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UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


FORM 10-QSB

(Mark One)



|[X] | QUARTERLY
 REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ----------------------------------------------------------------------------------
|    |                                                                                   
|    | For the quarterly
 period ended September 30, 2002                                
|    |                                                                                   

|[  ] | TRANSITION
 REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|---- | -----------------------------------------------------------------------------------
|     |                                                                                    
|     | For the transition
 period from _____ to _____                                     
|     |                                                                                    



---

OZ COMMUNICATIONS, INC.

(Exact Name of Small Business
 Issuer as Specified in Its Charter)




|California                       | 95-4560875                      
|-------------------------------- | --------------------------------
|(State or
 Other Jurisdiction of | (I.R.S. Employer
 Identification
|Incorporation
 or Organization)  | No.)                            



Windsor Station, Room 150


1100, De La Gauchetiere West


Montreal, Canada H3B 2S2


(Address of Principal Executive
 Offices)


(514) 390-1333

(Issuers Telephone
 Number, Including Area Code)




---

APPLICABLE ONLY TO ISSUERS
 INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS

Check whether the registrant filed all documents
 and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act
 after the distribution of securities under a plan confirmed by a court.

Yes [  ]     No [  ]


As of September
 30, 2002, there were 85,472,436 shares of the registrants Common Stock outstanding.

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

1



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TABLE OF CONTENTS



|                              |                                                                                               |                                                      |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | Item 1. Financial Statements                                                                 
|                              |                                                                                               | CONSOLIDATED BALANCE SHEETS                         
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS               
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS               
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME     
|                              |                                                                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                              | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                              | ITEM 3. CONTROLS AND PROCEDURES                                                              
|PART II. OTHER INFORMATION   
|                              | ITEM 1. LEGAL PROCEEDINGS  NOT APPLICABLE.                                                  
|                              | ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS  NOT APPLICABLE                           
|                              | ITEM 3. DEFAULTS UPON SENIOR SECURITIES  NOT APPLICABLE                                     
|                              | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                              | ITEM 5. OTHER INFORMATION  NOT APPLICABLE.                                                  
|                              | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURE                    
|Exhibit Index                
|EXHIBIT 99.1                 
|EXHIBIT 99.2                 



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|INDEX                          |        
|------------------------------ | -------
|                               |        
|PART I.  FINANCIAL INFORMATION |        
|                               | ITEM 1.
|                               |        
|                               |        
|                               |        
|                               |        
|                               |        
|                               | ITEM 2.
|                               | ITEM 3.
|PART II.  OTHER INFORMATION    |        
|                               | ITEM 1.
|                               | ITEM 2.
|                               | ITEM 3.
|                               | ITEM 4.
|                               | ITEM 5.
|                               | ITEM 6.
|SIGNATURES                     |        

2



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PART I. FINANCIAL INFORMATION




Item 1. Financial Statements




OZ COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS



|                                                                                                     | December 31, |             | September 30,
|---------------------------------------------------------------------------------------------------- | ------------ | ----------- | -------------
|                                                                                                     |              |             |              
|                                                                                                     | 2001         |             | 2002         
|                                                                                                     |              |             |              
|Assets                                                                                               |              |             |              
|Current assets:                                                                                      |              |             |              
|Cash and cash equivalents                                                                            | $            | 651,265     |              
|Trade accounts receivable, net
 of allowance for doubtful accounts of $197,250 and $0                |              | 58,894      |              
|Accounts receivable from shareholders                                                                |              | 3,033,953   |              
|Prepaid expenses and other
 current assets                                                           |              | 215,995     |              
|                                                                                                     |              |             |              
|Total current assets                                                                                 |              | 3,960,107   |              
|Property and equipment, net                                                                          |              | 2,883,093   |              
|Intangibles, net                                                                                     |              | 3,739,582   |              
|Other assets                                                                                         |              | 161,595     |              
|                                                                                                     |              |             |              
|Total assets                                                                                         | $            | 10,744,377  |              
|                                                                                                     |              |             |              
|Liabilities and
 Shareholders Equity (Deficit)                                                      |              |             |              
|Current liabilities:                                                                                 |              |             |              
|Trade accounts payable                                                                               | $            | 764,966     |              
|Accrued liabilities                                                                                  |              | 860,685     |              
|Deferred revenue                                                                                     |              | 8,348,974   |              
|Current portion of notes payable                                                                     |              | 775,941     |              
|                                                                                                     |              |             |              
|Total current liabilities                                                                            |              | 10,750,566  |              
|Notes payable:                                                                                       |              | 363,624     |              
|                                                                                                     |              |             |              
|Total liabilities                                                                                    |              | 11,114,190  |              
|                                                                                                     |              |             |              
|Redeemable common stock, $0.01
 par value                                                            |              | 4,500,000   |              
|Shareholders equity
 (deficit):                                                                     |              |             |              
|Convertible preferred stock,
 $0.01 par value:                                                       |              |             |              
|25,000,000 shares authorized:                                                                        |              |             |              
|14,270,964 and 13,970,964 shares
 issued and outstanding (liquidation value $13,970,964)             |              | 16,546,446  |              
|Common stock, $0.01 par value:                                                                       |              |             |              
|275,000,000 shares authorized
 90,387,596 and 85,472,436 shares issued and outstanding, respectively |              | 903,876     |              
|Additional paid-in capital                                                                           |              | 31,367,041  |              
|Notes receivable from shareholders                                                                   |              | (353,900    | )            
|Deferred compensation                                                                                |              | (2,305,848  | )            
|Accumulated other comprehensive
 income - cumulative translation adjustment                          |              | 704,149     |              
|Accumulated deficit                                                                                  |              | (51,731,577 | )            
|                                                                                                     |              |             |              
|Total shareholders equity
 (deficit)                                                                |              | (4,869,813  | )            
|                                                                                                     |              |             |              
|Total liabilities and
 shareholders equity (deficit)                                                | $            | 10,744,377  |              
|                                                                                                     |              |             |              

The accompanying notes are an integral part of the consolidated
 financial statements.

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OZ COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS(unaudited)



|                                                                                                             |  | FOR THE THREE MONTHSENDED SEPTEMBER 30, |            | FOR THE NINE MONTHSENDED SEPTEMBER 30,
|------------------------------------------------------------------------------------------------------------ |  | --------------------------------------- | ---------- | --------------------------------------
|                                                                                                             |  |                                         |            |                                       
|                                                                                                             |  | 2001                                    |            | 2002                                  
|                                                                                                             |  |                                         |            |                                       
|REVENUES                                                                                                     |  |                                         |            |                                       
|Development services                                                                                         |  |                                         | 1,163,020  |                                       
|Client services                                                                                              |  |                                         | 142,907    |                                       
|License fees                                                                                                 |  |                                         | 59,143     |                                       
|                                                                                                             |  |                                         |            |                                       
|Total Revenues                                                                                               |  |                                         | 1,365,070  |                                       
|COST OF REVENUES                                                                                             |  |                                         | 1,501,493  |                                       
|                                                                                                             |  |                                         |            |                                       
|GROSS PROFIT                                                                                                 |  |                                         | (136,423   | )                                     
|OPERATING EXPENSES                                                                                           |  |                                         |            |                                       
|Sales and marketing                                                                                          |  |                                         | 404,798    |                                       
|General and administrative(including stock-based
 compensation of $430,484, $195,773, $863,593 and $622,440) |  |                                         | 3,074,402  |                                       
|Research and development                                                                                     |  |                                         | 488,901    |                                       
|Impairment loss on intangible assets                                                                         |  |                                         |           |                                       
|                                                                                                             |  |                                         |            |                                       
|Total operating expenses                                                                                     |  |                                         | 3,968,101  |                                       
|                                                                                                             |  |                                         |            |                                       
|Operating loss                                                                                               |  |                                         | (4,104,524 | )                                     
|Contract termination fee                                                                                     |  |                                         |           |                                       
|Interest income                                                                                              |  |                                         | 11,150     |                                       
|Interest expense                                                                                             |  |                                         | (31,605    | )                                     
|Other income (expense), net                                                                                  |  |                                         | (85,297    | )                                     
|                                                                                                             |  |                                         |            |                                       
|Income (loss) before provision for income taxes and minority interest                                        |  |                                         | (4,210,276 | )                                     
|Income taxes                                                                                                 |  |                                         |           |                                       
|Minority interest                                                                                            |  |                                         | (7,854     | )                                     
|                                                                                                             |  |                                         |            |                                       
|Net income (loss)                                                                                            |  | $                                       | (4,218,130 | )                                     
|                                                                                                             |  |                                         |            |                                       
|NET INCOME (LOSS) PER SHARE:                                                                                 |  |                                         |            |                                       
|Basic                                                                                                        |  | $                                       | (0.05      | )                                     
|                                                                                                             |  |                                         |            |                                       
|Diluted                                                                                                      |  | $                                       | (0.05      | )                                     
|                                                                                                             |  |                                         |            |                                       

The accompanying notes are an integral
 part of the consolidated financial statements.

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OZ COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)



|                                                                                           | FOR THE THREE MONTHS |            | FOR THE NINE MONTHS
|------------------------------------------------------------------------------------------ | -------------------- | ---------- | -------------------
|                                                                                           | ENDED SEPTEMBER 30,  |            | ENDED SEPTEMBER 30,
|                                                                                           |                      |            |                    
|                                                                                           | 2001                 |            | 2002               
|                                                                                           |                      |            |                    
|Cash flows from operating activities:                                                      |                      |            |                    
|Net income (loss)                                                                          | $                    | (4,218,130 | )                  
|Adjustments to reconcile net loss to
 net cash provided by (used in) operating activities: |                      |            |                    
|Depreciation and amortization                                                              |                      | 1,150,689  |                    
|Impairment loss on intangible assets                                                       |                      |           |                    
|Loss on disposal of property and equipment                                                 |                      | 122,127    |                    
|Dilution of investment                                                                     |                      |           |                    
|Minority interest                                                                          |                      | 36,036     |                    
|Amortization of deferred stock-based compensation                                          |                      | 430,484    |                    
|Issuance of notes payable for employment services rendered                                 |                      |           |                    
|Changes in operating assets and liabilities:                                               |                      |            |                    
|Accounts receivable                                                                        |                      | 1,404,617  |                    
|Prepaid expenses and other assets                                                          |                      | 135,380    |                    
|Accounts payable                                                                           |                      | 199,596    |                    
|Accrued liabilities                                                                        |                      | (267,799   | )                  
|Deferred revenue                                                                           |                      | 1,355,120  |                    
|                                                                                           |                      |            |                    
|Net cash provided by (used in) operating activities                                        |                      | 348,120    |                    
|                                                                                           |                      |            |                    
|Cash flows from investing activities:                                                      |                      |            |                    
|Purchases of property and equipment                                                        |                      | (84,043    | )                  
|Proceeds from sales of property and equipment                                              |                      | 28,348     |                    
|                                                                                           |                      |            |                    
|Net cash provided by (used in) investing activities                                        |                      | (55,695    | )                  
|                                                                                           |                      |            |                    
|Cash flows from financing activities:                                                      |                      |            |                    
|Issuance of notes payable                                                                  |                      |           |                    
|Exercise of employee stock options                                                         |                      | 4,800      |                    
|Repayments of notes payable                                                                |                      | (5,369     | )                  
|                                                                                           |                      |            |                    
|Net cash provided by (used in) financing activities                                        |                      | (569       | )                  
|                                                                                           |                      |            |                    
|Effect of currency exchange rates on cash                                                  |                      | (451,608   | )                  
|                                                                                           |                      |            |                    
|Net increase (decrease) in cash                                                            |                      | (159,752   | )                  
|Cash and cash equivalents at beginning of period                                           |                      | 1,207,634  |                    
|                                                                                           |                      |            |                    
|Cash and cash equivalents at end of period                                                 | $                    | 1,047,882  |                    
|                                                                                           |                      |            |                    
|Supplemental cash flow information:                                                        |                      |            |                    
|Cash paid for interest                                                                     | $                    | 7,210      |                    
|                                                                                           |                      |            |                    
|Supplemental disclosures of non-cash investing and financing activities:                   |                      |            |                    
|Conversion of preferred stock to common stock                                              | $                    |           |                    
|                                                                                           |                      |            |                    
|Common stock issued for professional services                                              | $                    |           |                    
|                                                                                           |                      |            |                    
|Common stock reacquired in connection with termination of Microcell development contract   |                      |           |                    
|                                                                                           |                      |            |                    
|Dilution of investment                                                                     | $                    |           |                    
|                                                                                           |                      |            |                    

The accompanying notes are an integral part of the consolidated financial statements.

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OZ COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)



|                                        |                                         |            |                                        |  |   |            |   |  |      |             |      |  |   |           | 
|--------------------------------------- | --------------------------------------- | ---------- | -------------------------------------- |  | - | ---------- | - |  | ---- | ----------- | ---- |  | - | --------- | 
|                                        | FOR THE THREE MONTHSENDED SEPTEMBER 30, |            | FOR THE NINE MONTHSENDED SEPTEMBER 30,
|                                        |                                         |            |                                       
|                                        |                                         | 2001       |                                        |  |   | 2002       |   |  | 2001 |             | 2002
|                                        |                                         |            |                                        |  |   |            |  
|Net income (loss)                       | $                                       | (4,218,130 | )                                      |  | $ | (969,998   | ) |  |      | (12,956,473 | )    |  | $ | 1,467,017 | 
|Other comprehensive income (loss):      |                                         |            |                                        |  |   |            |   |  |      |             |      |  |   |           | 
|Foreign currency translation adjustment |                                         | (433,720   | )                                      |  |   | (67,991    | ) |  |      | 9,531       |      |  |   | 116,163   | 
|                                        |                                         |            |                                        |  |   |            |   |  |      |             |      |  |   |           | 
|Comprehensive income (loss)             | $                                       | (4,651,850 | )                                      |  | $ | (1,037,989 | ) |  | $    | (12,946,942 | )    |  | $ | 1,583,180 | 
|                                        |                                         |            |                                        |  |   |            |   |  |      |             |      |  |   |           | 

The accompanying notes are an
 integral part of the consolidated financial statements.

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OZ COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002

The accompanying financial statements of OZ Communications, Inc. and subsidiaries (theCompany)
 are unaudited and have been prepared pursuant to the rules and regulations of
 the U.S.
Securities and Exchange Commission. Certain information and note disclosures
 normally included in
annual financial statements prepared in accordance with generally accepted accounting
 principles in the
United States of America have been condensed or omitted pursuant to those rules and
 regulations. Accordingly,
these interim financial statements and notes should be read in connection
 with the Companys
2001 Annual Report on Form 10-KSB. The results of operations for the interim periods shown
in this report are not necessarily indicative of results to be expected for other
 interim periods or for the
full fiscal year. In the opinion of management, the information contained herein
 reflects all adjustments
necessary for a fair statement of the interim results of operations.

The year-end balance sheet data was derived from audited financial statements, but does not
include all disclosures required by generally accepted accounting principles.

The
 accompanying consolidated financial statements include accounts of the Company and its
subsidiaries. The Companys consolidated financial statements have been prepared assuming the Company
will continue as a going concern. The Company has devoted substantial efforts to developing new
products and has incurred annual losses and negative cash flows from operations since inception. In
January and February of 2002, the Company terminated all commercial agreements with Ericsson, and
amended several contracts with Microcell. Before their termination or amendment, as the case may be,
these agreements provided consistent cash payments in consideration for development and other services.
As a result of the termination or amendment of the agreements, the Company now owns all of its
own technology and is not dependent upon the sales and marketing efforts of either Ericsson or Microcell.
The Company now has completed products that it must sell either directly or through channel
partners. This new business is considerably different and riskier than its prior business as a developer
of software solutions for Ericsson and Microcell. The Company does not believe that its operating
requirements for the next 3 months can be funded from cash provided by operations and cash reserves.
As of September 30, 2002, cash reserves were $0.8 million. These factors raise substantial doubt about
the Companys ability to continue as a going concern. The Company is seeking to raise additional
capital through the offering of debt or equity securities. The Company is also limiting discretionary
expenses in all categories. However, there can be no assurance that the Companys efforts to achieve
profitable operations or raise additional capital will be successful. These consolidated financial statements
do not include any adjustment that might result from the outcome of this uncertainty.

Certain 2001 amounts have been reclassified to conform to the 2002 presentation.

2.   NET INCOME (LOSS) PER SHARE

Basic net
 income (loss) per share is computed using the weighted average number of common
shares outstanding for the period. Diluted net income (loss) per share is computed using the weighted
average number of common shares outstanding and any potentially dilutive securities.
 Potentially dilutive
securities are not included in the 2001 diluted net loss per share calculations as their inclusion
would be anti-dilutive to the basic net loss per share calculations. Potentially dilutive securities not
included in the diluted net loss per share calculation and outstanding during the nine months ended
September 30, 2001, included preferred shares, stock options, warrants and the put option on redeemable
common stock. Potentially dilutive securities included in the diluted net
 income per share calculation
and outstanding during the nine months ended September 30, 2002 included preferred shares and
the put option on redeemable common stock.

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The components of basic
 and diluted net loss per share are as follows:




|                                                    | (unaudited)NINE MONTHS ENDED SEPTEMBER 30, 
|--------------------------------------------------- | -------------------------------------------
|                                                    |                                            
|                                                    | 2001                                       
|                                                    |                                            
|Net income (loss)                                   | $                                          
|                                                    |                                            
|Weighted average outstanding shares of common stock |                                            
|Net income (loss) per share:                        |                                            
|Basic                                               | $                                          
|                                                    |                                            
|Diluted                                             | $                                          
|                                                    |                                            
|                                                    |                                            
|                                                    | (unaudited)THREE MONTHS ENDED SEPTEMBER 30,
|                                                    |                                            
|                                                    |                                            
|                                                    |                                            
|Net income (loss)                                   | $                                          
|                                                    |                                            
|Weighted average outstanding shares of common stock |                                            
|Net income (loss) per share:                        |                                            
|Basic                                               | $                                          
|                                                    |                                            
|Diluted                                             | $                                          
|                                                    |                                            

3.    RELATED PARTY TRANSACTIONS



On January 24, 2002 the Company entered into an agreement with Ericsson Radio Systems
AB, Ericsson Telecom AB, Ericsson Inc. and Ericsson Canada Inc. ending more than three years of
cooperation between the Company and Ericsson to develop and market the iPulse software. Under the
terms of the agreement Ericsson paid the Company an aggregate of $4.35 million during the quarter
ended March 31, 2002 and irrevocably (a) assigned to the Company an equal and undivided share of
its right, title and interest in and to (i) the iPulse software, including source and object code,
 (ii) theiPulse trademark, and (b) granted to the Company a worldwide and perpetual license for all purposes
to all other intellectual property rights contained in and related to the iPulse software, including any
patent rights, copyrights, rights to photographs, design rights, technical documentation and any other
industrial and intellectual property rights contained in the source and object code. The Company and
Ericsson each have the right to exploit the iPulse software in any way that they see fit. The agreement
expressly terminates all other contracts between the Company and Ericsson except for the shareholder
rights agreement made and entered into as of February 4, 1999 by and between the Company and
Ericsson Inc. and certain shareholders of the Company.




As a result of the termination of the Ericsson agreements, the Company has recognized a
contract termination fee, revenues from the Ericsson Canada, Inc. development agreement, and an
impairment loss on the related intangibles that the Company recorded in connection with the
acquisition of the shares of MCE Holding Corporation in November 2000. In the quarter ended March
31, 2002, the Company recognized $3.9 million of the $6 million paid by Ericsson as a contract
termination fee (other non-operating revenue) and $3.6 million in revenues from the development
agreement with Ericsson Canada Inc. that was recorded on the December 31, 2001 balance sheet as
deferred revenue.




On February 28, 2002, the Company and its Canadian subsidiary entered into a series of
amending agreements with Microcell Labs and Microcell Capital II Inc. Under the terms of the agree-


8



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ments the parties have terminated all specific
 development agreements between the parties, terminated
Microcells agreement to use the Company as its preferred development resource in the field of wireless
Internet messaging services, terminated Microcells right to require the Company to redeem Microcells
shares of the Companys common stock, terminated Microcells obligation to pay minimum
quarterly payments of $750,000 for development services, terminated a license of Ericssons iPulse 1.5
and delivered a license of the OZ® Instant Communications Platform. The license is conditioned upon
the purchase by Microcell Labs Inc. of annual support and maintenance contracts from the Company,
but is otherwise royalty-free for the first three years and incremental capacity required after the initial
three-year period will be purchased separately at competitive prices and terms. In addition, the parties
modified a shareholder agreement to change certain participation rights of Microcell and to provide
that the obligation of certain of the Companys shareholders to vote a sufficient number of shares to
elect Microcells designee as a director is applicable only to the election of directors held at the Companys
2002 annual shareholders meeting. In partial consideration for the Companys agreement to
make the amendments, Microcell has surrendered to the Company 5,299,160 shares of the Companys
common stock for cancellation.

In the quarter
 ended March 31, 2002, the Company recognized $4.5 million in revenue from
various specific development agreements with Microcell Labs Inc. that previously was recorded on the
balance sheet as deferred revenue, recorded a $3.1 million non-cash impairment loss on intangible
assets as an operating expense, reclassified $4.5 million of redeemable common stock as additional
paid-in capital, and allocated $529,916 among common stock and paid-in capital, and $220,084 to bad
debt expense related to $750,000 that was due in November 2001 from Microcell Labs Inc. under the
general co-operation and development agreement, but which was forgiven in connection with the return
of 5,299,160 common shares of the Company as part of the amendments.

In September 2002, smartVR ehf., then
 a wholly owned subsidiary of the Companys
SmartVR, Inc. subsidiary raised $588,000 from investors in Iceland. In this transaction, notes payable
of $816,803 were converted into shares of SmartVR, Inc. preferred stock. All outstanding shares of
SmartVR, Inc., including those held by the Company, were then exchanged for new shares of stock in
smartVR ehf., leaving SmartVR, Inc. the wholly owned subsidiary of smartVR ehf. As a result of this
transaction, the Company now holds less than 10% of the outstanding capital stock of smartVR ehf.

4.   RECENT ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 141, Business Combinations and SFAS No.
 142,Goodwill and Other Intangible Assets. SFAS No. 141 requires business combinations initiated
 after
June 30, 2001 to be accounted for using the purchase method of accounting, and broadens the criteria
for recording intangible assets separate from goodwill. Recorded goodwill and intangibles will be
evaluated against these new criteria and may result in an intangible asset being reclassified as goodwill,
or alternatively, amounts initially recorded as goodwill may be separately identified and recognized
apart from goodwill. SFAS No. 142 requires the use of a non-amortization approach to account for
purchased goodwill and certain intangibles. Under a non-amortization approach, goodwill and certain
intangibles are not amortized into results of operations, but instead are reviewed for impairment and
written down and charged to results of operations only in the periods in which the recorded value of
goodwill and certain intangibles is more than its fair value. The provisions of each statement that apply
to goodwill and intangible assets acquired prior to June 30, 2001 were adopted by the Company on
January 1, 2002. The adoption of SFAS No. 141 and 142 on January 1, 2002 did not have a material
effect on the Companys consolidated financial position or results of operations.

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations.
SFAS No. 143 will be effective January 1, 2003. Management does not expect that the adoption
of the statement will have a material effect on the Companys consolidated financial position or
results of operations.

In August 2001, the FASB
 issued SFAS No. 144, Accounting of the Impairment or Disposal
of Long-Lived Assets. The adoption of SFAS No. 144 on January 1, 2002 did not have a material
effect on the Companys consolidated financial position or results of operations.

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5.       
    GEOGRAPHIC, SEGMENT, AND SIGNIFICANT
 CUSTOMER INFORMATION

The Companys chief
 operating decision maker is considered to be the Companys Chief
 Executive Officer (CEO). The CEO reviews financial information presented
 on a consolidated basis accompanied by disaggregated information about revenues
 by geographic region and by product for purposes of making operating decisions and
 assessing financial performance. Through and including the three months ended March
 31, 2002, the Company operated in three operating segments: 1) development of software
 that enables the delivery of Internet-based services to mass-market wireless telephones,
 2) the delivery of Internet-based services to wireless network operators and Internet
 businesses, and related consulting services and 3) the licensing of the Companys core
 technologies to Ericsson and the licensing of the Companys products
 to network operators and Internet businesses. The Company no longer performs development
 services, except as development services may be incidental to the licensing of our
 products. During the three months ended September 30, 2002, the Company operated
 in two operating segments: 1) the delivery of Wireless Village-based services to
 wireless network operators and related consulting services, and 2) the licensing
 of the Companys products to network operators and mobile handset manufacturers.
 The disaggregated information reviewed on a product basis by the CEO is as follows:



|                | THREE MONTHS ENDEDSEPTEMBER 30, |           | NINE MONTHS ENDEDSEPTEMBER 30,
|--------------- | ------------------------------- | --------- | ------------------------------
|                |                                 |           |                               
|                | 2001                            |           | 2002                          
|                |                                 |           |                               
|Revenues:       |                                 |           |                               
|Development     | $                               | 1,163,020 |                               
|Client services |                                 | 142,907   |                               
|License         |                                 | 59,143    |                               
|                |                                 |           |                               
|Total revenues  | $                               | 1,365,070 |                               
|                |                                 |           |                               

Revenues attributable
 to geographic regions are based upon the origination of the sales. The Company
 currently has a corporate development employee based in Reykjavik, Iceland to address
 the European markets and sales operations in Montreal to address the United States
 and Canadian markets. Information regarding the Companys revenues in different
 geographic regions is as follows:



|                             | THREE MONTHS ENDEDSEPTEMBER 30, |           | NINE MONTHS ENDEDSEPTEMBER 30,
|---------------------------- | ------------------------------- | --------- | ------------------------------
|                             |                                 |           |                               
|                             | 2001                            |           | 2002                          
|                             |                                 |           |                               
|Revenues:                    |                                 |           |                               
|North America                | $                               | 1,195,746 |                               
|Europe (principally Iceland) |                                 | 169,324   |                               
|                             |                                 |           |                               
|Total revenues               | $                               | 1,365,070 |                               
|                             |                                 |           |                               

Ericsson and
 Microcell were the Companys main significant source of revenues during the
 three and nine months ended September 30, 2002. Revenues attributable to Ericsson
 comprised 65% and 46% of the total revenues for the three and nine months ended
 September 30, 2002, respectively. Whereas revenues attributable to Microcell comprised
 0% and 52% of the total revenues for the three and nine months ended September 30,
 2002, respectively.






|ITEM 2. | MANAGEMENTS DISCUSSION
 AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | --------------------------------------------------------------------------------------

This Managements Discussion
 and Analysis of Financial Condition and Results of Operations
 and other parts of this Form 10-QSB contain forward-looking statements that involve
 risks and uncertainties. Words such as anticipates, expects,
 intends, plans, believes, seeks,
 estimates, may, will, should,
 could, potential, continues, predicts
 and similar expressions and the negatives of such expressions identify such
 forward-looking statements. These statements are

10



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##### Table of Contents



not guarantees of future performance and
 are subject to numerous assumptions, risks and uncertainties and a number of factors
 that could cause actual results to differ materially from those expressed, forecasted
 or implied in such forward looking statements. Factors that might cause such a
 difference include, but are not limited to, those discussed in our Annual Report
 on Form 10-KSB and those appearing elsewhere in this Form 10-QSB. You are cautioned
 not to place undue reliance on these forward-looking statements, which reflect
 managements analysis only as of the date hereof. We assume no obligation to update these
 forward-looking statements to reflect actual results or changes in factors or assumptions
 affecting such forward-looking statements.

Overview

Since we were
 incorporated in December 1995, we have devoted substantially all of our resources
 to developing our multi-user communications platform, first in the context of three-dimensional
 (3D) online environments, and since 1997, primarily in the context of
 wireless telecommunications networks. In 1998, we began working with Ericsson to
 develop a wireless Internet communications platform that Ericsson called iPulse based
 on this technology. In January 2002 we terminated our development relationship
 with Ericsson and have been granted a fully paid up, nonexclusive and perpetual
 license to use the iPulse technology to develop our own products. We have combined
 the iPulse communications platform with the applications that we used to refer to
 as mPresence to create an integrated mobile instant messaging and presence
 management suite of Wireless Village compliant products, which we now call the OZ® Instant
 Communication Solution. We have also developed a mobile
 group-collaboration product that we call the OZ® Mobile Communities Solution. We
 first recognized development revenues in November 1998, and generated
 development revenues of approximately $7.7 million per year in the years ended December
 31, 2000 and 2001. We first recognized license revenues in February 1999, and generated
 license revenues of approximately $0.28 million in the year ended December 31, 2000
 and approximately $0.24 million for the year ended December 31, 2001.

We had net
 income of approximately $1.5 million for the nine months ended September 30, 2002
 and we incurred a net loss of approximately $24.6 million for the year ended December
 31, 2001 and $14.0 million for the year ended December 31, 2000. For the three
 months ended September 30, 2002, we had a net loss of approximately $1.0 million.
 As of September 30, 2002, we had an accumulated deficit of approximately $50.3
 million.

In the year
 ended December 31, 2001 we generated revenues from the delivery of development services,
 hosting and license fees. While in the nine months ended September 30, 2002 we
 have recognized revenues from development contracts that have terminated during
 the nine months, we do not expect to continue to provide significant development
 services or to recognize significant development revenues in future quarters, except
 as development services may be incidental to the licensing of our products. An
 example of this kind of development might be the customization of a user interface
 for a licensee of one of our products.

In late 2001
 we began supporting the Wireless Village Initiative. Founded by Ericsson, Motorola
 and Nokia, Wireless Village is the Mobile Instant Messaging and Presence Services
 Initiative. The Wireless Village Initiative was formed in April 2001 to define
 and promote a set of universal specifications for mobile instant messaging and presence
 services. The specifications are intended to be used for exchanging messages and
 presence information between mobile devices, mobile services and Internet-based
 instant messaging services, all fully interoperable and leveraging existing web
 technologies. Recent new additions to the Wireless Village Initiative include AOL
 and Vodafone. We became active in the Wireless Village Initiative and we have made
 our OZ® Instant Communication Solution software suite Wireless Village compliant.
 OZ® Instant Communication Solution has received favorable attention from some
 of the mobile handset vendors. As a result, we secured a contract with a major
 handset vendor to develop Wireless Village clients that will be built into mobile
 phone handsets that are scheduled to become available sometime in the first half
 of next year. We are actively discussing the development of similar products for
 a number of the other handset vendors. There can be no assurance,
however, that the Company will develop such products.

We expect
 to generate future revenues from license fees and Wireless Village based services
 that we intend to provide to mobile network operators. We expect to begin receiving
 licensing revenues from customers of the OZ® Instant Communication Solution and
 our value-added services in

11



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##### Table of Contents



early 2003. For the reasons discussed in
 this quarterly report on Form 10-QSB, however, we have no assurance that we will
 recognize significant revenues from these or other products.

Our business
 strategy relies to a significant extent on the success of Wireless Village as
 a standard for exchanging messages and presence information between mobile devices,
 mobile services and Internet-based instant messaging services, and the widespread
 propagation of our Wireless Village compliant products through our relationships
 with mobile handset manufacturers, network operators and integrators and resellers
 of software solutions to mobile network operators.

Consequently,
 we expect that our future revenues will be derived primarily from the following:



| | Licensing
 fees and/or revenue sharing payments paid by customers with respect to sales and
 licenses of OZ® Instant Communications Solution and OZ® Mobile Communities Solution;
 and
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                       
| | Fees from
 client services that we provide to our customers.                                                                                                                          

Our future
 success depends on our ability to derive revenues from the sources identified above.
 If the market for Wireless Village-based services via wireless telephones fails
 to develop or develops more slowly than expected, then our business would be materially
 and adversely affected. In addition, because there are a relatively small number
 of mobile handset manufacturers and network operators worldwide, any failure to
 sell our products to network operator customers successfully could result in a shortfall
 in revenues that could not be readily offset by other revenue sources.

We expect
 that our gross profit on revenues derived from sales of our products and services
 through future channel partners will be less than the gross profit on revenues from
 direct sales. Our success, in particular in international markets, depends in part
 on our ability to increase sales of our products and services through value-added
 resellers and to expand our indirect distribution channels.

We expect
 sales in Europe and North America to account for a significant portion of our revenues
 in the foreseeable future. Risks inherent in our international business activities
 include:



| | failure
 by us and/or third parties to develop localized content and applications that are
 used with our products;
|- | -------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                    
| | costs of
 localizing our products for foreign markets;                                                             
|  |                                                                                                                    
| | difficulties
 in staffing and managing foreign operations;                                                         
|  |                                                                                                                    
| | longer
 accounts receivable collection time;                                                                       
|  |                                                                                                                    
| | political
 and economic instability;                                                                               
|  |                                                                                                                    
| | fluctuations
 in foreign currency exchange rates;                                                                  
|  |                                                                                                                    
| | reduced
 protection of intellectual property rights in some foreign countries;                                     
|  |                                                                                                                    
| | contractual
 provisions governed by foreign laws;                                                                  
|  |                                                                                                                    
| | export
 restrictions on encryption and other technologies;                                                         
|  |                                                                                                                    
| | potentially
 adverse tax consequences; and                                                                         
|  |                                                                                                                    
| | the burden
 of complying with complex and changing regulatory requirements.                                        

Since early
 2000, we have invested substantially in research and development, marketing, domestic
 and international sales channels, professional services and our general and administrative
 infrastructure. These investments have significantly increased our operating expenses,
 contributing to net losses in all but one fiscal quarter since our inception. Our
 limited operating history makes it difficult to forecast future operating results.
 Although we believe that our revenues from sales of OZ® Instant Communications
 Solutions will commence by the first quarter of 2003 and grow over the following
 several quarters, our revenues may not increase at a rate sufficient to achieve
 and maintain profitability, if at all. We anticipate that our operating expenses
 will continue to decrease in the short term as we make further reductions in our
 work force and further reduce overhead. Even if we were to achieve profitability
 in any future quarter, we may not sustain or increase profitability on a quarterly
 or annual basis.

12



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Critical Accounting Policies

The Companys accounting
 policies are described in Note 1 of the notes to the consolidated
 financial statements in the Companys 2001 Annual Report on Form 10-KSB. As
 disclosed in Note 1 to the consolidated financial statements, the preparation of
 financial statements in conformity with generally accepted accounting principles
 in the United States of America requires management to make estimates and assumptions
 about future events that affect the amounts reported in the financial statements
 and accompanying notes. Future events and their effects cannot be determined with
 absolute certainty. Therefore, the determination of estimates requires the exercise
 of judgment. Actual results inevitably will differ from those estimates, and such
 differences may be material to the financial statements.

The most significant
 accounting estimates inherent in the preparation of the Companys financial
 statements include estimates associated with its revenue recognition, evaluation
 of the recoverability of long-lived assets, collectibility of accounts receivable,
 valuation of common stock issued in non-cash transactions, and assumptions used
 to determine the fair value of the Companys stock at the date stock options
 are granted. Various assumptions and other factors underlie the determination of
 these significant estimates. The process of determining significant estimates is
 fact specific and takes into account factors such as historical experience, current
 and expected economic conditions, and in some cases valuation techniques used by
 valuation specialists. The Company constantly re-evaluates these significant factors
 and makes adjustments where facts and circumstances dictate. Historically, actual
 results have not significantly deviated from those determined using the estimates
 described above.

RESULTS OF OPERATIONS



Revenues

Our revenues
 decreased from $1.4 million for the three months ended September 30, 2001 to $0.1
 million for the three months ended September 30, 2002 and increased from $5.8 million
 for the nine months ended September 30, 2001 to $8.7 million for the nine months
 ended September 30, 2002. The decrease in three-month revenues is primarily the
 result of the termination of the development agreements with Ericsson and Microcell.
 The increase in nine-month revenues was attributable to the recognition of payments
 from Microcell and Ericsson during the three months ended March 31, 2002, which
 prior to that time had been recorded on the Companys balance sheet as deferred
 revenue. Neither Ericsson nor Microcell is expected to be a source of revenue in
 the last quarter of 2002.

Cost of Revenues

For periods
 up to and including the quarter ended March 31, 2002, cost of revenues consisted
 of compensation and independent consultant costs for personnel engaged in our development
 services operations and related overhead. As we shift our sales focus to sales
 and licenses of our own services, we expect to incur the cost of third-party license
 and support fees. Cost of revenues decreased from $1.5 million for the three months
 ended September 30, 2001 to $0.1 million for the three months ended September 30,
 2002 and from $5.0 million for the nine months ended September 30, 2001 to $1.4
 million for the nine months ended September 30, 2002. The primary reason for the
 decrease is the result of the termination of the development agreements with Ericsson
 and Microcell. As a percentage of revenues, cost of revenues for the three months
 ended September 30, 2001 and 2002 were 110% and 101%, respectively. As a percentage
 of revenues, cost of revenues for the nine months ended September 30, 2001 and 2002
 were 85% and 16%, respectively

Sales and Marketing Expenses

Sales and
 marketing expenses consist primarily of compensation and related costs for sales
 and marketing personnel, sales commissions, marketing programs, public relations,
 promotional materials, travel expenses and trade show exhibit expenses. Sales and
 marketing expenses decreased 26% from $0.4 million for the three months ended September
 30, 2001 to $0.3 million for the three months ended September 30, 2002. Sales
 and marketing expenses decreased 32% from $2.1 million for the nine months ended
 September 30, 2001 to $1.5 million for the nine months ended September 30, 2002.
 These decreases resulted primarily from the reduction of our sales force and sales
 activities in Europe.

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As a percentage of revenues, sales and marketing expenses
 for the three months ended September 30, 2001 and 2002 were 30% and 217%, respectively.
 As a percentage of revenues, sales and marketing expenses for the nine months ended
 September 30, 2001 and 2002 were 37% and 17%, respectively.

General and Administrative Expenses

General and
 administrative expenses consist primarily of salaries and related expenses, accounting,
 legal and administrative expenses, professional service fees, stock-based compensation,
 depreciation and amortization and other general corporate expenses. General and
 administrative expenses decreased 82% from $3.1 million for the three months ended
 September 30, 2001 to $0.6 million for the three months ended September 30, 2002.
 General and administrative expenses decreased 64% from $9.4 million for the nine
 months ended September 30, 2001 to $3.5 million, for the nine months ended September
 30, 2002. These decreases were due primarily to the reduction of the number of
 personnel performing general and administrative functions. This was partially offset
 by the write down of the intangible assets associated with the acquisition of shares
 of MCE Holding Corporation, which reduced our amortization expenses. As a percentage
 of revenues, general and administrative expenses for the three months ended September
 30, 2001 and 2002 were 225% and 410%, respectively. As a percentage of revenues,
 general and administrative expenses for the nine months ended September 30, 2001
 and 2002 were 161% and 40%, respectively.

Research and Development Expenses

Research and
 development expenses consist primarily of compensation and related costs for research
 and development personnel. Research and development expenses increased 64% from
 $0.5 million for the three months ended September 30, 2001 to $0.8 million for the
 three months ended September 30, 2002. Research and development expenses increased
 13% from $1.9 million for the nine months ended September 30, 2001 to $2.2 for the
 nine months ended September 30, 2002. The increased is primarily due to effort
 put on the development of the OZ® Instant Communications Solution product. As
 a percentage of revenues, research and development expenses for the three months
 ended September 30, 2001 and 2002 were 36% and 578%, respectively. As a percentage
 of revenues, research and development expenses for the nine months ended September
 30, 2001 and 2002 were 33% and 25%, respectively.

Interest Income (Expense), Net

Interest income
 (expense), net changed from a net expense of $20,455 for the three months ended
 September 30, 2001 to a net expense of $2,189 for the three months ended September
 30, 2002. This change was the result of the sale of our Icelandic building and
 the resulting satisfaction of all notes payable secured by the building. Interest
 income (expense), net changed from a net expense of $30,459 for the nine months
 ended September 30, 2001 to a net expense of $50,210 for the nine months ended September
 30, 2002. The change is due to the lower cash balances held by us in the three
 and nine months ended September 30, 2002.

Impairment of Intangible Assets

Our impairment
 of intangible assets was $3.1 million for the nine months ended September 30, 2002
 primarily as a result of the cancellation of the Ericsson and Microcell development
 contracts in January and February 2002. We recognized the impairment of these assets
 in the three months ended March 31, 2002.

Contract Termination Fee

Contract termination
 fee was $3.9 million for the nine months ended September 30, 2002 as a result of
 the cancellation of the Ericsson development contract in January 2002. We recognized
 the contract termination fee in the three months ended March 31, 2002.

Other Income (Expense), Net

Other income
 (expense), net changed from a net expense of $85,297 for the three months ended
 September 30, 2001 to a net income of $707,016 for the three months ended September
 30,

14



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##### Table of Contents



2002. Other income (expense), net
 changed from a net expense of $291,170 for
 the nine months ended September 30, 2001 to a net income of $558,309 for the nine
 months ended September 30, 2002. The change is primarily due to a non-cash gain
 resulting from the exchange of shares of Smart VR, Inc. for those of smartVR ehf
 in a financing transaction that caused the conversion all of the outstanding notes
 payable of Smart VR, Inc. into shares of the preferred stock of Smart VR, Inc.

Income Taxes

At December
 31, 2000 and 2001 we had deferred tax assets of $9.7 million and $14.1 million respectively.
 Due to the uncertain nature of the ultimate realization, we have recorded a valuation
 allowance against deferred tax assets. At December 31, 2001 we had net operating
 loss carryforwards of approximately $34.8 million, $19.0 million and $5.1 million
 for federal, state and foreign income tax purposes, respectively. These carryforwards
 will expire from year 2002 through 2020.



Liquidity and Capital Resources

Our primary
 liquidity needs are for working capital, capital expenditures and investments, and,
 to a lesser extent, debt service. Our primary sources of liquidity are cash flows
 from operations.

Net
cash used in operating activities was $0.4 million for the nine months ended September 30,
 2002. The net cash used in operating activities for the nine months ended September
 30, 2002 was attributable primarily to the research and development and operating costs offset by the receipt of payments from Ericsson pursuant
 to our agreement to terminate the iPulse development relationship.

Net cash provided
 by investing activities was $0.7 million for the nine months ended September 30,
 2002, primarily reflecting sale of our building and computer equipment in Iceland.

Net cash used
 in financing activities was $0.3 million, which represented repayment of the note payable
 for our building in Iceland.

We are limiting
 discretionary expenses in all categories, closed facilities in Stockholm, Sweden,
 Reykjavik, Iceland and San Diego, California and reduced headcount. We do not believe
 that our operating requirements for the next three months can be funded from cash
 provided by operations and cash reserves. Therefore, we intend to seek additional
 debt or equity financing through private placements of our securities. We cannot
 be sure that any such financing will be obtained or, if obtained, will be adequate
 to meet our needs. Our consolidated financial statements for the year ended December
 31, 2001 have been prepared assuming that we will continue as a going concern.
 Our historical losses from operations, negative cash flows, and future need for
 additional capital raise substantial doubts about our ability to continue as a going
 concern. We may revise our plans in response to future changes in the mobile communications
 industry in general and the demand for our services in particular, our results of
 operations, our other capital requirements and other relevant factors. If additional
 funds are raised through the issuance of debt or preferred stock securities, these
 securities could have rights, preferences and privileges senior to holders of common
 stock, and terms of any debt could impose restrictions on our operations. The sale
 of additional equity or convertible debt securities could result in additional dilution
 to our shareholders and additional financing may not be available in amounts or
 on terms acceptable to us, if at all. If we are unable to obtain this additional
 financing, we may be required to reduce the scope of our planned product development
 and marketing efforts, which could harm our business, financial condition and operating
 results.




ITEM 3. CONTROLS AND PROCEDURES

An evaluation
 was performed under the supervision and with the participation of the Companys
 management, including its principal executive officer and principal financial officer,
 of the effectiveness of the Companys disclosure controls and procedures (as
 defined in Rules 13a-14(c) under the Securities Exchange Act of 1934, as amended).
 Based on that evaluation, which was completed within 90 days of the filing date
 of this 10-QSB, the Companys principal executive officer and principal financial
 officer concluded that the Companys disclosure controls and procedures were
 effective.

15



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##### Table of Contents



There has been no significant change in the Companys internal
 controls or in other factors that could significantly affect internal controls subsequent
 to the date of the evaluation, including any corrective actions with respect to
 significant deficiencies and material weaknesses.




PART II. OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS  NOT APPLICABLE.




ITEM 2. CHANGES IN SECURITIES AND USE OF
 PROCEEDS  NOT APPLICABLE.




ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  NOT APPLICABLE.




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

An annual
 meeting of our shareholders was held on September 17, 2002 at which the following
 three matters were voted upon:

1.          Election of the following directors of
 the Company



|Nominees               |  | For        |  | Against |  | Abstentions |  | Broker Nonvotes
|---------------------- |  | ---------- |  | ------- |  | ----------- |  | ---------------
|                      
|Steinthor
 Baldursson  |  | 72,818,768 |  |         |  |             |  |                
|Guðjón Már
 Guðjónsson |  | 72,818,768 |  |         |  |             |  |                
|Lars Lindqvist         |  | 72,818,768 |  |         |  |             |  |                
|Skúli Mogensen         |  | 72,818,768 |  |         |  |             |  |                
|Robert G.
 Quinn       |  | 72,818,768 |  |         |  |             |  |                

2.          Approval of an amendment
 to the Companys 1995 Stock
 Option Plan (the 1995 Option Plan) to increase the
 maximum aggregate number of shares of the Companys common stock available
 for the grant of options under the 1995 Option Plan from 18,000,000 to 23,000,000.



|For        |  | Against |  | Abstentions |  | Broker Nonvotes
|---------- |  | ------- |  | ----------- |  | ---------------
|          
|72,295,380 |  | 523,388 |  |             |  |                

3.          Ratification of appointment of Deloitte
 & Touche as the Companys independent auditors for the fiscal year ending
 December 31, 2002.



|For        |  | Against |  | Abstentions |  | Broker Nonvotes
|---------- |  | ------- |  | ----------- |  | ---------------
|          
|72,818,768 |  |         |  |             |  |                




ITEM 5. OTHER INFORMATION  NOT APPLICABLE.




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a. Exhibits



|99.1 |  | Certification
 pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley
 Act of 2002.
|---- |  | -------------------------------------------------------------------------------------------------------------
|     |  |                                                                                                              
|99.2 |  | Certification
 pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley
 Act of 2002.

16



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##### Table of Contents






SIGNATURE

In accordance
 with the requirements of the Exchange Act, the Registrant caused this report to
 be signed on its behalf by the undersigned, thereunto duly authorized.

| |                           |                                              
| | ------------------------- | ---------------------------------------------
| | OZ COMMUNICATIONS,
 INC. 
| | a California
 corporation
| |                           |                                              
| |                           |                                              
| | By:                       | /s/ STÉPHANE
 ARCHAMBAULT                    
| |                           |                                              
| |                           | Stéphane Archambault                         
| |                           | Director of
 Finance                         
| |                           | (Principal
 Financial and Accounting Officer)

Date: November 13, 2002

17



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##### Table of Contents



CERTIFICATION



|   | I, Skúli
 Mogensen, certify that:                                                                                                                                                                                                                                                                                                                                                            
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                              
|1. | I have reviewed
 this quarterly report on Form 10-QSB of OZ Communications, Inc.;                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                              
|2. | Based on my
 knowledge, this quarterly report does not contain any untrue statement of a material
 fact or omit to state a material fact necessary to make the statements made, in
 light of the circumstances under which such statements were made, not misleading
 with respect to the period covered by this quarterly report;                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                              
|3. | Based on my
 knowledge, the financial statements, and other financial information included in
 this quarterly report, fairly present in all material respects the financial condition,
 results of operations and cash flows of the registrant as of, and for, the periods
 presented in this quarterly report;                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                              
|4. | The
 registrants other certifying officer and I are responsible for establishing and maintaining
 disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and
 15d-14) for the registrant and we have:                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                              
|   | a.                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                              
|   | b.                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                              
|   | c.                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                              
|5. | The
 registrants other certifying officer and I have disclosed, based on our most recent
 evaluation, to the registrants auditors and the audit committee of the registrants board
 of directors (or persons performing the equivalent function):                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                              
|   | a.                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                              
|   | b.                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                              
|6. | The
 registrants other certifying officer and I have indicated in this quarterly report whether
 or not there were significant changes in internal controls or in other factors that
 could significantly affect internal controls subsequent to the date of our most
 recent evaluation, including any corrective actions with regard to significant deficiencies
 and material weaknesses.



|Date: November
 13, 2002 | /S/ SKÚLI
 MOGENSEN     
|------------------------ | ------------------------
|                         | Skúli Mogensen          
|                         | Chief Executive
 Officer

18



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##### Table of Contents



CERTIFICATION



|   | I, Stéphane
 Archambault, certify that:                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                    
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                    
|1. | I have reviewed
 this quarterly report on Form 10-QSB of the OZ Communications, Inc.;                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                    
|2. | Based on my
 knowledge, this quarterly report does not contain any untrue statement of a material
 fact or omit to state a material fact necessary to make the statements made, in
 light of the circumstances under which such statements were made, not misleading
 with respect to the period covered by this quarterly report;                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                    
|3. | Based on my
 knowledge, the financial statements, and other financial information included in
 this quarterly report, fairly present in all material respects the financial condition,
 results of operations and cash flows of the registrant as of, and for, the periods
 presented in this quarterly report;                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                    
|4. | The
 registrants other certifying officer and I are responsible for establishing and maintaining
 disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and
 15d-14) for the registrant and we have:                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                    
|   | a.                                                                                                                                                                                                                                                                                                                                                                                            | Designed such
 disclosure controls and procedures to ensure that material information relating
 to the registrant, including its consolidated subsidiaries, is made known to us
 by others within those entities, particularly during the period in which this quarterly
 report is being prepared;
|   |                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                    
|   | b.                                                                                                                                                                                                                                                                                                                                                                                            | Evaluated
 the effectiveness of the registrants disclosure controls and procedures as
 of a date within 90 days prior to the filing date of this quarterly report (the
 Evaluation Date); and                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                    
|   | c.                                                                                                                                                                                                                                                                                                                                                                                            | Presented
 in this quarterly report our conclusions about the effectiveness of the disclosure
 controls and procedures based on our evaluation as of the Evaluation Date;                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                    
|5. | The
 registrants other certifying officer and I have disclosed, based on our most recent evaluation,
 to the registrants auditors and the audit committee of the registrants
 board of directors (or persons performing the equivalent function):                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                    
|   | a.                                                                                                                                                                                                                                                                                                                                                                                            | All significant
 deficiencies in the design or operation of internal controls which could adversely
 affect the registrants ability to record, process, summarize and report financial
 data and have identified for the registrants auditors any material weaknesses
 in internal controls; and 
|   |                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                    
|   | b.                                                                                                                                                                                                                                                                                                                                                                                            | Any fraud,
 whether or not material, that involves management or other employees who have a
 significant role in the registrants internal controls; and                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                    
|6. | The
 registrants other certifying officer and I have indicated in this quarterly report whether
 or not there were significant changes in internal controls or in other factors that
 could significantly affect internal controls subsequent to the date of our most
 recent evaluation, including any corrective actions with regard to significant deficiencies
 and material weaknesses.



|Date: November
 13, 2002 | /S/ STÉPHANE
 ARCHAMBAULT
|------------------------ | -------------------------
|                         | Stéphane Archambault     
|                         | Director of
 Finance     



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##### Table of Contents






Exhibit Index



99.1     Certification pursuant to 18 U.S.C.
 § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002.




99.2     Certification pursuant to 18 U.S.C.
 § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002.