development expense declined to 18%, a result of the increase in revenue.

     Selling and Marketing.     Selling and marketing expenses consist 
primarily of personnel related costs and commissions, travel and 
entertainment expenses, advertising and promotional expenses, marketing 
communications, customer support, and service and facilities expenses.  
Selling and marketing expenses increased 20% to $7.3 million from $6.0 
million for the year ended December 31, 1998 and 1997, respectively.  An 
additional $1.3 million in promotional efforts including dealer incentives, 
advertising, and public relations in support of the Series M900 product 
accounted for the period increase.  This was offset to a minor degree by the 
non-recurrence of acquisition-related DocuMagix retention bonuses of $77,000 
from December 1997.     As a percentage of revenues, selling and marketing 
expenses declined slightly to 24%

                                      17

<PAGE>    17


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (continued) 

from 27% for the year ended December 31, 1998 from the year ended December 
31, 1997, as the rise in revenue outpaced the increase in marketing charges.

     General and Administrative.     General and administrative expenses 
include personnel related costs for administrative, finance, and executive 
personnel, outside professional fees, and facilities expenses. General and 
administrative expenses decreased 15% to $2.6 million from $3.0 million for 
the years ending December 31, 1998 and 1997, respectively.  Elimination of 
redundant costs related to facilities, business insurance, and legal and 
accounting services, effective with the acquisition of DocuMagix accounted 
for the drop in expense.  Expenses related to public company disclosures, 
e.g., reporting to shareholders and SEC filings, more than offset the non-
recurrence of DocuMagix retention bonuses of $169,000.  As a percentage of 
revenues, general and administrative expenses declined to 9% from 13% for 
the year ended December 31, 1998 from the year ended December 31, 1997.

     Acquisition Charges and Related Expense.     Acquisition charges 
related to the purchase of substantially all the assets of the Crandell 
Group, Inc. in July 1996 and the purchase of DocuMagix, Inc. through a 
pooling of interests transaction which closed in December 1997.  There were 
no acquisition related charges for the year ended December 31, 1998; there 
were a total of $2.1 million in acquisition charges for the year ended 
December 31, 1997.  The Crandell Group's $1.7 million portion of the 1997 
acquisition charges was comprised of: a $1.0 million compensation payment in 
July 1997, acquisition charges of $0.6 million for a variable equity award 
classified as compensation; and compensation expenses of $56,000 associated 
with royalties related to the continuing employment of the founders of the 
Crandell Group.  The $425,000 DocuMagix portion of the 1997 acquisition 
charges was primarily comprised of legal and accounting costs related to the 
pooling of interests transaction and the estimated lease obligation for the 
previous DocuMagix facility.

     Interest and Other Income (Expense).     Interest and other income, net 
increased to $365,000 from $111,000 for the year ended December 31, 1998 and 
1997, respectively.  Interest income from investments was essentially flat 
at $300,000, while interest expense declined to zero from $119,000.  Foreign 
exchange gains (losses) increased to $19,000 from ($58,000) for the years 
ended December 31, 1998 and 1997, respectively. 

     Provision for Income Taxes.     Due to the Company's net losses, there 
were no provisions for federal or state income taxes for the year ended 
December 31, 1998 or the year ended December 31, 1997.  Income tax 
provisions of $80,000 and $96,000 for the year ended December 31, 1998 and 
1997, respectively, relate primarily to foreign withholding taxes on certain 
royalty fees, but also include minimum state and franchise taxes.

     Net Loss.   The net loss for the year ended December 31, 1998 was $1.5 
million or $0.13 per share.  The net loss for the year ended December 31, 
1997 was $6.2 million or $0.84 per share including acquisition-related 
charges of $2.1 million related to the acquisition of the Crandell Group 
($1.7 million) and DocuMagix ($425,000).  Excluding acquisition-related 
charges and a one-time bonus ($396,000) associated with the retention of 
DocuMagix employees prior to the acquisition, the pro forma net loss for the 
year ended December 31, 1997 was $3.7 million or $0.50 per share.

Twelve Months Ended December 31, 1997 Compared to Twelve Months Ended 
December 31, 1996

     Revenues.   Total revenues increased 13% to $23.0 million for the 
twelve months ended December 31, 1997 from $20.4 million for the twelve 
months ended December 31, 1996.  Revenues from the historical operations for 
the Company rose 18% to $20.8 million from $17.6 million and those of 
DocuMagix decreased 20% to $2.2 million from $2.8 million.

     Product revenue from the sale of the Company's MFPs and related 
consumables and accessories were $16.3 million in 1997, a 16% increase from 
$14.0 million during the twelve month period ended December 31, 1996.  
Consumable revenue advanced 44% year to year and accounted for two-thirds of 
the increase in product revenues, while revenue from accessories fell 3% in 
1997.  Revenue from MFPs rose 9% year to year, which mirrored the 9% 
increase in MFP units.  Although the MFP revenue and unit increase were


                                       18

<PAGE>    18


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (continued) 

symmetrical, this resulted from an improved product mix in 1997 neutralized 
by price declines in the Company's major MFP product lines.  The twelve 
months ended December 31, 1996 included revenues from the lower priced 
inkjet based JetFax 4, which accounted for 16% of total units in 1996 and 
less than 1% in 1997, but this improvement in product mix was offset by a 
decline of 10% in the average selling price of the Company's baseline JetFax 
M5 and Series M900 laser/LED MFPs from 1996 to 1997.  The number of units 
sold each quarter was relatively flat during the four quarters of 1997.  The 
Series M900, the new product line of MFPs, was introduced at the end of the 
third quarter, but did not lead to higher unit shipments in the fourth 
quarter, due to competitive pricing in the market and delays in the 
placement of orders in the business equipment dealer channel.

     Development fees increased 30% to $2.2 million for the twelve month 
period ended December 31, 1997 from $1.7 million for the twelve month period 
ended December 31, 1996 as major development programs were initiated or 
continued for OEMs licensing the Company's embedded systems and PC software.  
The Company has previously reported delays on completion of the last 
milestone of a development agreement with one of its OEMs.  The OEM has been 
shipping the product for several months and has agreed that the final 
milestone payment will be completely paid.  Accordingly, the Company 
recognized the remaining $247,000 of revenue during 1997 relating to this 
final development milestone. 

     Software and technology licensing fees decreased 2% to $4.5 million for 
the twelve month period ended December 31, 1997 from $4.6 million for the 
twelve month period ended December 31, 1996.  The software and technology 
licensing fees from the Company's historical operations grew 24% to $2.4 
million in 1997 from $1.9 million in 1996. The 1997 year included 
significant licensing fees from the Company's software licensing and from 
the Hewlett-Packard project, which more than offset the decline due to the 
end of life of Xerox products for which The Company earned royalties.  
Software and technology licensing fees for DocuMagix fell 25% to $2.1 
million for 1997 from $2.7 million in 1996, as its separate Internet 
software products were withdrawn from the market and emphasis was focused on 
the third quarter launch of a new version of PaperMaster which incorporated 
Internet capabilities.

     International revenues increased to 29% of total revenues for 1997 
compared to 27% for 1996, primarily as a result of higher international 
product shipments to Europe. The Company does not sell its product in any 
Asian countries, though the product is sold in New Zealand and Australia. In 
both 1997 and 1996, development fees were generated from both Japan and 
Korea. Two customers, IKON Office Solutions and Hewlett-Packard, accounted 
for $4.4 million (19%) and $3.1 million (13%), respectively, of total 
revenues for the twelve month period ended December 31, 1997.  One of the 
customers, IKON Office Solutions, accounted for approximately 15% of total 
revenues for the twelve month period ended December 31, 1996.

     Cost of Product Revenues.     Cost of product revenues consists 
primarily of purchased materials; direct production labor and supervision 
for assembly and test; subcontracted manufacturing, mainly for printed 
circuit boards; indirect labor for inventory management, shipping and 
receiving, purchasing, manufacturing engineering, document control and 
operations management; and related facility and support costs. Cost of 
product revenues may vary as a percentage of total revenues in the future as 
a result of a number of factors including: relative production volumes; the 
mix of product shipped and the varying proportion of MFPs versus consumables 
and upgrades; changes in production yields, especially those associated with 
the introduction of new products; risk of inventory obsolescence and excess 
inventory; pricing pressures in the market; and vendor quality or supply 
problems.

     Cost of product revenues increased 1% to $11.9 million in 1997 from 
$11.8 million in 1996.  Given the higher product revenue level in 1997, the 
product gross margins advanced to 27.0% from 16.1% in the prior year.  The 
improvements in the gross margin for the JetFax branded products and 
consumables were due to manufacturing efficiencies, higher volumes, and a 
shift in mix to the newer JetFax M5 and Series M900 product lines; the 
aggregate of these improvements more than offset a decline in average 
selling price of MFPs.

     The Company purchases print engines for its new Series M900 product 
line in Yen from Oki Data Corporation.  As the Yen weakened since mid-year 
1997, the Company's cost of goods sold related to the

                                      19

<PAGE>    19


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (continued) 

print engine was lowered by $106,000.  In order to reduce the potential 
volatility related to the ongoing Yen liability, the Company entered into a 
Yen hedge in August 1997, which generated a loss of $94,000 for the twelve 
months ended December 31, 1997 that was included in cost of goods sold.  
Additionally, the translation of the Company's intercompany receivables had 
a small negative impact, which was partially offset by lower operating 
expenses of the Company's international operations.  The Yen hedge may 
minimize foreign exchange risks that would otherwise result from changes in 
foreign currency exchange rates.  There can be no assurance that these 
strategies will be effective or that transaction losses can be minimized or 
forecasted accurately.  Exchange gains and losses did not have a significant 
effect on the Company's results of operations for the twelve month periods 
ended December 31, 1997 and 1996, respectively.

     Cost of Software and License Revenues.     Cost of software and license 
revenues consists primarily of royalties paid for licensed technology 
included in the Company's products, amortization of purchased technology, 
and the duplication and packaging expense associated with software sold in 
the retail market.  Cost of software and license revenues increased 8% to 
$770,000 in 1997 from $716,000 in 1996.

     Research and Development.     Research and development expenses were 
comprised mainly of personnel related costs, engineering prototypes and 
supplies, payments to engineering contractors, computer equipment 
depreciation and facilities expenses.  Research and development expenses 
increased 67% to $5.4 million in 1997 from $3.2 million in the prior year.  
As a percentage of revenues, research and development expenses increased to 
23.3% for 1997 from 15.8% for 1996.  The year to year research and 
development increase for the Company's historical operations was $2.2 
million or 106%, while such expenses at DocuMagix (which include $150,000 of 
retention bonuses payable to research and development employees) fell 
$17,000 or 1%. The increases in research and development expense resulted 
primarily from: (i) the additional software development personnel added with 
the acquisition of the Crandell Group in July 1996, (ii) additional 
personnel added in 1997 as the year end research and development headcount 
for the Company's historical operations increased from 22 to 41, (iii) 
external consultant and prototype expenses, and (iv) DocuMagix retention 
bonuses.  The Company believes that the development and introduction of new 
products is critical to its success and expects that research and 
development expenses will increase on a dollar basis in the future, although 
at a lower rate than that experienced in 1997.

     Selling and Marketing.     Selling and marketing expenses consisted 
primarily of personnel related costs and commissions, travel and 
entertainment expenses of direct sales and marketing personnel, advertising 
and promotional expenses, marketing communications, customer support, and 
service and facilities expenses.  Selling and marketing expenses decreased 
15% to $6.0 million in 1997 from $7.1 million in the prior year.  The year 
to year selling and marketing expenses increase for the Company's historical 
operations was $105,000 or 2.8%, while such expenses at DocuMagix (which 
include $77,000 of retention bonuses payable to selling and marketing 
employees) fell $1.2 million or 35% in conjunction with scaling back 
expenses to match the lower revenues and the change in product direction 
away from Internet related products.  As a percentage of revenues, selling 
and marketing expenses fell to 26.3% in 1997 from 34.9% in 1996 due to 
marketing expenses decreasing as revenues increased.

     General and Administrative.     General and administrative expenses 
included personnel related costs for administrative, finance, and executive 
personnel; outside professional fees; facilities expenses; and retention 
bonuses for DocuMagix employees.  General and administrative expenses 
increased 33% to $3.0 million in 1997 from $2.3 million in 1996. The 
increase in the year to year general and administrative expenses for the 
Company's historical operations was $649,000 or 60.5%, while such expenses 
at DocuMagix (which include $169,000 of retention bonuses payable to general 
and administrative employees) increased $99,000 or 1%.  The increases were 
primarily due to higher expenses for personnel, facilities, business 
insurance, hiring, and DocuMagix retention bonuses.  As a percentage of 
revenues, general and administrative expenses rose to 13.2% in 1997 from 
11.2% in 1996.

     Acquisition Charges and Related Expense.     Acquisition charges 
related to the purchase of substantially all the assets of the Crandell 
Group, Inc. in July 1996 and the purchase of DocuMagix, Inc. through a 
pooling of interests transaction which closed in December 1997.  There were 
a total of $2.1 million

                                      20

<PAGE>    20


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (continued) 

in acquisition charges in 1997 and none in 1996.  The Crandell Group's $1.7 
million portion of the 1997 acquisition charges was comprised of: a $1.0 
million final payment in July 1997 to the Crandell Group in lieu of future 
royalty payments (which would have been recorded as compensation as they 
related to continued employment); Crandell acquisition charges of $0.6 
million for a variable equity award classified as compensation; and 
compensation expenses of $56,000 associated with royalties related to the 
continuing employment of the founders of the Crandell Group.  The $425,000 
DocuMagix portion of the 1997 acquisition charges was primarily comprised of 
legal and accounting costs related to the pooling of interests transaction 
and the estimated lease obligation for the previous DocuMagix facility.

     Interest and Other Income (Expense).     Interest and other income 
(expense) consisted primarily of interest income (expense), foreign exchange 
gains (losses), and miscellaneous items of other income (expense).  Interest 
and other income (expense) increased to $111,000 for the twelve months ended 
December 31, 1997 from $(76,000) for the comparable period of the prior 
year.  The  Company's historical operations generated $262,000 of interest 
income during 1997 while DocuMagix incurred interest expense of $75,000 for 
the same time period.  Total interest expense for 1996 was $104,000.  
Foreign exchange losses were $58,000 for 1997 versus $13,000 for 1996.

     Provision for Income Taxes.     Due to the Company's net losses, there 
were no provisions for federal or state income taxes for the twelve months 
ended December 31, 1997 or the twelve months ended December 31, 1996.  The 
income tax provisions of $96,000 for 1997 and $107,000 for 1996 primarily 
related to foreign withholding taxes on certain development fees.

         Net income (loss).    The net loss for 1997 was $6.2 million or 
$0.84 per share including acquisition-related charges of $2.1 million 
related to the acquisition of the Crandell Group ($1.7 million) and 
DocuMagix ($425,000).  Excluding acquisition-related charges and a one-time 
retention bonus ($396,000) associated with the retention of DocuMagix 
employees prior to the acquisition, the pro forma net loss for 1997 was $3.7 
million or $0.50 per share compared with a net loss of $4.9 million for the 
twelve months ended December 31, 1996.  Prior to the acquisition-related 
charges and the one-time retention bonus, $905,000 of the 1997 loss resulted 
from the Company's historical operations and $2.8 million was attributable 
to the operations of DocuMagix.

Liquidity and Capital Resources

     The Company has financed its operations to date principally through 
private placements of debt and equity securities, proceeds from borrowings 
under a bank line of credit, debt associated with the Crandell Acquisition, 
and  its 1997 initial public offering of common stock. The total amount of 
equity raised through December 31, 1998 was $42.6 million through a series 
of private financing rounds and the Company's June 1997 initial public 
offering.

     At December 31, 1998, the Company had $1.5 million available under its 
bank credit facility under which there were no borrowings at December 31, 
1998.  This lending facility is collateralized by substantially all of the 
Company's assets.  The maximum amount available under the line of credit is 
the lesser of $1.5 million or 80% of the Company's eligible outstanding 
domestic accounts receivable. The revolving line of credit was renegotiated 
on September 2, 1998, terminates on August 23, 1999, and is subject to 
renegotiation at that time.  The line of credit contains certain covenants 
which include the requirements that the Company maintain tangible net worth 
(as defined) of $5.0 million, quarterly net income, a quick ratio of at 
least 1.0 to 1.0, a maximum debt to net worth ratio (as defined) of 1.5 to 
1.0, and certain minimum liquidity and debt service coverage.  In addition, 
the agreement prohibits the payment of cash dividends.  The Company was in 
compliance with all such covenants at December 31, 1998, except the 
quarterly net income covenant for which the Company received a waiver dated 
March 10, 1999.

     Cash and short term investments decreased to $4.1 million at December 
31, 1998 from  $7.2 million at December 31, 1997.  Significant cash outlays 
included a $400,000 minority investment in Oasis Semiconductor and a 
$200,000 warehouse dock leasehold improvement.  Inventories increased to 
$4.5 million from  $4.0 million at December 31, 1998 and 1997, respectively, 
a result of higher stocking levels to support the growth in consumables 
revenue.  Accounts receivable decreased to $4.4 million from $4.8 million

                                      21

<PAGE>    21


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (continued) 

at December 31, 1998 and 1997, respectively, which was principally the 
result of the withdrawal of PaperMaster from the retail distribution 
channel, partially offset by increased product revenues and their related 
receivables.  Accounts payable decreased $895,000 to $777,000 at December 
31, 1998 from $1.7 million at December 31, 1997.  Further reduction of 
payables assumed through the DocuMagix acquisition and a slowdown in 
inventory related purchases accounted for the drop.

     Investing activities for the year ended December 31, 1998 used cash of 
approximately $0.6 million for: $0.6 million of property purchases, and $0.2 
million for other asset purchases, partially offset by $0.2 million net 
proceeds of short-term investments. There were no borrowing activities for 
the twelve months ended December 31, 1998. 

     The Company currently believes that its cash equivalents and short-term 
investments, together with available borrowings under its line of credit, 
and funds from current and anticipated operations, will be sufficient to 
meet the Company's working capital and capital expenditure requirements for 
the next twelve months.  If the Company acquires one or more businesses or 
products, the Company's capital requirements could increase substantially.  
In the event of such an acquisition or should any unanticipated 
circumstances arise which significantly increase the Company's capital 
requirements, there can be no assurance that necessary additional capital 
will be available on terms acceptable to the Company, if at all.

Factors That May Affect Operating Results

     The Company operates in a dynamic and rapidly changing environment that 
involves numerous risks and uncertainties.  The following section lists 
some, but not all, of those risks and uncertainties that may have a material 
adverse effect on the Company's business, financial condition or results of 
operations.  This section should be read in conjunction with the audited 
Consolidated Financial Statements and Notes thereto included in Part IV - 
Item 14 of this Annual Report on Form 10-K.

     Risks Associated with Internet-related Revenues.   The market for 
Internet-related document communications is very new and is evolving 
rapidly.  The Company expects that a significant portion of its revenues in 
the future will be generated through its eFax Service and ancillary 
products.  There can be no assurance, however, that the Company's subscriber 
base will continue to expand rapidly, that users will be willing to pay fees 
for premium services, or that the subscriber base will grow large enough to 
be capable of generating advertising revenue.

     Dependence on Intellectual Property Rights; Risk of Infringement.   The 
Company's success is heavily dependent upon its intellectual property. To 
protect its proprietary rights, the Company relies on a combination of 
copyright, trade secret and trademark laws, patents, nondisclosure 
agreements and other contractual restrictions. As part of its 
confidentiality procedures, the Company generally enters into nondisclosure 
agreements with its employees, consultants, OEMs and strategic partners and 
limits access to and distribution of its designs, software and other 
proprietary information. Despite these efforts, the Company may be unable to 
effectively protect its proprietary rights and, in any event, enforcement of 
the Company's proprietary rights may be expensive. There can be no assurance 
that the Company's means of protecting its proprietary rights will be 
adequate or that the Company's competitors will not independently develop 
similar technology.

     As the number of patents, copyrights, trademarks and other intellectual 
property rights in the Company's industry increases, the Company's 
intellectual property increasingly may become the subject of infringement 
claims. The Company has in the past received communications asserting that 
the Company's trademarks or products infringe the proprietary rights of 
other parties or seeking indemnification against such infringement. The 
Company is generally required to agree to indemnify its OEMs from third 
party claims asserting such infringement. There can be no assurance that 
third parties will not assert infringement claims against the Company or its 
OEMs in the future. Any such claims, regardless of merit, could be time 
consuming, result in costly litigation, cause revenue delays or require the 
Company to enter into royalty or licensing agreements that may not be 
available, or available on terms acceptable to the Company.  The failure of 
the Company to develop, or license on acceptable terms, a substitute 
technology could have a material adverse effect on the

                                      22

<PAGE>    22


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (continued) 

 Company's business, financial condition and results of operations. 

     Potential Fluctuations in Quarterly Results.   The Company in the past 
has experienced, and in the future may experience, significant fluctuations 
in quarterly operating results that have been or may be caused by many 
factors.   These factors include: 1) acceptance and timing of new products 
integrating fax technology with the Internet; 2) the size and timing of 
development or software licensing agreements; 2) the timing of new 
introductions or phase-out of the Company's branded products, 3) 
fluctuations in end user demand for the Company's branded and OEM products; 
and 4) seasonal trends, competition and pricing.  The Company expects that 
its operating results will continue to fluctuate as a result of these and 
other factors.      

     The Company has often recognized a substantial portion of its revenues 
in the last month of a quarter, with such revenues frequently concentrated 
in the last weeks or days of a quarter. The Company's branded products are 
primarily sold through dealers, and such dealers often place orders for 
products at or near the end of a quarter. As a result, because one or more 
key orders that are scheduled to be booked and shipped at the end of a 
quarter may be delayed until the beginning of the next quarter or cancelled, 
revenues for future quarters are not predictable with any significant degree 
of accuracy. For these and other reasons, the Company believes that period-
to-period comparisons of its results of operations are not necessarily 
meaningful and should not be relied upon as indicators of future 
performance. It is likely that in future quarters, the Company's operating 
results, from time to time, will be below the expectations of public market 
analysts and investors, which could have a material adverse effect on the 
price of the Company's Common Stock.

     The accuracy of quarterly license revenues from OEMs reported by the 
Company has been, and the Company believes will continue to be, dependent on 
the timing and accuracy of product sales reports received from the Company's 
OEMs. These reports are provided only on a quarterly basis (which may not 
coincide with the Company's quarter) and are subject to delay and potential 
revision by the Company's OEMs. Therefore, the Company is required to 
estimate all of the recurring license revenues from OEMs for each quarter. 
As a result, the Company will record an estimate of such revenues prior to 
public announcement of the Company's quarterly results. In the event the 
product sales reports received from the Company's OEMs are delayed or 
subsequently revised, the Company may be required to restate its recognized 
revenues or adjust revenues for subsequent periods, which could have a 
material adverse effect on the Company's business, financial condition and 
results of operations and the price of the Company's Common Stock. 

     Possible Volatility of Stock Price.   The trading price of the Common 
Stock is likely to be highly volatile and could be subject to wide 
fluctuations in response to factors such as actual or anticipated variations 
in the Company's quarterly operating results, announcements of technological 
innovations or new services by the Company or its competitors, announcements 
of significant acquisitions or strategic partnerships by the Company or its 
competitors,  changes in financial estimates and recommendations by 
securities analysts, and news reports relating to trends in its markets.  
Further, the stock market in general, and the market prices for Internet-
related companies in particular, have experienced extreme volatility that 
often has been unrelated to the operating performance of such companies.  
These broad market and industry fluctuations may adversely affect the price 
of the Company's Common Stock, regardless of its operating performance.

     Risks Associated with Change in Focus of the Company's Business.   The 
Company has historically focused primarily on the development, manufacture 
and sale of its branded MFPs and currently derives a substantial portion of 
its revenues from the sale of its branded MFPs.  The Company expects that 
its revenue growth will be dependent, in part, on expansion of Internet-
based document services and further licensing of the Company's embedded 
system technology and software products.  However, there can be no assurance 
that the Company will realize growth in revenues from such sales.   If such 
growth in revenues does not occur and if revenues from the sale of the 
Company's branded MFPs were not to continue at past growth rates, it could 
have a material adverse effect on the Company's business, financial 
condition and results of operations.  

     Dependence on Continued Growth of Electronic Commerce.   The Company 
intends to derive a significant portion of its revenues from its eFax 
Service and ancillary products. Rapid growth in the use of and interest in 
the Internet and online services is a recent phenomenon. As a result, a 
sufficiently broad base

                                       23

<PAGE>    23


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (continued) 

of consumers may not adopt and continue to use the Internet and other online 
services as a medium of commerce.  Web-based advertising and selling premium 
services are relatively new and it is difficult to predict the extent of 
further growth, if any.  In addition, the Internet may not prove to be a 
viable commercial marketplace for reasons such as potentially inadequate 
development of network infrastructure or enabling technologies and 
performance improvements to support increased levels of Internet activity.  
If the use of the Internet and other online services does not continue to 
increase or increases more slowly than expected, if the infrastructure for 
the Internet and online services proves to be inadequate to effectively 
support expansion, or the Internet does not become a viable commercial 
marketplace, it could have a material adverse effect on the Company's 
business, financial condition and results of operation.

     Dependence on OEMs.   The Company has derived a significant portion of 
its revenues from licensing of its embedded system technology and software 
and from development services to OEMs. The Company currently has OEM 
relationships with Hewlett-Packard Company, Oki Data Corporation, and Konica 
Business Systems. The Company anticipates that a significant portion of its 
revenues will be derived from OEMs in the future and that the Company's 
revenues will be dependent upon, among other things, the ability and 
willingness of OEMs to develop and promote MFPs that incorporate the 
Company's technology. The ability and willingness of these OEMs to do so is 
based upon a number of factors, which include the Company's ability to 
complete timely development of turnkey designs for them.  No assurance can 
be given as to the ability or willingness of the Company's OEMs to continue 
developing, marketing and selling products incorporating the Company's 
technology. The loss of any of the Company's significant OEMs could have a 
material adverse effect on the Company's business, financial condition and 
results of operations.

     Dependence on Dealers and Distributors.   The Company has derived a 
substantial portion of its revenues from sales of its branded MFPs through 
dealers and distributors. The Company expects that sales of these products 
through its dealers and distributors will continue to account for a 
substantial portion of its revenues for the foreseeable future. The Company 
currently maintains distribution relationships with dealers associated with 
IKON Office Solutions, a national group of office equipment dealers and A. 
Messerli AG, one of the Company's office equipment dealers located in 
Switzerland. Each of the Company's dealers and distributors can cease 
marketing the Company's products with limited notice and with little or no 
penalty.  The loss of one or more of the Company's major dealers and 
distributors could have a material adverse effect on the Company's business, 
financial condition and results of operations. The Company's dealers and 
distributors also offer competitive products manufactured by third parties. 
There can be no assurance that the Company's dealers and distributors will 
give priority to the marketing of the Company's products as compared to its 
competitors' products. Any reduction or delay in sales of the Company's 
products by its dealers and distributors could have a material adverse 
effect on the Company's business, financial condition and results of 
operations. 

     History of Operating Losses; Accumulated Deficit.   The Company had 
annual net losses since inception. The Company's historical losses and 
certain preferred stock dividends have resulted in an accumulated deficit of 
approximately $29.2 million as of December 31, 1998. There can be no 
assurance that the Company will achieve profitability on a quarterly or 
annual basis in the future. 

     Risks Associated with Technological Change.   The market for the 
Company's products and services is characterized by rapidly changing 
technology, evolving industry standards and needs, and frequent new product 
introductions.  As the market for Internet-based document communication and 
handling grows, it will begin to exert more pressure for advanced features 
at economical pricing.  The MFP market already expects development and 
release of new products with better performance and improved features at 
competitive price points. As the complexity of product development increases 
and the expected time-to-market continues to decrease, the risk and 
difficulty in meeting such schedules increases as well as the costs to the 
Company and its OEMs. In addition, the Company, its OEMs and their 
competitors, from time to time, may announce new products, capabilities or 
technologies that may replace or shorten the life cycles of the Company's 
branded products and software and the OEM products incorporating the 
Company's technology. The Company's success will depend on, among other 
things, market acceptance of the Company's product offerings and the ability 
of the Company and its OEM customers to respond to industry changes and 
market demands.  Any failure to anticipate or respond adequately to the 
rapidly changing technology and evolving industry standards

                                      24

<PAGE>    24


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (continued) 

and needs, or any significant delay in development or introduction of new 
and enhanced products and services, could result in a loss of 
competitiveness or revenues, which could have a material adverse effect on 
the Company's business, financial condition and results of operations. 

      Highly Competitive Industry.   The market for Internet-related 
document communication and handling is a newly emerging one and competitors 
are just beginning to appear.  The Company anticipates that it will need to 
provide good service and scale the business rapidly to meet demand, to 
create  name recognition for the Company in advance of those competitors, to 
build its subscriber base prior to any significant entry by the competition, 
and to continue to expand and improve on its eFax Service offerings.

     The Company's technology, development services and software primarily 
compete with solutions developed internally by OEMs. Virtually all of the 
Company's OEMs have significant investments in their existing solutions and 
have the substantial resources necessary to develop competing multifunction 
technologies and software that may be implemented into their products. The 
Company also competes with technologies, software and development services 
provided in the MFP market by other systems and software suppliers to OEMs. 
With respect to MFP embedded system technologies, the Company competes with, 
among others, Peerless Systems Corporation, Personal Computer Products, Inc. 
and Xionics Document Technologies, Inc. With respect to desktop software, 
the Company competes with, among others, Caere Corporation, Simplify 
Development Corporation, Smith Micro Software, Inc., Visioneer Inc., 
Wordcraft International and Xerox.  In the newly evolving market for fax-to-
e-mail services, competitors include JFAX, an existing business, and 
CallWave, a start-up that is just introducing its product.

     The market for MFPs and related technology and software is highly 
competitive and characterized by continuous pressure to enhance performance, 
to introduce new features and to accelerate the release of new products. The 
Company's branded products compete primarily with the dominant vendors in 
the fax market, all of whom have substantially greater resources than the 
Company and include, among others, Canon Inc., Panasonic, a division of 
Matsushita Electrical Industrial Co., Ltd., Pitney Bowes Inc., Ricoh Co. 
Ltd., Sharp Electronics Corporation and Xerox. The Company also competes on 
the basis of vendor name and recognition, technology and software expertise, 
product functionality, development time and price.

     The Company anticipates increasing competition for its MFPs, 
technologies, software under development, and Internet services. Most of the 
Company's existing competitors, many of its potential competitors and all of 
the Company's OEMs have substantially greater financial, technical, 
marketing and sales resources than the Company. In the event that price 
competition increases, competitive pressures could cause the Company to 
reduce the cost of its eFax Service offerings, to reduce the price of its 
branded products, to reduce the amount of royalties received on new licenses 
and to reduce the fees for its development services in order to maintain 
existing business and generate additional product sales and license and 
development revenues, which could reduce profit margins and result in losses 
and a decrease in market share. Such competitive pressures would have a 
material adverse effect on the Company's business, financial condition and 
results of operations.

     Dependence on Key Personnel.   The Company is largely dependent upon 
the skills and efforts of its senior management, particularly Edward R. 
Prince, III (''Rudy Prince''), its President and Chief Executive Officer, 
and Lon Radin, its Vice President of Engineering, and other officers and key 
employees, some of whom only recently have joined the Company. The Company 
maintains key person life insurance policies on Rudy Prince and Lon Radin. 
None of the Company's officers or key employees are covered by an employment 
agreement with the Company. The Company believes that its future success 
will depend in large part upon its ability to attract and retain highly 
skilled engineering, managerial, sales, marketing and operations personnel, 
many of whom are in great demand. Competition for such personnel, especially 
engineering, has recently increased significantly. The loss of key personnel 
or the inability to hire or retain qualified personnel could have a material 
adverse effect on the Company's business, financial condition and results of 
operations.

     Effect of Rapid Growth on Existing Resources; Potential Acquisitions.   
The Company has grown rapidly in recent years. A continuing period of rapid 
growth could place a significant strain on the Company's

                                      25

<PAGE>    25


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (continued) 

management, operations and other resources. The Company's ability to manage 
its growth will require it to continue to invest in its operational, 
financial and management information systems, procedures and controls, and 
to attract, retain, motivate and effectively manage its employees. There can 
be no assurance that the Company will be able to manage its growth 
effectively and failure to do so would have a material adverse effect on the 
Company's business, financial condition and results of operations.

     The Company may, from time to time, pursue the acquisition of other 
companies, assets or product lines that complement or expand its existing 
business. Acquisitions involve a number of risks that could adversely affect 
the Company's operating results, including the diversion of management's 
attention, the assimilation of the operations and personnel of the acquired 
companies, the amortization of acquired intangible assets and the potential 
loss of key employees. The Company has no present commitments nor is it 
engaged in any discussions or negotiations with respect to possible 
acquisitions. No assurance can be given that any acquisition by the Company 
will not materially and adversely affect the Company or that any such 
acquisition will enhance the Company's business.

     Dependence on Outside Suppliers; Dependence on Sole Source Suppliers.   
The Company relies on various suppliers of components for its products.  The 
Company generally buys components under purchase orders and does not have 
long-term agreements with its suppliers. Although alternate suppliers may be 
readily available for some of these components, for other components it 
could take an undetermined amount of time to qualify a replacement supplier 
and order and receive replacement components. The Company does not always 
maintain sufficient inventory to allow it to fill customer orders without 
interruption during the time that would be required to obtain an adequate 
supply of single sourced components. Although the Company believes it could 
develop other sources for single source components, no alternative source 
currently exists and the process could take several months or longer. 
Therefore, any interruption in the supply of such components could have a 
material adverse effect on the Company's business, financial condition and 
results of operations.

     Many of the components used in the Company's products are purchased 
from suppliers located outside the United States. Foreign manufacturing 
facilities are subject to risk of changes in governmental policies, 
imposition of tariffs and import restrictions and other factors beyond the 
Company's control. There can be no assurance that United States or foreign 
trading policies will not restrict the availability of components or 
increase their cost. Any significant increase in component prices or 
decrease in component availability could have a material adverse effect on 
the Company's business, financial condition and results of operations.

     Certain components used in the Company's products are available only 
from one source. The Company is dependent on Oki America, Inc. (''Oki 
America''), as the supplier of major components, including the printer 
engine, of the Series M900. Oki America is also a competitor of the Company. 
The Company is also dependent on American Microsystems, Inc. (''AMI'') to 
provide unique application specific integrated circuits (''ASICs'') 
incorporating the Company's imaging and logic circuitry, Motorola, Inc. 
(''Motorola'') to provide microprocessors, Pixel Magic, Inc., a subsidiary 
of Oak Technology, Inc. (''Pixel''), to provide a specialized imaging 
processor and Conexant Systems, Inc  (''Conexant'') to provide modem chips. 
If Oki America, AMI, Motorola, Pixel or Conexant were to limit or reduce the 
sale of such components to the Company, or if such suppliers were to 
experience financial difficulties or other problems which prevented them 
from supplying the Company with the necessary components, it could have a 
material adverse effect on the Company's business, financial condition and 
results of operations. Any shortage or interruption in the supply of any of 
the components used in the Company's products, or the inability of the 
Company to procure these components from alternate sources on acceptable 
terms, could have a material adverse effect on the Company's business, 
financial condition and results of operations. 

      International Activities.   Revenues from sales to the Company's 
customers outside the United States account for a significant portion of the 
Company's total revenues.  The international market for the Company's 
branded products and products incorporating the Company's technology and 
software is highly competitive. Risks inherent in the Company's 
international business activities also include currency fluctuations and 
restrictions, the burdens of complying with a wide variety of foreign laws 
and regulations, longer accounts receivable cycles, the imposition of 
government controls, risks of localizing and

                                      26

<PAGE>    26


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (continued) 

internationalizing products to local requirements in foreign countries, 
trade restrictions, tariffs and other trade barriers, restrictions on the 
repatriation of earnings and potentially adverse tax consequences, any of 
which could have a material adverse effect on the Company's business, 
financial condition and results of operations. Substantially all of the 
Company's international sales are currently denominated in U.S. dollars and, 
therefore, increases in the value of the U.S. dollar relative to foreign 
currencies could make the Company's products less competitive in foreign 
markets. Because of the Company's international activities, it faces certain 
currency exposure and translation risks. For example, the Company purchases 
certain key components pursuant to purchase contracts denominated in foreign 
currency.

     Dependence on Single Manufacturing Facility; Risks Related to Potential 
Disruption.   The Company's manufacturing operations are located in its 
facility in Northern California. In addition, a number of the suppliers of 
components for the Company's products and providers of outsourced assembly, 
upon which the Company relies, are located in Northern California. Since the 
Company does not currently operate multiple facilities in different 
geographic areas, or have alternative sources for many of its components or 
outsourced assembly, a disruption of the Company's manufacturing operations, 
or the operations of its suppliers, could cause the Company to cease or 
limit its manufacturing operations and consequently have a material adverse 
effect on the Company's business, financial condition and results of 
operations. 

     Readiness for Year 2000.     Readiness for year 2000 refers to the 
issue surrounding computer programs that use two digits rather than four to 
define a given year.  These programs might read a date using "00" as the 
year 1900 rather than the year 2000 and which therefore could cause a system 
failure or miscalculation.

     The Company's manufacturing facilities date from October 1996 and are 
not believed to be vulnerable in any significant way to Year 2000 non-
information technology system failures.  In August 1998 the Company 
renovated its existing telephone system at a cost of approximately $40,000, 
also bringing it into Year 2000 compliance.  The Company has invested 
approximately $367,000 and will continue to make certain investments 
estimated not to exceed $50,000  in  its software systems and applications 
to ensure the Company's information systems are Year 2000 compliant. The 
necessary funds to support these renovations have come from the Company's 
operating budget and future funding is not anticipated to require special 
funding outside of historical levels for this item.  The financial impact to 
the Company of the Company's Year 2000 compliance effort has not been and is 
not anticipated to be material to its financial position or results of 
operations in any given year.  For example, during 1997 and 1998, the 
Company purchased and implemented new manufacturing and accounting 
information systems with a total capitalized cost of $338,000.  The Company 
has obtained written assurances from the vendor, QAD Inc., that the systems 
are Year 2000 compliant, but has not conducted internal testing of the 
system readiness. 

     The Company believes that its current products are Year 2000 compliant.  
Certain of the Company's older products, which may not be Year 2000 
compliant are no longer under warranty and the Company believes it has no 
obligation related to these products. If the Company is mistaken in this 
assessment, the Company could incur expenses in defending legal actions for 
breach of contract or causes of action.  There can be no assurances that 
such expenses will not be material to the Company's financial position or 
results of operations.

     As discussed above, the Company has recently implemented new 
information systems and accordingly does not anticipate any internal Year 
2000 issues from those information systems, databases or programs.  However, 
the Company could be adversely impacted by Year 2000 issues faced by major 
distributors, suppliers, customers and financial service organizations with 
which the Company interacts.  The Company expects to complete its assessment 
of the potential impact of these ancillary issues by May 1, 1999. There can 
be no assurances that the Company will be able to detect all potential 
failures of the Company's and/or third parties' computer systems.  A 
significant failure of the Company's or a third party's computer system 
could have a material adverse effect on the Company's business, financial 
condition and results of operations, but the Company is unable at this time 
to assess what might be the extent of such effect.  The Company intends to 
complete a contingency plan by July 1, 1999, detailing actions that would be 
taken in the event that such a failure occurs. 

                                      27

<PAGE>    27


ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The following disclosures about the Company's market risk involve 
forward-looking statements. Actual results could differ materially from 
those projected in the forward-looking statements. The Company faces 
exposure to market risk from adverse movements in interest rates and foreign 
currency exchange rates, which could impact its results of operations and 
financial condition.   The Company does not use derivative financial 
instruments for speculative purposes.

     Short-term Investments.   At December 31, 1998, the Company held $2.8 
million in short-term investments consisting of high quality financial 
instruments with an original maturity of from three to fifteen months. These 
available-for-sale securities are subject to interest rate risk and will 
fall in value if market interest rates increase. If market interest rates 
were to increase immediately and uniformly by 10 percent from levels at 
December 31, 1998, the fair market value of the short-term investments would 
decline by an immaterial amount. The Company generally expects to have the 
ability to hold its fixed income investments until maturity and therefore 
would not expect operating results or cash flows to be affected to any 
significant degree by the effect of a sudden change in market interest rates 
on short-term investments.

     Foreign Currency Exchange Rate. Historically, the Company's primary 
exposure has related to significant purchases of materials for manufacture 
of its Series M900 product line which were denominated in Yen. In order to 
reduce the potential volatility related to its ongoing Yen liability, the 
Company has occasionally purchased foreign currencies and held them during 
the contract term. At December 31, 1998 the Company did not hold a hedge 
position against a foreign currency exposure.

     During the year ended December 31, 1998, the average exchange rate for 
purchases denominated in Yen improved to 133 Yen to the dollar from 122 Yen 
to the dollar for the year ended December 31, 1997, generating a reduction 
in cost of goods sold of over $300,000.  Assuming a similar volume of 
purchases denominated in Yen, and that the Company does not enter into a 
hedge in order to minimize volatility of its Yen liability for that period, 
a return to 1997 average exchange rates for purchases of 122 Yen to the 
dollar or lower could increase cost of goods sold by $300,000 or more.  At 
December 31, 1998 the Company had purchase commitments denominated in Yen of 
47,871,000; should there be a 10% change in average exchange rates to 120 
from the 1998 average of 133 Yen to the dollar, the cost of those purchases 
would increase approximately $40,000.  There can be no assurance that the 
exchange rate will not fall below 120 Yen to the dollar and thus that the 
Company will not experience an even higher increase in the cost of goods 
sold if it has not elected to hedge prior to that time.

     The Company does maintain cash balances denominated in British Pound 
Sterling, Irish Punt, French Francs, and German Deutschemarks.  If foreign 
exchanges rates were to weaken against the dollar immediately and uniformly 
by 10 percent from the exchange rate at December 31, 1998, the fair value of 
these foreign currency amounts would decline by an immaterial amount.


ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The Company's financial statements are set forth in Item 14 below.


ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
            FINANCIAL DISCLOSURE

     Not applicable.

                                      28

<PAGE>     28



                                   PART III

ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information concerning the directors of the Company is included in 
the Company's Proxy Statement to be filed in connection with the Company's 
1999 annual meeting of stockholders under the caption "Election of 
Directors" and is incorporated herein by reference. The information 
concerning the executive officers of the Company required by this item is as 
follows:

EXECUTIVE OFFICERS

     The executive officers of the Company, and their ages as of December 
31, 1998, are as follows:
<TABLE>
<CAPTION>

            Name                  Age             Position                 
-------------------------------   ---  ------------------------------------
<S>                               <C> <C>
Rudy Prince....................    41  Chief Executive Officer and Chairman 
                                       of the Board
Robert A. Pollock..............    46  President and Chief Operating Officer
Ronald P. Brown................    45  Vice President of Marketing
Michael Crandell...............    43  Vice President of Software
John L. Jacobson...............    31  Vice President of Manufacturing and 
                                       Hardware Development
Allen K. Jones.................    51  Vice President of Finance, Chief 
                                       Financial Officer and Secretary
Gary P. Kapner.................    37  Vice President of US Sales 
Lon B. Radin...................    48  Vice President of Engineering

</TABLE>

     Rudy Prince co-founded the Company and has served as its President and 
     -----------
Chief Executive Officer and a member of the Board of Directors since August 
1988. Mr. Prince was appointed as the Chairman of the Board of Directors in 
October 1996. From June 1985 to February 1988, Mr. Prince was the Vice 
President of Sales and Marketing at Entropic Speech, Inc., a manufacturer of 
telecommunications products. Prior to that, Mr. Prince served as Sales 
Manager with Digicon, Inc., a geophysical contractor (''Digicon''), from 
March 1980 to June 1985. From August 1978 to March 1980, Mr. Prince served 
as a marketing representative with the Data Processing Division of 
International Business Machines Corporation. Mr. Prince holds a B.S. in 
Mechanical Engineering from the University of Texas at Austin. Mr. Prince is 
the son of Edward R. Prince, Jr., a director of the Company.

	Robert Pollock joined the Company in March 1999 as  President and Chief 
     --------------
Operating Officer.  From January 1998 to February 1999 Mr. Pollock was a 
consultant serving in interim management positions for a variety of 
technology companies, including Chief Executive Officer for NameSecure.com, 
an Internet domain name service provider, and Vice President of Sales and 
Marketing for E-Traffic, an enterprise software company providing 
interactive commerce technology and marketing services.   Mr. Pollock was 
founder and Chief Executive Officer of Pacific Micro Marketing, Inc. from 
April 1983 to December 1997, a high technology sales and marketing firm 
whose client list includes Apple Computer, Eastman Kodak and NV Philips.  
Mr. Pollock holds a B.S. degree in Business Administration from San Jose 
State University  and an M.B.A. from St. Mary's College.


     Ron Brown joined the Company in August 1998 as the Vice President of 
     ---------
Marketing.  Mr. Brown was a founding partner in the Internet start-up, 
Musicvine from February 1997 to August 1998, concentrating on Web-casting 
sponsorships for large companies.   From February 1994 to February 1997, Mr. 
Brown was vice president of worldwide corporate marketing for SyQuest 
Technology, a manufacturer of removable storage devices for personal 
computers. From April 1993, until it was acquired by Artisoft, Inc. in 
February 1994, Mr. Brown was vice president of marketing for Eagle 
Technology, a manufacturer of networking products. Mr. Brown holds a B.A. 
degree in Advertising and an M.B.A. from San Jose State University.

     Michael Crandell joined the Company in July 1996 as the Vice President
     ----------------
of Software. From January 1993 to July 1996, Mr. Crandell served as the 
President of the Crandell Group, the assets of which were purchased by the 
Company in July 1996. Prior to that, Mr. Crandell served as the President of 
Crandell Development Corporation, a software development company from 
November 1984 to December 1992. From 1981 to November 1984, Mr. Crandell 
worked as a Software Engineer with Compucorp, Inc. Mr. Crandell holds a B.A. 
in Religious Studies from Stanford University.

     John L. Jacobson joined the Company in November 1995, and most recently 
     ----------------
held the position of Manufacturing Manager.  Mr. Jacobson was appointed Vice 
President of Manufacturing and Hardware in November 1998.  Prior to joining 
the Company, Mr. Jacobson spent eight years with the Electronics Division

                                      29

<PAGE>    29




of Ford Motor Company, where he held various positions in manufacturing and 
product engineering.  Mr. Jacobson holds a B.S. in Electrical Engineering 
from Marquette University, and a M.S. in Manufacturing Systems Engineering 
from Stanford University.

     Allen K. Jones joined the Company in May 1996 as the Vice President of 
     --------------
Finance, Chief Financial Officer and Secretary. From January 1976 to January 
1996, Mr. Jones served in various positions with Varian Associates, Inc., a 
diversified electronics company, most recently as the Vice President and 
Controller from January 1995 to January 1996 and prior to that as the Vice 
President and Treasurer from May 1990 to December 1994. Mr. Jones holds a 
B.S. in Chemical Engineering from Cornell University and a M.B.A. from the 
Wharton School of Finance at the University of Pennsylvania.

     Gary P. Kapner joined the Company in September 1990 as the Technical 
     --------------
Services Manager. Since 1994, Mr. Kapner has been responsible for the JetFax 
products sales in North America.  Mr. Kapner was appointed Vice President of 
U.S. Sales in November 1997. Mr. Kapner's role was also expanded in 1998 to 
include international responsibilities as well.  From June 1988 to September 
1990, Mr. Kapner served as National Technical Services Manager for Payfax, 
Inc. From May 1987 to 1988, Mr. Kapner worked in the Product Diagnostic 
Center for NEC's Western Region Fax Division.

     Lon B. Radin co-founded the Company and serves as the Vice President of 
     ------------
Engineering and a member of the Board of Directors of the Company. Dr. Radin 
also served as the Chairman of the Board of Directors from August 1988 to 
October 1996. From 1986 to 1988, Dr. Radin was the sole proprietor of L-Tel 
Laboratories, a developer of digital fax telephone devices. From 1981 to 
1986, Dr. Radin served in various positions, most recently as the Director 
of Software and Manager of Research with Time & Space Processing, Inc., a 
software developer of telecommunications products for the defense industry. 
Prior to that Dr. Radin served as a software services consultant for The 
Systems Group, an engineering consulting firm from 1976 to 1981. Dr. Radin 
holds a B.S. in Physics and Mathematics from the University of Michigan and 
a Ph.D. and an M.A. in Mathematics from the University of California at 
Berkeley.


ITEM 11.     EXECUTIVE COMPENSATION

     The information required by this item is included under the caption 
"Executive Compensation" in the Company's Proxy Statement to be filed in 
connection with the Company's 1999 annual meeting of stockholders and is 
incorporated herein by reference. 


ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this item is included under the caption 
"Security Ownership of Certain Beneficial Owners and Management" in the 
Company's Proxy Statement to be filed in connection with the Company's 1999 
annual meeting of stockholders and is incorporated herein by reference. 

ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this item is included under the caption 
"Certain Transactions with Management" in the Company's Proxy Statement to 
be filed in connection with the Company's 1999 annual meeting of 
stockholders and is incorporated herein by reference.

                                      30

<PAGE>    30


                                    PART IV

ITEM 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
   (a)   The following documents are filed as part of this Report:

<TABLE>
<CAPTION>

       1.  Financial Statements.
           ---------------------
      
                                                                        Page
                                                                        ----
       <S>                                                              <C>
        Independent Auditors' Report...................................  32 
        Consolidated Balance Sheets as of December 31, 1998 and 1997...  33
        Consolidated Statements of Operations for the Year Ended
          December 31, 1998, the Year Ended December 31, 1997, and the
          Nine Months Ended December 31, 1996..........................  34
          Consolidated Statements of Stockholders' Equity (Deficit) the
          Year Ended December 31, 1998, the Year Ended December 31, 1997,
          and the Nine Months Ended December 31, 1996..................  35
        Consolidated Statements of Cash flows for the Year Ended
          December 31, 1998, the Year Ended December 31, 1997,
          and the Nine Months Ended December 31, 1996..................  36
        Notes to Consolidated Financial Statements.....................  37

</TABLE>

        2. Financial Statement Schedules.
           ------------------------------ 

        Schedule II - Valuation and Qualifying Accounts (see page 51)
Schedules not listed above have been omitted because the information 
required to be set forth therein is not applicable or is shown in the 
financial statements or notes thereto.

        3. Exhibits.
           ---------
 
        Set forth below is a list of management contracts and compensatory 
plans and arrangements required to be filed as Exhibits by Item 14(a)(3).

  10.2**  1989 Stock Option Plan, as amended and restated, and forms of 
          Stock Option Agreements thereunder. 
  10.3**  1995 Stock Plan, as amended and restated, and form of Stock Option
          Agreement thereunder.
  10.4**  1997 Director Stock Option Plan and form of Stock Option Agreement
          thereunder.
  10.5**  1997 Employee Stock Purchase Plan and forms of agreements 
          thereunder.
  10.28** Common Stock Purchase Option dated as of March 29, 1996 by and 
          between Registrant and Steven J. Carnevale.
  10.29** Common Stock Purchase Option dated as of March 29, 1996 by and
          between Registrant and Thomas B. Akin.
                  
-------------
**     Incorporated by reference to the identically numbered exhibits filed 
in response to Item 16(a), "Exhibits", of the Company's Registration 
Statement on Form S-1, as amended, (File No. 333-23763), which was declared 
effective on June 10, 1997.
 
     (b)     Reports on Form 8-K.  No Reports on Form 8-K were filed by the 
Registrant during the fourth quarter of 1998.

     (c)     Exhibits Pursuant to Item 601 of Regulation S-K.  The exhibits 
required by this Item are listed in the Exhibit Index attached hereto, which 
is incorporated by reference.

     (d)     Financial Statement Schedules.   The financial statement 
schedule required by this Item is listed under Item 14(a)(2) above.


                                      31

<PAGE>    31





INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
eFax.com, Inc.:

     We have audited the accompanying consolidated balance sheets of 
eFax.com, Inc. (formerly JetFax, Inc.) and subsidiaries as of December 31, 
1998 and 1997, and the related consolidated statements of operations, 
stockholders' equity (deficit) and cash flows for the years ended December 
31, 1998 and 1997, and the nine-month period ended December 31, 1996. These 
financial statements are the responsibility of the Company's management. Our 
responsibility is to express an opinion on these financial statements based 
on our audits.

     We conducted our audits in accordance with generally accepted auditing 
standards. Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are free 
of material misstatement. An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial statements. 
An audit also includes assessing the accounting principles used and 
significant estimates made by management, as well as evaluating the overall 
financial statement presentation. We believe that our audits provide a 
reasonable basis for our opinion.

     In our opinion, such consolidated financial statements present fairly, 
in all material respects, the financial position of eFax.com, Inc. and 
subsidiaries at December 31, 1998 and 1997, and the results of their 
operations and their cash flows for the years ended December 31, 1998 and 
1997, and the nine-month period ended December 31, 1996 in conformity with 
generally accepted accounting principles.

     As discussed in Note 1, in 1998, the Company has adopted Staff 
Accounting Bulletin No. 98 in the computation of earnings per share for all 
periods presented.

DELOITTE & TOUCHE LLP

San Jose, California
February 8, 1999
(April 9, 1999 as to Note 14)

                                      32

<PAGE>    32


<TABLE>
<CAPTION>

            EFAX.COM, INC. (FORMERLY JETFAX, INC.) AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS
              (in thousands, except share and per share amounts)

                                                   
                                                 December 31,   December 31,
                                                     1998           1997     
                                                -------------   ------------ 
<S>                                             <C>             <C>
ASSETS

Current assets:

  Cash and cash equivalents.....................  $  1,305        $  4,200 
  Short-term investments........................     2,808           3,024 
  Trade receivables, net of allowances of: $277
    in 1998 and $656 in 1997....................     4,402           4,820 
  Inventories...................................     4,519           4,029 
  Prepaid expenses..............................       247             277 
                                                  --------        --------
       Total current assets.....................    13,281          16,350 

Property, net...................................     1,339           1,160 
Other assets....................................     1,595           1,346 
                                                  --------        -------- 
Total assets....................................  $ 16,215        $ 18,856 
                                                  ========        ========


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable..............................  $    777        $  1,672 
  Accrued liabilities...........................     1,576           1,864 
                                                  --------        -------- 
       Total current liabilities................     2,353           3,536 
                                                  --------        -------- 

Deferred revenue................................        25              49 

Commitments and contingencies (Note 7 and 14)... 

Stockholders' equity:

  Convertible preferred stock, $0.01 par
    value; 5,000,000 shares authorized, shares
    outstanding: none in 1998 and 1997..........        --              --
  Common stock, $0.01 par value; 35,000,000
    shares authorized, shares outstanding:
    11,873,711 in 1998 and 11,741,383 in 1997...       119             117 
  Additional paid-in capital....................    42,946          42,881 
  Accumulated deficit...........................   (29,228)        (27,727)
                                                  --------        --------
       Total stockholders' equity...............    13,837          15,271 
                                                  --------        --------
Total liabilities and stockholders' equity......  $ 16,215        $ 18,856 
                                                  ========        ========
</TABLE>

               See notes to consolidated financial statements.

                                      33

<PAGE>    33


<TABLE>
<CAPTION>

           EFAX.COM, INC. (FORMERLY JETFAX, INC.) AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF OPERATIONS
                   (in thousands, except per share amounts)

                                                                    Nine
                                     Year Ended    Year Ended   Months Ended
                                    December 31,  December 31,  December 31,
                                        1998          1997          1996
                                    ------------  ------------  ------------
<S>                                 <C>            <C>           <C>
Revenues:
  Product.........................   $ 23,385       $ 16,281      $ 10,205 
  Software and technology
   license fees...................      5,069          4,493         3,200 
  Development fees................      1,779          2,246         1,468 
                                     --------       --------      --------
    Total revenues................     30,233         23,020        14,873 
                                     --------       --------      --------
Costs and expenses:
  Cost of product revenues........     16,005         11,886         8,441 
  Cost of software and license
    revenues......................        710            770           517 
  Research and development........      5,445          5,355         2,554 
  Selling and marketing...........      7,267          6,046         5,212 
  General and administrative......      2,592          3,031         1,726 
  Acquisition and related expenses          -          2,106             - 
                                     --------       --------      --------
    Total costs and expenses......     32,019         29,194        18,450 
                                     --------       --------      --------
Loss from operations..............     (1,786)        (6,174)       (3,577)
                                     --------       --------      --------
Other income (expense), net:
  Interest income.................        320            310            40 
  Interest expense................         (1)          (120)          (26)
  Other income (expense)..........         46            (79)          (14)
                                     --------       --------      --------
    Total other income, net.......        365            111             - 
                                     --------       --------      --------
Loss before income taxes..........     (1,421)        (6,063)       (3,577)
Provision for income taxes........         80             96           107 
                                     --------       --------      --------
Net loss..........................     (1,501)        (6,159)       (3,684)
Series P Redeemable Preferred
  Stock dividends.................          -            (68)         (116)
                                     --------       --------      --------
Net loss applicable to common
  stockholders....................   $ (1,501)      $ (6,227)     $ (3,800)
                                     ========       ========      ========
Net loss per share (Note 1):
  Basic...........................   $  (0.13)      $  (0.84)     $  (2.13)
                                     ========       ========      ========
  Diluted.........................   $  (0.13)      $  (0.84)     $  (2.13)
                                     ========       ========      ========
Shares used in computation:
  Basic...........................     11,784          7,389         1,784
                                     ========       ========      ========
  Diluted.........................     11,784          7,389         1,784
                                     ========       ========      ========  
</TABLE>

                See notes to consolidated financial statements.

                                      34

<PAGE>  34


<TABLE>
<CAPTION>

                            EFAX.COM, INC. (FORMERLY JETFAX, INC.) AND SUBSIDIARIES

                           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                                    (in thousands, except share amounts)
 
                                      Convertible                        Additional
                                    Preferred Stock      Common Stock     Paid-in     Accumulated
                                   ------------------ ----------------- 
                                     Shares  Amount     Shares   Amount    Capital      Deficit      Total   
                                   --------- -------- ---------  ------  ----------- ------------  --------
<S>                               <C>        <C> <C> <C>        <C>      <C>         <C>          <C>                            
Balances, April 1, 1996........... 6,293,978  $   63  1,725,550  $   17   $  20,355   $  (17,747)  $  2,688 
Exercise of Common Stock options..         -       -     41,125       1           7            -          8 
Sale of DocuMagix Common and  
  Preferred Stock (exchanged
  for Common Stock in merger).....         -       -     22,411       -         236            -        236  
Sale of DocuMagix warrants                 -       -          -       -           6            -          6 
Cumulative dividends on Series F
  Convertible ($713) and Series P
  Redeemable ($116) Preferred Stock        -       -          -       -         713         (829)      (116)
Net loss..........................         -       -          -       -           -       (3,683)    (3,683)
                                   ---------  ------  ---------  ------    --------   ----------   --------
Balances, December 31, 1996....... 6,293,978      63  1,789,086      18      21,317      (22,259)      (861)
Employee Stock Purchase Plan......         -       -     16,948       -          77            -         77 
Exercise of Common Stock Options..         -       -    105,374       1          27            -         28  
Exercise of Common Stock Warrants.         -       -    516,782       5         269            -        274  
Cumulative dividends on Series F
  Convertible ($240) and Series P
  Redeemable ($68) Preferred Stock         -       -          -       -         240         (308)       (68) 
Warrant compensation expense
  (Note 2)........................         -       -          -       -         625            -        625 
Issuance of Common Stock in 
  connection with Initial Public
  Offering........................         -       -  2,750,000      27      19,329            -     19,356
Conversion of Convertible Preferred 
  Stock to Common Stock at IPO....(6,293,978)    (63) 6,293,978      63           -            -          - 
Conversion of Series F Cumulative
  Dividends.......................         -       -    162,703       2          (2)           -          - 
Issuance of Common Stock for
  DocuMagix warrants..............         -       -      2,190       -           -            -          - 
Issuance of Common Stock in exchange
  for DocuMagix convertible note           -       -    103,853       1         999            -      1,000 
Adjustment to conform fiscal year
  of DocuMagix....................         -       -        469       -           -          999        999 
Net loss..........................         -       -          -       -           -       (6,159)    (6,159)
                                   ---------  ------ ----------  ------    --------   ----------   --------
Balances, December 31, 1997.......         -       - 11,741,383     117      42,881      (27,727)    15,271 
Employee Stock Purchase Plan......         -       -     51,492       -         157            -        157 
Exercise of Common Stock Options..         -       -     53,245       1          21            -         22  
Exercise of Common Stock Warrants.         -       -     67,591       1          (1)           -          -  
Repurchase of Common Stock........         -       -    (40,000)      -        (112)           -       (112)
Net loss..........................         -       -          -       -           -       (1,501)    (1,501) 
                                   ---------  ------ ----------  ------    --------   ----------   --------
Balances, December 31, 1998.......         -  $    - 11,873,711  $  119    $ 42,946   $  (29,228)  $ 13,837 
                                   =========  ====== ==========  ======    ========   ==========   ========

</TABLE>
                                See notes to consolidated financial statements.

                                      35

<PAGE>    35


<TABLE>
<CAPTION>


          EFAX.COM, INC. (FORMERLY JETFAX, INC.) AND SUBSIDIARIES

                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (in thousands)
                                                                Nine Months
                                       Year Ended   Year Ended     Ended
                                      December 31, December 31, December 31,
                                          1998          1997        1996       
                                      ------------ -----------  ------------
<S>                                   <C>          <C>           <C>
Cash flows from operating activities:
  Net loss............................ $ (1,501)    $  (6,159)    $ (3,684)
  Adjustments to reconcile net loss
    to net cash used for operating
    activities:
    DocuMagix net loss for the quarter
      ended March 31, 1997............        -           999            - 
    Depreciation and amortization.....      705           539          208 
    Gain (loss) on disposal of assets.        3             -            - 
    Warrant compensation expense......        -           625            - 
    Provision for (reversal of)
      inventory reserves and purchase
      commitment......................      350           292         (339)
    Changes in assets and liabilities:
      Trade receivables...............      418        (2,375)        (255)
      Inventories.....................     (840)       (1,769)         997 
      Prepaid expenses................       30          (115)         (29)
      Accounts payable................     (895)         (819)      (2,251)
      Deferred revenue................      (24)           49            - 
      Accrued liabilities.............     (288)          578         (344)
                                       --------      --------     --------
        Net cash used for operating
         activities...................   (2,042)       (8,155)      (5,697)
Cash flows from investing activities:
  Purchase of property................     (604)         (742)        (541)
  Purchase of short-term investments..  (10,044)       (3,024)           - 
  Proceeds from sale of short-term
    investments.......................   10,260             -            - 
  Increase in other assets............     (532)         (783)         (80)
  Acquisition of Crandell Group.......        -             -         (305)
  Net cash used for investing activities   (920)       (4,549)        (926)
Cash flows from financing activities:
  Proceeds from sale of Common Stock..      179        19,735           18 
  Repurchase of Common Stock..........     (112)            -            - 
  Repayment of related party notes
    payable...........................        -             -          (61)
  Line of credit borrowings, net......        -             -          450 
  Equipment term note borrowings......        -             -          250 
  Proceeds from issuance of notes payable     -           500          500 
  Repayment of notes payable..........        -          (950)           - 
  Redemption of Preferred Stock -
    Series P, net.....................        -        (2,794)           - 
  Proceeds from Series F Convertible
    Preferred Stock-net...............        -             -          650 
                                       --------      --------     --------
  Net cash provided by (used for)
    financing activities..............       67        16,491        1,807
                                       --------      --------     --------
Increase (decrease) in cash and cash
  equivalents.........................   (2,895)        3,787       (4,816)
Cash and cash equivalents, beginning
  of year.............................    4,200           413        5,229
                                       --------      --------     --------
Cash and cash equivalents, end of year $  1,305      $  4,200     $    413 
                                       ========      ========     ========
Supplemental cash flow information:
  Interest paid....................... $      -      $    120     $      9 
                                       ========      ========     ========
  Taxes paid-foreign withholding...... $     52      $     96     $    105 
                                       ========      ========     ========
Supplemental noncash investing and
  financial information:
  Conversion of Convertible Preferred
    Stock to Common Stock at Initial
    Public Offering...................        -      $     63            -
                                       ========      ========     ========
  Issuance of Series G Convertible
    Preferred Stock for technology....        -                   $    225
                                       ========                   ========
  Cumulative dividends on Series F
    Convertible and Series P Redeemable
    Preferred Stock...................        -      $    308     $    829
                                       ========      ========     ========
  Acquisition of Crandell Group (Note 3):
    Fair value of assets acquired
    (includes intangibles of $540 and
    property of $15)..................        -             -     $    555
                                       ========      ========     ========
   Cash paid..........................        -             -         (305)
                                       ========      ========     ========
   Note payable to seller.............        -             -     $    250 
                                       ========      ========     ========
   Issuance of Common Stock in exchange
     for DocuMagix outstanding Common
     and Preferred Stock..............        -             -     $    236
                                       ========      ========     ========
   Issuance of Common Stock in exchange
     for DocuMagix convertible note...        -      $  1,000            - 
                                       ========      ========     ========

</TABLE>
               See notes to consolidated financial statements.

                                     36
<PAGE>

         EFAX.COM, INC. (FORMERLY JETFAX, INC.) AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
        Years Ended December 31, 1998, and 1997, and Nine Months
                         Ended December 31, 1996 

1.  Nature of Business and Significant Accounting Policies 

Nature of Business

     On February 8, 1999 JetFax, Inc. changed its name to eFax.com, Inc. 
("eFax.com" or "the Company").  The Company was incorporated in Delaware in 
August 1988 and since that time has engaged in the development, manufacture 
and sale of its branded multifunction products (MFPs) and entered into 
agreements with a number of manufacturers (OEMs) of MFPs for the 
customization and integration of the Company's embedded system technology 
and desktop software in several OEM products. 

     The Company acquired DocuMagix, Inc. on December 5, 1997 in a 
transaction accounted for as a pooling-of-interests.  All financial data of 
the Company has been restated to include the historical information of 
DocuMagix, Inc.

Fiscal Period End

     Effective December 31, 1996, the Company changed its fiscal year end 
from March 31 to a 52-53 week reporting year ending on the first Saturday on 
or after December 31. The 40-week period from April 1, 1996 to January 4, 
1997 is referred to herein as the nine months ended December 31, 1996. 
Fiscal years 1998 and 1997 include 52 weeks. For presentation purposes, the 
Company refers to its reporting years ended January 2, 1999, January 3, 
1998, and January 4, 1997 as ending on December 31, 1998, 1997, and 1996, 
respectively.

Principles of Consolidation

     The consolidated financial statements include the accounts of the 
Company and its wholly-owned subsidiaries.  All significant intercompany 
balances and transactions have been eliminated.

Certain Significant Risks and Uncertainties

     The preparation of financial statements in conformity with generally 
accepted accounting principles requires management to make estimates and 
assumptions that affect the reported amounts of assets and liabilities and 
disclosure of contingent assets and liabilities at the date of the financial 
statements and the reported amounts of revenues and expenses during the 
reporting period. Actual results could differ from those estimates. 
Estimates include the level of the allowance for potentially uncollectible 
accounts receivable, reserves for inventories, accrued OEM licensing 
revenues, product development revenues recognized on the percentage-of-
completion basis, accrued warranty costs, and a valuation allowance for net 
deferred tax assets.

     The Company sells and licenses its products and technology primarily to 
end users (through independent distributors and dealers) and OEMs in the 
United States, Canada, Asia and Europe. In addition, the Company performs 
development services for certain of its OEMs. The Company performs ongoing 
credit evaluations of its customers' financial condition and limits its 
exposure to losses from bad debts by limiting the amount of credit extended 
whenever deemed necessary and generally does not require collateral.

     Certain components used in the Company's products are available only 
from one source. In particular, the Company currently purchases its printer 
engine and certain semiconductor devices from separate single sources of 
supply.  Any shortage or interruption in the supply of any of the components 
used in the Company's products, or the inability of the Company to procure 
these components from alternate sources on acceptable terms, could have a 
material adverse effect on the Company's business, financial condition and 
results of operations.

                                      37

<PAGE>    37


         EFAX.COM, INC. (FORMERLY JETFAX, INC.) AND SUBSIDIARIES
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
        Years Ended December 31, 1998, and 1997, and Nine Months
                         Ended December 31, 1996 


     The Company operates in a very dynamic industry.  The Company believes 
that changes in any of the following areas could have a negative impact on 
the Company's future financial position and results of operations: the fact 
that the Company's markets are characterized by rapidly changing technology, 
evolving industry standards and frequent introductions of new products and 
enhancements, and the Company's ability to respond to such changes; 
difficulties which the Company may experience in completing the development 
of turnkey designs for OEM customers, its color technology or other 
products; expansion of its business model to include Internet-based 
electronic and paper document communications; the fact that the 
multifunction and color markets targeted by the Company are at an early 
stage of development;  the highly competitive nature of the markets for the 
Company's products;  the phase-out or early termination of the Company's 
branded products or OEM products incorporating the Company's technology;  
the Company's ability to attract and retain skilled personnel;  the 
Company's reliance on third party suppliers for components used in the 
Company's products;  the quarterly variability in the Company's bookings and 
design wins;  and the Company's reliance on a relatively small number of OEM 
customers for a large percentage of its revenue.

Foreign Currency Translation and Hedging

     The Company's foreign subsidiary in Germany uses the U.S. dollar as the 
functional currency. Accordingly, assets and liabilities are translated 
using period-end exchange rates, except for inventories and property, plant 
and equipment, which are translated using historical rates.  Revenues and 
costs are translated using historical rates. The resulting translation gains 
and losses are included in income as they are incurred. Foreign currency 
transaction gains and losses resulting from transactions denominated in 
other than the U.S. dollar are included in income as incurred.  The 
Company's foreign gains were $19,000 for the year ended December 31, 1998 
and its losses were $58,000 for the year ended December 31, 1997 and were 
insignificant in the period ended December 31, 1996.

     On occasion, the Company enters into firm purchase contracts with 
suppliers that are denominated in a foreign currency. The Company has 
occasionally purchased foreign currencies and held them during the contract 
term as a designated hedge of the purchase commitment. The foreign currency 
gains and losses from the foreign currency deposit are recognized as an 
offset to the foreign currency gains and losses from the firm purchase 
commitment.  At December 31, 1997, the Company had Yen deposits of 
115,000,000 which were designated as a hedge against Yen denominated firm 
purchase commitments; in September 1998 the Company closed its Yen account. 
At December 31, 1998 the Company did not hold a hedge position against a 
foreign currency.

Concentration of Credit Risk

     Financial instruments that potentially subject the Company to 
concentrations of credit risk consist of cash equivalents, short-term 
investments and accounts receivable. Credit risk with respect to trade 
receivables is spread over a number of geographically diverse customers, who 
make up the Company's customer base. At December 31, 1998 and 1997, one 
customer accounted for 30% and 35% of total accounts receivable, 
respectively.

Cash Equivalents and Short-Term Investments

     Cash equivalents are highly liquid debt instruments acquired with an 
original maturity of three months or less. The recorded carrying amounts of 
the Company's cash and cash equivalents approximate their fair market value. 
Short-term investments are high quality financial instruments with an 
original maturity of three to fifteen months.  The short-term investments 
are carried at cost, which approximates fair value. 

Accounts Receivable

     Accounts receivable include unbilled amounts of $526,000, $1,469,723 
and $364,000 relating to development revenues at December 31, 1998, 1997 and 
1996, respectively (see ''Revenue Recognition'' below).

                                      38
<PAGE>   38


        EFAX.COM, INC. (FORMERLY JETFAX, INC.) AND SUBSIDIARIES
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
        Years Ended December 31, 1998, and 1997, and Nine Months
                         Ended December 31, 1996 

Inventories

     Inventories are stated at the lower of cost (first-in, first-out) or 
market. The Company's products typically experience short life cycles, and 
the Company estimates the market value of its inventory based on the 
anticipated selling prices adjusted for completion and selling costs. Should 
the Company experience a substantial unanticipated decline in the selling 
price of its products and/or demand thereof, a valuation adjustment and 
corresponding charge to operations could result. In addition, the Company 
uses subcontractors for the manufacture of certain of its products and/or 
components and occasionally enters into purchase commitments for such 
purchases. Consequently, the Company evaluates its exposure relative to such 
contracts and the estimated selling prices of the related products, adjusted 
for completion and selling costs, and accrues for losses, if anticipated.

Property

     Property is stated at cost or, for items under capital lease, at the 
present value of future minimum lease payments at the lease inception. 
Depreciation and amortization are computed using the straight-line method 
over estimated useful lives of one to five years or the lease term, 
whichever is appropriate.

Other Assets

     Other assets as of December 31, 1998 and 1997 include a minority 
investment in Oasis Semiconductor of $725,000 and $325,000, respectively, 
(accounted for using the cost method) and intangible assets (acquired 
software, eFax license, licensing contracts and covenants not to compete) of 
$870,000 and $1,021,000, net of accumulated amortization of $488,000 and 
$205,000, respectively.  Amortization of intangible assets is computed using 
the straight line method over the estimated useful life of five years.

Long-Lived Assets

     In accordance with Statement of Financial Accounting Standards (SFAS) 
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed of," the Company evaluates long-lived assets for 
impairment whenever events or changes in circumstances indicate that the 
carrying amount of an asset may not be recoverable.

Income Taxes

     The Company accounts for income taxes under an asset and liability 
approach. Deferred tax liabilities are recognized for future taxable amounts 
and deferred tax assets are recognized for future deductions net of a 
valuation allowance to reduce deferred tax assets to amounts that are more 
likely than not to be realized.

Revenue Recognition

     Revenues from product sales to resellers, international distributors, 
OEMs and end users are recognized upon shipment.  OEMs, end users, and 
international distributors have no rights of return while resellers have 
limited return rights.  Allowances for potential returns and exchanges from 
resellers are provided at the time of sale based on historical returns and 
exchange experience.  The Company defers revenue on sales to domestic 
distributors and recognizes the revenue when the distributor sells the 
product to resellers.   The Company provides a ninety day warranty for parts 
and service on its hardware products as well as ongoing technical support to 
the dealer network. The Company provides a limited amount of telephone 
technical support to its software customers.  Estimated cost of warranty 
work is accrued when the revenue is recognized.

     The Company enters into development agreements with OEM customers for 
which it receives development fees with certain payments contingent upon 
attaining contract milestones. Development fee revenues are derived from 
customizing the Company's embedded system technology and software for 
inclusion in specific applications for its OEMs' products. The Company's 
development contracts with certain OEM customers have enabled the Company to 
accelerate its product development efforts.  The Company

                                      39

<PAGE>    39


        EFAX.COM, INC. (FORMERLY JETFAX, INC.) AND SUBSIDIARIES
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
        Years Ended December 31, 1998, and 1997, and Nine Months
                         Ended December 31, 1996 

classifies all development costs related to such contracts as research and 
development expenses because such development fees have only partially 
funded the Company's product development activities, and the Company 
generally retains ownership of the technology developed under these 
agreements. The agreements typically provide for license and royalty 
payments to the Company based on the OEM customers' subsequent use of the 
technology in their products. Revenues from product development agreements 
are recognized using the percentage of completion method. Estimates are 
reviewed and revised periodically throughout the lives of the contracts. Any 
revisions are recorded in the accounting period in which the revisions are 
made. Royalties are recognized as earned, and include OEM product licensing 
revenues which are primarily determined based on the number of OEM units 
sold. Such revenues are initially recorded based on an estimate of such 
number of units and are adjusted upon the receipt of actual unit sales data 
from OEMs in the accounting period in which the information is received.

Research and Development

     Research and development costs include costs and expenses associated 
with the design and development of new products. To the extent that such 
costs include the development of computer software, the Company follows the 
working model approach to determine technological feasibility of the 
software product. Costs incurred subsequent to establishing technological 
feasibility have been immaterial and, accordingly, all software development 
costs have been included in research and development expenses for the 
periods presented herein.

Stock-Based Compensation

     The Company accounts for stock-based awards to employees using the 
intrinsic value method in accordance with APB No. 25, "Accounting for Stock 
Issued to Employees."

Basic and Diluted Net Loss Per Share

     Basic and diluted net loss per share has been computed using the 
weighted average of common shares outstanding. Potential common shares 
issuable upon exercise of options, warrants, convertible preferred stock and 
redeemable preferred stock have been excluded from the computation during 
all periods presented as their effect is antidilutive due to the Company's 
net losses. Accordingly at December 31, 1998, options and warrants to 
purchase approximately 2,530,000 common shares at a weighted average 
exercise price of $3.03 per share have been excluded from the computation.  
Such options and warrants will be included, using the treasury stock method, 
in periods where the Company reports net income and the average fair market 
value of the Company's common stock exceeds the exercise price. The net loss 
applicable to common stockholders and the shares used for the computation of 
basic and diluted loss per share are the same.

     In 1998, the Company adopted the requirements of Securities and 
Exchange Commission Staff Accounting Bulletin ("SAB") No. 98, issued in 
February 1998, and began presenting its net loss per share data on a 
historical basis without giving retroactive effect to the conversion of the 
outstanding shares of convertible preferred stock that automatically 
converted into common shares in connection with the Company's June 1997 
initial public offering (IPO) of common stock. The adoption of SAB No. 98 
has been reflected in the net loss per share data for all periods prior to 
1998.

     The pro forma computation set forth below includes in the weighted 
average number of shares outstanding the 6,293,978 shares of common stock 
issued in connection with the IPO upon the automatic conversion of the 
outstanding convertible preferred shares. Because of the significant 
increase in outstanding common shares that occurred as a result of the 
conversion of convertible preferred stock, management believes that the pro 
forma computation of net loss per share provides a useful and more 
meaningful comparison of year to year per share data.


                                       40

<PAGE>    40


        EFAX.COM, INC. (FORMERLY JETFAX, INC.) AND SUBSIDIARIES
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
        Years Ended December 31, 1998, and 1997, and Nine Months
                         Ended December 31, 1996 

<TABLE>
<CAPTION>
                                                                 Nine
                                             Year Ended      Months Ended
                                            December 31,     December 31,
                                                1997             1996       
                                            ------------     ------------
<S>                                         <C>               <C>
Net loss applicable to common stockholders.. $   (6,227)       $  (3,800)
                                             ==========        =========
Pro Forma net loss per share:
  Basic..................................... $    (0.61)       $   (0.46)
                                             ==========        =========
  Diluted................................... $    (0.61)       $   (0.46)
                                             ==========        =========

Shares used in pro forma computation:
  Basic.....................................     10,170            8,203
                                             ==========        =========
  Diluted...................................     10,170            8,203  
                                             ==========        =========
</TABLE>

Comprehensive Income

     Effective January 1, 1998, the Company adopted Statement of Financial 
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." 
SFAS No. 130 requires an enterprise to report, by major components and as a 
single total, the change in net assets during the period from non-owner 
sources.  For the years ended December 31, 1998 and 1997, and the nine 
months ended December 31, 1996. There were no differences between the 
Company's comprehensive income and net income.

Disclosures about Segments of an Enterprise and Related Information

     In June 1997, the Financial Accounting Standards Board issued SFAS No. 
131, "Disclosures about Segments of an Enterprise and Related Information," 
which establishes annual and interim reporting standards for an enterprise's 
business segments and related disclosures about its products, services, 
geographic areas and major customers. Adoption of this statement does not 
impact the Company's consolidated financial position, results of operations 
or cash flows. It is the Company's opinion that its business is a single 
reportable segment, which addresses the communication and handling of 
electronic and paper documents.  Organizational structure and internal 
management reporting are not segmented, nor are there specific segment 
profitability responsibilities within management.

Accounting for Derivative Instruments and Hedging Activities

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 
133, "Accounting for Derivative Instruments and Hedging Activities," which 
defines derivatives, requires that all derivatives be carried at fair value, 
and provides for hedge accounting when certain conditions are met.  At 
December 31, 1998 the Company held no derivatives or hedge positions.

     On occasion, the Company enters into firm purchase contracts with 
suppliers that are denominated in a foreign currency. The Company has 
occasionally purchased foreign currencies and held them during the contract 
term as a designated hedge of the purchase commitment. The foreign currency 
gains and losses from the foreign currency deposit are recognized as an 
offset to the foreign currency gains and losses from the firm purchase 
commitment. 

     The Company purchases print engines for its Series M900 product line in 
Yen from Oki Data Corporation and includes exchange gains and losses related 
to Yen-based purchases and hedging activity in cost of goods sold.  In order 
to reduce the potential volatility related to the ongoing Yen liability, the 
Company entered into a Yen hedge in August 1997.  At December 31, 1997 the 
Company had Yen deposits of 115,000,000 which were designated as a hedge 
against Yen denominated firm purchase commitments. Given the considerable 
expense associated with maintaining the Yen hedge, coupled with the recent 
strengthening of the Yen in relation to the dollar, the Company decided to 
sell its Yen hedge in September 1998.  Hedging activity generated a loss of  
$12,000 for the year ended December 31, 1998.


                                      41

<PAGE>    41


        EFAX.COM, INC. (FORMERLY JETFAX, INC.) AND SUBSIDIARIES
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
        Years Ended December 31, 1998, and 1997, and Nine Months
                         Ended December 31, 1996 


2. Business Combinations

     On December 5, 1997, the Company acquired DocuMagix, Inc. (DocuMagix) 
in a merger transaction pursuant to an Agreement and Plan of Reorganization 
(Agreement) entered into with DocuMagix on November 11, 1997.  Under the 
Agreement, the Company issued 793,957 shares of its common stock in exchange 
for all outstanding common and preferred shares of DocuMagix, and all rights 
with respect to DocuMagix common stock under outstanding employee options 
were converted into rights with respect to the Company's common stock using 
the common stock exchange ratio of 0.004572.  In addition, the Company 
issued 2,190 shares of its common stock to certain holders of DocuMagix 
warrants in exchange for such warrants and 103,853 shares of the Company's 
common stock were exchanged for $1.0 million of outstanding convertible 
notes payable by DocuMagix. The merger has been accounted for as a pooling 
of interests and, accordingly, the consolidated financial statements for all 
periods have been restated to reflect the combined operations of the two 
companies.  The Company's fiscal year end is December (since it changed its 
fiscal year end from March to December beginning with the nine-month period 
ended December 31, 1996) while DocuMagix has used a June fiscal year.  
Accordingly, the consolidated statements of operations combine the Company's 
consolidated statements of operations for the year ended December 31, 1997, 
and the nine months ended December 31, 1996 with DocuMagix's statements of 
operations for the year ended December 31, 1997, and the nine months ended 
March 31, 1997, respectively. As a result, DocuMagix's results for the 
quarter ended March 31, 1997 have been included in both the nine month 
period ended December 31, 1996 and the year ended December 31, 1997. 
DocuMagix's unaudited revenues and net loss for this period are $438,000 and 
$999,000, respectively.  The table below shows the composition of combined 
net revenues and net loss for each of the periods indicated (in thousands).  
For DocuMagix the periods indicated represent the Company's reporting period 
into which the DocuMagix financial information was combined.

<TABLE>
<CAPTION>

                                                          Nine
                                    Year Ended        Months Ended
                                    December 31,       December 31,
                                        1997              1996     
                                   -------------      -------------
<S>                                 <C>                <C>
Revenues:
---------
eFax.com (formerly JetFax, Inc.)...   $  20,808          $  12,862
DocuMagix..........................       2,212              2,011 
                                      ---------          ---------
Combined...........................   $  23,020          $  14,873
                                      =========          =========
Net loss:
eFax.com (formerly JetFax, Inc.)...   $  (3,012)         $  (1,042)
DocuMagix..........................      (3,147)            (2,642)
                                      ---------          ---------
Combined...........................   $  (6,159)         $  (3,684)
                                      =========          =========

</TABLE>

     In connection with the restatement of the consolidated financial 
statements to give effect to the pooling of interests transaction with 
DocuMagix, Inc., the Company adjusted DocuMagix, Inc.'s financial statements 
to conform its revenue recognition policies to those of eFax.com (the 
adjustment deferred revenue recognition on sales to distributors).  The 
effect of the adjustment was to reduce revenue and increase net loss for the 
year ended December 31, 1997 by $15,000 and $12,000, respectively, and to 
increase revenue and decrease net loss by $438,000 and $351,000, 
respectively, for the nine months ended December 31, 1996.

     In July 1996, the Company acquired the assets of the Crandell Group, 
Inc. (the Crandell Group), a company in the business of developing and 
marketing software products, including certain products used in fax 
applications, some of which have previously been licensed by and used in the 
Company's products. The two principals of the Crandell Group (the 
Principals) entered into two-year employment agreements with the Company. 
The Company paid $250,000 upon the closing and $250,000 in July 1997, and 
incurred $55,000 of acquisition costs for a total purchase price of 
$555,000.  The purchase price was allocated $540,000 to

                                      42

<PAGE>    42


        EFAX.COM, INC. (FORMERLY JETFAX, INC.) AND SUBSIDIARIES
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
        Years Ended December 31, 1998, and 1997, and Nine Months
                         Ended December 31, 1996 

proprietary software, licensing contracts and covenants not-to-compete 
(included in Other Assets, see Note 1) and $15,000 to property and 
equipment.  The Company was obligated to make royalty payments to the 
shareholder/employees contingent upon continued employment and recorded 
acquisition expense of $1,056,000 and $228,000 for such payments for the 
years ended December 31, 1997 and 1996, respectively as compensation within 
research and development expense.  The Company's obligation to make these 
payments terminated upon the closing of the Company's IPO in June 1997 in 
consideration of a one-time acquisition expense of $1.0 million. In 
connection with a 1996 amendment to the above agreements, the Company issued 
a warrant to the Principals to acquire 100,000 shares of common stock at an 
exercise price of $1.75 per share.  Because the terms of the warrant were 
not fixed until the Company's IPO, the Company treated the warrant as 
variable and recorded $625,000 of compensation expense during 1997 included 
in acquisition expenses.  The results of operations for the Crandell Group 
prior to its acquisition by the Company are not material and, accordingly, 
pro forma information is not disclosed. 

3.     Inventories

<TABLE>
<CAPTION>

     Inventories consist of (in thousands): 

                                             December 31,    December 31,
                                                 1998           1997    
                                             ------------   ------------    
    <S>                                       <C>            <C>
     Materials and supplies..................  $   1,982      $   1,776  
     Work-in-process.........................         93            143 
     Finished goods..........................      2,444          2,110
                                               ---------      --------- 
     Total...................................  $   4,519      $   4,029
  
</TABLE>

4.     Property

<TABLE>
<CAPTION>

     Property consists of (in thousands):


                                             December 31,    December 31,
                                                 1998           1997    
                                             ------------   ------------    
    <S>                                       <C>            <C>
     Furniture and fixtures..................  $   1,816      $   1,472 
     Software................................        501            467 
     Leasehold improvements..................        440            234 
                                               ---------      ---------
     Total...................................  $   2,757      $   2,173 
     Accumulated depreciation and amortization    (1,418)        (1,013)
                                               ---------      ---------
     Property-net............................  $   1,339      $   1,160 

                                               =========      =========
</TABLE>

5.     Accrued Liabilities

<TABLE>
<CAPTION>
    
 Accrued liabilities consist of (in thousands): 

                                             December 31,    December 31,
                                                 1998           1997    
                                             ------------   ------------  
    <S>                                     <C>            <C>
     Compensation and related benefits.....  $     632      $     509 
     Acquisition related accruals..........         22            375 
     Royalties.............................         62            215 
     Product warranty......................         78             94 
     Other.................................        782            671 
                                             ---------      ---------
     Total.................................  $   1,576      $   1,864
                                             =========      ========= 

</TABLE>

                                      43

<PAGE>    43


        EFAX.COM, INC. (FORMERLY JETFAX, INC.) AND SUBSIDIARIES
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
        Years Ended December 31, 1998, and 1997, and Nine Months
                         Ended December 31, 1996 

6.     Line of Credit and Notes Payable

     The Company has a line of credit agreement under which it may borrow up 
to $1.5 million at the bank's prime rate (7.75% at January 2, 1999) plus 
0.5%.  Borrowings are limited to 80% on eligible domestic receivables, are 
secured by all assets of the Company and are subordinate to stockholder 
notes and lien positions. The line expires in August 23, 1999. No borrowings 
were outstanding under the line of credit at December 31, 1998.

     The line of credit contains certain covenants which, among other 
things, require the Company to maintain tangible net worth (as defined) of 
$5.0 million, quarterly net income, a quick ratio of 1.0 to 1.0, a maximum 
debt to net worth ratio (as defined) of 1.5 to 1.0 and certain minimum 
liquidity and debt service coverage. In addition, the agreement prohibits 
the payment of cash dividends. At December 31, 1998, the Company was not in 
compliance with the quarterly net income covenant.  Subsequent to year-end, 
the Company received a waiver of this covenant from the lender (See Note 
14).


7.     Lease Commitments

     The Company leases its primary facility under an operating lease 
expiring January 2003. Rent expense is recognized on a straight-line basis 
over the term of the lease. The lease agreement requires the Company to pay 
property taxes and maintenance costs. For the year ended December 31, 1998, 
December 31, 1997, and the nine months ended December 31, 1996, rent expense 
was $572,000, $523,000, and $246,000, respectively. Future minimum annual 
rental payments for facilities leases are: 1999, $755,000; 2000, $563,000; 
2001, $551,000; 2002, $551,000; 2003, $46,000 and none thereafter. 


8.     Stockholders' Equity

     In June 1997, the Company completed an initial public offering of 
2,750,000 shares of its common stock (selling shareholders sold an 
additional 750,000 shares in the offering) at a price of $8.00 per share.  
Concurrent with the offering, each of the 6,293,978 shares of convertible 
preferred stock then outstanding were converted into the same number of 
common shares and the 344,350 shares of Series P Redeemable Preferred Stock 
were redeemed for $2.8 million from the proceeds of the offering.  In 
addition, 389,512 shares of common stock were issued upon the net exercise 
of warrants, 127,270 shares of common stock were issued upon the exercise of 
other warrants and 162,703 shares of common stock were issued upon 
conversion of cumulative unpaid dividends on Series F Preferred Stock.  In 
1998, 67,591 shares of common stock were issued upon the net exercise of 
warrants.

Preferred Stock

     The number of shares of preferred stock authorized  to be issued is 
5,000,000.  The Board of Directors is authorized to issue the preferred 
stock from time to time in one or more series and to fix the rights, 
privileges and restrictions of the shares of such series.  As of December 
31, 1998, no shares of preferred stock were outstanding.

Stock Option and Purchase Plans

     The Company has an employee stock option plan and a nonemployee 
director option plan under which the Company may grant options to purchase 
up to 3,400,000 and 270,000 shares of common stock, respectively.  At 
December 31, 1998, 1,417,048 and 125,000 shares, respectively, remain 
available for future grant under these plans.  The terms for exercising 
options are determined by the Board of Directors and options expire at the 
earlier of ten years and one month or such shorter terms as may be provided 
in each

                                      44

<PAGE>    44


        EFAX.COM, INC. (FORMERLY JETFAX, INC.) AND SUBSIDIARIES
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
        Years Ended December 31, 1998, and 1997, and Nine Months
                         Ended December 31, 1996 

stock option agreement. In connection with the merger of DocuMagix (see Note 
2), the Company assumed outstanding DocuMagix options using the common stock 
exchange ratio.  At December 31, 1998, options to purchase 1,664 shares of 
the Company's common stock at a weighted average exercise price of $38.12  
were outstanding pursuant to the DocuMagix options. 

     The Company has reserved 500,000 shares of common stock for issuance 
pursuant to the 1997 Employee Stock Purchase Plan.  The plan permits 
employees to purchase shares at 85% of the lower of the fair market value of 
the common stock at the beginning or end of each six-month offering period. 
During 1997 and 1998, 16,948 and 51,492 shares, respectively, have been 
issued under the plan.  At December 31, 1998, 431,560 shares are reserved 
for issuance under the plan.

     Stock option activity and balances, excluding DocuMagix option activity 
which is immaterial, are summarized as follows:

<TABLE>
<CAPTION>

                                                             Weighted
                                                              Average
                                                Number     Exercise Price
                                              of Shares       Per Share
                                              ---------    --------------
<S>                                         <C>              <C>

Balance, March 31, 1996......................   129,650        $  0.190
Granted (weighted average fair market
 value $0.57)................................ 1,009,000           0.550
Canceled.....................................   (62,740)          0.270
Exercised....................................   (41,125)          0.200
                                              ---------        --------
Balance, December 31, 1996................... 1,034,785        $  0.540
Granted (weighted average fair market
  value $7.38)............................... 1,107,100           7.416
Canceled.....................................   (73,509)          4.349
Exercised....................................  (105,374)          0.272
Balance, December 31, 1997................... 1,963,002        $  4.288 
Granted (weighted average fair market
  value $3.19)...............................   847,800           3.194
Canceled.....................................  (720,408)          5.961
Exercised....................................   (53,245)          0.404
                                              ---------        --------
Balance, December 31, 1998................... 2,037,149        $  3.343
                                              =========
</TABLE>

<TABLE>
<CAPTION>

              Options Outstanding                      Options Exercisable   
----------------------------------------------------  ----------------------
                   Number       Weighted    Weighted    Number      Weighted  
   Range of    Outstanding at   Average     Average  Exercisable  at Average 
   Exercise      December 31,   Remaining   Exercise  December 31,  Exercise  
    Prices          1998      Life (Years)   Price       1998         Price   
---------------  ----------   -----------   --------  -----------   --------
<S>                <C>           <C>       <C>         <C>         <C>
$ 0.20 - $ 0.30     416,682       7.01      $  0.29     292,170     $  0.29
0.50   -   1.75     495,667       6.10         0.71     225,586        0.83
2.75   -   5.88     537,300       9.08         2.91      90,527        2.96
6.00   -   7.00      75,000       8.59         6.67      50,000        7.00
8.00   -   8.00     512,500       8.76         8.00     145,828        8.00 
---------------   ---------       ----      -------     -------     -------
$ 0.20 - $ 8.00   2,037,149       7.83      $  3.34     804,111     $  2.56 
===============   =========       ====      =======     =======     =======

</TABLE>

     As discussed in Note 1, the Company uses the intrinsic value method 
specified by Accounting Principles Board Opinion No. 25 to measure 
compensation expense associated with issuing stock options and, accordingly, 
has recorded no such expense in the consolidated financial statements, as 
such issuances have been at the fair value of the Company's common stock at 
the date of grant.

     Statement of Financial Accounting Standards No. 123, "Accounting for 
Stock-Based Compensation", (SFAS 123) requires the disclosure of pro forma 
net income and earnings per share had the Company adopted

                                      45

<PAGE>    45


        EFAX.COM, INC. (FORMERLY JETFAX, INC.) AND SUBSIDIARIES
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
        Years Ended December 31, 1998, and 1997, and Nine Months
                         Ended December 31, 1996 

the fair value method as of the beginning of the year ended March 31, 1996. 
Under SFAS 123, the fair value of stock-based awards to employees is 
calculated through the use of the minimum value method for all periods prior 
to the initial public offering, and subsequently through the use of option 
pricing models, even though such models were developed to estimate the fair 
value of freely tradable, fully transferable options without vesting 
restrictions, which significantly differ from the Company's stock option 
awards. These models also require subjective assumptions, including future 
stock price volatility and expected time to exercise, which greatly affect 
the calculated values. The Company's stock option calculations were made 
using the Black-Scholes option pricing model with the following weighted 
average assumptions: 

<TABLE>
<CAPTION>
                                          Employee Stock Options          
                               ------------------------------------------
                                                              Nine Months
                                 Year Ended      Year Ended      Ended
                                December 31,    December 31,  December 31,
                                    1998            1997         1996
                                ------------    ------------ -------------
<S>                               <C>             <C>          <C>
Risk-Free Interest Rate.........   5.36%           5.76%        6.29% 
Stock Volatility (*)............     100%             65%           -  
Expected Life (in years)........       1               1            1  
Dividends.......................       -               -            -  

</TABLE>

(*) 1997 :  65% subsequent to public filing; 0% prior to public filing


     The Company's calculations are based on a multiple option valuation 
approach and forfeitures are recognized as they occur. If the computed fair 
values of the stock-based awards (including awards under the Purchase Plan) 
had been amortized to expense over the vesting period of the awards, pro 
forma net loss available to common stockholders would have been $3,262,000 
($0.28 per share) for the year ended December 31, 1998, $6,706,000 ($0.91 
per share) for the year ended December 31, 1997, and $3,813,000 ($2.14 per 
share) for the nine months ended December 31, 1996. However, because options 
vest over several years and grants prior to April 1, 1995 have been excluded 
from these calculations, the pro forma adjustments for the years ended 
December 31, 1998 and 1997, and the nine months ended December 31, 1996 are 
not indicative of future period pro forma adjustments, assuming grants are 
made in those years, when the calculation will apply to all applicable stock 
options. 

     As of December 31, 1998, the Company has reserved or otherwise 
committed to issue 491,999 shares of Common Stock upon exercise of warrants.


9.     Income Taxes

     No federal and state income taxes were provided for the years ended 
December 31, 1998, December 31, 1997, and the nine months ended December 31, 
1996 due to the Company's net losses.  Foreign withholding taxes of 
approximately $52,000, $96,000 and $105,000 were paid during the years ended 
December 31, 1998, December 31, 1997, and the nine months ended December 31, 
1996, respectively.  The Company's effective tax rate differs from the 
federal statutory rate as follows (in thousands):

                                      46

<PAGE>    46


         EFAX.COM, INC. (FORMERLY JETFAX, INC.) AND SUBSIDIARIES
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
        Years Ended December 31, 1998, and 1997, and Nine Months
                         Ended December 31, 1996 

<TABLE>
<CAPTION>
                                         Year         Year       Nine Months
                                         Ended        Ended         Ended
                                      December 31, December 31, December 31,
                                          1998        1997          1996
                                      ------------ ------------ ------------
<S>                                    <C>          <C>           <C>
Taxes computed at federal statutory
  rate of 35%........................   $   (554)    $ (2,156)     $ (1,289)
Effect of losses without tax benefit.        554        2,156         1,289 
Foreign withholding taxes............         52           96           105 
Other................................         28            -             2 
                                        --------     --------      -------- 
Total provision......................   $     80     $     96      $    107 
                                        ========     ========      ======== 
</TABLE>

     Deferred income taxes reflect the net tax effects of temporary 
differences between the carrying amount of assets and liabilities for 
financial reporting purposes and the amounts used for income tax purposes, 
as well as operating loss and tax credit carryforwards. Significant 
components of the Company's net deferred income tax asset are as follows (in 
thousands):

<TABLE>
<CAPTION>
                                                 December 31,   December 31, 
                                                     1998           1997     
                                                 ------------   -----------
<S>                                               <C>            <C>
Deferred tax asset:
  Net operating loss carryforwards...............  $  7,283       $  7,031 
  Tax credit carryforwards.......................       277            291 
  Accounts receivable allowances.................       110            124 
  Depreciation...................................        99            101 
  Inventory valuation............................       173             91 
  Nondeducted expense accrual....................       201            256 
  Warranty reserve...............................        31             38 
  Capitalized research and development...........        68            230 
  Vacation accrual...............................       140             86 
  Other..........................................       139            291 
                                                   --------       --------
Total deferred tax assets........................     8,521          8,539 
Valuation allowance..............................    (8,521)        (8,539)
                                                   --------       --------
                                                   $      -       $      - 
                                                   ========       ========

</TABLE>

     As a result of the Company's history of operating losses, management 
believes that the recognition of the deferred tax asset is considered less 
likely than not. Accordingly, the Company has fully reserved its net 
deferred tax assets as of December 31, 1998 and 1997.  At December 31, 1998, 
consolidated net operating loss carryforwards of approximately $20 million 
and $7 million were available to offset future Federal and state taxable 
income, respectively, and research and development tax credits of $119,000 
and $158,000 were available to offset future Federal and state income taxes, 
respectively.  Current Federal and California tax law includes certain 
provisions limiting the annual use of net operating loss carryforwards in 
the event of certain defined changes in stock ownership.  The Company's 
ability to utilize its net operating loss and tax credit carryforwards could 
be limited according to these provisions. Management believes such 
limitation could result in the loss of carryforward benefits which expire 
from 2004 through 2017. The use of the above loss carryforwards is dependent 
upon the Company's ability to achieve profitability. The Company's net 
operating loss carryforwards attributable to its DocuMagix subsidiary before 
its acquisition are limited according to these provisions to approximately 
$380,000 per year or approximately $5.7 million and $1.9 million in total 
through the applicable federal and California carryforward periods, 
respectively.


10.     Employee Benefit Plan

     The Company has a 401(k) tax deferred savings plan for all eligible 
employees. Participants may

                                      47

<PAGE>    47


        EFAX.COM, INC. (FORMERLY JETFAX, INC.) AND SUBSIDIARIES
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
        Years Ended December 31, 1998, and 1997, and Nine Months
                         Ended December 31, 1996 

contribute a percentage of their compensation, which may be limited by the 
plan administrator or applicable tax laws. The Company may make 
discretionary matching contributions. Such matching contributions were 
immaterial for the year ended December 31, 1998, December 31, 1997, and the 
nine months ended December 31, 1996. 

11.     Customer and Geographic Information

     Two customers accounted for 18% and 16%, respectively, of total 
revenues for the year ended December 31, 1998.  The same two customers 
accounted for 19% and 13%, respectively, of total revenues for the year 
ended December 31, 1997. Two customers accounted for 18% and 9%, 
respectively, of total revenues for the nine months ended December 31, 1996.

     The following is a summary of revenues by geographic region (in 
thousands):

<TABLE>
<CAPTION>
                                       Year           Year       Nine Months
                                      Ended           Ended        Ended
                                   December 31,   December 31,  December 31,
                                       1998           1997          1996
                                   ------------   ------------  ------------
  <S>                               <C>            <C>           <C>
   United States..................   $ 24,747       $ 16,386      $ 10,905  
   Europe.........................      4,665          4,545         2,369  
   Asia...........................        568          1,098         1,322  
   Other..........................        253            991           277  
                                     --------       --------      --------  
   Total..........................   $ 30,233       $ 23,020      $ 14,873  
                                     ========       ========      ========  

</TABLE>

12. Related Party Transactions

     Related party transactions and balances not otherwise disclosed herein 
were as follows (in thousands):

<TABLE>
<CAPTION>
                                            December 31,     December 31, 
                                                1998             1997     
                                            ------------     ------------ 
<S>                                          <C>              <C>

    Sales to related party..................  $    31           $   167   
    Purchases from related party............        -                12   

</TABLE>

     The Company has also granted a stockholder a nonexclusive royalty-free 
license to utilize certain of its intellectual property.


13.     Quarterly Results - Unaudited
(in thousands, except per share amounts)

<TABLE>
<CAPTION>

                                             Three Months Ended          
                                  --------------------------------------- 
                                  Mar. 31,  June 30,  Sept. 30,  Dec.  31,
                                    1998      1998      1998       1998   
                                  --------  --------  --------  --------- 
                                 <S>       <S>       <S>        <S>       
Total revenues................... $  7,698  $  7,722  $  7,748   $  7,064 
Income (loss) from operations.... $ (1,325) $     64  $    (85)  $   (441)
Net income (loss) applicable to
  common stockholders............ $ (1,289) $    114  $     37   $   (365)
Net income (loss) per share:
  Basic.......................... $  (0.11) $   0.01  $   0.00   $  (0.03)
  Diluted........................ $  (0.11) $   0.01  $   0.00   $  (0.03)
Shares used in computing per
  share amounts:
  Basic..........................   11,741    11,755    11,806     11,834 
  Diluted........................   11,741    13,136    12,838     11,834 


</TABLE>
                                      48

<PAGE>    48


         EFAX.COM, INC. (FORMERLY JETFAX, INC.) AND SUBSIDIARIES
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
        Years Ended December 31, 1998, and 1997, and Nine Months
                         Ended December 31, 1996 

<TABLE>
<CAPTION>
                                             Three Months Ended          
                                  --------------------------------------- 
                                  Mar. 31,  June 30,  Sept. 30,  Dec.  31,
                                    1997      1997      1997       1997   
                                  --------  --------  --------  --------- 
                                 <S>       <S>       <S>        <S>       
Total revenues................... $   5,655  $  5,374  $  6,295   $  5,696 
Loss from operations............. $  (1,547) $ (1,900) $   (289)  $ (2,438)
Net loss applicable to
  common stockholders............ $  (1,672) $ (1,957) $   (234)  $ (2,364)
Net loss per share:
  Basic.......................... $   (0.93) $  (0.43) $  (0.02)  $  (0.20)
  Diluted........................ $   (0.93) $  (0.43) $  (0.02)  $  (0.20)
Shares used in computing per
  share amounts:
  Basic..........................     1,795     4,513    11,599     11,649
  Diluted........................     1,795     4,513    11,599     11,649
Pro forma net loss per share:
  Basic.......................... $   (0.20) $  (0.21)                    
  Diluted........................ $   (0.20) $  (0.21)
Shares used in computing pro
  forma per share amounts: 
  Basic..........................     8,233     9,196    
  Diluted........................     8,233     9,196

</TABLE>

       *     See "Basic and Diluted Net Loss Per Share" in Note 1 for the 
determination of the number of shares used in computing net loss per share 
in accordance with the adoption of SEC Staff Accounting Bulletin No.98.


14. Subsequent Events

     On March 10, 1999, the Company received a waiver from the lender for 
the quarterly net income covenant.

     In early March 1999, E-Fax Communications, Inc. ("E-Fax 
Communications"), a California corporation, filed a complaint against 
eFax.com Inc., a Delaware corporation, in the United States District Court, 
Northern District of California.  The Complaint alleged that the Company had 
engaged in trademark and service mark infringement and unfair competition in 
connection with the Company's use of the name "eFax.com."  On April 9, 1999, 
the Company and E-Fax Communications signed a settlement agreement in which 
E-Fax Communications will dismiss all charges against the Company, transfer 
all rights to the mark "E-FAX" to the Company, stop all use of the "E-FAX" 
trademark, and change its corporate name.  The Company has agreed to pay E-
Fax Communications a combination of cash and Common Stock in an amount not 
exceeding $2.5 million based on the average share price of the Common Stock 
just prior to the stock registration becoming effective in the near term.   
The purchased trademark rights will become an asset of the Company and be 
amortized over the period of benefit, estimated to be seven to ten years.  
The parties consider the settlement a compromise of disputed claims and 
preferable to a possible extended legal proceeding with uncertain outcome.

                                      49
<PAGE>    49


<TABLE>
<CAPTION>
                                                               Schedule II

                                eFax.com, Inc.
                          VALUATION AND QUALIFYING ACCOUNTS
                                (in thousands)

                                 Balance at  Charged to           Balance at
                                Beginning of  Cost and  Deduction/   End of
                                   Period     Expenses  Write-off   Period
                                   ------     --------  ---------   ------
<S>                               <C>        <C>       <C>         <C>
Year Ended December 31, 1998:
  Accounts receivable allowance... $ 656      $    -    $  (379)    $  277
                                   =====      ======    =======     ======

Year Ended December 31, 1997:
  Accounts receivable allowance... $ 559      $   133   $   (36)    $  656
                                   =====      ======    =======     ======

Nine Months Ended December 31, 1996:
  Accounts receivable allowance... $ 426      $   153   $   (20)    $  559
                                   =====      ======    =======     ======
  Accrued loss on inventory
    purchase commitment........... $ 649      $  (280)  $  (369)         -
                                   =====      ======    =======     ======
</TABLE>

                                      50

<PAGE>    50




                                  SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities 
and Exchange Act of 1934, the registrant has duly caused this Report to be 
signed on its behalf by the undersigned, thereunto duly authorized, in the 
city of Menlo Park, State of California on the 9th day of April, 1999.

                                                   EFAX.COM, INC.

                                        By:  /s/  EDWARD R. PRINCE, III
                                             -----------------------------
                                                Edward R. Prince, III, 
                                             Chief Executive Officer and
                                                Chairman of the Board

                               POWER OF ATTORNEY

     KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature 
appears below constitutes and appoints Edward R. Prince, III and Allen K. 
Jones, and each of them, his attorneys-in-fact, each with the power of 
substitution, for him in any and all capacities, to sign any amendments to 
this Report on Form 10-K and to file the same, with exhibits thereto and 
other documents in connection therewith, with the Securities and Exchange 
Commission, hereby ratifying and confirming all that each of said attorneys-
in-fact, or his substitute or substitutes, may do or cause to be done by 
virtue hereof.

     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 date indicated.

<TABLE>
<CAPTION>

          Signatures                  Title                       Date
--------------------------  -----------------------------   ----------------
<S>                         <C>                              <C>
/s/  EDWARD R. PRINCE, III  Chief Executive Officer and       April 9, 1999
--------------------------    Chairman of the Board
 (Edward R. Prince, III)     (Principal Executive Officer)
  
/s/  ALLEN K. JONES         Vice President of Finance,        April 9, 1999
--------------------------  Chief Financial Officer,
     (Allen K. Jones)       and Secretary (Principal 
                            Financial and Accounting Officer)


/s/  THOMAS B. AKIN         Director                          April 9, 1999
--------------------------
   (Thomas B. Akin)

/s/  DOUGLAS Y. BECH        Director                          April 9, 1999
--------------------------
  (Douglas Y. Bech)

/s/  STEVEN J. CARNEVALE          Director                    April 9, 1999
---------------------------
  (Steven J. Carnevale)


/s/  CHUNG CHIU                   Director                    April 9, 1999
---------------------------
       (Chung Chiu )       


/s/  EDWARD R. PRINCE, JR.        Director                    April 9, 1999
---------------------------
  (Edward R. Prince, Jr.)


/s/  LON B. RADIN                 Director                    April 9, 1999
---------------------------
      (Lon B. Radin)


/s/  ALBERT E. SISTO              Director                    April 9, 1999
---------------------------
    (Albert E. Sisto)

</TABLE>

                                      51

<PAGE>    51



                                Exhibit Index
                                -------------

                                eFax.com, Inc.
               Exhibits Pursuant to Item 601 of Regulation S-K
<TABLE>
<CAPTION>

     (a) Exhibits
    <S>    <C>

     3.1**  Certificate of Incorporation of Registrant filed on August 3, 
            1988, as currently in effect.
     3.2**  Certificate of Amendment of Certificate of Incorporation, as
            filed on October 31, 1990.
     3.3**  Certificate of Amendment of Certificate of Incorporation, as
            filed on August 13, 1991.
     3.4**  Certificate of Amendment of Certificate of Incorporation, filed
            on February 12, 1996.
     3.5**  Certificate of Amendment of Certificate of Incorporation filed
            on February 12, 1996.
     3.6**  Certificate of Amendment of Certificate of Incorporation filed
            on November 4, 1996.
     3.7**  Amended Certificate of Designation of Series A Preferred Stock,
            as currently in effect.
     3.8**  Certificate of Designation of Series B Preferred Stock, as 
            currently in effect.
     3.9**  Certificate of Designation of Series C Preferred Stock, as 
            currently in effect.
     3.10** Certificate of Designation of Series D Preferred Stock, as 
            currently in effect.
     3.11** Certificate of Designation of Series E Preferred Stock, as 
            currently in effect.
     3.12** Amended Certificate of Designation of Series E Preferred Stock,
            as currently in effect.
     3.13** Certificate of Designation of Series P Preferred Stock, as 
            currently in effect.
     3.14** Certificate of Designation of Series F Preferred Stock, as 
            currently in effect.
     3.15** Form of Restated Certificate of Incorporation of Registrant to 
            be filed upon the closing of the Offering made under this 
            Registration Statement.
     3.16** Amended and Restated Bylaws of Registrant, as currently in 
            effect.
     3.17** Form of Amended and Restated Bylaws to be adopted effective as 
            of the closing of the Offering made under this Registration 
            Statement.
     3.18** Certificate of Ownership and Merger, merging eFax.com, Inc., a 
            Delaware corporation and wholly owned subsidiary of JetFax, 
            Inc., with and into JetFax, Inc. as filed on February 8, 1999.
     4.1**  Specimen Common Stock Certificate.
    10.1**  Form of Indemnification Agreement between Registrant and each of 
            its directors and officers.
    10.2**  1989 Stock Option Plan, as amended and restated, and forms of 
            Stock Option Agreements thereunder.
    10.3**  1995 Stock Plan, as amended and restated, and form of Stock 
            Option Agreement thereunder.
    10.4**  1997 Director Stock Option Plan and form of Stock Option 
            Agreement thereunder.
    10.5**  1997 Employee Stock Purchase Plan and forms of agreements 
            thereunder.
    10.6**  Lease Agreement dated December 1, 1992 between Registrant and 
            Lincoln Menlo Phase I Associates Limited for Menlo Park, 
            California office.
    10.7**  Lease dated December 18, 1991 between Crandell Development 
            Corporation and Robert S. Grant for Santa Barbara, California 
            office.
    10.8**  Registration Rights Agreement dated March 5, 1997 by and among 
            the Registrant and Rudy Prince, Lon B. Radin and Virginia 
            Snyder.
    10.9**  Stock and Warrant Purchase Agreement dated as of August 31, 1988 
            by and among Registrant and Purchasers of 299,995 shares of 
            Series A Preferred, as amended February 1994.
    10.10** Preferred Stock Purchase Agreement dated as of December 16, 1988 
            by and among Registrant and purchasers of 336,000 shares of 
            Series A Preferred, as amended February 1994.
    10.11** Preferred Stock Purchase Agreement dated as of June 22, 1989 by 
            and between Registrant and David A. Brewer.
    10.12** Form of Subscription and Stock Purchase Agreement dated January 
            1991 by and between Registrant and certain purchasers of Series 
            A Preferred Stock.
    10.13** Form of Subscription and Stock Purchase Agreement dated July 
            1989 by and between Registrant and certain purchasers of shares 
            of Series B Preferred Stock.
    10.14** Form of Subscription and Stock Purchase Agreement dated December 
            1989 by and between Registrant and certain purchasers of shares
            of Series B Preferred Stock. 
    10.15** Form of Subscription and Stock Purchase Agreement dated 
            August/September 1990 by and between Registrant and certain
            purchasers of shares of Series C Preferred Stock. 


                                      52

<PAGE>    52



    10.16**  Subscription and Stock Purchase Agreement for the purchase of 
             shares of Series C Preferred Stock dated September 6, 1990 by 
             and between Registrant and Draper Associates Polaris Fund.
    10.17**  Subscription and Stock Purchase Agreement dated September 7, 
             1990 by and between Registrant and Adlar Turnkey Manufacturing 
             Corporation.
    10.18**  Form of Subscription and Stock Purchase Agreement for shares of 
             Series D and Series E Preferred Stock and Warrants dated July 
             1991 by and between Registrant and certain purchasers of shares 
             of Series D and Series E Preferred Stock.
    10.19**  Series E Preferred Stock Purchase Agreement dated August 18, 
             1991, as amended as of January 30, 1996, by and between 
             Registrant and Ailicec California Corporation.
    10.20**  Series F Preferred Stock Purchase Agreement dated as of March 
             5, 1996 by and between Registrant and purchasers of Series F 
             Preferred Stock.
    10.21**  Purchase and Debt Restructuring Agreement dated as of August 3, 
             1994 by and between Registrant and Ailicec International
             Enterprises Limited.
    10.22**  Note Purchase Agreement dated August 3, 1994 by and between 
             Registrant and certain purchasers of notes and warrants for the 
             purchase of Common Stock.
    10.23**  Warrant to Purchase Stock dated December 31, 1994 by and
             between Registrant and Ailicec International Enterprises
             Limited.
    10.24**  Common Stock Purchase Warrant dated December 16, 1996, and an 
             amendment thereto dated February 13, 1997, by and between
             Registrant and Michael Crandell.
    10.25**  Common Stock Purchase Warrant dated December 16, 1996, and an 
             amendment thereto dated February 13, 1997, by and between 
             Registrant and Larry Crandell.
    10.26**  Asset Purchase Agreement dated July 31, 1996, as amended 
             December 16, 1996, by and between Registrant and the Crandell 
             Group, Inc.
    10.27^** Development Agreement dated September 25, 1991 and amended as
             of February 12, 1997 by and between Registrant and Ailicec 
             International Enterprises Limited.
    10.28**  Common Stock Purchase Option dated as of March 29, 1996 by and 
             between Registrant and Steven J. Carnevale.
    10.29**  Common Stock Purchase Option dated as of March 29, 1996 by and 
             between Registrant and Thomas B. Akin.
    10.30**  Promissory Note to Lon B. Radin dated March 1, 1992 from 
             Registrant.
    10.31^** Development and Supply Agreement dated June 30, 1995 by and 
             between Registrant and Samsung Electronics Corporation.
    10.32^** Software License Agreement dated September 30, 1996 by and 
             between Registrant and Oki Data Corporation.
    10.33^** Supply and License Agreement dated November 1, 1996 by and
             between Registrant and Pixel Magic, Inc.
    10.34^** Facsimile Product Development Agreement dated June 9, 1994 by 
             and between Registrant and Xerox Corporation.
    10.35^** Facsimile Product Development Agreement dated November 23, 1994 
             by and between Registrant and Xerox Corporation.
    10.36^** Master Development, Purchase and Distribution License Agreement 
             dated effective as of January 31, 1997 by and between 
             Registrant and Hewlett-Packard Company.
    10.38**  Security Agreement dated July 31, 1996 by and between 
             Registrant and the Crandell Group, Inc.
    10.39^** OEM Purchase Agreement dated February 22, 1995, as amended 
             February 21, 1997, by and Between Registrant and Oki America,
             Inc.
    10.40**  Loan and Security Agreement dated August 23, 1996 by and
             between Registrant and Cupertino National Bank & Trust and the 
             amendment thereto dated March 11, 1997 and the amendment
             Thereto dated March 31, 1997.
    10.41**  Form of Dealer Agreement.
    10.42^** Agreement dated November 30, 1994 by and between the Crandell 
             Group, Inc. and Intel Corporation as amended May 11, 1995, 
             assigned and delegated to Registrant as of July 30, 1996 and as 
             further amended December 23, 1996.
    10.43*** First Amendment dated September 15, 1997 to Lease Agreement 
             dated April 4, 1997 between Registrant and Lincoln Menlo Phase 
             I Associates Limited for Menlo Park, California office.
    10.44*** Second Amendment dated December 2, 1997 to Lease Agreement 
             dated April 4, 1997 between Registrant and Lincoln Menlo Phase 
             I Associates Limited for Menlo Park, California office, as 
             amended September 15, 1997.
    10.45*** Sublease dated August 1, 1997 between Registrant and Systems & 
             Software Consortium, Inc. Santa Barbara, California office.

                                       53

<PAGE>    53



    10.46*** Lease Agreement between Registrant and Landlord, K. Dalbey and 
             M. Tachouet dated March 28, 1997 for Beaverton, Oregon office.
    10.47*** Lease Agreement between DocuMagix and Metropolitan Life 
             Insurance Company dated November 1, 1995 for San Jose, 
             California office.
    10.48    First Amendment to the Sublease Agreement made and entered into
             as of June 1, 1998 by and between JetFax, Inc. and Lara 
             Technology, Inc.
    10.49    Sublease made and entered into as of April 1, 1998, by and
             between JetFax, Inc., and Silicon Valley Group, Inc., under the
             Master Lease dated November 1, 1995 between Spieker Properties, 
             LP, successor and interest to Metropolitan Life Insurance 
             Company, and as further modified by the Amendment dated 
             September 17, 1996. 
    10.50^^  Amended and Restated Loan and Security Agreement between the 
             Registrant and Venture Banking Group, a division of Cupertino 
             National Bank dated September 18, 1998.
    10.51#   Revision D to Master Development, Purchase and Distribution 
             License Agreement dated as of December 22, 1998 by and between 
             Registrant and Hewlett-Packard Company which incorporates by 
             reference Master Development, Purchase and Distribution License 
             Agreement dated effective as of January 31, 1997 by and between 
             Registrant and Hewlett-Packard Company (Exhibit 10.36^**).
    21.1     Subsidiaries of Registrant.
    23.1     Independent Auditors' Consent and Report on Schedule (see page 
             57).
    24.1     Power of Attorney (see Signature Page).
    27.1     Financial Data Schedule.
    27.2     Restated Financial Data Schedule.
    27.3     Restated Financial Data Schedule.
    27.4     Restated Financial Data Schedule.


</TABLE>
-------------
**    Incorporated by reference to the identically numbered exhibits filed 
      in response to Item 16(a), "Exhibits", of the Company's Registration 
      Statement on Form S-1, as amended, (File No. 333-23763), which was 
      declared effective on June 10, 1997. 
^     Confidential treatment has been granted with respect to certain 
      portions of the exhibit and the omitted portions have been separately 
      filed with the Commission.
***   Incorporated by reference to the identically numbered exhibits filed 
      in response pursuant to Item 601 of Regulation S-K of the Company's 
      filing on Annual Report on Form 10-K for the fiscal year ended January 
      3, 1998.
^^    Incorporated by reference to Exhibit 10.1 filed November 17, 1998, on 
      Report on Form 10-Q for the quarter ended October 3, 1998.
#     Portions of the exhibit have been omitted pursuant to a request for 
      confidential treatment and the omitted portions have been separately 
      filed with the Commission.

                                      54

<PAGE>    54