U. S.
Securities and Exchange Commission




Washington,
D.C.  20549




FORM
10-Q




(Mark One)




x Quarterly Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934


For the
quarterly period ended June 30, 2009


or


 ̈ Transition Report
Pursuant to Section 13 of 15(d) of the Securities Exchange Act of
1934


For the
transition period from ____________ to ______________





Commission
File Number 000-23025




NOTIFY
      TECHNOLOGY
CORPORATION




(Exact
name of registrant as specified in its charter)




CALIFORNIA
                (State
      or other jurisdiction of
                incorporation
      or organization)
              
              77-0382248
                (IRS
      Employer Identification No.)




1054
      South De Anza Blvd., Suite 202San Jose,
    CA  95129(Address
      of principal executive
offices)




(408)
      777-7920(Registrant’s
      telephone number including area code)




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.




Yes          x           No             ̈




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).




Yes           ̈           No             ̈




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.




Large
      accelerated filer   ̈
                Accelerated
      filer   ̈Non-accelerated
      filer   ̈
                Smaller
      reporting company  þ




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).




Yes           ̈           No            x




As of
June 30, 2009, there were 14,075,662 shares of common stock
outstanding.





INDEX




PagePART
      I.  FINANCIAL INFORMATIONItem
      1.
                              Condensed
      Financial Statements:Condensed
      Balance Sheets as of June 30, 2009 (unaudited) and September 30,
      2008
                              3Condensed
      Statements of Operations for the three-and nine-month
      periods  ended June 30, 2009 and 2008
(unaudited)
                              4Condensed
      Statements of Cash Flows for the nine-month periods ended  June
      30, 2009 and 2008 (unaudited)
                              5Notes
      to Condensed Financial Statements (unaudited)
                              6Item
      2.
                              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                              9Item
      3
                              Quantitative
      and Qualitative Disclosures About Market Risk
                              16Item
      4(T).
                              Controls
      and Procedures
                              16PART
      II.  OTHER INFORMATIONItem
      1A.
                              Risk
      Factors
                              16Item
      4.
                              Submission
      of Matter to a Vote of Security Holders
                              23Item
      6.
                              Exhibits
                              23SIGNATURES
                              24


2


PART
I.  FINANCIAL INFORMATION (unaudited)





Item
1.            Financial
Statements





NOTIFY
TECHNOLOGY CORPORATION


CONDENSED
BALANCE SHEETS




June 30,
                
                
                September 30,2009
                
                
                2008(unaudited)
                
                
                
                (1)AssetsCurrent
      assets:Cash
      and cash equivalents
                
                $
                1,357,105
                
                
                $
                1,010,607Accounts
      receivable, net
                
                
                599,665
                
                
                
                509,735Other
      current assets
                
                
                24,898
                
                
                
                39,452Total
      current assets
                
                
                1,981,668
                
                
                
                1,559,794Non-current
      assetsProperty
      and equipment, net
                
                
                243,332
                
                
                
                173,224Lease
      deposits
                
                
                15,602
                
                
                
                -Total
      non-current assets
                
                
                258,934
                
                
                
                173,224Total
      assets
                
                $
                2,240,602
                
                
                $
                1,733,018Liabilities
      and shareholders' deficitCurrent
      liabilities:Current
      portion of capital lease obligations
                
                $
                4,753
                
                
                $
                4,445Accounts
      payable
                
                
                49,887
                
                
                
                40,045Accrued
      payroll and related liabilities
                
                
                331,653
                
                
                
                349,292Deferred
      revenue
                
                
                2,964,465
                
                
                
                2,418,235Other
      accrued liabilities
                
                
                139,740
                
                
                
                171,108Total
      current liabilities
                
                
                3,490,498
                
                
                
                2,983,125Long
      term portion of capital lease obligations
                
                
                7,069
                
                
                
                10,685Total
      liabilities
                
                
                3,497,567
                
                
                
                2,993,810Commitments
      and contingenciesShareholders'
      deficit:Preferred
      stock, $0.001 par value, 5,000,000 shares authorized, no shares
      outstanding
                
                
                —
                
                
                
                —Common
      stock, $0.001 par value, 30,000,000 shares authorized, 14,075,662 and
      13,968,995 shares issued and outstanding on June 30, 2009 and September
      30, 2008, respectively
                
                
                14,076
                
                
                
                14,076Additional
      paid-in capital
                
                
                23,424,865
                
                
                
                23,387,395Accumulated
      deficit
                
                
                (24,695,906
                )
                
                
                (24,662,263
                )Total
      shareholders’ deficit
                
                
                (1,256,965
                )
                
                
                (1,260,792
                )Total   liabilities
      and shareholders' deficit
                
                $
                2,240,602
                
                
                $
                1,733,018





(1) The
information in this column was derived from our audited financial statements for
the year ended September 30, 2008.





See
accompanying Notes to Condensed Financial Statements.


3


NOTIFY
TECHNOLOGY CORPORATION


CONDENSED STATEMENTS
OF OPERATIONS





Three-Month
      Periods
                
                
                Nine-Month
      PeriodsEnded
      June 30,
                
                
                Ended
      June 30,2009
                
                
                2008
                
                
                2009
                
                
                2008(unaudited)
                
                
                (unaudited)Revenue:Product
      revenue
                
                $
                1,593,805
                
                
                $
                1,144,800
                
                
                $
                4,366,636
                
                
                $
                3,331,443Total
      revenue
                
                
                1,593,805
                
                
                
                1,144,800
                
                
                
                4,366,636
                
                
                
                3,331,443Cost
      of revenue:Product
      cost
                
                
                —
                
                
                
                2,590
                
                
                
                8,620
                
                
                
                11,455Royalty
      payments
                
                
                38,925
                
                
                
                30,647
                
                
                
                109,072
                
                
                
                105,284Total
      cost of revenue
                
                
                38,925
                
                
                
                33,237
                
                
                
                117,692
                
                
                
                116,739Gross
      profit
                
                
                1,554,880
                
                
                
                1,111,563
                
                
                
                4,248,944
                
                
                
                3,214,705Operating
      expenses:Research
      and development
                
                
                469,970
                
                
                
                414,788
                
                
                
                1,449,731
                
                
                
                1,186,960Sales
      and marketing
                
                
                567,522
                
                
                
                472,378
                
                
                
                1,708,292
                
                
                
                1,374,160General
      and administrative
                
                
                397,804
                
                
                
                310,079
                
                
                
                1,127,477
                
                
                
                956,859Total
      operating expenses
                
                
                1,435,296
                
                
                
                1,197,245
                
                
                
                4,285,500
                
                
                
                3,517,979Income
      (loss) from operations
                
                
                119,584
                
                
                
                (85,682
                )
                
                
                (36,556
                )
                
                
                (303,274
                )Other
      income (expense), net
                
                
                662
                
                
                
                2,615
                
                
                
                2,913
                
                
                
                6,479Net
      income (loss)
                
                $
                120,246
                
                
                $
                (83,067
                )
                
                $
                (33,643
                )
                
                $
                (296,795
                )Basic
      net income (loss) per share
                
                $
                0.01
                
                
                $
                (0.01
                )
                
                $
                (0.00
                )
                
                $
                (0.02
                )Basic
      weighted average shares outstanding
                
                
                14,075,662
                
                
                
                14,075,662
                
                
                
                14,075,662
                
                
                
                14,046,336Diluted
      weighted net income (loss) per share
                
                $
                0.01
                
                
                $
                (0.01
                )
                
                $
                (0.00
                )
                
                $
                (0.02
                )Diluted
      weighted average shares outstanding
                
                
                14,849,281
                
                
                
                14,075,662
                
                
                
                14,075,662
                
                
                
                14,046,336





See
accompanying Notes to Condensed Financial Statements.


4


NOTIFY
TECHNOLOGY CORPORATION


CONDENSED
STATEMENTS OF CASH FLOWS




Nine-Month PeriodsEnded June 30,2009
                                                      
                                                      
                                                      2008(unaudited)Cash
      flows provided by (used in) operating activities:Net
      loss
                                                      
                                                      $
                                                      (33,643
                                                      )
                                                      
                                                      $
                                                      (296,795
                                                      )Adjustments
      to reconcile net loss to cash provided by operating
      activities:Depreciation
      and amortization
                                                      
                                                      
                                                      65,314
                                                      
                                                      
                                                      
                                                      43,641SFAS
      123(R) expense
                                                      
                                                      
                                                      37,470
                                                      
                                                      
                                                      
                                                      4,810Changes
      in operating assets and activities:Accounts
      receivable
                                                      
                                                      
                                                      (89,930
                                                      )
                                                      
                                                      
                                                      68,654Other
      current assets
                                                      
                                                      
                                                      2,593
                                                      
                                                      
                                                      
                                                      22,960Accounts
      payable
                                                      
                                                      
                                                      9,841
                                                      
                                                      
                                                      
                                                      (10,624
                                                      )Deferred
      revenue
                                                      
                                                      
                                                      546,230
                                                      
                                                      
                                                      
                                                      353,907Other
      accrued liabilities
                                                      
                                                      
                                                      (52,647
                                                      )
                                                      
                                                      
                                                      32,009Net
      cash provided by (used in) operating activities
                                                      
                                                      
                                                      485,228
                                                      
                                                      
                                                      
                                                      218,562Cash
      flows provided by (used in) investing activities:Purchase
      of property and equipment
                                                      
                                                      
                                                      (135,422
                                                      )
                                                      
                                                      
                                                      (52,160
                                                      )Deposit
      on property and equipment
                                                      
                                                      
                                                      —
                                                      
                                                      
                                                      
                                                      (56,228
                                                      )Net
      cash used in investing activities
                                                      
                                                      
                                                      (135,422
                                                      )
                                                      
                                                      
                                                      (108,388
                                                      )Cash
      flows provided by (used in) financing activities:Proceeds
      from exercise of options
                                                      
                                                      
                                                      —
                                                      
                                                      
                                                      
                                                      27,933Principal
      payments on capital lease obligations
                                                      
                                                      
                                                      (3,308
                                                      )
                                                      
                                                      
                                                      (6,564
                                                      )Net
      cash provided by (used in) financing activities
                                                      
                                                      
                                                      (3,308
                                                      )
                                                      
                                                      
                                                      21,369Net
      increase (decrease) in cash and cash equivalents
                                                      
                                                      
                                                      346,498
                                                      
                                                      
                                                      
                                                      131,543Cash
      and cash equivalents at beginning of period
                                                      
                                                      
                                                      1,010,607
                                                      
                                                      
                                                      
                                                      839,775Cash
      and cash equivalents at end of period
                                                      
                                                      $
                                                      1,357,105
                                                      
                                                      
                                                      $
                                                      971,318Supplemental
      disclosure of cash informationCash
      paid for interest
                                                      
                                                      $
                                                      636
                                                      
                                                      
                                                      $
                                                      1,497Cash
      paid for taxes
                                                      
                                                      $
                                                      850
                                                      
                                                      
                                                      $
                                                      2,430




See
accompanying Notes to Condensed Financial Statements.





5




NOTIFY
TECHNOLOGY CORPORATION
 Notes
to Condensed Financial Statements
 (Unaudited)
 
 1.
              BASIS
      OF PRESENTATION
 
 The
accompanying unaudited condensed financial statements of Notify Technology
Corporation (referred to as “the Company”, “we”, “us” and “our” unless the
context otherwise requires) have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and the instructions to Form 10-Q and Article 8 of
Regulation S-X.  The condensed financial statements included herein
are unaudited but include all adjustments (consisting only of normal recurring
adjustments), which we consider necessary for a fair presentation of the
financial position at such date and the operating results and cash flows for
those periods.  Although we believe that the disclosures in these
condensed financial statements are adequate to make the information presented
not misleading, certain information normally included in financial statements
and related footnotes prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission.  The accompanying condensed financial statements should be
read in conjunction with the financial statements and notes thereto included in
our Annual Report on Form 10-KSB for the year ended September 30,
2008.
 
 Results
for any interim period are not necessarily indicative of results for any other
interim period or for the entire year.
 
 2.
              NET
      INCOME (LOSS) PER SHARE
 
 The net
loss per share for the nine-month period ended June 30, 2009 was a loss of
$(0.00) compared to a loss of $(0.02) for the same period in the prior
year.  Options to purchase 3,608,014 and 2,773,000 shares of common
stock and warrants to purchase zero and 1,871,651 shares of common stock were
outstanding at June 30, 2009 and 2008, respectively. The outstanding options
were included in the computation of diluted net gain per share for the three
month period ended June 30, 2009 to fully dilute the earnings per share but were
not included in the computation of diluted net loss for the nine-month period
ended June 30, 2009 and thethree and
nine-month periods ended June 30, 2008, as
the effect would be anti-dilutive.
 
 3.
                  FINANCING
      ACTIVITIES
  On May
29, 2007, Commonwealth Associates, L.P., along with a number of other investors,
sold all of their respective interests in the Company, including options to
purchase Series A Preferred Stock in the form of Unit Purchase Options, to 21X
Investments LLC.  Commonwealth Associates, L.P. and the other
investors had originally acquired their interests in the July 2001 Preferred
Stock Offering of the Company.
 
 21X
Investments LLC is beneficially owned by David Brewer, a director and chairman
of the Audit Committee of the Company since February 2000.  As a
result of the May 29, 2007 transaction, Mr. Brewer acquired approximately 55%
beneficial ownership of the stock of the Company.
 
 The
warrants mentioned in Note 2 above and the
Unit Purchase Options mentioned in this Note 3 expired on July 20, 2008, leaving 14,075,662 shares of common stock
and options to purchase 3,453,244 shares of common stock as the only issued and
outstanding securities of the Company.  There were no remaining
obligations associated with the expiring warrants and options.
 
 On
December 17, 2008, the Board of Directors adopted the 2008 Equity Incentive Plan
(“2008 Plan”) subject to the approval of the Company's shareholders.  The Board
authorized 2,317,000 shares of the Company’s common stock to be reserved under
the 2008 Plan.  Included in the 3,608,014 total outstanding options as
of June 30, 2009 were 1,750,014 options granted under the 2008 Plan on December
17, 2008 to various employees.  These grants included 169,470 options
exchanged for 900,000 options granted under a prior option plan.
 
 6
  NOTIFY
TECHNOLOGY CORPORATION
 Notes
to Condensed Financial Statements
 (Unaudited)
 
 4.
              ACCOUNTING
      FOR STOCK BASED COMPENSATION
 
 Statement
of Financial Accounting Standards No. 148 (SFAS 148), "Accounting for
Stock-Based Compensation—Transition and Disclosure, an Amendment of FASB
Statement No. 123," amends the disclosure requirements of Statement of Financial
Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation," to require more prominent disclosures in both annual and interim
financial statements regarding the method of accounting for stock-based employee
compensation and the effect of the method used on reported results.
 
 On
October 1, 2006, we adopted Statement of Financial Accounting Standards (SFAS)
No. 123 (revised 2004), “Share-Based Payment,” requiring us to recognize expense
related to the fair value of our employee stock option awards. We recognize the
cost of all share-based awards on a graded vesting basis over the vesting period
of the award.  We recognized stock based employee compensation of
$17,294 and $37,470 in the respective three and nine-month periods ended
June 30, 2009.
 
 We
recognized no compensation expense during the three months ended June 30, 2009, related to the grant of options to
non-employees.
 
 5.
              PRODUCT
      WARRANTY
  We
warrant our products to current paid-up customers and make available for
download service update releases that contain the most up-to-date version of our
products.  These software updates are continually maintained and
released when available.  As such, we do not maintain a separate
warranty reserve but expense the cost to create and post any maintenance release
as a part of normal operations.
  6.
              RECENT
      ACCOUNTING PRONOUNCEMENTS
  In June
2006, the FASB issued Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income
Taxes,” which clarifies the accounting for uncertainty in income taxes
recognized in the financial statements in accordance with FASB Statement No.
109, “Accounting for Income
Taxes”.  FIN 48 provides guidance on the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return.  FIN 48 also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosures, and transition.  FIN 48 is effective for fiscal years
beginning after December 15, 2006.  For the nine-month period ended June 30, 2009, FIN 48 has had no impact on the condensed
financial statements.
 
 In
September 2006, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 157, “Fair Value
Measurements”.  SFAS No. 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair
value.  SFAS No. 157 is effective for fiscal years beginning after
November 15, 2007.  For the nine-month period ended June 30, 2009, SFAS No. 157 has had no impact on the
condensed financial statements.
  In
February 2007, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities”,  SFAS No. 159 provides an
option to report selected financial assets and financial liabilities using fair
value.  The standard establishes required presentation and disclosures
to facilitate comparisons with companies that use different measurements for
similar assets and liabilities.  SFAS No. 159 is effective for fiscal
years beginning after November 15, 2007.  For the nine-month period ended June 30, 2009, SFAS No. 159 has had no impact on the
condensed financial statements..
  In
December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business
Combinations" ("SFAS 141R"). SFAS 141R establishes principles and requirements
for how an acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any noncontrolling
interest in the acquiree and the goodwill acquired. SFAS 141R also establishes
disclosure requirements to enable the evaluation of the nature and financial
effects of the business combination. SFAS 141R is effective for fiscal years
beginning after December 15, 2008. For the nine-month period ended June 30, 2009, SFAS No. 141R has had no impact on the
condensed financial statements.
  7
  NOTIFY
TECHNOLOGY CORPORATION
 Notes
to Condensed Financial Statements
 (Unaudited)
  In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements—an amendment of Accounting Research Bulletin
No. 51" ("SFAS 160"). SFAS 160 establishes accounting and reporting standards
for ownership interests in subsidiaries held by parties other than the parent,
the amount of consolidated net income attributable to the parent and to the
noncontrolling interest, changes in a parent's ownership interest, and the
valuation of retained noncontrolling equity investments when a subsidiary is
deconsolidated. SFAS 160 also establishes disclosure requirements that clearly
identify and distinguish between the interests of the parent and the interests
of the noncontrolling owners. SFAS 160 is effective for fiscal years beginning
after December 15, 2008. For the nine-month
period ended June 30, 2009, SFAS No. 160 has had no impact on the
condensed financial statements.
 
 In
December 2007, the SEC issued Staff Accounting Bulletin 110 (SAB 110) to amend
the SEC's views discussed in SAB 107 regarding the use of the simplified method
in developing an estimate of expected life of share options in accordance with
SFAS No. 123(R). SAB 110 was effective for the
Company beginning in the first quarter of fiscal year 2009. Due to
limited history of option grant exercises, management does not believe that
the Company’s
historical share option exercise data provides it with sufficient evidence to estimatethe expected term. Therefore, the Company uses the simplified method of
calculating expected life described in the SEC's Staff Accounting Bulletin 107
(SAB 107).The Company will
continue to use the simplified method until it
has the historical data necessary to provide a reasonable estimate of
expected life, in accordance with SAB 107, as amended by SAB 110.
 
 In March
2008, the FASB issued Statement of Financial Accounting Standards No. 161,
“Disclosures about Derivative Instruments and Hedging Activities — an amendment
of FASB Statement No. 133” (“FAS 161”). FAS 161 requires entities to provide
enhanced disclosures about derivative instruments and hedging
activities.  FAS 161 is effective for fiscal years and interim periods
beginning on or after November 15, 2008. The Company does not expect the
adoption of FAS 161 to have a material impact on its financial position, results
of operations or cash flows.
 
 In May
2008, the FASB issued Statement of Financial Accounting Standards No. 162, “The
Hierarchy of Generally Accepted Accounting Principles” (“FAS 162”). FAS 162 is
effective 60 days following the SEC’s approval of the Public Company Accounting
Oversight Board Auditing amendments to AU Section, 411 The Meaning of “Present Fairly inConformity with Generally Accepted
AccountingPrinciples.”  The statement is
intended to improve financial reporting by identifying a consistent hierarchy
for selecting accounting principles to be used in preparing financial statements
that are presented in conformity with U.S. generally accepted accounting
principles (GAAP). The Company has not completed its evaluation of the effects,
if any, that FAS 162 may have on its financial position, results of operations
and cash flows.
  In May
2009, the FASB issued SFAS No. 165, “Subsequent Events”.  This Statement
addresses accounting for and disclosure of events that occur after the balance
sheet date but before financial statements are issued or available to be
issued.  SFAS No. 165 requires disclosure of the date through which an
entity has evaluated subsequent events and the basis for that date, the date
issued or date available to be issued.  The Company adopted this Statement
in the third fiscal quarter of 2009.  The Company evaluated subsequent
events through the date the accompanying financial statements were issued, which
was August 14, 2009. There have been no subsequent events required to be
disclosed unter this guidance.
  In June
2009, the FASB issued SFAS No. 168 “The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles – A Replacement of
SFAS No. 162”.  SFAS No. 168 establishes the FASB Accounting Standards
Codification as the source of authoritative U.S. generally accepted accounting
principles (GAAP) recognized by the FASB to be applied by nongovernmental
entities.  According to SFAS No. 168, rules and interpretive releases of
the Securities and Exchange Commission (SEC) under authority of federal
securities laws are also sources of authoritative GAAP for SEC
registrants.  On the effective date of this Statement, the Codification
will supersede all then-existing non-SEC accounting and reporting
standards.  All other nongrandfathered non-SEC accounting literature not
included in the Codification will become nonauthoritative.  This
Statement is effective for financial statements issued for interim and annual
periods ending after September 15, 2009.  The Company does not expect any
significant financial impact upon adoption of SFAS No. 168.
  8
  NOTIFY
TECHNOLOGY CORPORATION
 Notes
to Condensed Financial Statements
 (Unaudited)
 
 7.
              REVENUE
      RECOGNITION POLICY
  The Company recognizes revenue in accordance with
the American Institute of Certified Public Accountants Statement of Position
(“SOP”) 97-2, “Software Revenue Recognition,” and SEC Staff Accounting Bulletin
No. 104, “Revenue Recognition” (“SAB 104”).
  Under SOP
97-2, the Company recognizes software
license agreements when persuasive evidence of an agreement exists, delivery of
the product has occurred, the license fee is fixed or determinable and
collection is probable.  The
Company’s license agreements take two basic
forms.  The first form of agreement is essentially a subscription
agreement that is used in connection with the
Company’s hosting arrangement where the Company provides the software combined with
hosting services from a hardened site owned and managed by it.  The agreement generally has a
fixed term and the license revenue is recognized ratably over the term of each
service contract.  The second form of agreement involves the purchase
of a license and a service agreement based on the Vendor Supplied Objective
Evidence (“VSOE”) where only the service agreement is renewed each
year.  The Company recognizes the
license portion at the point of sale for those sales where VSOE has been
established and the service portion ratably over the term of the service
contract. For those contracts where VSOE has not been established, the revenue
of the entire contract is recognized ratably over the term of the
contract.  The Company’s sales
process provides for an optional trial period prior to the agreement to purchase
and no revenue is recognized during that trial period.
  Under SAB
104, the Company recognizes revenue when
the title and risk of loss have passed to the customer, there is persuasive
evidence of an arrangement, delivery of the product has occurred or services
have been rendered, the sales price is fixed or determinable and collection is
probable. Installation, when required, is commonly completed prior to an
agreement to facilitate a trial of the product.  Technical assistance
is available during the sales process and is unrelated to the service component
portion of the final arrangement.  Revenue related to installation is
recognized when the agreement is signed and the contract period has
commenced.
  
 Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
  FORWARD
LOOKING STATEMENTS
  This
Quarterly Report on Form 10-Q contains forward-looking statements, within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, which involve risks and
uncertainties.  Forward-looking statements generally include words
such as “may,” “will,” “plans,” “seeks,” ”expects,” “anticipates,”
“outlook,” “intends,” “believes” and words of similar import as well as the
negative of those terms. In addition, any statements that refer to expectations,
projections or other characterizations of future events or circumstances,
including any underlying assumptions, are forward-looking
statements.  Forward-looking statements in this Quarterly Report on
Form 10-Q include, but are not limited to:
  ·
              statements
      regarding the future growth of our wireless product
  line;
 ·
              statements
      regarding future revenue from our
products;
 ·
              statements
      regarding our future success;
 ·
              statements
      regarding our future financings;
 ·
              statements
      regarding future costs;
 ·
              statements
      regarding future research and development
  efforts;
 ·
              statements
      regarding competition in the market for wireless
  products;
  9
  NOTIFY
TECHNOLOGY CORPORATION
 Notes
to Condensed Financial Statements
 (Unaudited)
 
 ·
              statements
      regarding future patent
applications;
 ·
              statements
      regarding future financial results;
 ·
              statements
      regarding future plans to extend our product
  line.
  These
statements are based on current expectations and are subject to important
factors that could cause actual results to differ materially from those
projected in the forward-looking statements. Such important factors include, but
are not limited to, those discussed below under “Risk Factors” and elsewhere in
this Quarterly Report and in other documents we file with the U.S. Securities
and Exchange Commission. When reading the sections titled "Results of
Operations" and "Liquidity and Capital
Resources," you should also read our unaudited condensed financial
statements and related notes included elsewhere herein and our Annual Report on
Form 10-KSB for the fiscal year ended September 30, 2008. We disclaim any obligation to update any
forward-looking statements as a result of developments occurring after the date
of this Quarterly Report.
 
 OVERVIEW
 
 We were
incorporated in the State of California in August 1994.  We are an
independent software vendor (“ISV”) focused on providing secure, wireless
synchronization of email and personal information management (“PIM”) (calendar,
contacts, and tasks information) across a variety of wireless devices and email
collaboration suites. Our products provide solutions to organizations and
businesses supporting Novell GroupWiseTM, Microsoft ExchangeTM, Google EnterpriseTM
and a variety of alternative email collaboration suites such as the Sun Java
Communications Suite, the Oracle Collaboration Suite, the Mirapoint Messaging
Suite, CommunigatePro, Scalix Enterprise Server, Kerio Messaging Suite, the
MDaemon Messaging Suite, FirstClass, and Meeting Maker.  We support a
variety of wireless device platforms on each of these suites including the
BlackBerry®, Apple® iPhone®, iPod® touch, Palm, Windows Mobile®, and Symbian. In
July 2006, we became an official BlackBerry ISV Alliance Partner with Research
In Motion.  Using our products, our customers can achieve secure
wireless mobile access using various handheld wireless devices to manage their
email, calendar appointments and address books on any of the email collaboration
suites we support.  Our products support wireless devices from a wide
range of manufacturers and network carriers around the world.
 
 We
completed our initial public offering in September 1997, receiving net proceeds
of approximately $6.2 million. Prior to our initial public offering, our working
capital requirements were met through the sale of equity and debt securities in
private placements and, to a lesser extent, product revenue and a line of
credit. We have sustained significant operating losses in every fiscal period
from inception through the fiscal quarter ended March 31, 2009 and expect to
incur quarterly operating losses in the future. Our limited operating history
makes the prediction of future operating results difficult if not impossible.
Future operating results will depend on many factors, including the demand for
our products, the level of product and price competition, and our ability to
develop and market new products and control costs. There can be no assurance
that our revenues will grow or be sustained in future periods or that we will
ever achieve profitability.
 
 RESULTS
OF OPERATIONS
  Three-Month
Periods Ended June 30, 2009 and 2008
  Revenue
  Revenue
consists of net revenue from the sale of NotifyLink software licenses,
installation fees and the sale of third party software.  We recognize
the license portion at the point of sale for those sales where VSOE has been
established and the service portion ratably over the term of the service
contract. For those contracts where VSOE has not been established, the
revenue of the entire contract is recognized ratably over the term of the
contract.  Maintenance revenue is recognized on a straight-line basis
over the term of each contract.  Installation revenue is recognized
upon completion of trial activity and finalizing the software
agreement.  Third party software revenue is recognized upon delivery
to the customer.
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  NOTIFY
TECHNOLOGY CORPORATION
  Our
revenues increased 39% to $1,593,805 in the three-month period ended June 30,
2009, from $1,144,800 in the three-month
period ended June 30, 2008.  The increase in revenue was attributed to
growth in our NotifyLink product line and the addition of our NotifySync product
in Jaunuary 2009.  We also believe that the growth in acceptance of
cloud computing has led to an increase in sales of our on-demand
product.
 
 Our
NotifyLink product is comprised of a backend server component and a wireless
device client component. We are a provider of secure real time wireless
synchronization of email, calendar, contacts and tasks, supporting 13 different
email platforms. In addition we support any BlackBerry, Palm, Windows Mobile,
and select Symbian wireless devices on all major cellular voice and data
networks worldwide.  The NotifyLink solution provides users with
bi-directional mobile “automatic” synchronization of emails sent to end users’
email mailboxes and all emails originated forwarded and replied to from the
mobile device will be synchronized with the user’s email mailbox.  The
synchronized information also keeps personal calendars, contacts, and task
information continually up to date at both the server and the mobile device
level.
 
 Our
new NotifySyncTM gives BlackBerry® users secure, real-time, wireless
synchronization of Email and PIM with their ActiveSync Server. NotifySync
provides direct connect support to several email platforms namely Axigen Mail
Server, CommuniGate Pro Mail Server, Microsoft Exchange, Kerio Mail Server, and
the Zimbra Collaboration Suite. Organization receive through NotifySync a
synchronization solution that offers them support on all popular cellular voice
and data networks as well as any 802.11x wireless network.
 
 We sell
our products primarily in the United States directly to business users and
resellers.  Certain domestic customers have deployed our product to
international sites, demonstrating NotifyLink’s ability to link our customers’
email across international boundaries. We also have limited direct sales
internationally and sell primarily through resellers.  We launched an
ecommerce site in January 2009 to provide our new NotifySync product to the
general market.
  Cost
of revenue
  Cost of
revenue consists of the royalty expense to NCR for certain technology utilized
in our NotifyLink product and the cost of resale software related to NotifyLink.
Cost of revenue increased to $38,925 in the three-month period
ended June 30, 2009, from $33,237 for the three-month period ended June 30,
2008. The increase in the cost of revenue was due to the NCR royalty. We are
very close to finishing paying for a fully-paid license with NCR.  We
made the agreement with NCR in 2003 and expect to make the final payment in the
fiscal quarter ending September 30, 2009.
  Our gross
margin increased to 97.6% in the three month period ended June 30, 2009, compared to a gross margin of 97.1% in the
three-month period ended June 30, 2008.  The major cost component
affecting gross margin is royalty expense.  The royalty is applied at
a constant percentage of revenues regardless of volume The other major
costs of our business, consisting of product design and sales/support, are
categorized in operating expenses and thus do not impact gross
margin.
 
 Research
and development
 
 Research and development expenses
consist primarily of personnel costs and expenses. Research and development
expenses increased to $469,970 for the three-month period ended June 30, 2009, from $414,788 for the three-month period
ended June 30, 2008.  Virtually all the increase is due to
salaries, as we invested heavily in
expanding the NotifyLink product line and readying the new NotifySync product
line that launched in January 2009.  Our development efforts were
devoted to improving our software product in the area of device management,
porting our solution to new devices and creating new products.
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TECHNOLOGY CORPORATION
  We
believe that our future success, if any, depends significantly on our ability to
continue to enhance our existing wireless products and to develop new products.
Therefore, we intend to continue to incur research and development costs for the
foreseeable future.
  Sales
and marketing
  Sales and
marketing expense consists primarily of personnel, travel costs and sales
commissions related to our sales and marketing efforts.  We use an
internal sales force and a customer support staff to facilitate the NotifyLink
sales process.  Sales and marketing costs increased to $567,522 for
the three-month period ended June 30, 2009,
from $472,378 for the three-month period ended June 30, 2008.  The
increase in sales expense is due to additions to our sales staff and commissions
on strong sales activity. There is an inherent mismatch of commission expense to revenue because
a majority of our revenue is recognized over the life of the contract, whereas we record commission expense in the
month the contract is signed.
  We
anticipate that sales and marketing expenses will increase in future quarters as
we hire additional sales and customer support personnel and attempt to expand
our existing and create new distribution channels.
 
 General
and administrative
 
 General
and administrative expense consists of general management and finance personnel
costs, option vesting expense, insurance expense, rent expense, professional
fees and other general corporate expenses.  General and administrative
expenses increased to $397,804 for the three-month period ended June 30, 2009, from $310,079 for the three-month period
ended June 30, 2008.  The increase was
largely due tonon-cash expenses of
$17,295 for compensationexpense due to option vesting and a$29,912 inlegal expenses related to shareholder
matters.
 
 We
expect that general and administrative expense maycontinue to increase in future quarters as we adhere to the requirements
mandated by the Sarbanes-Oxley Act and integrate any additional requirements
imposed by future regulations.
  Nine-Month
Periods Ended June 30, 2009 and 2008
  Revenue
  Revenue
for the nine-month period ended June 30, 2009 increased 31% to $4,366,636 from
$3,331,443 for the nine-month period ended June 30, 2008.  A majority
of our revenue in both periods was derived from domestic
sources, centering largely on IMAP based
email systems and Novell GroupWise environments.  Sales to users of
iPhones also improved our revenues over the
nine-month period ended June 30, 2009.
 
 Cost of revenue
  Cost of
revenue consists of the royalty expense to NCR for certain technology utilized in
our NotifyLink product and the cost of resale
software related to NotifyLink.   Cost of revenue
increased to $117,692 in the nine-month period ended June 30, 2009 from $116,739
for the nine-month period ended June 30, 2008.
  Our gross
margin increased to 97.3% in the nine-month period ended June 30, 2009, compared to a gross margin of 96.5% in the
nine-month period ended June 30, 2008.   The major cost component affecting gross margin has beenroyalty expense.  The other major costs of
our business, consisting of product
design and sales/support, are categorized
in operating expensesand thus do not impact gross
margin.
 
 Research
and development
 
 Research and development expenses
consist primarily of personnel costs and  expenses. Research and
development expenses increased to $1,449,731 for the nine-month period ended
June 30, 2009, from $1,186,960 for the
nine-month period ended June 30, 2008.  Virtually all the increase is due to salaries, as we
invested heavily in expanding the NotifyLink product line and readying the new
NotifySync product line for launch in January 2009.  Our development
efforts were devoted to improving our
software product in the area of device management, porting our solution to new
devices and creating new products.
  12
  NOTIFY
TECHNOLOGY CORPORATION
  We believe that our future success, if any, depends
significantly on our ability to continue to enhance our existing wireless products and to develop new
products. Therefore, we intend to continue to incur research and development
costs for the foreseeable future
 
 Sales
and marketing
  Sales and
marketing expenses consist primarily of personnel, travel costs and sales
commissions related to our sales effort of the NotifyLink product line. We use
an internal sales force and a customer support staff to facilitate the
NotifyLink sales process.  Sales and marketing costs increased to
$1,708,291 for the nine-month period ended June 30, 2009, from $1,374,160 for the
nine-month period ended June 30, 2008. The increase in sales
expense is due to additions to our sales
staff, travel and show cost to market our
productsand commissions on strong sales
activity. Thereis an inherent mismatch of
commission expense to revenue because a majority of our revenue is recognized
over the life of the contract, whereas we record commission expense in the month
the contract is signed.
  We
anticipate that sales and marketing expenses will increase in future quarters as
we hire additional sales and customer support personnel and attempt to expand
our existing referral base and create new distribution channels.
 
 General
and administrative
 
 General
and administrative expenses consist of general management and finance personnel
costs, insurance expense, occupancy costs, professional fees, stock-based compensation expense and other general
corporate expenses.  General and administrative expenses increased to
$1,127,477 for the nine-month period ended June 30, 2009 from $956,859 for the
nine-month period ended June 30, 2008. The increase in expenses was due in part to $37,470in non-cashcompensation expense due to option
vesting,a $20,000 increase in bad debt reserve on the balance
sheetin response to higher accounts
receivable levels resulting from stronger sales.  In addition, we
experienced increases in legal and corporate expenses and medical
insurancecosts.
 
 We expect
that general and administrative expense may continue to increase in future quarters as we adhere to the requirements
mandated by the Sarbanes-Oxley Act and integrate any additional requirements
imposed by future regulations.
  LIQUIDITY
AND CAPITAL RESOURCES
  During
the nine-month period ended June 30, 2009, we funded our operations through a
combination of our gross profit earned from revenue and existing cash
balances.  Our ability to fund our recurring losses from operations
depends upon success of our NotifyLink wireless e-mail notification market
solutions.
  A
significant characteristic of our business is the sale of our products
customarily in the form of annual contracts paid for upon signing with the
revenue amortized over the twelve-month service period.  The
unamortized contract revenue is reflected in the deferred revenue account on our
balance sheet.  As our installed base grows, this practice increases
the deferred revenue liability on the balance sheet provided we add new
contracts faster than old contracts expire.  For example, deferred
revenue increased significantly to $2,964,465 at June 30, 2009 from $2,418,235
at September 30, 2008, due to growing our
installed base and improved retention of accounts that require an annual
renewal.   If we continue to add new accounts and renew
established accounts faster than we amortize our existing contracts, we could
continue to see deferred revenue increase in the future.
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  NOTIFY
TECHNOLOGY CORPORATION
  The major
cost of operations is comprised of (1) the engineering design of our products
offered for sale and (2) the sales process of a contract that requires both
direct sales effort and technical support hours to facilitate an optional 30-day
trial period of our software prior to purchase.  We believe that the
increase in the NotifyLink deferred revenue to $2,964,465 for the nine-month
period ended June 30, 2009 from $2,480,425 for the nine-month period ended June
30, 2008, combined with the increases in cash and
cash equivalents and accounts receivable over the same period,
illustrates that total product sales improved in the nine-month period ended
June 30, 2009.  Deferred revenue also represents the obligation to
service the contracts underlying the revenue.  However, we believe the
cash flow required to service the contracts is significantly less than the
amortized revenue recognized each month.
  Our
continued operations depend on the cash flow from sales of
NotifyLink.  In the event sales of our product decline or our revenue
is otherwise interrupted, we would have to reduce our operations to minimally
service our existing contract obligations unless we secured additional
financing. If we were unable to increase our revenues or secure financing, we
would have to restructure our business to reduce costs.
  We are
currently expanding our product offerings into our current or other niche
markets.  We believe that these niche markets are not adequately
addressed by market competitors at the present time.   We also
intend to capitalize on our ability to offer a single middleware solution for
those companies deploying a variety of manufacturers’ devices on a single email
system.  The success of our business operations will depend upon a
continued favorable market acceptance for our wireless software
products.
  We also
continue to evaluate our opportunities to obtain financing to provide additional
funding for our operations.  In the event we require additional
capital, we cannot predict whether we will be able to obtain financing on
commercially reasonable terms, if at all.  Any future financings may
take the form of debt or equity securities or a combination of debt and equity,
including convertible notes or warrants.  In the event we are required
to obtain additional financing, we cannot predict whether we could successfully
conclude a financing with any new investors.  Minimally, we expect
that any additional financing could result in a substantial dilution of the
equity and voting interests of our current shareholders.
 
 In July
2008, warrants and options to purchase our preferred stock that had been outstanding since July 2001,
expired without having been exercised.  The expiration left 14,075,662
shares of common stock and options to purchase 3,353,244 shares of common stock
as our only issued and outstanding securities.  There were no
remaining obligations associated with the expiring warrants and
options.  This simplification of our equity structure could be
advantageous in the event we require additional capital.
  On
December 17, 2008, the Board of Directors adopted the 2008 Equity Incentive Plan
(“2008 Plan”) subject to the approval of our shareholders.  The Board
authorized 2,317,000 shares of the Company’s common stock to be reserved under
the 2008 Plan.  Included in the 3,608,014 total outstanding options as
of June 30, 2009, were 1,750,014 options
granted under the 2008 Plan on December 17, 2008 to various
employees.  These grants included 169,470 options exchanged for
900,000 options granted under a prior option plan.
 
 At June
30, 2009, we had cash and cash equivalents of $1,357,105, compared to $971,318
at June 30, 2008.  Over the last several years, we have financed our
operations primarily through revenue from operations and existing cash
balances.  The net cash generated by operating activities equaled
$485,228 in the nine-month period ended June 30, 2009, versus net cash generated
by operating activities of $218,562 in the nine-month period ended June 30,
2008. The cash generated by operations in the nine-month period ended June 30,
2009 was primarily due toa combination of
a net loss of $33,643, an increase in accounts receivable of $89,930 and an increase in other accrued liabilities of
$52,647, offset by an increase in deferred revenue of
$546,230.  The cash generated by operations in the nine-month period
ended June 30, 2008 was largely due toa
combination of a net loss of $296,795 offset by an increase in deferred revenue
of  $353,907, a decrease in accounts receivable of $68,654 and an
increase in accrued liabilities of $32,009.  Although we have been
cash positive in the last two fiscal years, we anticipate that we will have
negative cash flow from time to time from
operating activities in future periods.
  Net cash
used by investing activities in the nine-month period ended June 30, 2009 was an
outflow of $134,422 for computer and office furniture
purchases.  There was a net cash outflow of $108,388 from the purchase
of fixed assets and accounting software in the nine-month period ended June 30,
2008.
  Net cash
provided by financing activities was an outflow of $3,308 and an inflow of
$21,369 for the nine-month periods ended June 30, 2009 and 2008,
respectively.  The net cash outflow for the nine-month period ended
June 30, 2009 was due to payments on capital leases.  The inflow for
the nine-month period ended June 30, 2008 was due to $27,933 from the exercise
of options partially offset by $6,564 of payments on capital
leases.
  14
  NOTIFY
TECHNOLOGY CORPORATION
  CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
  Our
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these
financial statements requires us to make significant estimates and judgments
that affect the reported amounts of assets, liabilities, revenues and expenses
and related disclosure of contingent assets and liabilities. We evaluate
estimates, including those related to bad debts, inventories and income taxes,
on an ongoing basis. We base our estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.
 
 We
believe the following critical accounting policies, among others, involve the
more significant judgments and estimates used in the preparation of our
financial statements:
 
 We
recognize revenue in accordance with the American institute of Certified Public
Accountants Statement of Position (“SOP”)
97-2, “Software Revenue Recognition,” and SEC Staff Accounting Bulletin No. 104,
“Revenue Recognition” (“SAB 104”).
 
 Under SOP
97-2, we recognize software license agreements when persuasive evidence of an
agreement exists, delivery of the product has occurred, the license fee is fixed
or determinable and collection is probable.  Our license agreements
take two basic forms.  The first form of agreement is essentially a
subscription agreement that is used in connection with our hosting arrangement
where we provide both the software combined with hosting services from a
hardened site owned and managed by us.  The agreement generally has a
fixed term and the license revenue is recognized ratably over the term of each
service contract.  The second form of agreement involves the purchase
of a license and a service agreement based on the Vendor Supplied Objective
Evidence (“VSOE”) where only the service agreement is renewed each
year.  We recognize the license portion at the point of sale for those
sales where VSOE has been established and the service portion ratably over the
term of the service contract. For those contracts where VSOE has not been
established, the revenue of the entire contract is recognized ratably over the
term of the contract.  Our sales process provides for an optional
trial period prior to the agreement to purchase and no revenue is recognized
during that trial period.
 
 Under SAB
104, we recognize revenue when the title and risk of loss have passed to the
customer, there is persuasive evidence of an arrangement, delivery of the
product has occurred or services have been rendered, the sales price is fixed or
determinable and collection is probable. Installation, when required, is
commonly completed prior to an agreement to facilitate a trial of the
product.  Technical assistance is available during the sales process
and is unrelated to the service component portion of the final
arrangement.  Revenue related to installation is recognized when the
agreement is signed and the contract period has commenced.
 
 We
maintain allowances for doubtful accounts for estimated bad debts. If the
financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances might be
required.
 
 The
carrying value of our deferred tax assets are dependent upon our ability to
generate sufficient future taxable income in certain tax
jurisdictions.  Should we determine that we would not be able to
realize all or part of our deferred tax assets in the future, an adjustment to
the deferred tax assets would be charged to income in the period such
determination was made.  Currently, our deferred tax assets are fully
reserved.
 
 OFF
BALANCE SHEET ARRANGEMENTS
  We have
no off balance sheet arrangements as defined by Item 303(a)4 of Regulation
S-K.
  15
  NOTIFY
TECHNOLOGY CORPORATION
 
 Item
      3.
              Quantitative
      and Qualitative Disclosures About Market
Risk.
 
 Market risk generally represents the
risk of loss that may result from the potential change in value of a financial
instrument as a result of fluctuations in interest rates and market prices. We
do not currently have any trading derivatives nor do we expect to have any in
the future. We have established policies and internal processes related to the
management of market risks, which we use in the normal course of our business
operations.
 
 Intangible
Asset Risk
 
 At June
30, 2009, we did not carry any intangible assets on our financial
statements.
 
 Equity
Price Risk
 
 At June
30, 2009, we did not own any equity investments. As a result, we do not
currently have any direct equity price risk.
 
 Commodity
Price Risk
 
 We do not
enter into contracts for the purchase or sale of commodities. As a result, we do
not currently have any direct commodity price risk.
 
 Item
4T.             Controls
and Procedures.
  (a)           Evaluation of Disclosure
Controls and Procedures.
 
 Our chief
executive officer and our chief financial officer, after evaluating our
disclosure controls and procedures (as defined in the rules and regulation of
the Securities and Exchange Commission under the Securities Exchange Act of 1934
(the "Exchange Act")), as of the end of the period covered by this Quarterly
Report on Form 10-Q, have concluded that as of such date, our disclosure
controls and procedures were effective to ensure that information we are
required to disclose in reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms.
  (b)           Changes in Internal
Controls.
  During
the period covered by this Quarterly Report on Form 10-Q, there were no
significant changes in our internal controls over financial reporting or in
other factors that have materially affected, or are reasonably likely to
materially affect, our internal controls over financial reporting.
 
 PART
II.        OTHER
INFORMATION
  Item
      1A.
              Risk
      Factors.
  We
operate in a dynamic and rapidly changing business environment that involves
numerous risks and uncertainties.  The following section lists some,
but not all, of these risks and uncertainties, which may have a material adverse
effect on our business, financial condition or results of
operations.
 
 Risks Related to Our Business
  The
recent downturn in the macroeconomic environment may negatively impact our
future results of operations.
  The
recent disruption in global macroeconomic conditions has had a significant
impact on the wireless industry as a whole.  Due to the uncertainty
about current macroeconomic conditions, our customers may postpone spending in
response to tighter credit, negative financial news and/or declines in income or
asset values, which could have a material adverse effect on the demand for our
products. Other factors that could influence demand include conditions in the
residential real estate and mortgage markets, labor and healthcare costs, access
to credit, consumer confidence and other macroeconomic factors affecting
consumer spending behavior. These and other economic factors could have a
material adverse effect on future demand for our products and on our financial
condition and operating results.
  16
  NOTIFY
TECHNOLOGY CORPORATION
 
 We
have a history of losses, and there is no assurance of future
profitability.
  For the
fiscal years ended September 30, 2008, 2007, 2006, and 2005, we incurred net
losses of $287,681, $426,004, $314,892 and $557,452, respectively. We also
incurred a net loss of $33,643 for the nine-month period ended June 30,
2009.  Although our cash flow from operations was positive in the
nine-month period ended June 30, 2009, we are not assured that we can maintain a
positive cash flow from operating activities in future periods. We may also
incur further operating losses in the future until such time, if ever, as there
is a substantial increase in orders for our products and product sales generate
a pattern of sufficient revenue to fund our continuing
operations.  There can be no assurance that sales of our products will
continue to generate or maintain positive cash flow or that we will attain or
thereafter sustain profitability in any future period.
 
 We
may be unable to generate the cash necessary to support a competitive level of
research and development activities.
  At June
30, 2009, we had an accumulated deficit of $24,695,906 and incurred a net loss
for the nine-month period ended June 30, 2009 of $33,643. We also had a working
capital deficit at that date of $1,508,830.  Our NotifyLink and
NotifySync products will need to sustain a favorable market acceptance in order
for us to be able to continue our research and development activities and to
fund operating expenses at a level required to stay competitive in our
market.  Regardless, even though our NotifyLink wireless product line
has generated sufficient contributions to our revenues to date to operate
profitably at the current level of research and development, an increase in the
level of research and development driven by market pressures could require us to
obtain further financing.  Obtaining additional financing will be
subject to a number of factors including market conditions, investor acceptance
of our business plan, and investor sentiment.  These factors may make
the timing, amount, terms and conditions of additional financing unattractive or
unavailable to us.  If, in a situation that required an increase in
research and development we are unable to maintain market acceptance of our
wireless products or raise additional financing, we will have to significantly
reduce our spending, delay or cancel planned activities or substantially change
our current corporate structure.  In such an event, we intend to
implement expense reduction plans in a timely manner.  However, these
actions would have material adverse effects on our business, results of
operations, and prospects, resulting in a possible failure of our
business.
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  NOTIFY
TECHNOLOGY CORPORATION
  If
we are unable to develop market and sell new and improved wireless products on a
timely basis, we could lose existing and potential customers and our sales could
decrease.
  We
continue to invest in our wireless products in order to grow our revenue and
improve our financial condition.  We need to develop, market and sell
new and improved wireless software products on a timely basis to keep pace with
technological developments, emerging industry standards, and the growing needs
of our sophisticated customers.  We may experience difficulties in
marketing and selling new products, and our inability to timely and
cost-effectively introduce new products and future enhancements, or the failure
of these new products or enhancements to achieve market acceptance, could
seriously harm our business.  Life cycles of wireless software
products are difficult to predict, because the market for such products is
relatively new and evolving and characterized by rapid technological change,
frequent enhancements to existing products and new product introductions,
changing customer needs and evolving industry standards.  The
introduction of competing products that employ new technologies and emerging
industry standards could render our products and services obsolete and
unmarketable or shorten the life cycles of our products and
services.  The emergence of new industry standards might require us to
redesign our products.  If our products are not in compliance with
industry standards that become widespread, our customers and potential customers
may not purchase our products.
  Revenues
or expenses may vary, affecting our quarterly operating results.
  We
anticipate that we will experience significant fluctuations in our operating
results in the future.  Fluctuations in operating results may cause
the price of our common stock to be volatile.  Operating results may
vary as a result of many factors, including the following:
  ·
              our
      level of research and development;
  ·
              our
      sales and marketing activities;
  ·
              announcements
      by us or our competitors;
  ·
              size
      and timing of orders from
customers;
  ·
              new
      product introductions by us or our
competitors;
  ·
              future
      market acceptance of our products;
and
  ·
              price
      erosion.
  Each of
the above factors is difficult to control and forecast.  Thus, they
could have a material adverse effect on our business, financial condition and
results of operations.
  Notwithstanding
the difficulty in forecasting future sales, we generally must undertake research
and development and sales and marketing activities and other commitments months
or years in advance.  Accordingly, any shortfall in product revenues
in a given quarter may materially adversely affect our financial condition and
results of operations because we are unable to adjust expenses during the
quarter to match the level of product revenues, if any, for the
quarter.  Due to these and other factors, we believe that quarter to
quarter comparisons of our results of operations are not necessarily meaningful
and should not be relied upon as indications of future performance.
  We
need to continue to develop our marketing channels and build our sales
force.
  We
continue to develop our formal referral partner channel and our international
reseller partner channel.  We participate in informal referral
arrangements with several wireless carriers, wireless device manufacturers and
several of our collaboration partners for the sale of our NotifyLink products
and services where our products assist in the sale of their
products.  We have a limited direct sales force to sell our NotifyLink
products and services to organizations and businesses and we rely upon both
formal and informal referral arrangements to provide leads for our NotifyLink
products.  To date, most of our referral arrangements are formal and
we will receive referrals only to the extent that our referral partners
successfully refer our products and services to potential
users.  There can be no assurance that we will continue to receive
referrals through our formal or informal arrangements.  Our NotifyLink
solution is sold into an emerging market and although we have operated on a cash
positive basis in the fiscal years ended
September 30, 2008 and 2007, we have not yet achieved a sufficient history of
operating profitably on an income statement basis.
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TECHNOLOGY CORPORATION
  We are
expanding our distribution channels for our wireless products by participating
in national and regional trade shows and promotions with strategic partners
across the United States and Europe.  We cannot predict whether these
activities will result in increased wireless revenue.  We also have
limited international sales due to limited resources to build a reseller
network.  Our management will need to expend time and effort to
develop these channels.  Our customer profile generally consists of a
large number of small to medium business customers thereby reducing our
dependence on any one customer.  We have expanded our internal sales
force in response. We also launched a ecommerce site in May 2009 to sell our
NotifySync product to the general market.  We are building experience
selling into the wireless market but make use of modest marketing and
distribution programs to expand our distribution channels and any marketing
efforts undertaken by or on behalf of us may not be successful.
  One
of our directors holds a large percentage of our stock and is able to exert
substantial control over us.
  David A.
Brewer, a member of our Board of Directors and the Chairman of our Audit
Committee since 2000, together with an entity affiliated with Mr. Brewer,
currently own approximately 56% of our outstanding common stock.  In
addition, Mr. Brewer owns options to purchase an additional fractional percent
of our common stock.   This represents a significant influence
over all matters requiring approval by shareholders, including the election of
directors, amendments to our Articles of Incorporation and significant corporate
transactions, such as a merger or other sale of our company or its
assets.  This concentration of ownership will limit other
shareholders’ ability to influence corporate matters and may have the effect of
delaying or preventing a third party from acquiring control over
us.
  Our
products may suffer from defects.
  Most of
our products consist of software and services related to our wireless NotifyLink
and NotifySync product lines.  Our products incorporate a mix of new
and proven technology that has been tested extensively, but may still contain
undetected design flaws.  A failure by us to detect and prevent a
design flaw or a widespread product defect could materially adversely affect the
sales of the affected product and our other products and materially adversely
affect our business, financial condition and operating results.
  We
depend on key executives.
  Our
potential for success depends significantly on key management employees,
including our Chairman, President and Chief Executive Officer, Mr. Paul F.
DePond, our Vice President of Development, Rhonda Chicone and our Chief
Financial Officer, Gerald W. Rice.  We have entered into amended and
restated employment agreements with these three key management
employees.  We do not currently have “key man” life insurance on any
of these executives or any of our other key employees.  The loss
of the services of these executives or those of any of our other key employees
would materially and adversely affect us.  We also believe that our
future success will depend in large part on our ability to attract
and retain additional highly skilled technical, management, sales and
marketing personnel. If we were unable to retain or hire the necessary
personnel, the development of new products and enhancements to current products
would likely be delayed or prevented.  Competition for these highly-skilled
employees is intense.  Therefore, there can be no assurance that we
will be successful in retaining our key personnel or in attracting and retaining
the personnel we require for expansion.
  Our
intellectual property may not be adequately protected and we may infringe the
rights of others.
  We regard
various features and design aspects of our products as proprietary and rely
primarily on a combination of copyright, trademark and trade secret laws and
employee and third-party nondisclosure agreements to protect our proprietary
rights.   Our software products are generally not subject to
patent claims.  There can be no assurance, therefore, that any of our
competitors, some of whom have far greater resources than we do, will not
independently develop technologies that are substantially equivalent or superior
to our technology.
 
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  NOTIFY
TECHNOLOGY CORPORATION
  Our charter provisions may discourage
acquisition bids.
  Our
Articles of Incorporation give our Board of Directors the authority to issue an
aggregate of 5,000,000 shares of preferred stock and to determine the price,
rights, preferences, privileges and restrictions, including voting rights for
these shares, without any further vote or action by our shareholders. The
rights of the holders of our common stock will be subject to, and may be
adversely affected by, the rights of the holders of any preferred stock that may
be issued in the future. The issuance of preferred stock, while providing
flexibility in connection with possible acquisition and other corporate
purposes, could have the effect of making it more difficult for a third party to
acquire a majority of our outstanding voting stock.
 
 Our
Articles of Incorporation limit the liability of officers and directors and we
have entered into indemnification agreements with them.
  Our
Articles of Incorporation eliminate, in certain circumstances, the liability of
our directors for monetary damages for breach of their fiduciary duties as
directors.  We have also entered into indemnification agreements with
each of our directors and officers.  Each of these indemnification
agreements provides that we will indemnify the indemnitee against expenses,
including reasonable attorneys' fees, judgments, penalties, fines, and amounts
paid in settlement actually and reasonably incurred by such director in
connection with any civil or criminal action or administrative proceeding
arising out of his performance of duties as a director or officer, other than an
action instituted by the director or officer.  These indemnification
agreements also require that we indemnify the director or other party thereto in
all cases to the fullest extent permitted by applicable law.  Each
indemnification agreement permits the director or officer that is party thereto
to bring suit to seek recovery of amounts due under the indemnification
agreement and to recover the expenses of such a suit if they are
successful.  We currently have directors’ and officers’ liability
insurance, but there can be no assurance that any or all of our indemnification
obligations will be covered by this insurance or that the insurance limits will
not be exceeded.
 
 Risks
Related to Our Industry
  We
face significant competition.
  We
believe the market for our wireless products is extremely competitive for
certain platforms, and less competitive for others.  Several companies
offer wireless email notification and management software for Microsoft Exchange
and Novell GroupWise.  Many of these companies have greater financial
and other resources than we do.  Microsoft and Novell offer similar
products at little to no charge that function in large parts of the enterprise
email market.  We sell our products in segments of the market where
the free products do not provide adequate functionality or sufficient product
features.  If these lower cost products were extended to our segment
of the market, we would face additional price pressure.  We may not be
able to compete successfully against better funded competitors as the market for
our products evolves and the level of competition increases.  A
failure to compete successfully against existing and new competitors would
materially and adversely affect our business, revenue, operating results, and
financial condition.
  If
the market for wireless data communications devices does not grow, we may not
successfully increase or maintain the sale of our NotifyLink
products.
 
 The
overall market for wireless data communications devices has experienced
significant growth in recent years.  The success of our NotifyLink
Enterprise On-Premise and On-Demand products depends upon this
growth.  There can be no assurance that the market for wireless
software products will continue to grow.  We cannot predict that
growth of our NotifyLink products will continue. If the various markets in which
our software products compete fail to grow, or grow more slowly than we
currently anticipate, or if we are unable to establish product markets for our
new software products, our business, results of operation and financial
condition would be materially and adversely affected.
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  NOTIFY
TECHNOLOGY CORPORATION
  Risks
Related to Our Common Stock
  If
we fail to remain current on our reporting requirements, we could be removed
from the OTC Bulletin Board, which would limit the ability of broker-dealers to
sell our securities and the ability of shareholders to sell their securities in
the secondary market.
  Companies
trading on the OTC Bulletin Board, such as Notify Technology, must be reporting
issuers under Section 12 of the Securities Exchange Act of 1934 (“Exchange
Act”), and must be current in their reports under Section 13 of the Exchange
Act, in order to maintain price quotation privileges on the OTC Bulletin
Board.  If we fail to remain current on our reporting requirements, we
could be removed from the OTC Bulletin Board.  As a result, the
liquidity of our securities could be adversely affected by limiting the ability
of broker-dealers to sell our securities and the ability of shareholders to sell
their securities in the secondary market
  Our
common stock is subject to the “penny stock” rules of the Securities and
Exchange Commission, and the trading market in our common stock is limited,
which makes transactions in our stock cumbersome and may reduce the investment
value of our stock.
  Our
common stock is “penny stock” because it is not registered on a national
securities exchange or listed on an automated quotation system sponsored by a
registered national securities association, pursuant to Rule 3a51-1(a) under the
Exchange Act.  For any transaction involving a penny stock, unless
exempt, the rules require:
  ·
              That
      a broker or dealer approve a person’s account for transactions in penny
      stocks; and
  ·
              That
      the broker or dealer receives from the investor a written agreement to the
      transaction, setting forth the identity and quantity of the penny stock to
      be purchased.
  The
broker or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prescribed by the Securities and Exchange Commission
relating to the penny stock market, which, in highlight form:
  ·
              Sets
      forth the basis on which the broker or dealer made the suitability
      determination; and
  ·
              That
      the broker or dealer received a signed, written agreement from the
      investor prior to the transaction.
  Generally,
brokers may be less willing to execute transactions in securities subject to the
penny stock rules.  This may make it more difficult for investors to
dispose of our common stock and cause a decline in the market value of our
stock.
  Disclosure
also has to be made about the risks of investing in penny stocks in both public
offerings and in secondary trading and about the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions.  Finally, monthly statements have
to be sent disclosing recent price information for the penny stock held in the
account and information on the limited market in penny stocks.
  The
market for penny stocks has suffered in recent years from patterns of fraud and
abuse.
  Shareholders
should be aware that, according to SEC Release No. 34-29093, the market for
penny stocks has suffered in recent years from patterns of fraud and
abuse.  Such patterns include:
  ·
              Control
      of the market for the security by one or a few broker-dealers that are
      often related to the promoter or
issuer;
  ·
              Manipulation
      of prices through prearranged matching of purchases and sales and false
      and misleading press releases;
  ·
              Boiler
      room practices involving high-pressure sales tactics and unrealistic price
      projections by inexperienced
salespersons;
  ·
              Excessive
      and undisclosed bid-ask differential and markups by selling
      broker-dealers; and
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  NOTIFY
TECHNOLOGY CORPORATION
  ·
              The
      wholesale dumping of the same securities by promoters and broker-dealers
      after prices have been manipulated to a desired level, along with the
      resulting inevitable collapse of those prices and with consequential
      investor losses.
  Our
management is aware of the abuses that have occurred historically in the penny
stock market. Although we do not expect to be in a position to dictate the
behavior of the market or of broker-dealers who participate in the market,
management will strive within the confines of practical limitations to prevent
the described patterns from being established with respect to our
securities.  The occurrence of these patterns or practices could
increase the volatility of our share price.
  Our
stock price may be volatile.
  The
market price for our common stock may be affected by a number of factors,
including the announcement of new products or product enhancements by us or our
competitors, the loss of services of one or more of our executive officers or
other key employees, quarterly variations in our or our competitors' results of
operations, changes in earnings estimates, developments in our industry, sales
of substantial numbers of shares of our common stock in the public market,
general market conditions and other factors, including factors unrelated to our
operating performance or the operating performance of our
competitors.  In addition, stock prices for many companies in the
technology sector have experienced wide fluctuations that have often been
unrelated to the operating performances of these companies.  These
factors and fluctuations, as well as general economic, political and market
conditions, such as recessions, may materially adversely affect the market price
of our common stock.
 
 22
  NOTIFY
TECHNOLOGY CORPORATION
 
 PART
II.        OTHER INFORMATION
  Item
4    Submission of Matters toa Vote of Security
Holders
  We held
an Annual Meeting of Shareholders on April 28, 2009.  The meeting was
adjourned until May 29, 2009 when a quorm was present and the meeting was
completed.  Out of 14,075,662 shares of Common Stock entitled to vote
at such Annual Meeting, there were present in person or by proxy 11,833,389
shares of common stock.  At the Annual Meeting, the holders of our
common stock approved the following proposals:
  (1)
              The
      elections of Paul F. DePond, David A. Brewer and Mark Frappier as
      directors of Notify Technology Corporation for the ensuing year and until
      their successors are elected.  The vote for the nominated
      directors was as follows:
  Paul F.
DePond, 10,779,465 votes cast for and 5,000 votes against; David A. Brewer,
10,778,760 votes cast for and 5,705 votes against, Mark Frappier 10,784,465
votes cast for and no votes against.
  (2)
              To
      approve the Notify Technology Corporation 2008 Equity Incentive Plan (the
      “2008 Equity Plan”) to replace our 1997 Stock Plan as it has
      expired.  The intial number of shares issuable under the 2008
      Equity Plan is 2,317,000.  The vote for approving the 2008
      Equity Plan was as follows:
  9,389,706
votes were cast for and 26,300 votes against with 1,368,459 broker
non-votes.
  (3)
              To
      amend our Bylaws to modify the number of members of our Board of Directors
      to a range between three and five, with the exact number of directors to
      be fixed by a resolution of the Board. The vote for amending the Bylaws
      was as follows:
  10,777,572
votes were cast for and 6,592 votes were cast against with 300 votes
abstaining.
  (4)
              The
      ratification of the appointment of L.L. Bradford & Company, LLC as our
      independent auditors of the Company for the fiscal year ending September
      30, 2009.  The vote for ratification of L.L. Bradford &
      Company, LLC was as follows:
  10,784,465
votes were cast for, no votes were cast against and no votes
abstaining.
  Item
6.    Exhibits
  (a)
              Exhibits:
  31.1 Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
  31.2 Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
  32.1 Certification
of Chief Executive Officer and Chief Financial Officer under Section 906 of the
Sarbanes-Oxley Act of 2002
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  NOTIFY
TECHNOLOGY CORPORATION
  SIGNATURES
  Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
  NOTIFY
      TECHNOLOGY CORPORATIONDated:  August
      13, 2009/s/
      Gerald W. RiceChief
      Financial Officer(Principal
      Financial and Accounting
Officer)
  24